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Wellin v. Wellin

Court of Appeals of South Carolina

January 4, 2019

Peter J. Wellin, Cynthia W. Plum, and Marjorie W. King, Appellants,
v.
Keith S. Wellin, Respondent. Appellate No. 2016-001141

          Heard October 17, 2018

          Appeal From Charleston County Roger L. Couch, Circuit Court Judge Irvin G. Condon, Probate Court Judge

          Robert H. Brunson, Merritt Gordon Abney, and Patrick Coleman Wooten, all of Nelson Mullins Riley & Scarborough, LLP, of Charleston, and Allen Mattison Bogan, of Nelson Mullins Riley & Scarborough, of Columbia, for Appellants.

          Edward G.R. Bennett, of Evans Carter Kunes & Bennett, PA, of Charleston; Robert H. Hood, Mary Agnes Hood Craig, and James Bernard Hood, all of Hood Law Firm, LLC, of Charleston; and Tiffany Nicole Provence, of Provence Messervy, LLC, of Summerville, for Respondent.

          KONDUROS, J.

         Peter J. Wellin, Cynthia W. Plum, and Marjorie W. King (collectively, Appellants) appeal the circuit court's order affirming the probate court's order that required the Wellin Family 2009 Irrevocable Trust to pay approximately $50 million to Synovus Bank as Special Conservator II for their father, Keith S. Wellin (Wellin). We reverse.

         FACTS/PROCEDURAL BACKGROUND

         Wellin amassed considerable wealth in his lifetime primarily consisting of shares of stock in Berkshire Hathaway, Inc. He had three children-Peter, Cynthia, and Marjorie-with his first wife and remarried three times. Wellin married his fourth wife, Wendy, in 2002. In 2003, Wellin established Friendship Partners, LP and transferred 896 shares of Berkshire Hathaway Class A stock to Friendship Partners. Wellin was a limited partner in Friendship Partners although he owned 98.9 % of its assets through a trust, the Florida Revocable Trust, for which he was trustee. A separate entity, Friendship Management, LLC, was the general partner in Friendship Partners with managerial control and the remaining ownership interest. Cynthia was the manager of Friendship Management. Also in 2003, Wellin gifted $10 million to each of his children and to Wendy as well. In 2009, Wellin established the Wellin Family 2009 Irrevocable Trust (the Trust), an intentionally defective grantor trust.[1] He named Appellants as trustees and beneficiaries of the Trust.[2] Wellin funded the Trust by transferring his interest in Friendship Partners to the Trust in exchange for a Promissory Note (the Note) for approximately $50 million with provisions for periodic interest.

         As time went on, Appellants began to believe Wendy was influencing Wellin and manipulating his finances to her advantage. In July 2013, Wellin filed an action in federal district court seeking to set aside the 2003 gifts to Appellants, but not to Wendy, and the 2009 transactions that benefited his children and lineal descendants via the Trust (Wellin I). Appellants filed an action in probate court seeking the appointment of a conservator to protect Wellin's assets.

         In August 2013, the probate court appointed Edward Bennett as a temporary conservator, pending mediation or a full hearing, with the role of "ensur[ing] that transfers of assets are not made without fair and adequate consideration." In November of 2013, Wellin, through Bennett, delivered a document to Appellants purporting to exercise a right under the Trust to substitute certain assets in exchange for Trust assets of equal value. To effectuate this swap, Wellin forgave the Note by marking it "Paid in Full," in exchange for a 58% limited partnership in Friendship Partners. Appellants, as trustees, rejected this swap transaction.

         The district court issued a temporary restraining order (TRO) in Wellin I enjoining Appellants from selling the Berkshire Hathaway stock. However, that TRO was dissolved. In December 2013, Friendship Partners liquidated its assets, consisting primarily of the Berkshire Hathaway stock, which was valued at approximately $157 million. The proceeds were distributed to the Trust.[3] Wellin filed an action in probate court alleging various breaches of duty against Appellants in selling the stock and distributing the majority of the proceeds to themselves (Wellin II). The probate court granted a TRO enjoining the Appellants from disposing of or exercising any control over any proceeds related to the liquidation, but that case was removed to the federal district court and the TRO was dissolved. The Trust tendered a check for $50 million to Bennett as payment for the Promissory Note, which was not due until 2021. Bennett rejected the payment, taking the position the Note ceased to exist after it was marked "Paid in Full" as part of the swap transaction. Bennett also demanded the Trust pay Wellin $92 million representing the value of a 58% interest in Friendship Partners.

         Thereafter, in January 2014, Bennett filed an "Application for Guidance" pursuant to section 62-5-416(b) of the South Carolina Code (Supp. 2018), asking the probate court for guidance as to whether he had authority to pursue the $92 million on Wellin's behalf. The court conducted a hearing at which extensive arguments were made by counsel for Bennett, counsel for Appellants, and counsel for Wellin. At the hearing, Bennett stated he was seeking to clarify whether he, as conservator, had authority to pursue the $92 million. As the hearing progressed, Bennett eventually asked the probate court to require the Trust to pay at least the $50 million, represented by the Note, so those funds could be protected for Wellin's benefit pending the outcome of the district court litigation.

         At the hearing, Appellants admitted Wellin was entitled to $50 million under the Note if the Note was then extinguished and even stated they would be willing to pay the funds into the court. The probate court ordered the Trust to pay $50 million to Synovus Bank as a secondary conservator. Appellants filed a motion to reconsider, arguing the Promissory Note was an asset of Wellin's estate, but the $50 million was not. They maintained that accordingly, the probate court lacked jurisdiction to issue an order affecting the actual funds. They also argued the court lacked personal jurisdiction over the Trust as the children were appearing in their individual capacities in the conservatorship action, they had not been afforded due process in the absence of Bennett filing a summons and complaint seeking the $50 million, and the request should be dismissed pursuant to Rule 12(b)(8) of the South Carolina Rules of Civil Procedure because the same claims were being litigated in district court.[4]

         Appellants also filed a motion for voluntary dismissal of the conservatorship action pursuant to Rule 41 of the South Carolina Rules of Civil Procedure. The probate court denied the motion finding Rule 41, dealing with dismissals prior to the filing of an Answer, did not ...


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