Partnerships – Joint Venture – Real Property – Purchase & Sale

Even though plaintiffs have not alleged that they agreed to share in the losses of their partnership/joint venture with defendant Barfield, they have alleged that they agreed to be partners in the buying, holding, operation and sale of real property, and to split profits and share proceeds. At the judgment-on-the-pleadings stage, plaintiffs’ allegations are sufficient to allege a partnership or joint venture.

The court denies defendants’ motion for judgment on the pleadings.

Allegations

When plaintiff Reason’s Bladen County properties were being foreclosed upon, he turned to his aunt and uncle (plaintiffs Jimmy and Cathy Sills) and his father’s friend, defendant Barfield, who was a real estate developer. The parties first agreed to create a limited liability company but later agreed to operate under the same terms with Barfield’s company, defendant Market Crossing, LLC, serving as their LLC

Pursuant to an oral agreement, the Sills made bids on the properties and deposited earnest money in excess of $50,000. Plaintiffs transferred the winning bids and earnest money deposits to Market Crossing. The Sills have been reimbursed only $25,000.

In accordance with the agreement, Market Crossing sold two of the properties to the Sills for $5,000 more each than the property’s bid price.

However, the final property was a motel. For a time, Reason and Barfield operated the motel, with Barfield handling the money and Reason performing services. Barfield then sold the motel and has not shared with plaintiffs any profits or sale proceeds.

Discussion

Plaintiffs allege that they and Barfield “entered into an oral agreement to create and operate a business that would purchase, hold, operate, manage, and sell [certain] real property” and that the parties “agreed they would split any profits and share any proceeds from the LLC’s business based on the percentage of their membership interests.” While it will be important at a later stage for plaintiffs to present evidence that the parties’ agreement was not limited to sharing only the upside of their venture, at this early stage of the case, plaintiffs have adequately met this pleading requirement.

Moving to the requirement that plaintiffs plead that the parties shared control and that each co-adventurer acted as an agent of the others, plaintiffs allege that they entered into an oral agreement with Barfield to be “partners and joint owners and [to] have [an] interest in the Properties through their ownership of or membership in the joint venture.” They called their relationship a partnership.

In addition, plaintiffs allege the existence of a division of labor in furtherance of their business plan. While Barfield was to secure financing, plaintiffs were responsible for securing the winning bids. Plaintiffs also engaged an attorney to create the LLC, and they engaged a real estate agent whose appraisal of the motel they shared with Barfield. In turn, Barfield included plaintiffs in meetings with a financier.

But plaintiffs argue that, when it came to the motel, they had no equal right of control. They assert that Barfield had “complete legal control” and that he “held all the cards—all the financial and legal power over Plaintiffs with regard to the parties’ business venture and the Langston Motel Property.”

The allegations of the complaint describe the relationship between the parties as it evolved, including Barfield’s alleged misrepresentations and breach of fiduciary duty. Plaintiffs have sufficiently pled that the parties agreed to act as each other’s agent and divide responsibilities but to share ownership and control.

The complaint alleges that Barfield reassured and promised plaintiffs that “the parties’ agreement had not changed, and that each of them would share the profits and proceeds of the business venture as originally planned and agreed.” It is this promise that plaintiffs claim was breached. Nothing more is required to state a claim for breach of contract.

In the alternative, plaintiffs adequately allege that they did not act gratuitously when they secured the bid for the motel, paid the required earnest money drawn from the Sills’ joint bank account, and then assigned the bids to Market Crossing. Plaintiffs assert that they conferred a “specific and measurable benefit” on defendants, which defendants voluntarily accepted, and that plaintiffs “reasonably expected good and valuable consideration” in return. Plaintiffs claim that defendants have failed to pay that consideration and that plaintiffs have been damaged as a result. The allegations are sufficient to state a claim in quantum meruit.

Motion denied.

Reason v. Barfield (Lawyers Weekly No. 012-025-23, 18 pp.) (Julianna Theall Earp, J.) J.D. Hensarling and Ian Richardson for plaintiffs; Thomas Segars, Jeremy Falcone and Scottie Forbes Lee for defendants. 2023 NCBC 25