KBL Properties, LLC, et al. v. Bellin


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Docket Number: 2004-CA-00785-SCT
Linked Case(s): 2004-CA-00785-SCT
Oral Argument: 01-12-2005
 

 

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Supreme Court: Opinion Link
Opinion Date: 03-17-2005
Opinion Author: Dickinson, J.
Holding: Reversed and Remanded

Additional Case Information: Topic: Limited liability company - Motion to strike attachment - M.R.A.P. 10 - Raising additional equity - Buy-sell offer
Judge(s) Concurring: Smith, C.J., Waller and Cobb, P.JJ., Easley, Carlson and Randolph, JJ.
Non Participating Judge(s): Diaz, J.
Concurs in Result Only: Graves, J.
Procedural History: Summary Judgment
Nature of the Case: CIVIL - OTHER

Trial Court: Date of Trial Judgment: 03-31-2004
Appealed from: DeSoto County Chancery Court
Judge: Percy L. Lynchard, Jr.
Disposition: Granted summary judgment for the defendant minority interest member of a limited liability company.
Case Number: 03-4-558(L)

Note: Appellee's Motion to Strike a Portion of the Document Improperly Relied upon by Appellant, Kalian, granted. Stipulation filed by both parties and treated as a Motion to Supplement the Record, granted.

  Party Name: Attorney Name:  
Appellant: KBL Properties, LLC and Mazin A. Kalian




JOHN BARNETT TURNER , JR. MATTHEW P. CAVITCH



 

Appellee: Mark S. Bellin LOUIS FERREE ALLEN OSCAR CLARK CARR, III  

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Topic: Limited liability company - Motion to strike attachment - M.R.A.P. 10 - Raising additional equity - Buy-sell offer

Summary of the Facts: KBL Properties, LLC was formed as a Mississippi limited liability company. KBL had three founding members, each of whom initially invested $1 of equity: Mazian Kalian, with a financial and governance interest of 40%; Clay Lane, with a financial and governance interest of 30%; and Mark Bellin, with a financial and governance interest of 30%. Kalian was the manager. At a meeting of the LLC members on March 6, 2003, Kalian and Lane voted to authorize KBL to raise additional equity in the amount of $225,000, and invited all members to invest additional equity. Bellin abstained from the vote, while Kalian and Lane agreed to invest more equity and together invested $157,500. Bellin did not invest any new equity; and therefore, his contributed capital remained at $1. Under the terms of the operating agreement, Bellin’s financial interest declined to 0.00063 percent as a result of the new contributions of equity capital. Thereafter, Lane served Bellin with notice of a “buy-sell” offer in which he offered to buy Bellin’s interest for $6.30 or to sell his own interest to Bellin for $428,569.60. Bellin did not respond, but his attorney wrote to Kalian’s counsel objecting to the March 6, 2003, resolution. Kalian, Lane, and KBL filed suit against Bellin for a declaratory judgment that KBL’s raising of additional equity capital was lawfully authorized, Bellin’s financial interest was lawfully reduced in accordance with the LLC agreement, Lane had lawfully exercised his buy-sell option, and that Lane was entitled to lawfully purchase Bellin’s entire membership interest in accordance with his buy-sell offer. Bellin answered and filed counterclaims. Bellin filed a motion for summary judgment and KBL and Kalian filed a cross motion for summary judgment. The court granted summary judgment in favor of Bellin. The chancellor certified as final the order granting summary judgment, and KBL and Kalian appeal.

Summary of Opinion Analysis: Issue 1: Motion to strike attachment KBL and Kalian attached to their brief a transcript of a special joint meeting of members and manager of KBL that occurred on March 6, 2003. The transcript was not part of the original record. Bellin argues that under M.R.A.P. 10, the transcript pages were not part of the record in the chancery court and therefore should not be considered on appeal. Since these transcript pages were not available to the trial court when it determined the merits of the summary judgment motion, Bellin’s motion to strike is granted. Issue 2: Summary judgment Kalian and KBL argue that summary judgment in favor of Bellin was improper because the raising of additional equity was valid and Bellin’s financial interest was properly reduced when he chose not to invest and because Lane validly invoked the buy-sell provisions to buy out Bellin. The March 6, 2003, resolution was not a mandatory capital call, but was a legitimate request for additional equity that Bellin could have agreed or declined to contribute. The transcript of the March 6, 2003 meeting, demonstrates that Bellin was given a fair opportunity to consider whether to invest additional equity, and that Bellin himself understood this. The LLC operating agreement provided that each member’s financial interest was his own contributed capital divided by the aggregate contributed capital for all members. When Bellin did not contribute more capital, his financial interest was legitimately reduced under the operating agreement. Bellin, as a party to the LLC agreement, knew that this would occur. The LLC operating agreement has no specific provision on raising additional equity. However, the fact that the operating agreement does not affirmatively provide for raising additional equity does not mean that doing so is prohibited. Under Section 79-29-108(1), KBL could lawfully raise additional equity. Several provisions of the LLC operating agreement imply that the agreement anticipated that additional capital could be raised. Bellin’s financial interest was properly reduced as a result of the other members’ capital contributions in a valid call for the raising of additional equity, and summary judgment was improperly granted on this issue. With regard to Lane’s buy-sell offer, under the language of the operating agreement, only a conveyance by Lane required the consent of the other members, and no conveyance occurred here. Because Lane’s buy-sell offer met the requirements of the LLC’s operating agreement, summary judgment was improperly granted on this issue.


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