{
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  "name": "JAN BRITT LYNN, Plaintiff v. JAMES GREGORY LYNN and the ESTATE OF KENNETH LYNN and JAMES LYNN & SONS, INC., Defendants, and JAMES GREGORY LYNN, Third Party Plaintiff, v. PENNY W. LYNN as the Administratrix of THE ESTATE OF GEORGE KENNETH LYNN, PENNY W. LYNN, Individually and as the Guardian Ad Litem of MIRANDA KELSEY LYNN, JENNIFER KAY LYNN BACHINGER, BRANDON KENNETH LYNN, HOLLY KERRY LYNN and JAMES LYNN AND SONS, INC., Third Party Defendants",
  "name_abbreviation": "Lynn v. Lynn",
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    "judges": [
      "Judges CALABRIA and GEER concur."
    ],
    "parties": [
      "JAN BRITT LYNN, Plaintiff v. JAMES GREGORY LYNN and the ESTATE OF KENNETH LYNN and JAMES LYNN & SONS, INC., Defendants, and JAMES GREGORY LYNN, Third Party Plaintiff, v. PENNY W. LYNN as the Administratrix of THE ESTATE OF GEORGE KENNETH LYNN, PENNY W. LYNN, Individually and as the Guardian Ad Litem of MIRANDA KELSEY LYNN, JENNIFER KAY LYNN BACHINGER, BRANDON KENNETH LYNN, HOLLY KERRY LYNN and JAMES LYNN AND SONS, INC., Third Party Defendants"
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    "opinions": [
      {
        "text": "HUNTER, Robert C., Judge.\nThis case arises out of a dispute over a 55% ownership interest in James Lynn & Sons, Inc. (\u201cJames Lynn & Sons\u201d), a closely held corporation. In a declaratory judgment entered 28 August 2008, the trial court held that third-party plaintiff James Gregory Lynn (\u201cGregory Lynn\u201d) was the rightful owner of that interest, making him the sole owner of the corporation. Third-party defendants James Lynn & Sons and Penny W. Lynn, in her individual capacity and as (1) administratrix of the estate of George Kenneth Lynn (\u201cKenneth Lynn\u201d) and (2) guardian ad litem for her four children, appeal the trial court\u2019s declaratory judgment. After careful review, we affirm.\nBackground\nJames Lynn & Sons was incorporated on 22 December 1988 by James Carl Lynn (\u201cJames Lynn\u201d) and his two sons, Gregory Lynn and Kenneth Lynn. On the day of incorporation James Lynn received 25.5 shares of stock and Kenneth and Gregory Lynn each received 12.25 shares of stock. Upon graduation from high school, Kenneth and Gregory Lynn were employed on a full-time basis with the corporation.\nOn 23 December 1991 and 22 December 1993, additional shares of stock were issued to the three owners, the latter date being the last time that stock was ever issued for the corporation. As of 22 December 1993, James Lynn owned 51% of the issued stock and each son owned 24.5%. On 30 December 1993, the three corporate owners and their spouses entered into a Shareholders\u2019 Agreement, which stated in pertinent part:\nWHEREAS, it is desired by each of the parties hereto that the business and affairs of the Corporation shall be conducted without interruption and shall not suffer from the delays and losses that frequently occur when it appears to [sic] shares in a closely held corporation may pass to outsiders[.]\n3. SHARE CERTIFICATES. Each certificate representing restricted shares of the Corporation shall bare [sic] the following legend prominently displayed: \u201cThe shares represented by this Certificate, and the transfer thereof, are subject to the provisions of that certain Shareholders\u2019 Agreement, dated December 30, 1993, a copy of which is on file in, and may be examined at, the principal office of the Corporation.\u201d\n4. PURCHASE UPON DEATH. Upon the death of any Shareholder, his estate will sell, and the Corporation will purchase, at purchase value (as hereinafter defined), all of the restricted shares owned by the deceased Shareholder at the time of his death; and all the parties hereto will take such action as may be required to effect such purchase, including without limitation any necessary recapitalization of the Corporation. The purchase price shall be paid immediately upon the receipt by the Corporation of the proceeds of any insurance on the life of the deceased Shareholder owned by the Corporation and payable to the Corporation or to the estate or heirs of the deceased Shareholder, to the extent of such proceeds.\n5. PURCHASE VALUE (AGREED PRICE). \u201cPurchase value\u201d means that life insurance proceeds in an amount not less than Seventy-Five Thousand ($75,000.00) Dollars, which will be deemed automatically adjusted equitably and proportionately to reflect any stock dividend, stock split, or similar recapitalization affecting the shares. The aforementioned purchase value has been reviewed by all of the Shareholders and undersigned parties to the Agreement. The purchase value set forth herein shall be reviewed annually by all of the surviving Shareholders and will either be confirmed or revised upon such review on the basis of the then existing business and financial condition and prospects of the Corporation. The good faith decision of a majority of such Shareholders upon each such review shall be conclusive; and each such decision shall be noted in the attached Appendix \u201cA\u201d and endorsed by each such Shareholder. It is the intent of the Shareholders that the receipt of the aforementioned insurance proceeds by the estate, or surviving spouse, or heirs of the deceased Shareholder shall be full and final satisfaction of said deceased Shareholder\u2019s interest in the James Lynn & Sons, Inc. Corporation.\n(Emphasis added). On 8 March 1993, prior to the execution of the Shareholders\u2019 Agreement, Kenneth and Gregory Lynn each purchased a $75,000 life insurance policy. Each brother was the record owner and beneficiary of the other brother\u2019s policy.\nJames Lynn died in October 1997 and his estate was administered by his wife, Doris Lynn. The corporation did not own insurance on the life of James Lynn because it was too expensive. The 51% interest in the corporation owned by James Lynn at the time of his death passed to his wife intestate. In March 2001, Gregory and Kenneth Lynn entered into a negotiated settlement with their mother in order to purchase the shares. On 11 April 2001, the parties signed a \u201cStock Purchase and Release Agreement\u201d (the \u201crelease agreement\u201d) in which Gregory and Kenneth Lynn paid Doris Lynn $100,000 for the shares and to resolve other disputes between the parties. The release agreement referenced the Shareholders\u2019 Agreement stating:\nWHEREAS, Corporation and its Shareholders executed a Shareholders\u2019 Agreement dated December 30, 1993, entered into by the Decedent, the Minority Shareholders, the Corporation, among others, ... to sell and purchase, respectively, the Stock upon the death of the Decedent.\nIn May 2001, Kenneth and Gregory Lynn purchased additional life insurance on each other in the amount of $150,000. In October 2001, they increased the life insurance policy amount on each policy from $150,000 to $300,000 and also maintained the original $75,000 policies. In total, each brother had life insurance in the amount of $375,000. At some point in 2001, the brothers became owners of their own life insurance policies. Subsequently, during 2005 and 2006, Kenneth Lynn named his wife as the beneficiary of his policy while Gregory Lynn named his children as beneficiaries of his policy. The evidence at the hearing revealed that at all times the corporation paid the premiums for every policy on the lives of Kenneth and Gregory Lynn. The brothers never reimbursed the corporation for those payments nor were the payments reported as individual income on the brothers\u2019 W-2 tax forms.\nOn 24 November 2003 Jan Lynn filed a complaint against her husband, Gregory Lynn, requesting, inter alia, divorce from bed and board and equitable distribution. On 8 July 2004, after disagreements arose between Kenneth and Gregory Lynn, the two negotiated a stock transfer by which Kenneth Lynn became the majority shareholder with a 55% ownership interest, and Gregory Lynn kept a 45% minority shareholder interest. No consideration was given to either party with regard to the stock transfer. Kenneth Lynn subsequently terminated Gregory Lynn\u2019s employment with the corporation, though he maintained his 45% ownership interest.\nGregory and Jan Lynn were divorced on 14 October 2005, but continued to engage in contentious litigation to resolve issues concerning equitable distribution. On 17 October 2006, Jan Lynn moved to join Kenneth Lynn as a party in the domestic dispute in order to establish that Kenneth Lynn was the majority shareholder in James Lynn & Sons, that Gregory Lynn was the minority shareholder, and that Gregory Lynn\u2019s shares were subject to equitable distribution.\nOn 17 October 2006, prior to a final equitable distribution order pertaining to the property of Jan Lynn and Gregory Lynn, Kenneth Lynn unexpectedly died intestate. Upon his death, his estate received the 55% ownership interest in James Lynn & Sons, and his widow, Penny Lynn, received the $375,000 life insurance proceeds. On 28 February 2007, Jan Lynn filed an emergency request to have a manager appointed for the corporation. On 17 September 2007 and 11 December 2007, over objections by the Estate of Kenneth Lynn and James Lynn & Sons, orders were entered joining the Estate of Kenneth Lynn and James Lynn & Sons and severing the equitable distribution claims from the other claims between Jan Lynn and Gregory Lynn. On 19 December 2007, Jan Lynn filed an amended complaint for equitable distribution, claiming that after Kenneth Lynn\u2019s death Gregory Lynn became the sole owner of James Lynn & Sons and that those shares previously owned by Kenneth Lynn were, therefore, at issue in the equitable distribution dispute. The amended complaint included the estate of Kenneth Lynn and James Lynn & Sons as defendants.\nOn 25 January 2008, Gregory Lynn answered the amended complaint for equitable distribution and asserted a third-party complaint against the corporation and Penny Lynn in her individual capacity, as administratrix of the estate of Kenneth Lynn, and as guardian ad litem for her four children. Gregory Lynn claimed that pursuant to the Shareholders\u2019 Agreement, he became the sole owner of the corporation upon his brother\u2019s death and subsequent payment of life insurance proceeds to Penny Lynn.\nOn 26 February 2008, Jan Lynn filed a motion for declaratory judgment regarding the nature and extent of Gregory Lynn\u2019s ownership interest in the corporation. On 28 February 2008, Penny Lynn filed an answer to the amended complaint and filed a counterclaim requesting a declaratory judgment that would declare her the rightful owner of her deceased husband\u2019s 55% interest in James Lynn & Sons.\nOn 16 July 2008, a hearing was conducted by Judge Napoleon B. Barefoot, Jr. in Columbus County District Court. The parties stipulated into evidence the Shareholders\u2019 Agreement and copies of the parties\u2019 share certificates. Upon review of the Shareholders\u2019 Agreement and hearing arguments of counsel, the trial court determined that there were ambiguities in the Shareholders\u2019 Agreement and decided to hear further evidence. The principal ambiguity, according to the trial court, concerned the term \u201crestricted shares,\u201d which was not defined in the Shareholders\u2019 Agreement. The meaning of this term was critical to the trial court\u2019s determination of ownership because the \u201cPurchase Upon Death\u201d clause of the Shareholders\u2019 Agreement specified that any life insurance proceeds paid upon the death of one of the shareholders would serve as complete payment to purchase \u201crestricted shares\u201d inherited by an heir of the deceased \u2014 in this case, Penny Lynn.\nPlaintiffs contended that all stock distributed prior to the execution of the Shareholders\u2019 Agreement was in fact restricted because it could not be transferred to anyone outside of the family. Furthermore, the Shareholders\u2019 Agreement provided that upon the death of a shareholder, the life insurance paid (a minimum of $75,000) would serve to repurchase the shares inherited by the decedent\u2019s heirs. Therefore, according to plaintiffs, because Kenneth Lynn owned only restricted shares of stock, and upon his death Penny Lynn inherited that stock and received $375,000 in life insurance proceeds, the stock was effectively purchased from her by the corporation, making Gregory Lynn the sole shareholder. Defendants contended that the language of the Shareholders\u2019 Agreement was clear and that Kenneth Lynn\u2019s shares did not specify on the legend that they were restricted. Accordingly, the proceeds of the life insurance policy did not effectively purchase the shares and Penny Lynn was, therefore, the rightful owner of her late husband\u2019s 55% interest in the corporation.\nAt the hearing, over defendants\u2019 objections, Harold Pope, the attorney who drafted the Shareholders\u2019 Agreement, testified that all shares issued by the corporation were \u201crestricted\u201d and that the omission of the restricted notation on the shares was immaterial. Plaintiffs presented documentary evidence that the brothers had purchased life insurance totaling $375,000 for each brother. Internal documents from the life insurance company showed that the applications for insurance noted that the insurance was to fund a \u201cPartnership Buy/Sell Agreement.\u201d The brothers\u2019 applications also referenced each other and stated that each policy should be \u201cissue [d] in conjunction with [the other brother\u2019s policy] ... as part of a privately owned Partnership Buy/Sell Agreement.\u201d Glenn Ray, the life insurance agent who sold Gregory and Kenneth Lynn the policies, also testified regarding the intent of the purchase stating that the policy was to fund a buy-sell agreement. Faye Simmons, the corporation\u2019s office secretary testified that the corporation paid all premiums for the life insurance policies. Alan Thompson, a CPA who performed corporate account services for the corporation, testified that he was aware of the Shareholders\u2019 Agreement and it was his understanding that the life insurance was meant to fund a buy-sell agreement. Plaintiffs also submitted the release agreement entered into by the brothers and their mother, which references the Shareholders\u2019 Agreement and its purpose \u2014 \u201cto sell and purchase ... the Stock upon the death of the Decedent.\u201d\nOn 28 August 2008, the trial court issued an order in which it made findings of fact and conclusions of law based on the documents and evidence presented at the hearing. The court ordered: (1) \u201c[t]hat the Estate of George Kenneth Lynn, administered by Penny W. Lynn, shall transfer the decedent\u2019s stock shares of James Lynn & Sons, Inc. to said corporation on or before the 15th day of September, 2008\u201d; (2) \u201c[t]hat the receipt of the full life insurance proceeds from the policies owned by George Kenneth Lynn hereby constitute full and final payment for the stock shares owned by the decedent George Kenneth Lynn, pursuant to the Shareholders\u2019 Agreement executed December 30, 1993\u201d; (3) \u201c[t]hat this transfer shall fully and finally resolve the issues of stock ownership in James Lynn & Sons, Inc.\u201d; and (4) \u201c[t]hat James Gregory Lynn shall be the sole owner of all shares of stock and sole owner of James Lynn & Sons, Inc.\u201d The third-party defendants now appeal the trial court\u2019s declaratory judgment.\nStandard of Review\n\u201c \u2018The Declaratory Judgment Act, [N.C. Gen. Stat. \u00a7] 1-253 et seq., affords an appropriate procedure for alleviating uncertainty in the interpretation of written instruments and for clarifying litigation.\u2019 \u201d Hejl v. Hood, Hargett & Associates, Inc.,-N.C. App.-,-, 674 S.E.2d 425, 427 (2009) (quoting Bellefonte Underwriters Ins. Co. v. Alfa Aviation, 61 N.C. App. 544, 547, 300 S.E.2d 877, 879 (1983)). \u201c \u2018The standard of review in declaratory judgment actions where the trial court decides questions of fact is whether the trial court\u2019s findings are supported by any competent evidence. Where the findings are supported by competent evidence, the trial court\u2019s findings of fact are conclusive on appeal.\u2019 \u201d Cross v. Capital Transaction Grp., Inc., 191 N.C. App. 115, 117, 661 S.E.2d 778, 780 (2008) (quoting Lineberger v. N.C. Dep\u2019t of Corr., 189 N.C. App. 1, 7, 657 S.E.2d 673, 678, aff\u2019d per curiam in part and disc. review improvidently allowed in part, 362 N.C. 675, 669 S.E.2d 320 (2008)). \u201c \u2018However, the trial court\u2019s conclusions of law are reviewable de novo.\u2019 \u201d Id. (quoting Browning v. Helff 136 N.C. App. 420, 423, 524 S.E.2d 95, 98 (2000)). Questions of contract interpretation are also reviewed de novo. Hickory Orthopaedic Center, P.A. v. Nicks, 179 N.C. App. 281, 291, 633 S.E.2d 831, 837 (2006).\nDiscussion\nI. Admission of Extrinsic Evidence\nDefendants first contend that because the Shareholders\u2019 Agreement was plain and unambiguous on its face, the trial court was required to rule strictly upon review of the Agreement itself and no extrinsic evidence was admissible, including, inter alia, witness testimony and documentary evidence concerning the intent behind the Agreement. Specifically, defendants argue that the Shareholders\u2019 Agreement clearly states in the \u201cPurchase Upon Death\u201d clause that the deceased shareholder\u2019s estate would be required to sell all \u201crestricted shares\u201d back to the corporation and that the corporation would purchase those shares through \u201cthe proceeds of any insurance on the life of the deceased [shareholder owned by the [Corporation and payable to the [Corporation or the estate or heirs of the deceased [shareholder . . . .\u201d Defendants claim that the share certificates did not indicate that the shares owned by Kenneth Lynn were restricted and that the corporation did not own any life insurance on the life of Kenneth Lynn. Accordingly, defendants assert that Penny Lynn was not required to transfer the 55% interest she inherited back to the corporation. Based on this logic, Penny Lynn would keep the life insurance proceeds in the amount of $375,000 as well as the shares she inherited. First, we must determine whether the Shareholders\u2019 Agreement is, in fact, ambiguous.\n\u201cSince consensual arrangements among shareholders are agreements \u2014 the products of negotiation \u2014 they should be construed and enforced like any other contract so as to give effect to the intent of the parties as expressed in their agreements . . . .\u201d Blount v. Taft, 295 N.C. 472, 484, 246 S.E.2d 763, 771 (1978). \u201cWith all contracts, the goal of construction is to arrive at the intent of the parties when the contract was issued. The intent of the parties may be derived from the language in the contract.\u201d Mayo v. North, Carolina State University, 168 N.C. App. 503, 508, 608 S.E.2d 116, 120 (2005) (internal citation omitted), aff\u2019d per curiam, 360 N.C. 52, 619 S.E.2d 502 (2005).\n\u201cIt is the general law of contracts that the purport of a written instrument is to be gathered from its four comers, and the four corners are to be ascertained from the language used in the instrument.\u201d Carolina Power & Light Co. v. Bowman, 229 N.C. 682, 693-94, 51 S.E.2d 191, 199 (1949). \u201cWhen the language of the contract is clear and unambiguous, construction of the agreement is a matter of law for the court. . . and the court cannot look beyond the terms of the contract to determine the intentions of the parties.\u201d Piedmont Bank & Trust Co. v. Stevenson, 79 N.C. App. 236, 240, 339 S.E.2d 49, 52, aff\u2019d per curiam, 317 N.C. 330, 344 S.E.2d 788 (1986). However, \u201c[e]xtrinsic evidence may be consulted when the plain language of the contract is ambiguous.\u201d Brown v. Ginn, 181 N.C. App. 563, 567, 640 S.E.2d 787, 790 (2007) (citations omitted). \u201cWhether or not the language of a contract is ambiguous ... is a question for the court to determine.\u201d Piedmont Bank and Trust Co., 79 N.C. App. at 241, 339 S.E.2d at 52. In making this determination, \u201cwords are to be given their usual and ordinary meaning and all the terms of the agreement are to be reconciled if possible . . . .\u201d Id. \u201c[Wjhere the language presents a question of doubtful meaning and the parties to a contract have, practically or otherwise, interpreted the contract, the courts will ordinarily adopt the construction the parties have given the contract ante litem motam.\u201d Davison v. Duke University, 282 N.C. 676, 713-14, 194 S.E.2d 761, 784 (1973). The court must not, however, \u201cunder the guise of construing an ambiguous term, rewrite the contract or impose liabilities on the parties not bargained for and found therein.\u201d Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500, 506, 246 S.E.2d 773, 777 (1978).\nA. Evidence Concerning the Term \u201cRestricted Shares\u201d\nHere, the trial court found as fact:\nThat the Shareholder\u2019s Agreement had some ambiguities in it as in some paragraphs it referred to \u201cshares\u201d and in other paragraphs it referred to \u201crestricted shares.\u201d That the agreement further provides that restricted shares of stock would be issued and there would be a legend prominently displayed on the shares of stock indicating they were restricted and subject to the Shareholders\u2019 Agreement dated December 30, 1993. However, no restricted stock or any other stock of any kind was issued after the Shareholders\u2019 Agreement on December 30, 1993. .. . Also, the $75,000.00 life insurance policies [were] already in effect between the brothers when the Shareholders\u2019 Agreement was signed.\nThe Agreement did not specifically define the term \u201crestricted shares.\u201d Due to the perceived ambiguity by the trial court, further evidence was heard.\nUpon careful review of the Shareholders\u2019 Agreement, we agree with defendants that there is no ambiguity in the Agreement, and, more specifically, we find no ambiguity in the term \u201crestricted shares.\u201d Accordingly, extrinsic evidence admitted solely for the purpose of defining \u201crestricted shares\u201d under the Shareholders\u2019 Agreement was improper. See Piedmont Bank & Trust Co., 79 N.C. App. at 240, 339 S.E.2d at 52. Nevertheless, we find no error in the trial court\u2019s ultimate determination \u2014 that the shares owned by Kenneth Lynn were restricted and that the life insurance proceeds were intended to purchase those shares from his estate. Because we reach the same conclusion as the trial court based strictly on a reading of the Shareholders\u2019 Agreement, we find the admission of extrinsic evidence to clarify the term \u201crestricted shares\u201d to be immaterial in this case. See Starco, Inc. v. AMG Bonding & Ins. Serv., Inc., 124 N.C. App. 332, 335, 477 S.E.2d 211, 214 (1996) (\u201c[T]o obtain relief on appeal, an appellant must not only show error, . . . appellant must also show that the error was material and prejudicial, amounting to denial of a substantial right that will likely affect the outcome of an action.\u201d).\nOur holding that the Shareholders\u2019 Agreement is unambiguous is based, in part, on the clear intent stated in the Agreement. \u201cWhile the intent of the parties is at the heart of a contract, intent is a question of law where the writing is free of any ambiguity which would require resort to extrinsic evidence or the consideration of disputed fact.\u201d Martin v. Ray Lackey Enterprises, 100 N.C. App. 349, 354, 396 S.E.2d 327, 330 (1990). The Agreement states:\nWHEREAS, all of the issued and outstanding shares of the Corporation are owned and held of record as follows:\nSHAREHOLDER NUMBER OF SHARES\nJames Carl Lynn[] 51%\nGeorge Kenneth Lynn 24.5%\nJames Gregory Lynn 24.5%\nWHEREAS, it is desired by each of the parties hereto that the business and affairs of the Corporation shall be conducted without interruption and shall not suffer from the delays and losses that frequently occur when it appears to [sic] shares in a closely held corporation may pass to outsiders[.]\n1. TRANSFER TO RELATED PARTY. Each Shareholder shall be free to transfer, during his lifetime or by testamentary transfer, all or [part of his] shares to any party related by blood; but such transferee of those shares shall thereafter be bound by all of the provisions of this Agreement, and no further transfer of such shares shall be made by such transferee except back to the Shareholder who originally owned them, or to a related party of such transferee, or except in accordance with the provisions of Paragraph 2. hereinbelow.\nThe Agreement further states that prior to the transfer of any \u201crestricted shares, except as permitted under Paragraph 1[,]\u201d the shareholder seeking to transfer his or her shares is required to first submit to the corporation an \u201coffer to sale\u201d the shares. If the corporation rejects the offer, or if the offer lapses, then the other shareholders must also receive the opportunity to purchase the shares for the same price and under the same terms as the offer made to the corporation. The Agreement then provides for the purchase of \u201crestricted shares\u201d upon the death of a shareholder with the proceeds of life insurance owned by the corporation, and payable to the heirs of the decedent. Multiple provisions are, therefore, included in the Agreement to ensure that the corporation remain closely held and not pass to \u201coutsiders.\u201d Paragraph one uses the term \u201cshares\u201d and limits the transfer of shares to blood relatives only. Subsequently, the term \u201crestricted shares\u201d is used in other provisions regarding transfer of shares. Due to the extensive restrictions on alienation of shares, we find that all shares that had been issued prior to the execution of the Agreement were \u201crestricted\u201d and that the term \u201crestricted shares\u201d was not limited to those shares distributed prospectively as defendants claim. In fact, no shares were ever issued after the execution of the Agreement, and the Agreement lists the percentage interest owned by each shareholder at the time the Agreement was executed.\nThe type of restrictions found in the Shareholders\u2019 Agreement at issue in this case are common in closely held corporations.\nIn family owned corporations, or other corporations in which all shares of stock are held by a relatively small number of shareholders, it is not unusual for all shareholders to agree that the corporation, or the other shareholders, will be given the first opportunity to purchase the shares of a terminated or retiring shareholder. . . . These restrictions allow shareholders to choose their business associates, to restrict ownership to family members, and to ensure congenial and knowledgeable associates.\nCrowder Const. Co. v. Kiser, 134 N.C. App. 190, 196-97, 517 S.E.2d 178, 184 (emphasis added) (internal citation omitted), disc. review denied, 351 N.C. 101, 541 S.E.2d 142 (1999).\nAlso relevant to our determination that the Shareholders\u2019 Agreement is not ambiguous is the fact that the brothers specifically purchased $75,000 in life insurance prior to executing the Shareholders\u2019 Agreement. Clearly the policies in the amount of $75,000, the exact amount stated in the \u201cPurchase Value\u201d provision of the Agreement, was meant to purchase those shares already distributed in the event that one of the shareholders died. These shares are designated as \u201crestricted\u201d in the Agreement. The Agreement explicitly states that \u201c[i]t is the intent of the Shareholders that the receipt of the aforementioned insurance proceeds by the estate, or surviving spouse, or heirs of the deceased Shareholder shall befull and final satisfaction of, said deceased Shareholder\u2019s interest in the James Lynn & Sons, Inc. Corporation.\u201d (Emphasis added). The term \u201cinterest\u201d is used here as opposed to \u201crestricted shares,\u201d which evidences the intent that all shares owned by the decedent be covered.\nWe recognize, as did the trial court, that the Agreement alternates between use of the terms \u201cshares\u201d and \u201crestricted shares\u201d; however, we do not find that this creates an ambiguity in the Agreement where the intent of the parties is clear from the document as a whole. \u201cSince the object of construction is to ascertain the intent of the parties, the contract must be considered as an entirety. The problem is not what the separate parts mean, but what the contract means when considered as a whole.\u201d Jones v. Casstevens, 222 N.C. 411, 413-14, 23 S.E.2d 303, 305 (1942) (quoting Simmons v. Groom, 167 N.C. 312, 316, 83 S.E. 471, 473 (1914)). Viewing the Agreement as a whole, we find the intent to be clear and unambiguous. Each share distributed was subject to specific transfer limitations and was, therefore, restricted. The parties intended these \u201crestricted shares\u201d to be governed by the \u201cPurchase Upon Death\u201d and \u201cPurchase Value\u201d provisions of the Agreement.\nWe also acknowledge that the Agreement mandates specific language on the legend of restricted shares that was not present on the shares distributed in this case, but we do not find that fact to be determinative. The failure to indicate on the legends that the shares were restricted would perhaps impact a transfer to a good faith purchaser who would not have notice that the shares were restricted. See U.C.C. \u00a7 8-204 (1994) (\u201cA restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction . . . .\u201d). However, that is not the case here. Penny Lynn signed the Shareholders\u2019 Agreement and was, therefore, aware of the clear intent of the Agreement and the limitations on transfer. Mosely v. WAM, Inc., 167 N.C. App. 594, 599, 606 S.E.2d 140, 143 (2004) (\u201cWhen a party affixes his signature to a contract, he is manifesting his assent to the contract.\u201d).\nAssuming, arguendo, that we found the Agreement to be ambiguous, thus requiring extrinsic evidence to clarify the intent of the parties, the evidence presented at the hearing clearly establishes that the parties intended for all shares in existence to be \u201crestricted\u201d and that the parties intended to abide by the \u201cPurchase Upon Death\u201d provision. Harold Pope, the attorney who drafted the Shareholders\u2019 Agreement, testified that all shares issued by the corporation were \u201crestricted\u201d and that the omission of the restricted notation on the shares issued prior to the execution of the Agreement did not make those shares unrestricted. He also pointed to paragraph five of the Agreement, which states that the intent of the shareholders was for the insurance proceeds to purchase the decedent\u2019s interest in the corporation, which would include all shares, and claimed that he always includes \u201ca sentence or two, or paragraph if necessary, to state the intent of the parties.\u201d\nThe most revealing piece of extrinsic evidence presented to the trial court was the release agreement signed by Kenneth Lynn, Gregory Lynn, and their mother, Doris Lynn, in which the Shareholders\u2019 Agreement was referenced as well as the intent of the Agreement \u2014 \u201cto sell and purchase ... the Stock upon the death of the Decedent.\u201d All three individuals who signed the release agreement also signed the Shareholders\u2019 Agreement. See Nicks, 179 N.C. App. at 290, 633 S.E.2d at 836 (\u201cPrior course of conduct evidence is more compelling when the prior conduct involved the same parties in the same relation to each other.\u201d). Even though the corporation did not own life insurance on James Lynn, the parties still honored the intent of the Agreement. Doris Lynn accepted $100,000 as full and final satisfaction for her deceased husband\u2019s shares, and to settle other disputes between the parties.\nIn sum, we find that there was no ambiguity in the Shareholders\u2019 Agreement. All shares owned by James Lynn and his sons at the time the Agreement was executed were \u201crestricted\u201d and subject to the terms of the Shareholders\u2019 Agreement, including the \u201cPurchase Upon Death\u201d provision. Even if we found that the Agreement was ambiguous, as the trial court did, the extrinsic evidence presented at the hearing overwhelmingly supports our interpretation.\nB. Evidence Concerning the Life Insurance Policies\nDefendants further dispute the admission of evidence concerning the purpose of the life insurance policies. Specifically, testimony and documents admitted tending to show that the life insurance was purchased to fund a \u201cbuy-sell agreement.\u201d\nThe trial court did not find that there was an ambiguity in the Shareholders\u2019 Agreement concerning the insurance provision. Practically speaking, once the trial court determined that the shares owned by Kenneth Lynn were restricted, evidence was required to show whether the parties had complied with the insurance provision of the Shareholders\u2019 Agreement, which specified that life insurance owned by the corporation on the life of the deceased shareholder would serve as full payment for shares inherited by an heir of the decedent.\nWe conclude that all evidence submitted concerning the insurance policies was necessary to the determination of the action and was not presented as extrinsic evidence to clarify an ambiguity. The trial court did not, therefore, err in reviewing this evidence.\nII. Findings of Fact\nDefendants further assign error to most of the trial court\u2019s findings of fact and allege that they are either irrelevant or not based on competent evidence. Because we have determined that the terms of the Shareholders\u2019 Agreement are not ambiguous, and that Kenneth Lynn\u2019s shares were restricted pursuant to the express intent of the Agreement, we need not address defendants\u2019 arguments concerning findings that were based on extrinsic evidence or findings regarding the intent of the Agreement itself. We will, however, address assignments of error pertaining to compliance with the Agreement.\nThe trial court found as fact, based on the evidence presented, that while the brothers technically \u201cowned\u201d the multiple life insurance policies, the intent of the brothers in purchasing the policies was to fund the buy-sell agreement, as provided for in the \u201cPurchase Upon Death\u201d and \u201cPurchase Value\u201d provisions of the Shareholders\u2019 Agreement. The court further found that at all times the corporation paid the policy premiums and were not reimbursed by the brothers; the premium payments were not included as income on the brothers\u2019 W-2 tax forms; and that the documents pertaining to the policies were kept at the corporate office.\nTestimony from multiple sources and documentary evidence supported the trial court\u2019s findings. Glenn Ray, an agent with Farm Bureau Life Insurance, testified that prior to executing the Shareholders\u2019 Agreement, the brothers each purchased $75,000 in life insurance. The forms indicated that the purpose of buying the insurance was to fund a buy-sell agreement. The brothers subsequently purchased additional insurance such that the life of each brother was insured for $375,000. Faye Simmons, who had served as the corporation\u2019s office secretary since 1994, testified that the corporation paid the premiums on the policies; that the brothers never reimbursed the corporation; and that the documents concerning the policies were kept in the corporate office. Alan Thompson, a CPA who assisted the corporation with its taxes, testified that he was aware that a buy-sell agreement was in effect and that it was funded by the brothers\u2019 life insurance policies. There was no contrary evidence presented. Accordingly, we hold that the trial court\u2019s findings were supported by competent evidence.\nIII. Conclusions of Law\nDefendants assign error to all of the trial court\u2019s conclusions of law pertaining to the interpretation of the Agreement, the intent of the Agreement, and compliance with the Agreement. The trial court concluded:\n2. That the intent and purpose of the Shareholders\u2019 Agreement dated December 30, 1993 is clearly stated in the plain language of the Agreement as is found in Paragraphs 4 and 5 of said Agreement. That the Shareholders\u2019 Agreement dated December 30, 1993 was a valid Buy/Sell Agreement supported by consideration and is binding on the parties.\n3. That the shareholders of James Lynn & Sons, Inc. complied with the provisions of the Shareholders Agreement upon the death of Mr. James C. Lynn, Sr. in 1997 and upon the death of George Kenneth Lynn in 2006.\n4. That Penny Lynn received the proceeds from the Life Insurance required in the Shareholder\u2019s Agreement upon her husband Kenneth Lynn\u2019s death and [to] comply with said agreement she as Administrator of Kenneth\u2019s estate should be required to transfer Kenneth Lynn\u2019s shares of James Lynn & Sons, Inc. stock [sic] [in] said corporation to be disbursed to Gregory as required in the Agreement.\n5. That pursuant to Rule 57 of the North Carolina Rules of Civil Procedure the court declares that all terms of the Shareholders\u2019 Agreement have been complied with and the agreement shall be enforced with ownership of the shares of James Lynn & Sons, Inc.[,] stock currently held by the Estate of George Kenneth Lynn or his widow Penny Lynn[,] to be transferred through [the] Corporation to James Gregory Lynn their rightful owner.\nWe find no error in the trial court\u2019s conclusions of law. Based on our holdings, supra, with regard to interpretation and intent of the Agreement, we need only specifically address the trial court\u2019s conclusion of law that \u201cthe shareholders of James Lynn & Sons, Inc. complied with the provisions of the Shareholders\u2019 Agreement... upon the death of Kenneth Lynn . .. .\u201d (Emphasis added). The trial court\u2019s findings establish that the brothers \u201cowned\u201d the life insurance policies. The Agreement states that life insurance \u201cowned by the Corporation and payable to the Corporation or to the estate or heirs of the deceased Shareholder, to the extent of such proceeds[]\u201d would serve as full payment for stock inherited. It is undisputed that the insurance proceeds were paid to the estate of the deceased shareholder. Defendants argue that because the corporation did not technically \u201cown\u201d the policies, the Agreement was not complied with and Penny Lynn is entitled to the insurance proceeds and the shares she inherited. We disagree.\nKenneth Lynn originally named his brother as owner of his life insurance policy in the amount of $75,000 and he made it clear in his application that the policy was being purchased to fund a buy-sell agreement. He further referenced his brother\u2019s application and noted that his policy should be \u201cissue [d] in conjunction with [Gregory Lynn\u2019s policy] ... as part of a privately owned Partnership Buy/Sell Agreement.\u201d Kenneth Lynn also purchased an additional policy in the amount of $150,000 and then increased that policy to $300,000. Gregory Lynn was listed as the owner of these policies as well. On 2 August 2001, Kenneth Lynn requested that ownership of his policies be changed so that he would become the owner of the policies rather than his brother. Regardless of who was the record owner, all premiums on Kenneth Lynn\u2019s various policies from 1993 until his death in 2006 were paid by the corporation.\nAs the trial court acknowledged, the policies were owned by Kenneth Lynn, not the corporation, at the time of his death; however, this does not defeat the clear intent of the Shareholders\u2019 Agreement, which was observed by the parties through their actions and course of dealing since its execution. The evidence shows that the brothers intended for the life insurance policies to fund a buy-sell agreement. The Shareholders\u2019 Agreement expressed the intent of the shareholders that the proceeds of the life insurance policies would serve as full payment for any interest, which would include all shares, in the corporation inherited by the estate of a deceased shareholder. We must honor the intent of the Agreement, viewed as a whole. State v. Philip Morris USA Inc.,-N.C. App. \u2014,-, 669 S.E.2d 753, 756 (2008) (\u201cIntent is derived not from a particular contractual term but from the contract as a whole.\u201d) (citation and quotation marks omitted), aff\u2019d, 363 N.C. 623, 685 S.E.2d 85 (2009). In so doing, we hold that the trial court did not err in concluding as a matter of law that \u201cthe shareholders of James Lynn & Sons, Inc. complied with the provisions of the Shareholders\u2019 Agreement . . . upon the death of Kenneth Lynn . . . .\u201d\nConclusion\nWe hold that the Shareholders\u2019 Agreement is not ambiguous; the trial court improperly considered extrinsic evidence to interpret the contract; Kenneth Lynn\u2019s shares were \u201crestricted\u201d and subject to the \u201cPurchase Upon Death\u201d provision of the Agreement; the trial court\u2019s findings of fact regarding compliance with the Agreement were supported by competent evidence; and the trial court\u2019s conclusions of law are not erroneous in any respect. Accordingly, we affirm the declaratory judgment, which ordered the Estate of Kenneth Lynn, administered by Penny Lynn, to transfer the shares inherited intestate from Kenneth Lynn to James Lynn & Sons, Inc.\nAffirmed.\nJudges CALABRIA and GEER concur.\n. The third-party defendants, appellants in this action, are collectively referred to as \u201cdefendants.\u201d\n. At times, the Shareholders\u2019 Agreement will be referenced as \u201cthe Agreement.\u201d\n. For ease of reference, plaintiff Jan Lynn and third-party plaintiff Gregory Lynn are at times referred to collectively as \u201cplaintiffs\u201d as their positions at the declaratory judgment hearing were identical.\n. James Lynn & Sons was not represented by counsel at the hearing.\n. No shares were distributed after the Shareholders\u2019 Agreement was signed.\n. Although an equitable distribution order had not been entered at the time of this appeal, the declaratory judgment was a final judgment from the district court regarding ownership of the shares, and, therefore, this appeal is not interlocutory. N.C. Gen. Stat. \u00a7 7A-27(c) (2007).\n. Jan Lynn, Penny Lynn, and Doris Lynn signed the Agreement although they were not shareholders at that time.\n. As discussed infra, evidence concerning the purchase of life insurance was not admitted to clarify an ambiguity; rather, the evidence was admitted to show compliance with the Agreement.\n. Defendants cite no authority for their argument in violation of N.C. R. App. P. 28(b)(6).\n. Viewed in context, the partnership agreement referenced is, in fact, the Shareholders\u2019 Agreement at issue.",
        "type": "majority",
        "author": "HUNTER, Robert C., Judge."
      }
    ],
    "attorneys": [
      "II. Griffith Gamer and law student K. Scott Newton for plaintiff-appellee.",
      "Don W. Viets, Jr. for third-party plaintiff-appellee.",
      "Williamson, Walton & Scott, LLP, by Benton H. Walton, III and C. Martin Scott, II, The Odom Firm, PLLC, by Thomas L. Odom, Jr. and David W. Murray for third-party defendants-appellants."
    ],
    "corrections": "",
    "head_matter": "JAN BRITT LYNN, Plaintiff v. JAMES GREGORY LYNN and the ESTATE OF KENNETH LYNN and JAMES LYNN & SONS, INC., Defendants, and JAMES GREGORY LYNN, Third Party Plaintiff, v. PENNY W. LYNN as the Administratrix of THE ESTATE OF GEORGE KENNETH LYNN, PENNY W. LYNN, Individually and as the Guardian Ad Litem of MIRANDA KELSEY LYNN, JENNIFER KAY LYNN BACHINGER, BRANDON KENNETH LYNN, HOLLY KERRY LYNN and JAMES LYNN AND SONS, INC., Third Party Defendants\nNo. COA09-556\n(Filed 16 February 2010)\n1. Corporations\u2014 Shareholders\u2019 Agreement \u2014 extrinsic evidence\nThe admission of extrinsic evidence about a Shareholders\u2019 Agreement in an action involving the disputed transfer of shares in a closely held company was improper but immaterial. Taken as a whole, the intent of the Shareholders\u2019 Agreement was clear: the corporation was to remain closely held and shares were not to pass to outsiders. Issues surrounding the use of the term \u201crestricted shares\u201d were not determinative. Morever, assuming the extrinsic evidence was correctly admitted, that evidence clearly established that the parties intended for all of the shares to be restricted.\n2. Corporations\u2014 insurance policies \u2014 compliance with Shareholders\u2019 Agreement\nEvidence concerning insurance policies in an action to determine the transfer of shares in a closely held corporation was necessary to determine compliance with the Shareholders\u2019 Agreement, and was not presented as extrinsic evidence clarifying an ambiguity in the Agreement.\n3. Corporations\u2014 Shareholders\u2019 Agreement \u2014 compliance\u2014 findings supported by evidence\nThe trial court\u2019s findings concerning compliance with a Shareholders\u2019 Agreement were supported by competent evidence.\n4. Corporations\u2014 Shareholders\u2019 Agreement \u2014 buy-sell provision \u2014 compliance\nThe trial court did not err by concluding that a buy-sell provision in a Shareholders\u2019 Agreement was complied with even though the insurance policy used to fund the provision was owned by an individual rather than the corporation. The intent of the Agreement was observed by the parties through their actions and course of dealing.\nAppeal by third-party defendants from judgment entered 28 August 2008 by Judge Napoleon B. Barefoot, Jr. in Columbus County District Court. Heard in the Court of Appeals 4 November 2009.\nII. Griffith Gamer and law student K. Scott Newton for plaintiff-appellee.\nDon W. Viets, Jr. for third-party plaintiff-appellee.\nWilliamson, Walton & Scott, LLP, by Benton H. Walton, III and C. Martin Scott, II, The Odom Firm, PLLC, by Thomas L. Odom, Jr. and David W. Murray for third-party defendants-appellants."
  },
  "file_name": "0423-01",
  "first_page_order": 451,
  "last_page_order": 468
}