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Litchfield Plantation: E-mails tell of struggle to sell troubled property
By Charles Swenson
As the owners of Litchfield Plantation desperately looked for a buyer for their undeveloped property in the fall of 2010, they were running out of money. So they turned to one of their few sources of funds: the homeowners association.
The shareholders of the company that controlled the property got a resolution from the Litchfield Plantation Co. attorney allowing the company to borrow $50,000 from the Litchfield Plantation Association, which is funded by assessments on property owners. In exchange, the association would get a promissory note, one of six it held from the Litchfield Plantation Co. totaling nearly $1.5 million.
The loan was needed to keep the plantation solvent, according to the lawyer, Charles Nation. “You know the story,” he wrote to the shareholders in an e-mail.
The loan is among the items discussed in 40 pages of e-mail exchanges filed in U.S. District Court in Charleston as part of a suit by the former president of Resources Planning Corp., Allan Kidston, against the company’s three shareholders, who are the children of its founder, Donald Parsons.
Resources Planning held and managed the property owned by Parsons’ wife, Louise. Litchfield Plantation is one of the earliest planned residential developments on Waccamaw Neck, but in 40 years it has never approached its capacity, which was once about 800 dwellings.
Kidston was the president of Resources Planning for 31 years. He resigned in April. In May, he filed suit in state court seeking money he was owed for salary and benefits under a 2006 employment agreement. His annual salary under the agreement was $275,000.
The case was transferred to federal court, where the three shareholders – James A. Parsons, Donald H. Parsons Jr. and Sarah Parsons – asked that it be dismissed. They say the court lacks jurisdiction because they have never done business in the state. Sarah and James live in Connecticut. Donald Jr. lives in Colorado.
None of the siblings have managed or “made any decisions on behalf of the company,” they told the court.
In response, Kidston said he has over 500 pages of e-mails and other documents that show he was in contact with James Parsons regularly between 2005 and 2011. The brothers, “contrary to their sworn declaration to the court, were closely and fully involved with making decisions on matters concerning RPC and did indeed play a substantial role in the company’s management,” Kidston states in an affidavit.
As president and CEO, “I answered only to the Parsons,” he said.
Kidston asks for three times the compensation he is due plus actual damages and indemnification from tax liens. No amount is stated in his complaint, but in a 2010 e-mail to James Parsons, Kidston said he was owed over $1 million in unpaid and deferred salary and expenses.
The e-mails show that Kidston hoped to be paid from sales or loans made to the company. In a December 2009 e-mail, he tries to persuade James Parsons that a proposed $500,000 loan was a bad deal because it was structured as a sale so that the lender could skip the foreclosure process if the company defaulted. Kidston argued that the property was appraised at $1.2 million and that allowing the deal to go through would reduce Resources Planning’s assets.
“This structure is very disturbing because the L’field Plantation assets are the prime source of RPC’s repayment and the source to pay the obligations resting with RPC that are of the highest priority,” Kidston wrote, referring to his unpaid compensation.
Kidston’s compensation agreement included bonuses for paying down debt held by Louise Parsons and the Resources Planning shareholders, who are her step-children. At the time the agreement was signed the debt, secured by property in the plantation, was estimated at $19.1 million to Louise Parsons and $4.9 million to the shareholders, according to court documents.
“Each time the RPC mortgages are released on any L’field Plantation real estate,” Kidston wrote in the December 2009 e-mail to James Parsons, “the security for the mortgages we hold on L’field Plantation is being systematically eliminated.”
But James Parsons told Kidston that Litchfield Plantation Co. and Resources Planning were “in an absolute crisis mode just trying to survive on a week-to-week basis given the lack of cash flow from its business operations and a series of looming debt defaults.”
The $500,000 deal “is only a very short term patch to help stave off foreclosures,” Parsons wrote.
Scott Trotter, who was president of Litchfield Plantation Co. through a buyout agreement, was due to earn a commission on the sale. Kidston objected. “The $30,000 commission would go a very long way to pay the grounds crew, gate attendants and other essential bills necessary to keep L’field Plantation operating, particularly when Trotter has not paid association fees for property he owns,” Kidston wrote.
He told James Parsons that “Trotter has proven he is not motivated to sell our property to generate cash.”
Parsons replied that, “We are at the mercy of our lenders and our partners to help us work through this. Since we do not have the contacts or the credibility to secure debt or equity on our own at this point we must rely on those with a vested interest in helping us.”
The Parsonses argue in court documents that these exchanges, limited mainly to James, don’t support Kidston’s claim that they controlled Resources Planning. The shareholders said James took on that role because neither their step-mother nor anyone at Litchfield Plantation Co. would talk to Kidston. “He only acted as a liaison,” they say.
James Parsons also loaned Litchfield Plantation Co. $231,000 in 2009. In the motion to dismiss Kidston’s complaint he said he doesn’t expect to be paid back, but in e-mails with Kidston they discussed how that loan would be paid if a commercial tract was sold. If not, Kidston said the loan would be secured by “unencumbered real estate.”
The e-mails show they agreed to split any proceeds from the sale of Litchfield Plantation to repay Parsons’ loan and Kidston’s past due compensation.
The potential of a sale was raised in a March 2010 e-mail from James Parsons to Kidston. Scott Trotter and Logan Trotter, partners in Waverly Creek Realty, which had an exclusive sales and marketing agreement for Litchfield Plantation, said they expected an offer. “All of the other buyers … mentioned previously have apparently faded away,” Parsons wrote.
E-mails show that the sale was to the Ponderosa Group for $10 million in cash. That didn’t include repaying the homeowners association, but Jeff Van Treese, the lawyer for Resources Planning, wrote that he thought the buyer could assume the loans. Van Treese and Scott Trotter were the only two board members of the association at the time.
By May, Charles Nation, attorney for Litchfield Plantation Co., had prepared documents for a sale to close in a month. “This is a staccato like pace for any purchaser at this dollar level,” he wrote in an e-mail to the sellers and their representatives.
Kidston was not among the recipients, but he got a copy from James Parsons.
“We may need to increase the purchase price by the amount of the assumed [homeowners association] debt,” Nation noted.
The deal apparently did not go through, though James Parsons and Kidston were still talking about sharing the proceeds. “I am anticipating you and I will be paid in full from any transaction involving the sale of all of the Litchfield Plantation assets,” Kidston wrote. “You because the money you advanced to keep Litchfield Plantation alive and me for the payroll and related obligations due.”
Logan Trotter told Parsons in September 2010 that there were now four potential buyers. But there was a snag: Resources Planning had assigned mortgages to Kidston that dated to the creation of the Litchfield Plantation development in the early 1970s.
“I don’t know the outstanding loan amounts, but I hear it’s in the $110,000,000 range,” Trotter wrote. To sell the property would require Kidston’s consent. “This scenario has created a very chilling effect on our efforts.”
Trotter asked Parsons to talk with Kidston. “None of the other interested parties – Louise, Scotty, Jeff, the vendors nor the other creditors [–] are willing to negotiate with Allan on this matter nor do the other interested parties want his input,” he wrote.
Parsons said he would phone Kidston.
A month later, the issue of the mortgages assigned to Kidston were raised in an e-mail from Louise Parsons to her step-children. “The assignment of the mortgages to Allan Kidston has stopped all sales at Litchfield Plantation and prevented me from receiving a substantial amount of money. We have a third person looking, but he will not make an offer until the RPC mortgages go away.”
The final e-mail included in Kidston’s court filing was sent in November 2010 by him to James Parson to arrange a phone call to discuss the sale of the plantation.
Litchfield Plantation Co. was sold in April to John Miller of DeBordieu. The price was not disclosed, but Miller has said it was under $6 million.
Also in April, Kidston filed suit in state court demanding payment of the loans he was assigned. The balance was over $102 million. Litchfield Plantation Co. said the claims are barred by the statute of limitations and filed a counter complaint seeking sanctions for bringing a frivolous suit.
That case is also pending.