Part 9- Partnerships, Chapter 40: Limited Liability Companies, Limited Partnerships, and Limited Liability Limited Partnerships, Doc 2 | Indiana University Bloomington - Edubirdie

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Indiana University Bloomington
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Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
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402

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1
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bratrochanter

In the case of In re Garrison-Ashburn, LC, Chapman and Comer, as 50/50 members of two LLCs (Garrison-Ashburn, L.C. and Garrison-Woods, L.C.), disputed over whether Comer, as the LLC’s operating manager, had the authority to execute a land sale contract on behalf of Garrison-Woods without Chapman’s consent. Chapman argued that both members’ signatures were required, per the operating agreement, to execute contracts and deeds. Comer, however, contended that as operating manager, he held exclusive control over business operations, including contract execution. The court ruled in favor of Comer, citing the LLC’s operating agreement, which granted the operating manager “sole and complete control of the management and operation of the affairs and business of the Company” and the authority to execute contracts on behalf of the LLC. While another section of the agreement required signatures from both an operating manager and an assistant for certain actions, the court clarified that this did not restrict the operating manager’s overarching authority to manage the company’s business. Furthermore, the court noted that by filing for bankruptcy, Chapman became dissociated from the LLC under Virginia law. This dissociation stripped him of management rights, leaving him with only economic rights to his ownership interest. Consequently, Comer retained full management control and authority to finalize the sale.

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