PRESENT: All the Justices

JANET M. OTT

OPINION BY

v. Record No. 101278 JUSTICE WILLIAM C. MIMS

 November 4, 2011

LOU ANN MONROE, ET AL.

FROM THE CIRCUIT COURT OF STAFFORD COUNTY

John R. Alderman, Judge Designate

In this appeal, we consider whether membership in a 

Virginia limited liability company may be transferred by will.

I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW

Admiral Dewey Monroe, Jr. (“Dewey”) and his wife Lou Ann 

Monroe (“Lou Ann”) formed a Virginia limited liability company, 

L&J Holdings, LLC (“the Company”), which was governed by an 

operating agreement they executed in April 2003 (“the 

Agreement”). The Agreement provided that Dewey and Lou Ann were 

the sole members and that they held an 80% membership interest 

and a 20% membership interest, respectively. It also provided 

that Lou Ann would be the managing member and Joseph G. Monroe 

(“Joseph”) would serve as the successor managing member in the 

event of her death, disability, removal, or resignation.

Paragraph 2 of the Agreement provided that “[e]xcept as 

provided herein, no Member shall transfer his membership or 

ownership, or any portion or interest thereof, to any non-Member 

person, without the written consent of all other Members, except 

by death, intestacy, devise, or otherwise by operation of law.” 
2

Paragraph 10(B) provided in relevant part that “[n]o Member 

shall, directly or indirectly, transfer, sell, give, encumber, 

assign, pledge, or otherwise deal with or dispose of all or any 

part of his Membership Interest now owned or subsequently 

acquired by him, other than as provided for in this Agreement.” 

Paragraph 10(C) provided in relevant part that, Paragraph 10(B) 

notwithstanding, “any Member . . . may transfer all or any 

portion of the Member’s Interest at any time to . . . [o]ther 

Members [or] [t]he spouse, children or other descendants of any 

Member.”

Dewey died in 2004. Through a will executed prior to the 

formation of the Company, he bequeathed his entire estate to his 

daughter, Janet. After the will was admitted to probate, Janet 

asserted that Dewey’s bequest transferred his membership in the 

Company to her. She called a meeting of the Company, sending 

notice to Lou Ann, with the intent to remove Lou Ann and Joseph 

from their positions as managing member and successor managing 

member, respectively. Lou Ann responded that Janet had 

inherited only Dewey’s right to share in profits and losses of 

the Company and to receive distributions to which he would be

entitled.

Janet proceeded with the meeting and putatively removed Lou 

Ann and Joseph, electing herself as the Company’s new managing 

member and electing Susan Shackelford as successor managing 
3

member in the event of her death, disability, removal, or 

resignation. Thereafter, Janet filed a complaint in the circuit 

court seeking declaratory judgment that she had inherited her 

father’s full membership in the Company and Lou Ann and Joseph 

had been validly removed from their positions. Lou Ann and 

Joseph filed a demurrer, again asserting that Janet had 

inherited only Dewey’s right to share in profits and losses and 

to receive distributions.

The court denied the demurrer and the case proceeded to a 

bench trial. At its conclusion, the court held that Dewey was 

dissociated from the Company upon his death by operation of Code 

§ 13.1-1040.1(7)(a). Consequently, the court concluded that all 

his rights as a member to participate in the control of the 

Company’s affairs terminated and only the right to share profits 

and losses and to receive distributions survived to be inherited 

by Janet through his will. Accordingly, the court ruled that 

Janet was not a member of the Company and thus lacked the 

authority to remove Lou Ann and Joseph from their positions. We 

awarded Janet this appeal.

II. ANALYSIS

This appeal assigns error to the circuit court’s 

interpretation of the Agreement and the relevant statutes. 

Accordingly, we review the judgment de novo. Uniwest Constr., 
4

Inc. v. Amtech Elevator Servs., 280 Va. 428, 440, 699 S.E.2d 

223, 229 (2010).

When interpreting a contract, we construe it as a whole. 

When its terms are clear and unambiguous, we give them their 

plain meaning. We harmonize its provisions and give effect to 

each of them when it reasonably can be done. Id. Similarly, we 

construe statutes as a consistent and harmonious whole to give 

effect to the overall statutory scheme. Virginia Electric & 

Power Co. v. Board of County Supervisors, 226 Va. 382, 388, 309 

S.E.2d 308, 311 (1983). We apply the plain meaning of a statute 

unless its terms are ambiguous or doing so would lead to an 

absurd result. Covel v. Town of Vienna, 280 Va. 151, 158, 694 

S.E.2d 609, 614 (2010).

Janet argues that the circuit court erred in ruling that 

Dewey was dissociated upon his death by operation of Code 

§ 13.1-1040.1(7)(a) because that provision is preceded by the 

proviso, “[e]xcept as otherwise provided in the articles of 

organization or an operating agreement.” She asserts that 

Paragraph 2 of the Agreement constitutes such an exception and 

supersedes dissociation under the statute.1

 We disagree.

 1 Janet also asserts that statutory dissociation is 

preempted by Paragraph 10(A), which states that “no Member shall 

have any right to voluntarily resign or otherwise withdraw from 

the Company . . . without the prior written consent of all 

remaining Members of the Company. Any attempted resignation or 

withdrawal without the requisite consent shall be null and void 
5

A. THE VIRGINIA LIMITED LIABILITY COMPANY ACT

We begin our analysis by examining the statutory framework 

governing Virginia limited liability companies, the Virginia 

Limited Liability Company Act, Code § 13.1-1000 et seq. (“the 

Act”). “The [limited liability company] is a hybrid entity, 

borrowing from both the corporate and partnership models” to 

combine a corporation’s limited liability for its owners with a 

partnership’s pass-through treatment for income tax purposes. 

S. Brian Farmer & Louis A. Mezzullo, The Virginia Limited 

Liability Company Act, 25 U. Rich. L. Rev. 789, 790 (1991). 

When the Act was enacted in 1991, federal tax regulations denied 

the pass-through treatment afforded partnerships if a business 

entity possessed three of the four principal characteristics of 

corporations: (1) perpetual existence, (2) central management, 

(3) limited liability of owners, and (4) free transferability of 

ownership interests. Id. at 813-15. Because limited liability 

was an indispensible characteristic of limited liability 

companies, the provisions of the Act were drafted to avoid the 

three remaining corporate characteristics. Id. at 815-21. 

Thus, the transferability of a member’s interest in a limited 

 

and have no legal effect.” Nothing in the record of this case 

establishes that Dewey’s death was a voluntary attempt to resign 

or otherwise withdraw from the Company. Paragraph 10(A) 

therefore is not implicated.
6

liability company is analogous to the transferability of a 

partner’s interest in a partnership.

When the Act was enacted in 1991, the Uniform Partnership 

Act expressly provided that

[a] conveyance by a partner of his interest in 

the partnership does not . . . entitle the 

assignee, during the continuance of the 

partnership, to interfere in the management or 

administration of the partnership business or 

affairs, or to require any information or account 

of partnership transactions, or to inspect the 

partnership books; but it merely entitles the 

assignee to receive in accordance with his 

contract the profits to which the assigning 

partner would otherwise be entitled.

Former Code § 50-27(1) (Repl. Vol. 1989).2

Implicit within this language was the recognition that a 

partner’s interest in a partnership comprises two distinct and 

divisible components. The first component, the control

interest, encompasses the partner’s entitlement to participate 

with the other partners in the administration of the 

partnership’s affairs. The second component, the financial

interest, encompasses only the sharing of profits and losses of 

the partnership and receipt of distributions from its

accumulated income and assets. Under the statute, only the 

financial interest is alienable. Thus, the control interest in 

 2 This limitation was preserved in Code § 50-73.106 when 

Chapter 1 of Title 50 was repealed and replaced upon the 

enactment of the Virginia Uniform Partnership Act in 1996. 1996 

Acts ch. 292.
7

a partnership is personal to the partner and cannot be bestowed 

on another by the unilateral act of a partner even if the words 

of his conveyance do not expressly limit its scope.

The division of a partner’s interest into a control 

interest, which may not be transferred unilaterally, and a 

financial interest is mirrored in the Act. Both when the 

Company was formed and when Janet inherited through Dewey’s 

will, Code § 13.1-1039 provided that

[u]nless otherwise provided in the articles of 

organization or an operating agreement, a 

membership interest in a limited liability 

company is assignable in whole or in part. . . . 

An assignment does not entitle the assignee to 

participate in the management and affairs of the 

limited liability company or to become or to 

exercise any rights of a member. Such an 

assignment entitles the assignee to receive, to 

the extent assigned, only any share of profits 

and losses and distributions to which the 

assignor would be entitled.3

Thus, an assignee of a financial interest has no control 

interest in a limited liability company without becoming a 

member. Code § 13.1-1040(A) provides the means by which the 

assignee of a financial interest may become a member: “Except 

as otherwise provided in writing in the articles of organization 

or an operating agreement, an assignee of an interest in a 

limited liability company may become a member only by the 

 3 Code § 13.1-1039 was subsequently amended and reenacted to 

add a new subdivision not relevant to this appeal. 2006 Acts 

ch. 912.
8

consent of” a majority of those members exercising the direct 

management of the company.

In light of this statutory background, we turn to Janet’s 

argument.

B. DIRECT INHERITANCE OF MEMBERSHIP IN A

LIMITED LIABILITY COMPANY BY DESCENT OR DEVISE

Janet argues that she inherited Dewey’s membership directly 

by operation of his will. She asserts the Agreement permitted 

her to inherit directly because Paragraph 2 superseded Code 

§ 13.1-1040.1(7)(a). However, Paragraph 2 merely prohibits any 

member from transferring any part of his membership except (a)

where specifically allowed under the terms of the Agreement, (b) 

with the consent of all the other members, or (c) upon death, 

intestacy, devise, or otherwise by operation of law. It does 

not address statutory dissociation and does not state an intent 

to supersede Code § 13.1-1040.1(7)(a). Consequently, it lacks 

specific language that would constitute an exception to the rule 

of dissociation set forth in Code § 13.1-1040.1. Dewey thus was 

dissociated from the Company upon his death and Janet became a 

mere assignee by operation of Code § 13.1-1040.2, entitled under 

Code § 13.1-1039 only to his financial interest.

Even if Paragraph 2 had superseded dissociation under Code 

§ 13.1-1040.1, it is not possible for a member unilaterally to 

alienate his personal control interest in a limited liability 
9

company. Code § 13.1-1039(A). The words “[u]nless otherwise 

provided in the articles of organization or an operating 

agreement” in Code § 13.1-1039 make it possible for a limited 

liability company to restrict the assignment of members’ 

financial interests because they modify the remainder of the 

sentence, which continues “a membership in a limited liability 

company is assignable in whole or in part.” The words “[u]nless 

otherwise provided in the articles of organization or an 

operating agreement” do not make it possible for a limited 

liability company to allow a member to assign his control 

interest because they do not modify the separate sentence, which 

states that “[a]n assignment does not entitle the assignee to 

participate in the management and affairs of the limited 

liability company or to become or to exercise any rights of a 

member.” Additionally, Code § 13.1-1023(A) provides that an 

operating agreement may not contain provisions inconsistent with 

the laws of the Commonwealth. Thus it was not within Dewey’s 

power under the Agreement unilaterally to convey to Janet his 

control interest and make her a member of the Company upon his 

death because the Agreement could not confer that power on him.

III. CONCLUSION

For the foregoing reasons, the circuit court did not err in 

holding that Janet inherited only Dewey’s financial interest in 

the Company – the right to share in profits and losses and to 
10

receive distributions. Because she was not a member, the 

circuit court did not err in holding that she lacked authority 

to remove its managing member and successor managing member. 

Accordingly, we will affirm the judgment of the circuit court.

Affirmed.