William Penn Partnership V Saliba

13 A.3d 749 (2011)

Facts

Saliba (P), Ksebe (P), and Hoyt each owned a one-sixth interest in Del Bay. The William Penn Partnership (D) owned the remaining one half interest in Del Bay. Bill Lingo, Bryce Lingo, and their mother, Margaret, each owns a one-third interest in the partnership. Bryce and Bill are its managing partners. Del Bay was formed to construct a motel on land owned and contributed to Del Bay by Ksebe's (P) now-deceased husband. Del Bay also received capital contributions from the William Penn Partnership (D), Hoyt, and Saliba (P). They built the Beacon Motel which generated a net income stream of approximately $250,000 for Del Bay. Del Bay converted to a Delaware LLC pursuant to an Operating Agreement. Ownership remained the same. Under the LLC Operating Agreement, 'all decisions and approvals of the members' required a vote of two-thirds of the interests held by the members. The Operating Agreement does not expressly eliminate any fiduciary duties. The Lingos were the managers. Del Bay had a first right of refusal on any member selling their membership shares. Ps had a falling out with the Lingos (Ds). Ds received two offers to purchase the hotel. Both of which they declined and both of which were never communicated to Ps. Ds then offered to sell the Motel to JGT. J.G. Townsend Jr. & Co. is a Delaware Subchapter S corporation with its principal place of business in Georgetown, Delaware. JGT is a landholdings and agricultural company. The Lingos (Ds), together with their two younger brothers, collectively own 40% of JGT and form a majority of its board of directors. The Lingos (Ds) serve on the JGT board of directors, and Bryce is the Chairman. Ps were kept out of the loop. Hoyt was informed. Ps suddenly found sales contracts in their mailboxes The contract listed the Lingos (Ds) and or their 'assigns' as purchasers, and indicated a purchase price of $6 million. The contract indicated that settlement 'shall be completed' on or before June 30, 2003. Ps wrote Hoyt expressing an interest to purchase Hoyt's membership for $1 million and the Lingos' combined interest for $3 million. Ds telephoned Ps’ lawyer and stated they would sell but it had to be by June 30th. They never told the attorney that the Operating Agreement had superseded the Articles of Partnership referred to in his letter, or that JGT was considering purchasing the property. Also, the June 30th date was a lie as JGT had until April 2004 to benefit from the exchange. Hoyt informed Ds that Ps' offer was superior because it included an assumption of the mortgage on the property. Ds then agreed to assume the mortgage. Ds nor Hoyt ever communicated this information to Ps or their attorney. Ds convinced Hoyt to sign their contract immediately so they could present it to the JGT board. Hoyt signed it. No one contacted Ps. The JGT board formally approved the purchase of the Beacon Motel. Ds assigned their rights to purchase the property to JGT. Ps and their attorney learned of the sale. They objected. At the closing, Bill Lingo (D) signed a Del Bay resolution, falsely stating that at a special June 30 meeting the members of Del Bay 'unanimously' authorized the sale of the Beacon Motel. Ps filed an action for breach of fiduciary duty against the managers of Del Bay Associates, LLC. The Chancellor issued a telephonic ruling holding that Ds failed to meet their burden of establishing the entire fairness of the sale. Ds appealed.