In re 1545 Ocean Ave. LLC v. Ocean Suffolk Props. LLC

In November 2006, 1545 Ocean Avenue, LLC (1545 LLC) was formed, and its articles of organization were filed. On November 15, Crown Royal Ventures, LLC (Crown Royal) (plaintiff) and Ocean Suffolk Properties, LLC (Ocean Suffolk) (defendant) were issued two membership certificates for 50 units. An operating agreement was signed by Walter T. Van Houten, a member of Ocean Suffolk, and John J. King, a member of Crown Royal, making them both managers and members of 1545 LLC. Van Houten and King each contributed 50 percent of the capital to purchase the property known as 1545 Ocean Avenue. Van Houten and King agreed to solicit bids from third parties to complete the work on the property. The construction company owned by Van Houten was allowed to submit a bid, upon approval of the managers. Van Houten and King disagreed on whether Van Houten unilaterally began work on the project. King also objected to the cost, but not the quality, of Van Houten’s work. In April 2007, King announced his intention to withdraw his investment from 1545 LLC and to either have Ocean Suffolk buy out Crown Royal’s membership in 1545 LLC, or vice versa. Crown Royal filed to dissolve 1545 LLC because the parties could not reach resolution. Crown Royal argued a deadlock arose from Van Houten’s violations of the operating agreement. Ocean Suffolk responded that all of Van Houten’s actions were done in accordance with the operating agreement and the only deadlock was the purchase of each other’s interest in 1545 LLC. Van Houten argued that King’s resignation as a member was in violation of the operating agreement and that Van Houten had been acting as the sole manager of 1545 LLC since King’s resignation. The project was within three or four weeks of completion. The trial court granted the petition for dissolution, and Ocean Suffolk appealed.