Venture Sales, LLC, et al. v. Perkins
| Docket Number: | 2010-CA-01552-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 04-26-2012 Opinion Author: Waller, C.J. Holding: Affirmed and Remanded |
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| Additional Case Information: |
Topic: Dissolution of company - Limited liability company - Section 79-29-802 - Operating agreement - Not reasonably practicable - Winding up the company Judge(s) Concurring: Carlson and Dickinson, P.JJ., Randolph, Lamar, Kitchens, Chandler, Pierce and King, JJ. Procedural History: Bench Trial Nature of the Case: CIVIL - OTHER |
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| Trial Court: |
Date of Trial Judgment: 08-27-2010 Appealed from: Forrest County Chancery Court Judge: Johnny Lee Williams Disposition: Dissolved Venture Sales. Case Number: 10-0145-GN-W |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Venture Sales, LLC, Gary Fordham and David E. Thompson |
THOMAS E. SCHWARTZ
S. ROBERT HAMMOND, JR. |
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| Appellee: | Walter Ray Perkins | PAUL H. HOLMES MARCUS A. McLELLAND |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Dissolution of company - Limited liability company - Section 79-29-802 - Operating agreement - Not reasonably practicable - Winding up the company |
| Summary of the Facts: | Walter Perkins owned 27.7 acres of land. Sometime in the late 90s, Perkins was approached by Gary Fordham and David Thompson about a potential business venture involving this land. Perkins, Fordham, and Thompson eventually agreed that Fordham and Thompson would acquire the 438 acres of land that adjoined Perkins’s land to the south; then, the parties would combine their respective land, along with some cash, and form a venture to develop the land. After Fordham and Thompson purchased the 438 acres, Perkins contributed his land as well as $155,378.59 in cash to Venture Sales, an already-existing company in which Fordham and Thompson were partners. Fordham and Thompson contributed their land to Venture Sales, along with $1,459.12 in cash, each. The cash and land contributions were structured such that Perkins, Fordham, and Thompson each would own one-third of the company. The Restated Purpose of Venture Sales, set forth in Section 1.02 of the Restated Limited Liability Company Agreement for Venture Sales, LLC, was stated as follows: “The purpose of the Company is to initially acquire, develop and sale [sic] commercial and residential properties near Petal, Forrest County, Mississippi and subsequently at other locations to be decided by the Company and to conduct any other lawful business, purpose, or activity as decided by the Members.” At the time the company was formed, Perkins was working as an assistant coach for the Cleveland Browns, a professional football team, and was living in Ohio. As of the beginning of this litigation, the property remained undeveloped and virtually unchanged. According to Fordham and Thompson, there are several causes, outside the members’ control, for the delay in development. However, during this time, Fordham and Thompson have successfully developed at least two other subdivisions with approximately 200 collective houses within twenty-five miles of the Venture Sales property. In early 2009, Venture Sales negotiated an option contract for the sale of a portion of its land, however the contract expired before it closed. Also in 2009, Venture Sales listed its entire property for sale for $5.2 million, but the listing expired without a deal. Fordham requested the members’ approval to list the property for $3.5 million, but Perkins did not agree. In February 2010, Perkins filed an application for judicial dissolution of Venture Sales. The chancellor ordered the company dissolved. Fordham, Thompson, and Venture Sales appeal. |
| Summary of Opinion Analysis: | Issue 1: Dissolution Section 79-29-802 allows a member of a limited liability company to apply to the chancery court for an order of dissolution of the company in certain circumstances. The chancellor determined that there was no fraud, abuse of authority, persistent unfairness, or waste of company property by any Venture Sales members. Accordingly, the chancellor’s decision to dissolve Venture Sales was solely because he determined it was “not reasonably practicable” for Venture Sales to carry on its business in conformity with its operating agreement. The Mississippi Limited Liability Company Act does not define “not reasonably practicable.” While no definitive, widely accepted test or standard exists for determining “reasonable practicability,” it is clear that when a limited liability company is not meeting the economic purpose for which it was established, dissolution is appropriate. The company’s operating agreement must be used to determine the purpose for which the company was formed. Venture Sales’ operating agreement states that the company’s purpose is “to initially acquire, develop and sale [sic] commercial and residential properties near Petal, Forrest County, Mississippi.” At trial, Fordham admitted that the company was formed for the purpose of acquiring and developing property. Yet, more than ten years after Venture Sales was formed with Perkins as a member, the property remains completely undeveloped. Fordham and Thompson presented no evidence that Venture Sales would be able to develop the land as intended within the foreseeable future. When asked by the trial court when Venture Sales might be able to begin developing as it had planned, Fordham could not say. Venture Sales is not fulfilling the purpose stated in its operating agreement. Thus, the chancellor did not abuse his discretion by granting the petition for dissolution of Venture Sales. Issue 2: Winding up the company In his order, the chancellor did not make provisions for winding up Venture Sales. Fordham and Thompson argue that the chancellor should have ordered Fordham, as manager of Venture Sales, to proceed with winding up the company in accordance with the MLLCA. Perkins agrees that the MLLCA provides the process for winding up a limited liability company, and does not object to a remand on this issue. Thus, the case is remanded to the chancery court for winding up the affairs of Venture Sales. |
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