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Gee v. Delta Speir Plantation LLC

United States District Court, D. South Carolina, Beaufort Division

May 16, 2019

RAYMOND M. GEE and ADAM M. MARTIN, Plaintiffs,
v.
DELTA SPEIR PLANTATION LLC and JAMES S. SHAW, Defendants.

          ORDER

          DAVID C. NORTON, UNITED STATES DISTRICT JUDGE

         The following matter is before the court on defendant Delta Speir Plantation LLC's (“Delta”) partial motion to dismiss, ECF No. 26. For the reasons set forth below, the court grants in part and denies in part the motion.

         I. BACKGROUND

         In 2010, defendant James S. Shaw (“Shaw”) allegedly requested assistance from plaintiffs Raymond M. Gee (“Gee”) and Adam M. Martin (“Martin”) (collectively, “plaintiffs”) in assessing the investment value of a tract of land in Jasper County known as Delta Bluffs. Shaw is the sole member and manager of Delta through Shaw's solely owned entity, JS Real Estate Investments LLC. Plaintiffs agreed to help Shaw, investigated the property, and made an assessment regarding Delta Bluffs's investment value. In 2011, Shaw allegedly verbally agreed to pay plaintiffs 20% of any profit he made from selling any portion of Delta Bluffs as compensation for plaintiffs' work. Plaintiffs continued to work on the due diligence and underwriting of Delta Bluffs, and they also met with Jasper County officials, local real estate professionals, and attorneys in order to assist Shaw in acquiring Delta Bluffs. Shaw eventually purchased Delta Bluffs at a public auction in December 2011.

         Shaw then allegedly sought plaintiffs' assistance in setting up a tax-advantaged donation of 100 acres of Delta Bluffs to Savannah College of Art and Design (“SCAD”). In order to realize the tax savings from this donation, Shaw allegedly requested that plaintiffs close the donation transaction by the end of 2012, which plaintiffs did. Plaintiffs allege that Delta and/or Shaw realized at least $2.5 million in tax savings as a result. In 2014, the parties entered into a written agreement (“the Agreement”). The Agreement put the parties' verbal agreement regarding profit sharing from the sale of Delta Bluffs into writing, and it also required Delta to pay plaintiffs 20% of any federal or state tax savings realized from the land donation to SCAD in return for plaintiffs' assistance in the donation. The parties agreed that any payment based on tax savings would be due upon the expiration of the risk of a state or federal tax audit. In addition, the Agreement contains a merger clause that states that the Agreement “encompasses the entire agreement between the parties.” ECF No. 19-1 at 1.

         Plaintiffs allege that in early 2015, Shaw again requested and received plaintiffs' help in renewing an expiring wetland permit on Delta Bluffs. After that, there was no more communication between the parties regarding Delta Bluffs. Then in early 2016, Delta allowed several hundred acres of trees on Delta Bluffs to be harvested for timber. Plaintiffs allege that Delta received at least $2 million for this transaction, and plaintiffs are entitled to $400, 000, pursuant the Agreement's term that plaintiffs will receive 20% of any profit made from selling a portion of Delta Bluffs. Plaintiffs further allege that the time period for a tax audit on SCAD donation expired in 2016, and as a result, plaintiffs are owed $501, 600, which is allegedly 20% of the tax savings from the donation. Plaintiffs demanded payment of $901, 600 in March 2017, and Delta has not yet paid them.

         Plaintiffs filed this action in the Court of Common Pleas for the County of Jasper, South Carolina on September 5, 2018. Delta removed the action on October 10, 2018. Then Delta filed a motion to dismiss on October 17, 2018, ECF No. 7, which was fully briefed; however, the complaint's allegations were insufficient for the court to determine which state law to apply, so the court instructed plaintiffs to amend their complaint in order to address the choice-of-law issue. Plaintiffs filed their amended complaint on January 31, 2019. ECF No. 19. The amended complaint levies claims for breach of contract against Delta and for quantum meruit against both Delta and Shaw. Delta filed a partial motion to dismiss on March 7, 2019, ECF No. 26, asking the court to dismiss plaintiffs' breach-of-contract claim. Plaintiffs responded to the motion on March 21, 2019, ECF No. 28, and Delta replied on March 28, 2019, ECF No. 32. The court held a hearing on the motion on May 13, 2019. The motion is now ripe for review.

         II. STANDARD

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations as true and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at 1134. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         III. DISCUSSION

         Delta argues that plaintiffs' breach-of-contract claim should be dismissed because no event in the Agreement has occurred to trigger payment to plaintiffs. First, Delta contends that Delta's sale of timber does not qualify as selling “a portion of Delta Bluffs” and therefore plaintiffs are not entitled to a portion of that profit. Next, Delta argues that the risk of a state or federal tax audit on the SCAD transaction has not expired due to a consent restraining order between the United States and Shaw, meaning plaintiffs are not yet entitled to a portion of the tax savings.[1] The court agrees that the sale of timber does not qualify as a sale of a portion of Delta Bluffs, meaning that plaintiffs are not entitled to a portion of the profit from that sale. However, the court finds that the consent restraining order does not create an ongoing risk of a tax audit, meaning that the risk of a tax audit has expired and plaintiffs' breach-of-contract claim as to their entitlement to a portion of defendants' tax savings may proceed.

         A. Sale of Timber as a Triggering Event

         Delta first argues that plaintiffs are not entitled to a portion of the profit from the sale of timber on Delta Bluffs because under the UCC, as adopted by South Carolina, [2]the sale of timber is the sale of a good, not real property, and therefore not “a portion . . . of Delta Bluffs.” Delta explains that the Agreement entitles plaintiffs to 20% of the profits from the “sale of a portion or all of Delta Bluffs.” ECF No. 19-1 at 1. The Agreement identifies Delta Bluffs as “a parcel of land.” Id. While Delta concedes that the Agreement does not define “portion, ” Delta argues that because “portion” is defined by the American Heritage College Dictionary as “[a] section or quantity within a larger thing; a part of a whole, ” the plain language of “a portion . . . of Delta Bluffs” describes a section of the real property of Delta Bluffs. ECF No. 26-1 at 7. Delta argues that because timber became a good when the contract for its sale was effectuated, it cannot be considered as a section of Delta Bluffs's real property, and therefore plaintiffs are not entitled to a portion of the profit from the sale of timber.

         Plaintiffs disagree, arguing that timber was part of the real property of Delta Bluffs at the time of the creation of the Agreement and as such, they are entitled to a portion of the sale of timber. They also respond that the sale of timber fits within the Agreement's definition of “profit, ” which is “proceeds from a sale . . . relating to transactions regarding the property (i.e. donations, etc.).” ECF No. 19-1 at 1. Plaintiffs go on to explain that the use of the word/abbreviation “etc.” means that there are essentially no limitations on the type ...


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