Summary 2010 WY 83

Summary of Decision issued June 24, 2010

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: In re: Kite Ranch, LLC

Citation: 2010 WY 83

Docket Number: S-09-0203

Appeal from the District Court of Albany County, the Honorable Jeffrey A. Donnell, Judge.

Representing Powell Family of Yakima, LLC: F. Scott Peasley of Peasley Law Office, Douglas, Wyoming.

Representing the Dunmires: M. Gregory Weisz of Pence and MacMillan, LLC, Laramie, Wyoming.

Representing the Hedstroms: William H. Vines of Jones, Jones, Vine & Hunkins, Wheatland, Wyoming.

Facts/Discussion: The case is an appeal from a district court order determining the ownership and management rights of the members of a limited liability company (the LLC). A secondary question was presented as to whether the district court adjudicated issues that were not raised by the pleadings.

Can a party be a member of a LLC without evidence of a contribution to capital: Whether or not a member actually made the stated capital contribution is not determinative of that member’s “membership” in the LLC. Section 17-15-121(a)(i) states that a member may or may not yet have made the capital contribution attributed to him or her in the articles of organization. Section 17-15-109(a) declares that issuance of the certificate of organization is conclusive evidence that all conditions precedent required to be performed by the members have been complied with.
Under the Wyoming LLC Act, do economic and noneconomic rights of company members vest in proportion to contribution to capital or pursuant to the articles of organization: The legislature has chosen to measure the different rights of a member of a limited liability company in different ways. In the instant case, the members clearly agreed for several years to allocate profits and losses on the basis of the initial capital contributions set forth in the Articles of Organization. It is not up to the courts to tell them they were wrong in doing so. The undisputed facts in the record clearly show the existence of an oral operating agreement.
Does Wyoming law recognize a distinction between contributions to capital as initially listed in the articles of organization of a LLC and as reflected on the company’s books and records: The Court answered this question in the affirmative using the phrase: “as initially listed in the article of organization, or as the articles of organization have been amended from time to time.” At any time there may be, and likely will be, a difference between the amount of a member’s stated capital contribution and the amount of his capital or equity account.
Did the district court commit reversible error by adjudicating claims made against the unrepresented LLC: the district court’s characterization of the members’ contributions as loans or as capital contributions was not an adjudication of claims against the LLC, but was what both parties sought – a declaration of their comparative interests in the LLC.
Were issues related to dissolution of the LLC ripe for adjudication: The Court did not read the district court’s Final Order or the decision letter as having adjudicated any issues related to dissolution. Neither in the decision letter nor in the Final Order does the district court endeavor to order dissolution of the LLC or to order any particular distribution of assets.

Conclusion: With or without an operating agreement, a person may be a member of a limited liability company so long a his or her initial capital contribution or ownership interest is adequately identified in the articles of organization filed with the secretary of state, or as a subsequent amendment to the articles of organization so indicates. The individual economic and noneconomic rights of the members of a limited liability company vest in the various manners set forth in the Act or where appropriate, as set forth in an operating agreement. In the instant case, the members’ management rights, and the allocation of profits and losses, is in proportion to their stated capital in the unamended articles of organization. Wyoming law recognizes a distinction between contributions to capital as initially listed in the articles of organization or in the articles of organization as they may have been amended, and contributions to capital that may be reflected in a member’s capital account or equity account. In the instant case, the members clearly intended that neither Powell’s additional capital contribution of $300,000 nor Dunmires’ loans in excess of $400,000 were to affect the stated capital contributions in the unamended articles of organization. The district court neither adjudicated claims against the limited liability company, nor determined the individual claims of members or other claimants in the event of dissolution.

Affirmed in part and reversed in part.

C.J. Voigt delivered the decision.

Link: http://tinyurl.com/24nxx2l .

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