Case Title: IN THE MATTER OF KITE RANCH, LLC, a Wyoming limited liability company: POWELL FAMILY OF YAKIMA, LLC, a Washington limited liability company, DOUGLAS BRICKMAN, individually, and DOUGLAS BRICKMAN and ANNE BRICKMAN, husband and wife, and as joint tenants V. GALEN DUNMIRE and REBECCA DUNMIRE, husband and wife, as joint tenants and JAMES HEDSTROM and DONNA HEDSTROM, husband and wife, as joint tenants

Citation: 

Docket Number: S-09-0203

State: wyoming

Court: Wyoming Supreme Court

Date: 2010-06-24T00:00:00Z

Document:
IN THE MATTER OF KITE RANCH, LLC, a Wyoming limited liability company: POWELL FAMILY OF YAKIMA, LLC,  a Washington limited liability company, DOUGLAS BRICKMAN, individually, and DOUGLAS BRICKMAN and ANNE BRICKMAN, husband and wife, and as joint tenants V. GALEN DUNMIRE and REBECCA DUNMIRE, husband and wife, as joint tenants and JAMES HEDSTROM and DONNA HEDSTROM, husband and wife, as joint tenants2010 WY 83234 P.3d 351Case Number: S-09-0203Decided: 06/24/2010
APRIL 
TERM, A.D. 2010

 
 
IN 
THE MATTER OF KITE RANCH, LLC, a Wyoming limited liability 
company:POWELL FAMILY OF YAKIMA, LLC,  a Washington limited liability company, 
DOUGLAS BRICKMAN, individually, and DOUGLAS BRICKMAN and ANNE BRICKMAN, husband 
and wife, and as joint 
tenants,Appellants(Defendants),v.GALEN DUNMIRE and 
REBECCA DUNMIRE, husband and wife, as joint tenants and JAMES HEDSTROM and DONNA 
HEDSTROM, husband and wife, as joint 
tenants,Appellees(Plaintiffs).

 
 
Appeal 
from the District Court of Albany County

The 
Honorable Jeffrey A. Donnell, Judge

 
 
Representing 
Appellants:

F. 
Scott Peasley of Peasley Law Office, Douglas, Wyoming.

 
 
Representing 
Appellees Galen and Rebecca Dunmire:

M. 
Gregory Weisz of Pence and MacMillan, LLC, Laramie, 
Wyoming.

 
 
Representing 
Appellees James and Donna Hedstrom:

William 
H. Vines of Jones, Jones, Vines & Hunkins, Wheatland, 
Wyoming.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 

VOIGT, 
Chief 
Justice.

 
 
[¶1]      This 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 has been presented 
as to whether the district court adjudicated issues that were not raised by the 
pleadings.  We affirm in part and 
reverse in part.

 
 
ISSUES

 
 
[¶2]      1.    Can a party be a member of a 
limited liability company without evidence of a contribution to 
capital?

 
 
            
2.    Under the 
Wyoming Limited Liability Company Act (the Act), do economic and noneconomic 
rights of company members vest in proportion to contributions to capital or 
pursuant to the articles of organization?

 
 
            
3.    Does Wyoming 
law recognize a distinction between contributions to capital as initially listed 
in the articles of organization of a limited liability company, and as reflected 
on the company's books and records?

 
 
            
4.    Did the 
district court commit reversible error by adjudicating claims made against the 
unrepresented limited liability company?

 
 
            
5.    Were issues 
related to dissolution of the limited liability company ripe for 
adjudication?

 
 
FACTS

 
 
[¶3]      This case 
previously was before this Court on the limited issue of the propriety of an 
injunction that had been granted by the district court and, for convenience's 
sake, we will simply re-state the facts as they were stated in the opinion 
issued in that matter:

 

            
In 2001, Dunmires, Hedstroms and Brickmans discussed purchasing a ranch 
in Albany County.  The purchase 
price of the ranch was $1.1 million.  
They approached Powell about providing funds to help with the 
purchase.  Powell agreed to provide 
$300,000 toward the purchase price of the ranch.

 
 
            
The parties secured a loan from First National Bank (FNB) for the bulk of 
the purchase price.  The FNB loan 
was evidenced by a promissory note and mortgage on the ranch property.  All members, except Powell, personally 
guaranteed the note, and Dunmires supplied additional real property to secure 
the FNB loan.  FNB required the 
borrowers to form a business entity as a condition of the loan and to limit 
Powell's ownership in the new entity to a "maximum of 20%."  FNB also stated that the equity Powell 
provided could "not be accounted for through a note or 
mortgage."

 
 
            
Hedstroms and Brickmans executed articles of organization for Kite Ranch 
on December 26, 2001.  Dunmires, 
Brickmans, Hedstroms and Powell contributed initial capital of $1,000, with 20 
percent coming from Powell and 26.66 percent from each of the other 
members.  The articles were filed 
with the Wyoming Secretary of State's office.  However, the members did not execute an 
operating agreement, even though proposed agreements were apparently circulated 
among them.[1]

 
 
            
Kite Ranch operated as a cattle ranch over the next few years, leasing 
its property for grazing purposes.  
All of the members except Powell met periodically to discuss business 
matters, although the meetings were not formal as no official notice was given 
prior to the meetings and minutes were not kept.  During this time, approximately $220,000 
of Powell's equity contribution was returned to it, leaving it with a capital 
account of approximately $80,000.  
Dunmires provided approximately $415,000 in funds to Kite Ranch during 
those years.  The company's 
financial records indicate that Dunmires' contributions were carried as loans to 
the company.  The company's 
accountant testified that Dunmires directed her to designate the funds as 
loans.

 
 
            
In 2006, Powell and Brickmans became concerned about the management of 
the company.  Powell and Hedstroms 
executed contradictory leases on behalf of the company, leasing the ranch 
property to different individuals for the 2007 grazing season.  In addition, the FNB note fell into 
default when it matured on November 1, 2006.

 
 
            
On January 12, 2007, Dunmires and Hedstroms filed a complaint for 
declaratory judgment against Powell and Brickmans.  They also named the limited liability 
company as an involuntary plaintiff.  
They sought a declaration of the parties' respective interests, rights 
and responsibilities with respect to the limited liability company.  Powell and Brickmans responded with a 
petition for a temporary restraining order and preliminary injunction giving 
Powell management authority over the company and enjoining Dunmires and 
Hedstroms from exercising any management authority.

 
 

In 
re Kite Ranch, LLC, 
2008 WY 39, ¶¶ 3-8, 181 P.3d 920, 922 (Wyo. 2008) (Kite Ranch I).

 
 
[¶4]      In Kite Ranch I, we affirmed the district 
court's grant of a preliminary injunction giving Powell the authority to manage 
the ranch during the pendency of these proceedings.  Id. at ¶ 32, at 929.  We noted, however, that the district 
court's factual findings at that stage of the proceedings were "subject to being 
revisited at the trial . . . ."  Id. at ¶ 25, at 927 n.4.2  The 
matter then returned to the district court, where a motion for partial summary 
judgment was heard on February 18, 2009, and a bench trial on remaining issues 
was held on May 26-27, 2009.  The 
district court issued decision letters on February 23, 2009, and June 9, 2009, 
and a final order on July 20, 2009. This appeal followed.  Additional facts will be presented in 
the following discussion as they pertain to specific 
issues.

 
 
STANDARD 
OF REVIEW

 
 
[¶5]                  
            
Our standards for reviewing orders granting summary judgment are well 
established:

 
 
We 
review a summary judgment in the same light as the district court, using the 
same materials and following the same standards.  Summary judgment is proper only when 
there are no genuine issues of material fact and the prevailing party is 
entitled to judgment as a matter of law.

 
 
A 
motion for summary judgment places an initial burden on the movant to make a 
prima facie showing that no genuine issue of material fact exists and that 
summary judgment should be granted as a matter of law.  Once a prima facie showing is made, the 
burden shifts to the party opposing the motion to present specific facts showing 
that a genuine issue of material fact does exist.  We analyze challenges to a grant of 
summary judgment by reviewing the record in a light most favorable to the party 
opposing the motion giving him all favorable inferences that can be drawn from 
the facts.  Conclusory statements or 
mere opinions are insufficient, however, to satisfy an opposing party's 
burden.

 
 

Gayhart 
v. Goody, 
2004 WY 112, ¶ 11, 98 P.3d 164, 168 (Wyo. 2004) 
(quoting Moore v. Lubnau, 855 P.2d 1245, 1248 (Wyo. 1993)) 
(citations omitted).  "Summary 
judgment may be the appropriate resolution in a declaratory judgment 
action."  Coffinberry v. Bd. of County Comm'rs of 
County of Hot Springs, 2008 WY 
110, ¶ 3, 192 P.3d 978, 979 (Wyo. 2008).

 
 
[¶6]      We recently 
reiterated our standard for reviewing the findings of fact and conclusions of 
law of a district court after a bench trial:

 
 
The 
factual findings of a judge are not entitled to the limited review afforded a 
jury verdict.  While the findings 
are presumptively correct, the appellate court may examine all of the properly 
admissible evidence in the record.  
Due regard is given to the opportunity of the trial judge to assess the 
credibility of the witnesses, and our review does not entail re-weighing 
disputed evidence.  Findings of fact 
will not be set aside unless they are clearly erroneous.  A finding is clearly erroneous when, 
although there is evidence to support it, the reviewing court on the entire 
evidence is left with the definite and firm conviction that a mistake has been 
committed.

 
 
Further, 
with regard to the trial court's findings of fact,

 
 
we 
assume that the evidence of the prevailing party below is true and give that 
party every reasonable inference that can fairly and reasonably be drawn from 
it.  We do not substitute ourselves 
for the trial court as a finder of facts; instead, we defer to those findings 
unless they are unsupported by the record or erroneous as a matter of 
law.

 
 
The 
district court's conclusions of law are, however, subject to our de novo standard of 
review.

 
 

Vargas 
Ltd. P'ship v. Four "H" Ranches Architectural Control Comm., 
2009 WY 26, ¶ 9, 202 P.3d 1045, 1049-50 (Wyo. 2009) 
(internal citations omitted).  
Statutory construction is a question of law that we review de novo.  State ex rel. Wyo. Dep't of Revenue v. 
Hanover Compression, LP, 2008 WY 
138, ¶ 8, 196 P.3d 781, 784 (Wyo. 2008).

 
 
DISCUSSION

 
 
Can 
a party be a member of a limited liability company without evidence of a 
contribution to capital?

 
 
[¶7]      Powell and 
Brickmans contend that, despite the statement in the Articles of Organization 
that cash contributions were being made "at this time"Powell, $200.00; 
Brickmans, $266.67; Hedstroms, $266.67; and Dunmires, $266.67there was no 
evidence at trial that anyone but Powell actually made a capital contribution. 
 It follows, Powell asserts, that 
nobody but Powell ever became a member of the LLC.

 
 
[¶8]      This issue was 
resolved by the district court via summary judgment.  On December 12, 2008, Dunmires filed a 
motion for partial summary judgment, asking the district court to determine that 
Powell, Brickmans, Dunmires, and Hedstroms were the members of the LLC, that 
their capital contributions equaled the amounts and percentages set forth in the 
Articles of Organization, and that the members' equity ownership in the LLC was 
in the same percentages.  In a 
decision letter issued February 23, 2009, followed by an order filed April 15, 
2009, the district court held that the four parties listed were, indeed, the 
members of the LLC, but left the two remaining issues for trial. 

 
 
[¶9]      The district 
court's conclusions that Powell, Brickmans, Dunmires, and Hedstroms were all 
members of the LLC was based on two precepts.  First, the district court found that 
"[i]t is clear that, at the time Kite Ranch, LLC was formed, Powell, Brickmans, 
Hedstroms, and Dunmires were intended to be members' in the limited liability 
company."  Second, the district 
court cited Wyo. Stat. Ann. § 17-15-121(a)(i) (LexisNexis 2009), for the 
proposition that "a member is liable to the LLC for the difference between his 
contributions to capital as actually made and as state[d] in thearticles 
of organization."  In other words, 
whether or not a member actually made the stated capital contribution is not 
determinative of that member's "membership" in the LLC.

 
 
[¶10]   We will affirm the summary judgment 
on this point.  It is clear that 
Powell, Brickmans, Hedstroms, and Dunmires were intended to be, and became, the 
members of the LLC.  The 
communications with FNB anticipated that these would be the members.  The Articles of Organization identified 
them as the members.  Furthermore, 
in what amounts to an admission on this point, Powell signed an Authorization 
and Consent form on December 28, 2001, identifying the members of the LLC as 
Powell, Brickmans, Hedstroms, and Dunmires.

 
 
[¶11]   As noted by the district court, 
Wyo. Stat. Ann. § 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.  Furthermore, Wyo. 
Stat. Ann. § 17-15-109(a) (LexisNexis 2009) 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 . . . 
."  So, if payment of the initial 
capital contribution were to be seen as a prerequisite to membership, such was 
conclusively established by issuance of the certificate of organization to the 
LLC on December 28, 2001.

 
 
[¶12]   Powell and Brickmans would like the 
law to be that, until a limited liability company actually has a person's 
initial capital contribution "in hand," that person is not and cannot be a 
member of the limited liability company.  
They cite no law to that effect, and the statutes cited above do not 
contain that requirement.  Instead, 
the statutes make the member liable to the limited liability company for the 
difference between the amount of his stated capital contribution and the amount 
actually contributed.  Consequently, 
even if the facts are viewed in the light most favorable to Powell and 
Brickmans, and we assume that Brickmans, Hedstroms, and Dunmires did not each 
pay the stated $266.67, that fact does not mean they are not members of the 
LLC.3

 
 
Under 
the Wyoming Limited Liability Company Act, do economic and noneconomic rights of 
company members vest in proportion to contributions to capital or pursuant to 
the articles of organization?

 
 
[¶13]   An analysis of pertinent parts of 
the Act is helpful in responding to this question.  In Lieberman v. Wyoming.com LLC, 11 P.3d 353, 357 (Wyo. 2000), we 
said the following:

 
 
            
Under the Wyoming LLC act, a member's interest in an LLC consists of 
economic and non-economic interests.  
One interest is a member's capital contribution, which a member may 
withdraw under certain conditions.  
Wyo. Stat. Ann. §§ 17-15-115 and 120.  A member also generally has the right to 
receive profits.  Wyo. Stat. Ann. § 
17-15-119.  A member's interest also 
usually grants him the ability to participate in management.  Wyo. Stat. Ann. § 17-15-116.  Overall, a member's interest is 
transferable, although the management rights of a transferee may be 
limited.  Wyo. Stat. Ann. § 
17-15-122.  While these statutory 
provisions provide some guidance regarding a member's interest, we must look at 
an LLC's operating agreement and articles of organization.

 
 
[¶14]   A later case involving the same 
parties and the same underlying issues, Lieberman v. Mossbrook, 2009 WY 65, ¶¶ 35-48, 208 P.3d 1296, 1307-1310 (Wyo. 
2009), is an example of the use of an operating agreement to determine the 
difference between one's capital contributions and one's capital account or 
equity account.  In the instant 
case, to the contrary, where there is no formal written operating agreement, we 
have been urged to look to the "default" provisions of the statutes, even though 
the statutes do not provide the detail in regard to such matters as might be 
expected in an operating agreement.  
See Mark A. Sargent & 
Walter D. Schwidetzky, Limited Liability 
Company Handbook § 1:3 (2008); Larry E. Ribstein & Robert R. Keatinge, 
Limited Liability Companies §§ 2:5, 
5:2 (1996); and Am. Jur. 2d New Topic 
Service Limited Liability Companies § 3 (2005).

 
 
[¶15]   Some answers can be gleaned from 
the statutes, despite their limitations.  
For instance, Wyo. Stat. Ann. § 17-15-116 (LexisNexis 2009) provides as 
follows in regard to management of a limited liability company in the absence of 
an operating agreement:

 
 
            
Management of the limited liability company shall be vested in its 
members, which unless otherwise provided in the operating agreement shall be in 
proportion to their contribution to the capital of the limited liability 
company, as adjusted from time to time to properly reflect any additional 
contributions or withdrawals by the members . . . .

 
 
[¶16]   Standing alone, this statute 
provides that "contributions to capital," a term not defined in the statute, 
varies over time, and controls the right to management in proportion to that 
variable amount.  It would seem 
illogical, however, to assume that the management rights of the members would 
change every time some member contributed another dollar, or every time a dollar 
was returned to a member.  Reading 
further in the Act, we see that Wyo. Stat. Ann. § 17-15-129(b) (LexisNexis 2009) 
requires that the articles of organization be amended whenever "[t]here is a 
change . . . in the amount or the character of the contributions to 
capital."  Likewise, Wyo. Stat. Ann. 
§ 17-15-120(a)(iii) (LexisNexis 2009) requires the articles of organization to 
be "amended as to set out the withdrawal or reduction" whenever a member 
receives back any part of his or her contribution to 
capital.

 
 

[¶17]   When read together, these statutes 
reflect an intent that the capital contribution of a member, for purposes of 
determining management rights under Wyo. Stat. Ann. § 17-15-116,  be such amount as is then 
reflected in the articles of organization, in the absence of an operating 
agreement.  This is precisely the 
rationale applied by the district court in this case:

 
 
            
The parties first dispute the amounts to be designated as "capital 
contributions" of each member.  
Considering first the only significant company document signed by all the 
members, which document must be given effect by the Court if at all possible, 
the [Articles of Organization] specify total initial capital of $1,000.00, 
contributed by Powell ($200.00); Brickman ($266.67); Hedstrom ($266.67); and 
Dunmire ($266.67).  The [Articles of 
Organization] also provide for "additional contributions to capital" upon 
unanimous consent of the members.  
While there has been some dispute about this, the Court finds that the 
parties initially contributed the amounts stated in the [Articles of 
Organization].  The dispute really 
concerns the additional $299,800.00 advanced to the LLC by 
Powell.

 
 
            
Wyoming [S]tatute § 17-15-129(b)(i) requires amendment to the articles of 
organization if there is a change "in the amount or character of the 
contributions to capital."  Id.  Additionally, Kite Ranch, LLC's 
[Articles of Organization] require unanimous consent for additional capital 
contributions.  Kite Ranch, LLC's 
[Articles of Organization] were never amended and its members never unanimously 
consented to additional capital contributions to the extent they would modify 
the [Articles of Organization].  
Further, the contemporaneous FNB loan commitment letter is clear in 
representing the parties' intent, at the time, to limit Powell's ownership 
interest to twenty percent (20%).  
Accordingly, Dunmire argues that the additional monies contributed by 
Powell are appropriately labeled part of Powell's "capital account" but not an 
"initial capital contribution," or "stated capital 
contribution."

 
 
[¶18]   Two inescapable facts emerge from 
the evidence in this case:  first, 
at the inception of the parties' agreement, when the bank loan was obtained and 
the Articles of Organization were filed, Powell's stated capital was $200, and 
his membership interest was 20%, despite everyone's knowledge that Powell was 
contributing $300,000; and second, the Articles of Organization were never 
amended to show any other capital or management percentagenot when Powell's 
contribution went up to $300,000, and not when it went down to 
$80,000.

 
 
[¶19]   This discussion takes us full 
circle to the original question which, restated, is whether, under the Act, the 
rights of a member of a limited liability company are dictated by his or her 
proportional share of capital contributions as stated in the articles of 
organization, or by some other amount reflective of his or her proportional 
share of the company's equity, represented by a "capital account" or "equity 
account."  We have already noted how 
Wyo. Stat. Ann. §§ 17-15-116, 120(a)(iii) and 129(b) tie management of the 
company to the stated capital of the articles of organization, as those articles 
of organization may be amended from time to time.4  By 
contrast, Wyo. Stat. Ann. § 17-15-119 (LexisNexis 2009) provides that profits, 
losses, and distribution of assets are all to "be allocated on the basis of the 
value of the contributions made by each member to the extent they have been 
received by the limited liability company and have not been returned."  Once again by contrast, Wyo. Stat. Ann. 
§ 17-15-126(b) (LexisNexis 2009) provides that, upon dissolution of a limited 
liability company, members' claims for capital, for profits, and for income on 
their contributions, are shared "in proportion to the respective amount of the 
claims."

 
 
[¶20]   In case it is not self-evident, the 
lesson here is that the legislature has chosen to measure the different rights 
of a member of a limited liability company in different ways, which is what 
makes it impossible to answer the present question by simply opting between the 
two offered alternatives.  It is a 
common rule of statutory construction that "when the legislature used certain 
language in one part of the statute and different language in another, the court 
assumes different meanings were intended."  
2A Norman J. Singer & J.D. Shambie Singer, Statutes and Statutory Construction § 
46:6 (7th ed. 2007); see also In re 
Adoption of Voss, 550 P.2d 481, 485 (Wyo. 1976).  

 
 
[¶21]   We are satisfied that, under the 
statutes enumerated, the management rights of a member are measured by the 
stated capital percentages set forth in the initial articles of organization, or 
as those articles of organization may have been amended from time to time, 
unless established otherwise by an operating agreement.  Additional contributions to capital that 
are not reflected in change in the nature or amount of that stated capital, and 
therefore do not cause a concomitant amendment to the articles of organization, 
do not change the members' management rights.  It follows that the management rights of 
the members of this LLC are proportional to their 20/26/26/26 percentages.  The final order of the district court 
must be reversed to the extent that it concludes 
otherwise.

 
 
[¶22]   On the other hand, the members' 
rights to profits (and losses) and to other distributions of assets during the 
existence of the limited liability company are "allocated on the basis of the 
value of the contributions made by each member . . . ."  Wyo. Stat. Ann. § 17-15-119.  And upon dissolution, members' claims 
for capital, for profits, and for income on their contributions are allocated 
"in proportion to the respective amounts of the claims."  Wyo. Stat. Ann. § 17-15-126(b).  In other words, the answer to the second 
question presented by Powell in this appeal is that some membership rights vest 
in proportion to stated capital set forth in the articles of organization, and 
some membership rights vest in proportion to unreturned contributions.5

 
 
[¶23]   The primary difficulty with this 
entire discussion, however, is that it presupposes that there was no operating 
agreement in this case.  Both the 
parties and the district court approached the case as if that were true, largely 
because several versions of written operating agreements were circulated, but 
none were signed by all the members.  
The flaw with this reasoning is that an operating agreement need not be 
in writing; it may be an oral agreement.  
 Ribstein & Keatinge, Limited Liability Companies § 4:16; Am. 
Jur. 2d New Topic Service Limited 
Liability Companies § 3.  That 
leads inexorably to this question:  
If there was no operating agreement, what guided the operation of the LLC 
from its inception in December 2001 to the outbreak of this lawsuit in 
2007?

 
 
[¶24]   Numerous undisputed facts suggest 
the existence of an oral operating agreementan agreement based upon the 
members' pre-formation agreements:  
(1) all members signed and agreed to FNB's loan commitment letter and the 
instrument authorizing the loan; (2) the bank loan was made, and the original 
capitalization of the LLC followed the FNB loan commitment requirements; (3) the 
Articles of Organization followed the initial capitalization structure; (4) the 
Articles of Organization were not amended, and Powell did not seek to have them 
amended; (5) the LLC's tax returns, with the exception of the first year's 
return, followed the initial capitalization structure; (6) profits and losses 
were allocated, without objection, pursuant to the initial capitalization 
structure, rather than pursuant to statute; (7) Hedstrom operated the ranch 
until the onset of the present dispute, with the full knowledge and agreement of 
all the members; (8) the members met periodically but informally to discuss 
management of the ranch and the LLC; and (9) almost immediately after purchasing 
the ranch, the members had the LLC begin to repay Powell's additional capital 
contribution of $300,000.  The 
last-mentioned fact, for instance, did not just occur in a vacuum; it was a 
deliberate and purposeful act of the members of the LLC, done pursuant to their 
agreement that Powell was to be a minority equity holder whose equity would be 
returned as quickly as possible.

 
 
[¶25]   It is not fatal to an operating 
agreement that it does not cover all pertinent concerns.  If certain subjects are not addressed in 
the operating agreement, the limited liability company is guided in regard 
thereto by the default provisions of the statutes.  Am. Jur. 2d New Topic Service Limited Liability 
Companies § 3; Ribstein & Keatinge, Limited Liability Companies § 4:16.  Perhaps because of the statutory default 
concept, limited liability statutes typically do not mandate a particular 
structure or particular provisions for operating 
agreements:

 
 
The 
statutes allow the owners of the business to use the operating agreement to set 
up the management of the entity pretty much as they please, and in a manner far 
less restrictive than the special close corporation statutes, which generally 
share the same goal of circumventing the mandatory provisions of the general 
corporation statute to facilitate managerial flexibility.

 
 
Sargent 
& Schwidetzky, Limited Liability 
Company Handbook § 1:3.

 
 
[¶26]   Some conclusions to be drawn from 
all of this are:  (1) the Act's 
requirements are not particularly specific or detailed; (2) the Act does not 
even define the term "operating agreement," no less prescribe its contents or 
coverage; (3) operating agreements may cover some subjects, but leave others to 
statutory "default" provisions; and (4) operating agreements may be oral, making 
them even more difficult to construe.  
One overarching consideration, however, is that this flexibility is 
purposeful in the Act:  "This 
hands-off approach leaves virtually all of the essential elements of the capital 
structure to be determined by the parties, with results reflected in an 
operating agreement' that is roughly analogous to a general partnership 
agreement."  Id.

 
 
[¶27]   The challenge for the courts is to 
give effect to the intent of the members of a limited liability company, where 
that intent does not violate the statutes.  
In that regard, we cannot agree with the following conclusion of the 
district court:

 
 
The 
LLC's subsequent shift to the use of "stated capital" percentages in allocating 
profits and losses in its federal tax returns was not in accord with the 
statutory scheme.  To the extent 
that Kite Ranch, LLC's historical distribution of profits has differed from the 
process described herein, it will need to adjust those distributions so as to 
accurately reflect the balances in each member's capital 
account.

 
 
Wyo. 
Stat. Ann. § 17-15-119 provides that profits and losses and distributions of 
assets are to be "made on the basis of the value of the contributions made by 
each member," but only if an operating agreement does not provide 
otherwise.  In this 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.6

 
 
Does 
Wyoming law recognize a distinction between contributions to capital as 
initially listed in the articles of organization of a limited liability company, 
and as reflected on the company's books and 
records?

 
 
[¶28]   In large part, we have already 
answered this question in the affirmative, as did the district court, except 
that the phrase "as initially listed in the articles of organization" is 
inaccurate.  It would be more 
accurate to say "as initially listed in the articles of organization, or as the 
articles of organization have been amended from time to time."  The statutory sections cited in the 
previous section of this discussion are not ambiguous in that they provide sure 
guidelines by which a limited liability company can operate, and they provide 
guidance as to the treatment of the economic and noneconomic interests of 
members.  In those statutes, it is 
manifest that the books and records of the limited liability company may show 
capital contributions in a member's capital account or equity account that are 
not also included in his or her stated capital in the articles of 
organization.

 
 
[¶29]   The appellee's expert, a certified 
public accountant, testified at trial that he had done tax and accounting work 
for about 500 limited liability companies since the law's inception in Wyoming 
in the late 1970's.  He further 
testified as follows:

 
 
Q.    What is your 
understanding?

 
 
A.    Well, there's  there is a 
capital contribution for accounting and tax purposes and additions to 
capital.  And then there's a capital 
contribution for purposes of the Wyoming Statute.

 
 
. 
. . .

 
 
Q.    All right.  Based on your experience in work for 
limited liability companies and having reviewed this Exhibit 32, do you have an 
opinion as to what the capital contributions are of the four persons shown on 
that Exhibit 32?

 
 
A.    Yes, I 
do.

 
 
Q.    And what  what is your 
opinion?

 
 
A.    Well, that the Powell Family 
of Yakima has permanent capital of $200; that Douglas Brickman has capital of 
$266.67; that James D. Hedstrom and Donna Hedstrom has [sic] permanent capital 
of $266.67; and that Galen Dunmire and Rebecca Dunmire have a permanent capital 
of $266.66.

 
 
Q.    All right.  Are you aware of any amendment to these 
Articles of Organization?

 
 
A.    I am aware of no amendment 
filed with the Secretary of State.

 
 
Q.    All right.  Now, we have talked at length about the 
various tax returns and the balance sheets for the Kite Ranch, LLC.  Do you have an understanding of where 
the $300,000 that Powell Family of Yakima used to pay for a portion of the 
ranch, how was that characterized in the tax returns of the 
company?

 
 
A.    It is characterized as an 
addition to capital.

 
 
Q.    All right.  And does it show up in the capital 
account of Powell Family of Yakima?

 
 
A.    It 
does.

 
 
Q.    All right.  Now, Mr. Paiz, you and I have talked 
about the fact that there was  there was $300,000 provided by Powell Family of 
Yakima, correct?

 
 
A.    
Correct.

 
 
Q.    You and I have talked about 
how there was 100,000 that was given back, correct?

 
 
A.    
Correct.

 
 
Q.    And do you agree with me that 
in the first year tax return, that $200,000 shows up in the capital account in 
Powell Family of Yakima?

 
 
A.    It 
does.

 
 
Q.    All right.  During your work with limited liability 
companies, have you encountered a situation when someone put money into the 
company and it was posted to their capital account?

 
 
A.    Yes, I 
have.

 
 
Q.    Is that 
common?

 
 
A.    It is very, very 
common.

 
 
Q.    All right.  Are you aware of a situation where 
someone has provided money to a company, that their money that they give, is 
posted to that member's capital account without that posting changing their 
capital contribution in the company?

 
 
A.    All the 
time.

 
 
Q.    All right.  What types of things cause that to 
happen?

 
 
A.    Oh, company needing capital 
and certain loan covenants.  For 
example, saying, here's  here's the percentage of loans you can make, and a 
company still needs capital.  And so 
one of the partners may advance capital as such but not change ownership, 
because they don't agree to it and don't file the necessary amendments of the 
Articles of Organization as required by Statute to reflect those changes in 
ownership or profit sharing percentages.

 
 
Q.    Okay.  So you have indicated that it is common 
for money to be posted to a partner's capital account?

 
 
A.    
Correct.

 
 
Q.    All right.  And you and I have discussed it at 
length, the propriety of that with regard to Powell Family of Yakima.  Do you have an opinion as to the 
propriety of the posting of that $200,000 after the hundred came back?  Do you have an opinion as to the 
propriety of the posting of that money to Powell Family of Yakima's capital 
account?

 
 
A.    Yeah.  It's clearly an increase in the capital 
account, because the loan document said it was not going to be a 
debt.

 
 
Q.    Okay.  So your opinion is, that was entirely 
appropriate?

 
 
A.    That was entirely 
appropriate.

 
 
Q.    Okay.  Mr. Paiz, do you understand that Powell 
Family of Yakima is asserting that their contribution of that money to assist in 
the purchase of the Kite Ranch should result in their capital contribution as 
shown in Articles of Organization Exhibit 32 of 
increasing?

 
 
A.    Could you repeat 
that?

 
 
Q.    Yeah.  That was not a good 
question.

 
 
        Are 
you aware that Powell Family of Yakima is arguing that the money that it gave to 
buy a portion of the ranch should be treated as a capital 
contribution?

 
 
A.    Yeah.  I am aware that they would like it 
treated as a capital contribution, in effect, amending the Articles of 
Organization.

 
 
. 
. . .

 
 
Q.    Mr. Paiz, in your course of 
providing work for limited liability companies, when someone wants to make a 
change to their capital contribution in the company, have you offered advice to 
them?

 
 
A.    
Definitely.

 
 
Q.    And what is the advice you 
have offered?

 
 
A.    That we will have an 
amendment to the Articles of Organization, and all of the members will execute 
that and it will be filed with the Secretary of State of 
Wyoming.

 
 
. 
. . .

 
 
Q.    Mr. Paiz, have you ever seen 
the argument being advanced by Mr. Powell applied in your work for all of those 
limited liability companies that you do work for?

 
 
A.    No.

 
 
. 
. . .

 
 
Q.    Okay.  I believe you touched on some of these 
items, but I want to make sure I understand.  What types of things go into a member's 
 in determining a member's capital account balance?  In other words, what attributions are 
made of in and out?

 
 
A.    Okay.  You know, they are capital additions, 
the original capital contribution, the capital additions, the share of allocated 
net income, the withdrawals of cash, the returns of capital, and then market 
value adjustments.

 
 
Q.    Okay.  In your opinion, is a member's capital 
account balance at any given point in time, is that the same thing as their 
capital contribution?

 
 
A.    No.

 
 
Q.    Why 
not?

 
 
A.    Because the  the capital 
accounts vary from time to time with these allocations of net income.  And when you are accounting for it on 
the tax basis, you clearly know that this net income is not the economic net 
income of the entity.  And so you 
know there are adjustments.  The 
original capital account is the capital amount stated in the Articles and agreed 
to by all of the members in writing.

 
 
[¶30]   This testimony has been quoted at 
length to show that the members of this limited liability company treated the 
initial contributions to capital, and the additional contribution of $300,000 by 
Powell, exactly as we find to have been allowed by the unambiguous 
statutes.  Sargent & 
Schwidetzky, Limited Liability Company 
Handbook § 1:3.  At any 
given time there may be, and likely will be, a difference between the amount of 
a member's stated capital contribution, as reflected in the articles of 
organization, and the amount of his capital or equity account.  In the instant case, Powell's $300,000 
contribution is an example of just such a difference.  There is no evidence anywhere in the 
record that any of the members, including Powell, ever intended for that 
$300,000 to represent stated capital in an ownership or management sense.  It was additional capital that was to be 
repaid.  The members could have made 
it otherwise, but they did not.7

 
 
Did 
the district court commit reversible error by adjudicating claims made against 
the unrepresented limited liability company?

 
 
[¶31]   On January 12, 2007, the Dunmires 
and the Hedstroms filed a Complaint for Declaratory Judgment.  The named defendants were Powell and the 
Brickmans.  The LLC was named as an 
"involuntary plaintiff."  In 
summary, the plaintiffs sought a declaration as to the parties' respective 
ownership interests in the LLC, and a declaration as to their respective 
liabilities and obligations to the LLC and to each other.  The responsive counterclaim filed by 
Powell and the Brickmans also sought a declaratory judgment.  In addition to asking the district court 
to declare the parties' respective ownership interests in the LLC, and the 
parties' respective liabilities and obligations "between and among themselves," 
the counterclaim sought "an accounting to determine:  (1)  the economic and non-economic interests 
of all the members in the company; (2) the amount of each member's capital 
account, and total equitable interest in the company; and (3) each member's 
monetary obligations for debts in the company, and to each 
other[.]"

 
 
[¶32]   On October 16, 2008, Powell and the 
Brickmans filed a motion to bifurcate the proceedings, with one trial 
determining the parties' ownership interests and one trial determining the 
parties' liabilities to the LLC and to one another.  Dunmires and Hedstroms objected to 
bifurcation on the ground that the issues were closely interrelated, 
particularly because the distinction between a capital contribution and a loan 
implicated both the issue of ownership and the issue of liability.  The district court denied the motion, 
finding that "evidence will necessarily overlap and any attempt to bifurcate 
these issues will result in confusion and duplication."

 
 
[¶33]   Although this issue has not been 
presented as alleged error in failing to bifurcate the trial, we will briefly 
state the law in that regard.  
W.R.C.P. 42(b) provides as follows:

 
 
            
(b)    Separate trials.  The court, in 
furtherance of convenience or to avoid prejudice, or when separate trials will 
be conducive to expedition and economy, may order a separate trial of any claim, 
cross-claim, counterclaim, or third-party claim, or of any separate issue or of 
any number of claims, cross-claims, counterclaims, third-party claims, or 
issues.

 
 
We 
review a decision not to bifurcate a trial for an abuse of discretion, and 
reverse only if the district court's decision was outside the bounds of reason 
under the circumstances.  In re Conservatorship & Guardianship of 
CPR, 2009 WY 76, ¶¶ 9-10, 209 P.3d 879, 883 (Wyo. 2009).  "[W]hen the issues to be tried are not 
clearly separate and distinct, they do not lend themselves to bifurcation."  Carlson v. Carlson, 836 P.2d 297, 305 (Wyo. 
1992).

 
 
[¶34]   Here, we find that the district 
court did not abuse its discretion in declining the motion to bifurcate because 
identification of the parties' respective contributions as capital contributions 
or as loans to the LLC was clearly central to answering the presented 
questions.  Moreover, based upon the 
evidence presented, the district court appropriately characterized contributions 
as capital or as loans, but did not, for instance, specifically adjudicate what 
amount, if any, the LLC owed to the Dunmires for loans made to the LLC.  Neither did it specifically adjudicate 
the exact amount of Powell's addition to capital that remained to be repaid, nor 
did it determine the actual amounts for a proper allocation of profits and 
losses.  In short, 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 exactly 
what both parties sought in their pleadingsa declaration of their comparative 
interests in the LLC.

 
 
Were 
issues related to dissolution of the limited liability company ripe for 
adjudication?

 
 
[¶35]   The short answer to this question 
is "no."  The longer answer is that 
this Court does not read the district court's Final Order or the decision letter 
incorporated therein as having adjudicated any issues related to 
dissolution.  In the final paragraph 
of the section of the decision letter dealing with capital contributions and 
ownership interests, the district court does set forth a very general statement 
of what, "as it now stands," a distribution of assets would entail.  That paragraph, however, is simply a 
recitation of the provisions of Wyo. Stat. Ann. § 17-15-126, which statute 
governs distribution of assets upon 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.  The district court merely notes how its 
characterization of particular contributions places those particular 
contributions into different categories in the event of 
dissolution.

 
 
CONCLUSION

 
 
[¶36]   To summarize:

 
 
            
1.    With or 
without an operating agreement, a person may be a member of a limited liability 
company so long as 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.

 
 
            
2.    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, as more fully explained hereinabove.  See supra 

¶ 
13.  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.

 
 
            
3.    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.

 
 
            
4.    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.

 
 
[¶37]   Affirmed in part, and reversed and 
remanded for entry of an order consistent herewith.

 
 
FOOTNOTES

 
 

1It 
is more accurate to say that the members did not execute a written operating 
agreement.  They did, however, 
operate for years under an oral agreement.  
More will be said about that later herein. 

 
 

2The 
facts had not been fully presented, and the dispositive legal issues had not 
been fully joined at the injunction stage of this case that resulted in Kite Ranch I.  The focus of that opinion was upon the 
question of whether the district court had abused its equitable discretion in 
granting Powell management control of the LLC, pendente lite, where Powell was at that 
time the only member with a positive capital account.  We found no abuse of discretion under 
those circumstances.  Further 
development of the facts and the law, however, have caused both the district 
court and this Court to modify several findings and conclusions.  Where there are contradictions, 
especially in regard to the latter, this opinion shall 
control.

 
 

3As 
mentioned above, the district court decided the issue of membership via summary 
judgment, with part of its reasoning being that it did not matter, under the 
statutes, whether the members had actually contributed the amounts of stated 
capital in the articles of organization.  
We have addressed this membership issue as a summary judgment 
determination.  We note, however, 
that at the later bench trial, the appellee's expert witness, in examining the 
LLC's records, testified that "there was a contribution of capital by the 
original four members, in accordance with the Articles of Organization."  The point is that, had the question of 
membership been reserved for trial, rather than determined in the summary 
judgment, the answer would not have differed.

 
 

4We 
said in Lieberman, 11 P.3d  at 359, 
that the requirement in Wyo. Stat. Ann. 17-15-129(b)(i) that the articles of 
organization be amended if there is a change in the amount or character of a 
member's capital contribution means that "the amount of a member's capital 
contribution is a constant not subject to market fluctuations."  That statement was made in the context 
of a general holding that, where Lieberman was withdrawing but the limited 
liability company was not being dissolved, he was entitled only to the return of 
his stated capital contribution of $20,000, but not to payment of his "equity 
interest."

 
 

5It 
is not necessary in resolving the present case for us to determine precisely 
what the legislature meant by the concept of "unreturned contributions" in Wyo. 
Stat. Ann. § 17-15-119 because, as the statute allows, the members of this LLC 
allocated profits and losses on the basis of their initial capital 
contributions.  See infra ¶ 27.

 
 

6The 
question of whether there was an oral operating agreement was not raised 
below.  It is impossible, however, 
to analyze the rights of the members of a limited liability company under the 
statutes without considering the role of whatever operating agreement may have 
existed.  Because the undisputed 
facts in the record clearly show the existence of such an agreement, we have 
concluded that it would not serve the interests of the litigants or the 
interests of judicial economy to remand the case for further development of this 
issue. 

 
 

7One 
argument repeatedly made by Powell as to why its management rights and 
distributive rights should be tied to total capital contributions, rather than 
to initial stated capital, is that its $300,000 completely dwarfed the capital 
amounts contributed by the other members.  
Powell presents this argument in terms of riskskin in the game.  The problem is that, in doing so, Powell 
overlooks the $800,000 loan executed and guaranteed by the other members, 
overlooks Dunmires' provision of additional security to FNB by way of a 
residential mortgage, and overlooks Dunmires' loans to the LLC totaling nearly 
$415,000.  The 20/26/26/26 
percentage ownership split is not unreasonable under these circumstances.  This is especially true where the 
evidence shows that, had FNB not insisted on Powell's contribution being capital 
rather than a loan, Powell would not have become a member, and even when FNB 
required capital rather than debt, Powell told FNB "it [was] the plan of the 
other investors to buy out [Powell's] interest within the next five years."  There is no evidence anywhere in the 
record that the members ever intended for Powell's $300,000 to represent an 
ownership/management interest, or to give Powell a concomitant share of profits 
and losses.