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Terra Land Services, Inc. v. McIntyre

Court of Appeals of Arkansas, Division I

February 20, 2019

TERRA LAND SERVICES, INC., Samantha Smith, and Jim Tom Bell, Appellants
Jerry MCINTYRE and McVesting, LLC., Appellees

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[Copyrighted Material Omitted]

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         Ogles Law Firm, P.A., Jacksonville, by: John Ogles, for appellants.

         Leigh Law, PLLC, by: Victoria Leigh; and Walas Law Firm, PLLC, by: Breean Walas, Little Rock, for appellees.


         DAVID M. GLOVER, Judge

          The issue in this case is whether the parties reached a full and complete settlement agreement of their claims. The Faulkner County Circuit Court determined the parties did and entered an order compelling execution of the settlement agreement. On appeal, appellants argue that the court’s determination is clearly erroneous, is a misapplication of Arkansas contract law relating to settlement agreements, and should be reversed and remanded. We agree.

          I. Litigation History

          In 2008, appellant Terra Land Services, Inc. ("Terra"), whose shareholders were Samantha Smith ("Smith") and Jim Tom Bell ("Bell"),[1] entered into a partnership with McVesting, LLC ("McVesting"), whose sole member was Jerry McIntyre ("McIntyre"), to purchase and lease mineral interests. The parties agreed McVesting

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would own legal title to the property the partnership purchased.

          In August 2012, McIntyre informed Terra he no longer recognized Terra’s ownership interest in the partnership; Terra sued both McIntyre and McVesting for breach of the partnership agreement. In an amended complaint, Terra alleged McVesting’s "Articles of Organization" were amended in September 2008 to add Terra as a member of McVesting (with Terra owning 70% and McIntyre owning 30%); asserted McIntyre had assumed possession of all McVesting’s books, records, funds, and other property in contravention of Terra’s rights as majority owner; and requested a full accounting and damages for any monetary losses due to McIntyre’s actions. In July 2013, the circuit court enjoined McIntyre and McVesting from disposing of any assets in which any of the parties had a beneficial interest. In September 2014, McIntyre and McVesting filed a counterclaim against Terra and a third-party complaint against Smith and Bell individually alleging Terra, Smith, and Bell had breached the partnership agreement with McIntyre and McVesting, had conspired to defraud McIntyre and McVesting, had converted McIntyre and McVesting’s property, and had committed fraud.

          In the summer of 2016, the circuit court ordered McVesting to execute authorizations to obtain its business records regarding receipt and payment of funds and payment of expenses and ordered McIntyre to provide Terra with any information needed to access McVesting’s accounts. The circuit court appointed Tom Dailey as special master and entered a separate order (1) directing McIntyre and McVesting to provide Dailey with McVesting’s tax returns and related information since its inception, as well as any written document relating to the organization and governance of McVesting; (2) instructing Terra to make its best effort to obtain all bank records relating to McVesting; and (3) ordering the parties to cooperate with Dailey in obtaining any other necessary information or in having any telephone conferences. The circuit court’s order also dissolved McVesting as of August 12, 2016, subject to rescission or modification for good cause shown by either party or Dailey if the circuit court determined a different termination date was proved or agreed to by the parties.

          In March 2017, Dailey provided his determinations to the circuit court. In his report, Dailey found McVesting never had an operating agreement; he was unable to value the property (mineral) interests; there was approximately $ 337,225.55 in cash and receivables to be divided; the income and tax-liability allocations between Terra and McIntyre had varied over the years and could not be reconciled in the absence of an operating agreement; and in Dailey’s opinion, the only way Terra could establish entitlement to more than 50% of McVesting was to establish McVesting originally had three members and Terra succeeded two of those members.

          In October 2017, Terra filed a second amended complaint adding Martha Niece, McVesting’s accountant, as a defendant.[2] The second amended complaint alleged that Smith, Bell, ...

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