SWYERS V. ALLEN FAMILY PARTNERSHIP #1
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In this case, the Supreme Court of Kentucky addressed a dispute over the division of proceeds from the sale of a commercial property. The parties involved were business partners who had formed an LLC to manage the property. One of the partners, Allen, had previously asked his partners to sell their interests in the LLC to his children to resolve a tax problem. The partners agreed, but wanted to ensure they would not forfeit potential future profits from the property sale. They decided that proceeds from a future sale of the building would be split according to their ownership interests up to $8 million, and any proceeds above $8 million would be divided equally among them.
In 2017, the property sold for $10 million, and a dispute arose over how to distribute the proceeds. One of the partners, Swyers, distributed the proceeds according to the previously agreed upon formula. However, the Allen family contested this, arguing that the entire proceeds should have been distributed according to ownership interests.
The trial court ruled in favor of Swyers, finding that the agreement provided for a bifurcated distribution of proceeds, with an $8 million sale price threshold. The Court of Appeals disagreed, concluding that distributions of one-third each were warranted only if the total net proceeds exceeded $8 million.
The Supreme Court of Kentucky reversed the Court of Appeals' decision, agreeing with the trial court's interpretation of the agreement. The court concluded that the parties had intended to split the proceeds on a sale price threshold of $8 million, and that only the sales commission needed to be deducted before calculating the distribution of the final $2 million of the sale price.
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