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Wallop Canyon Ranch, LLC v. Goodwyn

Supreme Court of Wyoming

June 9, 2015

WALLOP CANYON RANCH, LLC, a Wyoming Limited Liability Company; Appellant (Defendant),
v.
SCOTT MADISON GOODWYN, individually, as a Limited Partner, for himself and derivatively on behalf of the WALLOP FAMILY LIMITED PARTNERSHIP, a Wyoming Limited Partnership, Appellee (Plaintiff). SCOTT MADISON GOODWYN, individually, as a Limited Partner, for himself and derivatively on behalf of the WALLOP FAMILY LIMITED PARTNERSHIP, a Wyoming Limited Partnership, Appellant (Plaintiff),
v.
PAUL STEBBINS WALLOP AS PERSONAL REPRESENTATIVE ON BEHALF OF THE ESTATE OF MALCOLM WALLOP, deceased; PAULSTEBBINS WALLOP AS SUCCESSOR TRUSTEE UNDER THE MALCOLM WALLOP REVOCABLE TRUST UNDER AGREEMENT DATED JANUARY 2, 2008; PAUL STEBBINS WALLOP, individually; WALLOP CANYON RANCH, LLC, a Wyoming Limited Liability Company; WALLOP FAMILY LIMITED PARTNERSHIP, a Wyoming Limited Partnership, Appellees (Defendants).

Appeal from the District Court of Sheridan County The Honorable John G. Fenn, Judge

Representing Wallop Canyon Ranch, LLC in Case No. S-14-0139, and all Appellees in Case No. S-14-0140 except the Wallop Limited Partnership: Anthony T. Wendtland of Wendtland & Wendtland, LLP, Sheridan, Wyoming.

Representing Scott Madison Goodwyn: S. Joseph Darrah of Darrah Law Office, P.C., Powell, Wyoming; Daniel B. Frank of Frank Law Office, P.C., Cheyenne, Wyoming. Argument by Mr. Darrah.

Before DAVIS and FOX, JJ., and TYLER, SULLINS, and BROOKS, DJJ.

PER CURIAM.

[¶1] In 1992, Malcolm Wallop and French Wallop created an estate plan with the intention of owning and operating the Canyon Ranch and establishing a means of transferring ownership to their respective children. Central to the estate plan is the Wallop Family Limited Partnership (WFLP), a Wyoming limited partnership, which owns and operates the Canyon Ranch. Also as part of this estate planning, they formed Wallop Canyon Ranch, LLC (WCR), a Wyoming limited liability company, mainly to serve as the general partner of the WFLP.

[¶2] Scott Goodwyn, individually, as a limited partner in the WFLP and derivatively on behalf of the WFLP, sued Malcolm Wallop, Paul Stebbins Wallop, WCR, the WFLP, Oliver Matthew Wallop, Amy Wallop Mann, and Malcolm Moncrieffe Wallop, alleging various breaches in the ownership, operation, and management of the WFLP.

[¶3] After a bench trial, the district court found generally in favor of Goodwyn on his claims relating to gifts made to him and other limited partners, and adjusted a loan interest rate. It found generally against Goodwyn on his claims of breach of fiduciary duties by certain defendants. The district court also determined that the gifting issues upon which Goodwyn prevailed were derivative claims, and it held that Goodwyn was entitled to reasonable attorney's fees relating to the derivative claims pursuant to Wyo. Stat. Ann. § 17-14-1104.

[¶4] In Docket No. S-14-0139, WCR challenges the basis of the award of attorney's fees.

[¶5] In Docket No. S-14-0140, Goodwyn challenges the district court's findings and conclusions ultimately denying his claims of breach of fiduciary duties by certain defendants.

[¶6] We find no error and affirm.

ISSUES

[¶7] In Docket No. S-14-0139, WCR presents the following issue:

Did the trial court err when it concluded that [Goodwyn] had actually prevailed and successfully recovered upon a derivative claim at trial that would qualify him to recover attorney's fees and costs for this case under W.S. § 17-14-1104?

[¶8] In Docket No. S-14-0140, Goodwyn presents the issues as follows:

A. The district court erred in interpreting the plain language of the Certificate and Agreement of Wallop Family Limited Partnership and went outside the four corners of the document when it found the Judgment and Divorce Decree equivalent to a voluntary marital partition settlement agreement.
B. The district court erred when it found [Goodwyn] must pierce the corporate veil of WCR, LLC in order to impose liability for fiduciary duty breaches by Malcolm and Paul Wallop.
C. Malcolm and Paul Wallop engaged in diversion of corporate opportunities through the use of [Canyon Ranch Recreation, LLC (CRR)] and Elk Rock Companies.
D. The district court erred in finding that [Goodwyn's] evidence of diversion of corporate opportunity was "too speculative."

FACTS

Wallop Family Limited Partnership – Canyon Ranch

[¶9] Malcolm and French were married in May 1984. Malcolm has four children from a prior marriage: Paul, Oliver, Amy, and Malcolm M.; and French has a son from a prior marriage: Scott.[1]

[¶10] In 1992, Malcolm and French created an estate plan with the intention of owning and operating their most significant asset, the Canyon Ranch, [2] and eventually to pass its ownership and operation to their Children. Among other things, the estate plan included the Certificate and Agreement of Wallop Family Limited Partnership (WFLP Agreement), executed by Malcolm and French on December 31, 1992. The WFLP Agreement led to the formation of the WFLP, a Wyoming limited partnership, which owns and operates the Canyon Ranch.

[¶11] Upon creation of the WFLP, Malcolm and French also formed WCR, a Wyoming limited liability company, to serve as the general partner of the WFLP. WCR received a two percent ownership interest in WFLP. Malcolm and French managed WCR. The initial members of the WFLP were Malcolm (49% ownership), French (49% ownership), and WCR (2% ownership). To begin implementing their estate plan's goal of transferring ownership of the Canyon Ranch, beginning in December 1995, Malcolm and French began gifting percentages of their respective WFLP ownership interests to their Children.[3]

[¶12] In April 2000, Malcolm filed for divorce against French. The Judgment and Decree of Divorce (Decree) was entered on August 13, 2002. The Decree awarded Malcolm all of French's interest in the WFLP and the WCR. This Court affirmed these awards to Malcolm in Wallop v. Wallop, 2004 WY 46, ¶¶ 32, 35, 88 P.3d 1022, 1032 (Wyo. 2004). Accordingly, French assigned to Malcolm her remaining limited partnership interests in the WFLP, as well as her remaining interests in WCR.

[¶13] Next, Paul purchased a 50% interest in WCR from Malcolm. Malcolm (50% owner of WCR) and Paul (50% owner of WCR) then became the managing members of WCR. After Malcolm passed away in September 2011, Paul, as 50% owner of WCR and also as Trustee of the Malcolm Wallop Revocable Trust, became the sole managing member of WCR.

[¶14] The primary asset of the WFLP is the Canyon Ranch (Ranch). At times, Malcolm and Paul made contributions to the WFLP for the operation of the Ranch. Also, to pay debts and provide additional income to the Ranch, the WFLP sold off parcels of its land. As of May 2011, the Ranch included approximately 2, 860 acres.

[¶15] Historically, the Ranch has been used for various outdoor recreational activities and ranching operations. After the WFLP was established, the Ranch underwent several improvements, including construction of a lodge to provide guest accommodations. The Ranch and associated lodge provided paid recreational activities for guests. Over time, the WFLP has entered into various use agreements for purposes of using the Ranch for game bird hunting, big ga me hunting, livestock grazing, a gun club, and other recreational purposes. Paul and Malcolm, collectively and individually, owned or controlled entities that entered into certain of these use agreements with the WFLP.

[¶16] In March 2005, Paul offered to buy Goodwyn's interest in the WFLP. Goodwyn initially expressed interest in selling his share in the WFLP, but he first sought to have his interests determined. After investigating the scope and value of his interests in the WFLP, pursuing both individual claims and derivative claims on behalf of the WFLP, Goodwyn filed suit alleging accounting discrepancies in the WFLP and mismanagement of the WFLP by Malcolm and Paul.

Federal Court case

[¶17] Goodwyn first filed suit against Malcolm, Paul, and the WCR (Federal Defendants) in the United States District Court for the District of Wyoming on March 31, 2009. The federal court case sought relief for Goodwyn, individually, and also based upon derivative claims on behalf of the WFLP. The Federal Defendants moved to dismiss the federal action, claiming that Goodwyn's claims were derivative in nature, thus making WFLP an indispensable party under F.R.C.P. 19. The federal court agreed and determined that the WFLP must be joined as a party. In so ruling, diversity jurisdiction was destroyed, depriving the federal court of subject matter jurisdiction, for which dismissal was granted.

State Court case

[¶18] Goodwyn then filed his case in the district court against Malcolm;[4] Paul (individually, and as Personal Representative on behalf of the Estate of Malcolm Wallop, and as Successor Trustee under the Malcolm Wallop Revocable Trust); WCR; the WFLP;[5] and Oliver, Amy, and Malcolm M. (as limited partners in the WFLP).[6]Goodwyn's claims against these defendants (Wallop Defendants) relate to the ownership, operation, and management of the WFLP.[7] Goodwyn asserted claims for breach of fiduciary duty, breach of contract, breach of the covenant of good faith and fair dealing, and for an accounting. He also claimed that Malcolm had "rendered" a 1998 gift to all of the children during the divorce, and that the interest booked as due on loans by partners Paul and Malcolm to the partnership improperly adjusted annually instead of being set at the date of the loan.

[¶19] The district court held a five-day bench trial. At trial, Goodwyn sought a determination of his and the other limited partners' respective ownership interests in the WFLP; sought a determination regarding the effect of the transfer of French's interests in the WFLP to Malcolm; and claimed that the WCR, Malcolm, and Paul mismanaged the WFLP to the detriment of the limited partners. The district court found generally in favor of Goodwyn on his claims relating to the gifting issues and the adjustment of the loan interest rate, [8] and generally against Goodwyn on his claims of breach of fiduciary duties. The district court found that the Wallop Defendants, individually or collectively, did not breach any fiduciary duties, mismanage WFLP property, or convert WFLP property.

[¶20] After trial, Goodwyn sought an award of attorney's fees and costs. The Wallop Defendants argued that Goodwyn did not prevail upon any claims for which he should receive an award of attorney's fees. The district court held a hearing regarding attorney's fees and costs, determined that Goodwyn prevailed at trial upon derivative claims, and pursuant to Wyo. Stat. Ann. § 17-14-1104, it awarded Goodwyn reasonable attorney's fees and costs.

STANDARD OF REVIEW

[¶21] Following a bench trial, this court reviews a district court's findings and conclusions using a clearly erroneous standard for the factual findings and a de novo standard for the conclusions of law. Piroschak v. Whelan, 2005 WY 26, ¶ 7, 106 P.3d 887, 890 (Wyo. 2005) (citing Hansuld v. Lariat Diesel Corp., 2003 WY 165, ¶ 13, 81 P.3d 215, 218 (Wyo. 2003) and Rennard v. Vollmar, 977 P.2d 1277, 1279 (Wyo. 1999)).

The factual findings of a judge are not entitled to the limited review afforded a jury verdict. While the findings are presumptively correct, the appellate court may examine all of the properly admissible evidence in the record. Due regard is given to the opportunity of the trial judge to assess the credibility of the witnesses, and our review does not entail re-weighing disputed evidence. Findings of fact will not be set aside unless they are clearly erroneous. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.

Piroschak, ¶ 7, 106 P.3d at 890. Findings may not be set aside because we would have reached a different result. Harber v. Jensen, 2004 WY 104, ¶ 7, 97 P.3d 57, 60 (Wyo. 2004). Further,

we assume that the evidence of the prevailing party below is true and give that party every reasonable inference that can fairly and reasonably be drawn from it. We do not substitute ourselves for the trial court as a finder of facts; instead, we defer to those findings unless they are unsupported by the record or erroneous as a matter of law.
Id. (quotation marks omitted) (some citations omitted).

Pennant Serv. Co. v. True Oil Co., LLC, 2011 WY 40, ¶ 7, 249 P.3d 698, 703 (Wyo. 2011) (quoting Hofstad v. Christie, 2010 WY 134, ...


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