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Broyhill v. DeLuca

United States Bankruptcy Court of the Eastern District of Virginia
194 B.R. 65 (1996)


Facts

Joel T. Broyhill (plaintiff) and Robert and Marilyn DeLuca (defendants) created a limited liability company (LLC) called D & B Countryside, L.L.C. (D&B). The operating agreement required unanimous agreement of all members to appoint a manager but contained no provision on removal. The DeLucas were named managers. The agreement stated that the company would be dissolved by a set date or on the happening of certain events, including the bankruptcy of a partner. In such an event, the remaining members had the option to continue the business and appoint a new manager. The DeLucas offered Northern Virginia Realty, Inc. (NVRI) (plaintiff) a 15 percent share of D&B. Under the amended operating agreement, NVRI received seven and a half percent of both Broyhill’s and the DeLucas’ share. Broyhill did not sign the agreement but did not object. The DeLucas transferred D&B money to outside accounts and placed a $3 million deed of trust against D&B’s property without the other members’ knowledge. Broyhill and NVRI met and signed an agreement to remove the DeLucas as managers and elect Broyhill. The DeLucas filed chapter 11 bankruptcy petitions on behalf of themselves and D&B. Broyhill and NVRI executed an agreement to continue the business and elect Broyhill manager. Broyhill and NVRI requested a declaration that the DeLucas were validly removed as D&B’s managers and that Broyhill was validly made manager.

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Holding and Reasoning (Mitchell, J.)

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