A Touch of Aggressiveness

Instilling the right attitude about family money in your family members requires a certain aggressiveness about using resources and financial devices. The January 2000 Louisiana Appeals Court decision in William Brockman v. Salt Lake Farm Partner

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ship et al. shows how one family thought creatively about using trusts to a practical end. And, despite the courtroom losses that it suffered, the family’s attitude toward using family money influenced others. Salt Lake Farm Partnership was a hunting club, formed as a corporation in the late 1970s when Travis Oliver purchased a 3,200-acre tract of land. Oliver assembled 10 other men, all avid hunters, to acquire the land and develop it for hunting. Each of the original members, including Ralph Brockman, put up $20,000; the club financed the balance of the $1.8 million purchase price. Sometime prior to 1982, Ralph Brockman transferred his share to a trust on behalf of his two sons and named his brother, William Brockman, trustee. In 1982, the Salt Lake corporation restructured as a partnership. In addition to hunting dues, each
partner was liable to make an annual capital contribution or capital call of up to $20,000; but, upon unanimous vote of the partners, a capital call of more than $20,000 could be required. On the club’s books, these contributions would be kept in a partner’s capital account. The Articles of Partnership stated that, if a partner failed to meet a capital call, “the Partnership shall liquidate that Partner’s interest.” Upon liquidation, the partner would get back 70 percent of his capital account, with the balance forfeited to the partnership. During the 1980s, Oliver purchased 80 acres of land to the north of the Salt Lake tract. Although

Oliver didn’t grant a lease or right-of-way to the club, he allowed members free use of his adjacent tract for ingress and egress. This became the main thoroughfare to the club’s property. Incidents in other business dealings between Brockman and Oliver were straining their relationship by the late 1980s. By 1991, some partners had withdrawn from Salt Lake, reducing the number of partners to seven. This was also when the club’s bank loan was due to expire so, the partners would have to refinance. In order to refinance, a $60,000 capital call was necessary. Final vote on the matter was set for a meeting in September 1991. Prior to the vote, Ralph Brockman called and sent memos to partners, expressing his dissatisfaction with the direction Salt Lake was taking. He wanted a formal, permanent right of way across the Oliver property as a precondition to voting for the refinancing. Oliver assured him this would be arranged. Neither Ralph nor William Brockman was able to attend the September 1991 meeting; after receiving official notice of the meeting, Ralph gave a written proxy to another friend and Salt Lake member. The friend cast the Brockman Trust’s vote in favor of the capital call, which passed unanimously. William Brockman received formal notice of the capital call on October 3, 1991; Ralph, who’d been traveling, received it a few days later. But Ralph wasn’t content with how things had gone while he’d been away. He felt that the lease Oliver offered the

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club for the access road didn’t meet his demand for a permanent right-of-way. Ralph offered to pay only $30,000 from the trust on the capital call. In November, Salt Lake offered Ralph $78,000 for the trust’s capital account. He declined the offer. Salt Lake terminated the Brockman Trust’s interest on December 11, 1991. William Brockman filed a lawsuit against Salt Lake, Oliver and several other members in January 1992. The trust sought 70 percent of its capital account and other expenses. Alternatively, on the theory that the termination was invalid, the trust asked for a judgment dissolving the Salt Lake partnership. The case went to trial, and through the testimony of the Brockmans, the Brockman Trust made the following arguments:

• Consent to the $60,000 capital call was invalid because a proxy had been granted by Ralph Brockman, who was
not the trustee.

• Consent was also invalid because the trust’s vote was specifically conditioned on acquiring a permanent rightof- way across the Oliver Tract.

• After the September 1991 meeting, Salt Lake did not promptly mail meeting minutes to the Brockman Trust, thus keeping it in the dark and denying it the ability to act more quickly to protect its interest.

• Salt Lake undervalued the Brockman Trust’s capital account.

Because Ralph had consistently voted the partnership shares that were owned by the trust, the trial court had a hard time accepting these rather sly points. It issued directed verdicts rejecting all the Brockmans’ claims. They appealed. The appeals court wasn’t much more sympathetic. It ruled that reasonable jurors would have inevitably concluded that William delegated legal voting authority to Ralph, and that Ralph therefore had the apparent authority either to cast this vote himself or grant a proxy to a trusted friend and partner. The appeals court did rule in favor of the Brockman
Trusts on one count. It wrote: Even though the trust failed to prove fiduciary breaches, intentional misdeeds and the
right to be reinstated into Salt Lake, it showed that upon termination it was owed 70 percent of its capital account. The trust introduced sufficient evidence to cast doubt on [Salt Lake]’s final calculation. So, the trust could make the case for a larger reimbursement from Salt Lake. Despite Ralph Brockman’s untenable claims, he had been smart and aggressive about putting his partnership shares in the trusts for his sons.

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