Broyhill v. Deluc

194 B.R. 65 (1996)

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Nature of the Case

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Facts

D & B Countryside, L.L.C. was formed on April 12, 1994, to develop a shopping center and office development in Sterling, Virginia. The original members of the company were P and D. The organization of the company was set forth in an Operating Agreement dated April 12, 1994 ('the operating agreement'). Under the terms of the operating agreement, the manager of the company must be appointed by unanimous vote but the agreement was silent on removal of a manager. The agreement provided for the dissolution of the company on December 31, 2024 or the earlier occurrence of certain specified events, including the death, resignation, expulsion, bankruptcy or dissolution of a Member … unless the business of the Company is continued by the unanimous consent of the remaining Members. P and D were each to make $1,000,000 capital contributions. The source of the capital funds for P and D was a $1,500,000 loan from NationsBank. P testified his understanding was that the entire loan proceeds were to be paid to D & B Countryside. As it turns out, only $200,000 of the loan proceeds were actually deposited in D & B Countryside's bank account. D solicited Theodore Boinis ('Boinis'), the president of Northern Virginia Realty, Inc. ('NVRI') and trustee of its profit-sharing plan, to become a member and offered him a 15% interest in the company in exchange for a $600,000 investment. D offered to personally guarantee a 10% minimum rate of return on NVRI's investment. NVRI agreed to the proposal and wire-transferred the $600,000 to D & B Countryside's bank account on July 22, 1994. Within a week, $594,300 of those funds had been transferred to other D-related entities or D personally. In October 1994, the relationship between P and D soured, largely because D did not respond to a number of requests by P for information concerning his investment. After P learned that almost all of the $600,000.00 invested by Boinis had been immediately transferred out of D & B Countryside and that D had placed a $ 3,000,000.00 deed of trust against D & B Countryside's property without his knowledge, P and NVRI Profit Sharing Trust executed a document on April 14, 1995, purporting to remove D as D & B Countryside's managers and electing P as manager. On May 5, 1995, D filed a voluntary chapter 11 petition and on May 9, 1995, D & B Countryside filed a voluntary chapter 11 petition. Subsequent to D's petition, P and NVRI Profit Sharing Trust executed a document in which they elected to continue the business and confirmed the election of P as the new manager.