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In re DeLuca

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


Facts

Robert and Marilyn DeLuca (defendants) and Joel Broyhill (plaintiff) formed D&B Countryside, LLC (D&B), a limited-liability company (LLC) in Virginia, to develop a shopping center and office development known as Parc City Centre. The DeLucas and Broyhill were each 50 percent members in D&B, with the DeLucas named as joint managing members. The D&B Operating Agreement (Operating Agreement) provided that the manager of D&B would be appointed by the unanimous vote of all members, and required the written consent of a member for the assignment of a member’s interest. Additionally, the agreement required the dissolution of D&B if certain events occurred, including a member’s bankruptcy, unless the remaining members unanimously agreed to continue the business of D&B. The DeLucas asked Theodore Boinis, the president of Northern Virginia Realty, Inc. (NVRI) (plaintiff), to become a member of D&B. Boinis provided a $600,000 investment in exchange for a 15 percent interest in D&B. The transaction was consummated via an Amended and Restated Operating Agreement (Amended Agreement) signed by the DeLucas and Boinis. The Amended Agreement assigned a 7.5 percent portion of the DeLucas’ membership interest to NVRI and consented to a 7.5 percent assignment of Broyhill’s membership interest to NVRI. Broyhill never agreed to the assignment in writing, but did not later object. Thereafter, the relationship between the DeLucas and Broyhill soured when Broyhill learned that the majority of NVRI’s $600,000 investment had gone into the personal accounts of the DeLucas. Without giving notice to the DeLucas, Broyhill and NVRI executed an agreement removing the DeLucas as managers of D&B and electing Broyhill as manager. The DeLucas filed for bankruptcy. Broyhill and NVRI intervened and filed a petition seeking a declaration that they had properly removed the DeLucas as managers of D&B and that Broyhill had been properly appointed as successor manager.

Rule of Law

Issue

Holding and Reasoning (Mitchell, J.)

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