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WELLIN I - Original Claims

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Taylor McCarty

on 15 December 2017

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Transcript of WELLIN I - Original Claims

CONSTRUCTIVE FRAUD
ELEMENTS:
WELLIN v. WELLIN
WELLIN I
(
Peter, Ceth, aiding & abetting breach of fiduciary duty as to Mari
)
Existence of a fiduciary relationship;
Breach of duty by the fiduciary; and
Damages to the principal as a result of the breach of duty.
NEGLIGENT
MISREPRESENTATION
VIOLATION OF SC UNIFORM SECURITIES ACT,
(Peter Wellin)
UNJUST ENRICHMENT
BREACH OF CONTRACT
ACCOMPANIED BY FRAUDULENT ACT
RESCISSION OF 2013 GIFTS BASED ON MISTAKE OF FACT
(Peter, Ceth & Mari)
BREACH OF CONTRACT
(Peter)
REFORMATION OF PROMISSORY NOTE
Proper where equity requires
ELEMENTS:
CONSTRUCTIVE TRUST
APPROPRIATE WHERE:
Keith S. Wellin v. Wellin Children, South Dakota Trust Co., Friendship Partners, LP & Friendship Management, LLC

2:13-cv-01831
ELEMENTS:
Breach of Fiduciary Duty
PETER
EXISTENCE OF FIDUCIARY DUTY:
Was Keith’s agent;

Owed Keith the duties of care, loyalty, and good faith, as well as the duty to act in Keith’s best interests;

Keith reposed special trust and confidence in Peter.

Presumption of undue influence on the part of the agent, Peter, due to the confidential relationship in existence at the time of the Nov. 2009 transaction and Jan. 2013 gifts

BREACH OF FIDUCIARY DUTY:
Failed to safeguard Keith’s funds;

Failed to act in Keith’s best interests;

Failed to fully inform Keith of the impact that the Nov. 2009 transaction and Jan. 2013 gifts would have on Keith’s financial condition;

Failed to fully inform and made misrepresentations to Keith of the tax consequences of the Nov. 2009 transaction and the Jan. 2013 gifts;

Violated terms of 5 POAs executed in favor of Peter by Keith;

Mislead and took advantage of Keith's weakened mental state in Nov. 2009 and Jan. 2013;

Retained Keith’s funds for his own benefit;

Placed his own personal interests over Keith’s; and

Failed to reimburse Keith for Nov. 2009 transaction and Jan. 2013 gifts.

DAMAGES:
- All losses;

- Lost appreciation of BRKa holdings;

- Gift and income taxes incurred;

- Attorney’s fees

CETH
Dismissed by Judge Norton in Order - MJOP/MSJ
MARI
Individually, for aiding & abetting Peter's breach:
Individually, for aiding & abetting Ceth - Dismissed by Judge Norton in Order - MJOP/MSJ
• Knowingly participated in Peter’s breaches of duty by participating in the Nov. 2009 transaction;

• Knowingly participated in Peter’s breaches of duty by supporting, receiving, and retaining the Jan. 2013 gifts;

• Keith suffered financial loss due to Mari’s aiding and abetting in Peter’s breaches of duty.

ALLEGATIONS
FRAUD
False and material misrepresentation;
Known to be false or made with reckless disregard for its truth or falsity;
Made with the intent that the representation be acted upon;
Hearer’s ignorance of its falsity;
Hearer’s reliance on its truth;
Hearer’s right to rely thereon; and
Damages to the hearer as a result of his reliance on the misrepresentation.
Represented to Keith that the Nov. 2009 transaction was “tax advantaged” and in Keith’s best interest.

Represented to Keith that Keith had solvency to afford the Jan. 2013 gifts and their related tax consequences.

Knew these representations were untrue, or recklessly disregarded their truth or falsity when he made them.

Intended for Keith to rely on these statements by:
(1) Consenting to and executing documents to effect the Nov. 2009 transaction without question; and
(2) Making the Jan. 2013 gifts to Peter, Ceth & Mari.

Keith did not know that Peter’s statements were false;

Keith relied on the truth of Peter’s statements;

Keith had the right to rely on Peter’s statements due to the nature of their relationship, as agent and son;

Keith suffered Financial loss
ELEMENTS:
ALLEGATIONS:
False and material misrepresentation;
Pecuniary interest by the party making the statement;
Duty of care owed by the party making the statement to the hearer;
Failure to exercise due care by the party in making the false representation;
Hearer justifiably relief on the representation; and
Damages to the hearer as a result of his reliance on the misrepresentation.

Falsely represented that the Nov. 2009 transaction was tax advantaged;

Falsely represented that Keith had the solvency to afford the Jan. 2013 gifts and their tax consequences;

Had a pecuniary interest in making both representations to Keith;

Owed Keith a duty of care

Breached his duty of care in making the false representations to Keith;

Keith was justified in relying on Peter’s representations regarding the Nov. 2009 and the Jan. 2013 gifts;

Keith suffered financial loss as a result of his reliance on Peter’s false representations;

(Peter)
ELEMENTS:
ALLEGATIONS:
Existence of a contract;
Breach thereof; and
Damages caused by the breach

Keith executed 5 POAs in favor of Peter in 2006;

Each POA is a contract that created an agency relationship between Keith, the principal, and Peter, the agent.

Peter owed a duty to act in Keith’s best interests under these documents.

Peter breached each of the POAs by making false representations, making material omissions, and undertaking courses of conduct with respect to the Nov. 2009 transaction and Jan. 2013 gifts which were not in Keith’s best interests.

Keith suffered financial loss as a result of Peter’s breach of the POA.
(Peter)
ELEMENTS:
ALLEGATIONS:
Breach of Contract;
Fraudulent intent relating to the breach; and
Fraudulent act accompanying the breach
(Same breach of contract allegations as before)

Had a fraudulent intent when he breached each of the POAs

Acted fraudulently by:
(a) Representing to Keith that the 2009 Transaction was a tax advantaged transaction & in Keith’s best interest;
(b) Representing to Keith that Keith had the solvency to afford the Jan. 2013 gifts and their associated taxes;
(c) Failing to inform Keith about the financial consequences of the Jan. 2013 gifts.

Actions in connection with Nov. 2009 Transaction and the Jan. 2013 gifts were characterized by dishonesty in fact or unfair dealing.

Keith suffered financial loss as a result of Peter’s actions.
S.C. CODE § 35-1-101 et seq.

Dropped in Second Amended Complaint
(Peter)
ELEMENTS:
ALLEGATIONS:
False and material statement;
Knowledge of falsity or reckless disregard for the truth of the statement;
Reliance on the statement;
Hearer’s ignorance of the falsity of the statement; and
Damages to the hearer as a result of his reliance on the false statement
Falsely represented to Keith that the Nov. 2009 transaction was “tax advantaged.”

Falsely represented to Keith that Keith had the solvency to afford the Jan. 2013 gifts and the tax consequences of them.

Had knowledge of the falsity of his statement, or recklessly disregard for the truth or falsity of his statement.

Misrepresentations were significant and material.

Keith was ignorant of the falsity of Peter’s statements.
Keith had a right to rely on, and did rely on the truth of the representations made by Peter.

These misrepresentations led to Keith’s financial damage.
Dismissed by Judge Norton in Order - MJOP / MSJ
ELEMENTS:
ALLEGATIONS:
Non-gratuitous benefit conferred by plaintiff upon defendant;
Realization of that benefit by defendant; and
Retention of the benefit by defendant in circumstances that make it inequitable to retain without paying for value of the benefit.
Obtained & wrongfully retained money and securities belonging to Keith.

Have been unjustly enriched by retention of these funds.

Keith suffered financial loss as a result of Defendants’ retention of Keith’s securities from the Nov. 2009 transaction and Keith’s money from the Jan. 2013 gifts.

ALLEGATIONS:
Equity requires; or
To prevent unjust enrichment where:
(a) Title to property is improperly retained, or
(b) The retention of property by another would be unconscionable.
Peter abused his confidential relationship as Keith’s Attorney-in-Fact by inducing Keith to participate in the Nov. 2009 transaction and make the Jan. 2013 gifts.

Defendants obtained Keith’s funds under the Nov. 2009 transaction and the Jan. 2013 gifts through bad faith, abuse of confidence, and/or breaches of their fiduciary duties to Keith.

Defendants have retained and been unjustly enriched by the assets obtained through the Nov. 2009 transaction and Jan. 2013 gifts.

Peter and Ceth’s abuse of confidence with respect to Keith’s property makes it unconscionable for Defendants to retain Keith’s property transferred under the Nov. 2009 transaction or the Jan. 2013 gifts.

Keith suffered financial loss due to Defendants’ retention of his funds.
APPOINTMENT OF RECEIVER
ALLEGATIONS:
Apparent right to the property which is the subject of the action;
Property is in the possession of an adverse party; and
Property is in danger of being lost, materially injured, or impaired.
Keith held a security interest in the assets he transferred to the 2009 Trust – namely, his interest in Friendship Partners, LP.

These assets are held by the 2009 Trust, at the direction of its Trustees, Peter, Ceth, Mari, and South Dakota Trust Co.

The Trustees of the 2009 Trust could at any time sell or encumber the interest in Friendship Partners, LP, causing irreparable harm to Keith.

Keith also has a right to a substantial portion of the BRKa holdings of Defendant Friendship Partners, LP, controlled by Defendant, Friendship Management, LLC.

Friendship Partners, LP, through its general partner, Friendship Management, LLC, could cause the sale or encumbrance of its BRKa holdings.

Such a sale would cause irreparable harm to Keith.
Thus, the assets are in danger of being lost, material injured or impaired.

Therefore, appointment of a receiver is proper.
(Peter, Ceth, Mari King
& South Dakota Trust Co.)
ALLEGATIONS:
Keith was fraudulently induced to consent to the Nov. 2009 transaction.

Terms of the Promissory Note issued by the 2009 Trust to Keith’s Revocable Trust were far below fair market value when it was signed.

Appraisal of Keith’s limited partnership interest in Friendship Partners, LP was significantly undervalued at the time the Nov. 2009 transaction was executed.
4) Keith did not understand the inequity of the terms of the Note or the impact of the Nov. 2009 transaction on his finances.

Promissory Note should be reformed to reflect the fair market value of the interest transferred and to adequately provide terms for duration, valuation, and repayment.
MOTION FOR
TEMPORARY RESTRAINING ORDER
Granted July 3, 2013
by Judge Norton

Extended until briefing and hearing on Motion for Preliminary Injunction completed
(Peter)
(All Defendants)
Delaware Action
Keith S. Wellin v. Wellin Children, South Dakota Trust Co., Friendship Partners, LP & Friendship Management LLC
Declaratory Judgment:
Ownership of Limited Partnership & Default on Promissory Note
Breach of
Limited Partnership Agreement
(LLC, Peter, Ceth & Mari)
Breach of Fiduciary Duty:
Limited Partnership Agreement
(LLC, Peter, Ceth & Mari)
Elements:
Existence of fiduciary relationship
Breach of duty by the fiduciary; and
Damages to the principal as a result of the breach of duty.

Allegations:
LLC, as General Partner of Friendship Partners, LP, owes fiduciary duties to Friendship Partners, LP as well as its limited partners.

Ceth, as General Manager of the LLC, owes the same duties.

Peter and Mari, as members of the LLC who actively participate in its decision-making, also owe fiduciary duties to Friendship Partners, LP as well as its limited partners.

Ceth, Peter & Mari acted in concert in controlling the LP.

The Nov. 2009 Transaction, along with the LLC, Ceth, Peter & Mari's participation in it, constitutes a breach of fiduciary duty to Keith.

These breaches caused Keith irreparable harm and significant damage.
Aiding & Abetting Breach of Fiduciary Duty:
Limited Partnership Agreement
(Peter & Mari)
Allegations:
Civil Conspiracy
(Peter, Ceth & Mari)
Allegations:
Peter, Ceth & Mari devised and agreed to induce Keith to enter the Nov. 2009 Transaction.

Purpose of plan was to enhance their own wealth and to benefic financially.

Peter, Ceth & Mari made false representations to KEith by misrepresenting or omitting material information about the consequences of the Nov. 2009 Transaction.

Keith was damaged by these actions.
Combination of two or more persons;
For the purpose of injuring another;
Which causes special damages
Elements:
Statutory removal of General Partner under Delaware Law
(LLC)
Breach of
Covenant of Good Faith
and Fair Dealing
(LLC, Peter, Ceth & Mari)
Existence of fiduciary relationship;
Assisting another in breach of duty; and
Damages to principal
Elements:
The LLC and Ceth, as General Manager of the LLC, owe fiduciary duties to Friendship Partners, LP and to Keith.

The Nov. 2009 Transaction constitutes a breach of fiduciary duty by the LLC and Ceth.

Peter knowingly promoted, facilitated, aided or abetted the LLC and Ceth's breach of duty by traveling to SC and inducing Keith to participate in the Nov. 2009 Transaction.

Mari actively participated in the Nov. 2009 Transaction.

These actions caused Keith irreparable harm, and the Nov. 2009 Transaction should be void.
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