Inc. or LLC? The question sparked a lawsuit between current and former owners of longtime Petersburg diner

The Dixie has been a staple of Petersburg dining for decades. (Mike Platania photo)

A legal battle sparked by the sale of a longtime Petersburg diner seems to hinge on a typo.

The former owners of Dixie Restaurant, Charles and Frances Rawlings, are suing the couple they sold the business to last year, Dylan and Savannah Yeargin.

The lawsuit claims that the Rawlings and Yeargins made a “mutual mistake” when crafting the contract for the sale of the restaurant, specifically that the legal entity changing hands was mistakenly listed as “Dixie Restaurant, Inc.” as opposed to its actual name, “Dixie Restaurant, LLC.”

That typo, the Rawlings allege, led the Yeargins to “effectively steal the Rawlings’ business,” by asserting they have no obligation to pay the Rawlings, despite taking over the restaurant’s operations eight months ago.

The Rawlings have taken to the courts to try to resolve the matter, namely by correcting the contract and obligating the Yeargins to pay them the roughly $265,000 purchase price the two parties agreed to.

Dixie Restaurant opened at 250 N. Sycamore St. in Petersburg’s Old Towne district in the 1920s, serving American breakfast and lunch diner fare. The Rawlings took over as owners in 2011 but looked to sell last spring as they prepared for retirement. It was then, according to the lawsuit, that the Yeargins expressed interest in buying it.

From left: Dylan Yeargin, Savannah Yeargin, Charles Rawlings and Frances Rawlings outside the Dixie. (Facebook)

The lawsuit paints a picture of a smooth first few months of negotiations and transition between the two sides.

The couples allegedly went to dinner last March and agreed to “relatively simple” sale terms. The Yeargins would buy the restaurant’s business, equipment and name for $250,000 and gradually pay off the amount with weekly payments to the Rawlings of $1,000, the lawsuit states.

The deal also supposedly included clauses that required the Rawlings to leave $15,000 in the restaurant’s register as a cash infusion to kick-start the operation and the Yeargins to be employed at the restaurant leading up to the deal so they could learn to operate the business. This agreement is referred to in the lawsuit as the “Oral Contract.”

Last April, just a few weeks after reaching the agreement, the Yeargins began working at the Dixie, and by June, the Rawlings released their rights to the restaurant’s lease to the Yeargins.

In August, the two parties allegedly drafted a sale and purchase agreement, ostensibly to put the oral contract in writing, but the document, which is included in court filings as an exhibit, states that the Rawlings were selling “Dixie Restaurant, Inc.” to the Yeargins.

The lawsuit states that “Dixie Restaurant, Inc.” does not exist and that the Rawlings’ operating entity for the restaurant was in fact “Dixie Restaurant, LLC.”

According to the lawsuit, listing the business in the contract as a corporation as opposed to a limited liability company was a mistake the Rawlings and Yeargins made, and the error seems to have gone unnoticed at the time the deal closed on Sept. 1, 2024.

The Yeargins took to social media to announce the deal, describing owning the restaurant as “a dream” in an August 2024 Facebook post, and expressing gratitude to the Rawlings for giving them “all the tools we’d need to succeed” in a story in the Progress-Index, Petersburg’s local newspaper.

“The Rawlings were pleased that the Yeargins were carrying on their legacy,” the lawsuit states. “But this gratitude quickly faded when the payment obligations began.”

The lawsuit claims that from September to December, the Yeargins began making the agreed upon payments to the Rawlings, writing a total of 11 checks for $13,000 in that period. But they claim that the payments stopped in December.

When the Rawlings asked why the payments stopped, they claim the Yeargins asserted that “despite being the sole operators of the Dixie Restaurant … they never actually purchased the Dixie Restaurant and that no obligation exists to pay for what they received from the Rawlings.”

The Rawlings claim in their lawsuit that the Yeargins point to the “Inc.” vs. “LLC” distinction, allegedly claiming that since the Rawlings can’t sell them a nonexistent company, “no obligation to pay exists and the Dixie Restaurant … is simply theirs now.”

“Despite publicly announcing their ownership in both social and actual media, making eleven payments on the sale, and continuing to operate the Dixie Restaurant turned over to them as a turn-key restaurant, the Yeargins still maintain that the option (to acquire the stock of the Dixie Restaurant business) was not exercised,” the lawsuit states.

The Rawlings are alleging eight counts, including breach of contract and conversion, and have named the Yeargins and their new operating entity for the restaurant, Dixie Restaurant & Catering Services, LLC, as defendants.

Even though the Dixie is in Petersburg, the Yeargins’ LLC is registered in the City of Richmond, and the Rawlings have filed the lawsuit in Richmond Circuit Court.

The Rawlings are asking the court to rule that the sale and purchase agreement is void and unenforceable, and that the contract be corrected to list the business as “Dixie Restaurant, LLC.” They’re asking that they be awarded punitive damages of up to $350,000 and that a collective trust be imposed on all profits and proceeds of the Dixie “as a result of the Defendants’ wrongful actions.”

Attorneys Franklin Cragle and Eliza Unrein of the Hirschler law firm, who are representing the Rawlings, said in a statement their clients regret that “despite giving the Yeargins the opportunity to own and operate the Dixie Restaurant, as well as the opportunity to amicably resolve these issues outside of the legal process, that litigation is necessary.”

“The Rawlings simply want to receive the money promised to them in exchange for their beloved restaurant and to retire in peace,” the statement read.

This week the Yeargins filed a demurrer, asking for the lawsuit to be dismissed. Their attorney, Nate Scaggs of Hill & Rainey Attorneys, said in a statement that the Yeargins are “hardworking and honest people.”

“They will not be intimidated and will defend themselves in this lawsuit, which tries to attack them and smear their good names,” Scaggs said. “They are deeply upset that this situation has come to them being sued, but at this time, they must leave the case up to the Court to decide the matter, and they are confident they will prevail.”

No hearings have been set in the case.

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