The Business Court considers a variety of claims arising out of a family campground business in Bohn v. Black, 2019 NCBC 34.
The Black Forest Family Camping Resort, Inc., a family business, was supposed to be a place where campers in Transylvania County could come to spend time with their families. It operated for over 20 years until one day the Black Family experienced a rift, causing the filing of this lawsuit in the North Carolina Business Court. Judge Conrad considered a variety of claims at summary judgment involving the break-up of a family business that operated with no formal contracts and communal family fund.
A takeaway: The Court was looking for more business formality to substantiate the plaintiffs’ claims rather than personal relationships.
In 1992, Judith Black and her late husband moved to Transylvania County to open a campground as a family business. The family members that operated the business were Judith, her three daughters – Jeanne, Nancy, and Laurie – and their spouses. Judith allegedly promised the other family members that they could be co-owners of the business with her. In reliance on this promise, the family members worked for the family campground without pay for a number of years. The family members also contributed financially to an account controlled solely by Judith and used for family and campground expenditures (“family general fund”).
The family campground operated as an unincorporated business from 1995 until 2004 when Judith incorporated the business. Judith is the corporation’s only officer and shareholder and the real property on which the campground sits is in Judith’s name only.
The plaintiffs, Laurie and her husband Matt Bohn, allege they were integral in the operation of the campground, including working nights and weekends without pay. They also lived on the campground property in a modular home, which according to the plaintiffs, was a promise that Judith made to induce them to live and work there. There is a question as to whether the funds from the family general fund were used to pay for the house.
In 2016, the plaintiffs had a falling out with Judith and the rest of the family when the family allegedly issued an ultimatum: either Matt would agree to turn over his expected Social Security benefits to the family general fund or the Bohns would be forced to lose their home and leave the campground. The plaintiffs refused. In May 2017, Judith sent a letter demanding rent and stating that she intended to block the Bohns from accessing their home. Litigation resulted when Laurie and Matt Bohn, plaintiffs, sued Judith, other members of Laurie’s family, and the Black Forest Family Camping Resort, the defendants. The complaint alleged the following causes of action: breach of fiduciary duty, undue influence, unjust enrichment, equitable estoppel, breaches of contract, de facto partnership, and declaratory judgment. The plaintiffs sought ownership of the home, one-quarter of the campground business, and the real estate associated with both. The Court considered this case on cross motions for summary judgment.
De Facto Partnership: the plaintiffs argue that the campground business is a partnership based on Judith’s alleged promise that each of her daughters would be co-owners of the campground. In considering this issue, the Court held that even though no formal agreement is required for a partnership, co-ownership and the sharing of any actual profits are indispensable requisites for a partnership. The Court held that the indispensable requisite of co-ownership of the business is lacking – the campground business is a formally organized corporation and not a partnership, Judith is the sole shareholder of the business, no one filed a state or federal income tax return identifying the campground as a partnership, Laurie never reported income of any kind from the campground on her tax returns, Laurie never exercised independent judgment or control over the campground business, and Laurie never controlled the money of the campground business. Therefore, the Court granted summary judgment in favor of the defendants.
Breach of fiduciary duty: As the Court explained, “The relationship between Judith, her children, and the campground defies easy definition.” Therefore, a jury should decide whether a fiduciary relationship existed and whether it was breached. The Court also questioned whether the plaintiffs could provide any damages as a result of an alleged breach and whether the statute of limitations would bar this claim. Thus, the Court denied both motions for summary judgment.
Undue influence: the plaintiffs argue that Judith used her strong will and intimidation to coerce them into paying her large sums of money over the past two decades. The Court held that the key to proving undue influence is showing that the victim is in a physical or mental state that renders him or her subject to the coercive influence of another. Here, the Court did not find the plaintiffs, who were college graduates with multiple jobs outside of the campground, as physically or mentally weak. The Court again granted defendants’ motion for summary judgment.
Equitable estoppel: the Court held that North Carolina does not recognize equitable estoppel as an affirmative cause of action so summary judgment was granted in favor of defendants.
Unjust Enrichment: the plaintiffs base this claim on the fact that they worked at the campground without pay and contributed financially to the business. The key with an unjust enrichment claim is that the evidence must show that the property or benefits were conferred on a defendant under circumstances which give rise to a legal or equitable obligation on the part of the defendant to account for the benefits owed. The Court held that the allegation that Judith induced the plaintiffs to improve her land and business was sufficient to withstand summary judgment.
Contract claims: the plaintiffs allege that they loaned Judith money for the campground, which she admitted she failed to repay in her deposition. The Court denied summary judgment for the plaintiffs because the loans were given without specifying a time for repayment. The plaintiffs also allege that Judith promised to provide two vehicles in exchange for labor and money to the campground. The Court denied defendants’ motion for summary judgment.
In addition to the rulings mentioned above, the Court denied summary judgment on the plaintiffs’ request for a declaratory judgment additional remedies, including a request for an accounting, receivership, a constructive trust, and a permanent injunction. The resolution of these requests in large part depends on the resolution of the unjust enrichment claim, so the Court denied the summary judgment motions.