Condo v. Conners

266 P.3d 1110 (2011)

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Nature Of The Case

This section contains the nature of the case and procedural background.

Facts

Thomas Banner's attempted assignment of a portion of his membership interest in the Hut Group to his former wife, P. Banner was a member of the Hut Group with a one-third ownership interest. As part of a divorce settlement, Banner agreed to assign P his right to receive monetary distributions from the Hut Group. Banner and P agreed that Banner would vote against all issues that required unanimous consent, unless P directed him to do otherwise, effectively assigning P his voting interest in the Hut Group. Banner first sought approval from Ds. Article 10.1 of the Hut Group's operating agreement expressly provides that 'a Member shall not sell, assign, pledge or otherwise transfer any portion of its interest in [the Hut Group]' 'without the prior written approval of all of the Members.' Article 10.2 states: 'If at any time any Member proposes to sell, assign or otherwise dispose of all or any part of its interest in the [LLC], such Member . . . shall first obtain written approval of all of the Members to such transfer pursuant to [Article] 10.1 . . . .' Ds refused consent to assign. Banner went ahead and did it anyway, and it was approved as part of the divorce settlement without any showing that it was in compliance with Article 10.1 of the Operating Agreement. Ds found out and offered to buy Banner's interest. Banner agreed to sell for $125,000. P found out and sued Ds and their attorney, Porterfield, for tortious interference with contract and civil conspiracy. P claimed she was validly assigned the right and that Ds had conspired with Banner in bad faith to buy his interest at a 'fire-sale' price. The trial court held that Banner's assignment was void as against public policy because his failure to receive the consent of the other members constituted bad faith in corporate dealings. P appealed, and the court of appeals affirmed on other grounds. The court held that because two members expressly objected to the Banner assignment, 'the operating agreement rendered the assignment ineffective for any purpose' and 'the assignment was void.' Consequently, the court of appeals held that Banner had no authority to assign an interest to P absent the consent of the other members and that therefore it was proper for the trial court to grant summary judgment. P appealed.

Issues

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Rule Of Law

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Holding & Decision

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Legal Analysis

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