Illinois Official Reports

Appellate Court

In re Marriage of Schlichting, 2014 IL App (2d) 140158

Appellate Court 

Caption

In reMARRIAGE OF LARISA D. SCHLICHTING, a/k/a Larisa D. 

Fansler, Petitioner-Appellant, and BRUCE E. SCHLICHTING, 

Respondent-Appellee.

District & No. Second District

Docket No. 2-14-0158

Filed September 29, 2014

Held

(Note: This syllabus 

constitutes no part of the 

opinion of the court but 

has been prepared by the 

Reporter of Decisions 

for the convenience of 

the reader.)

In an appeal centered on an order awarding respondent petitioner’s 

membership interest in a family-owned limited liability company that 

operated a rock quarry and had been deemed to be marital property by 

the trial court, the appellate court held that the trial court abused its 

discretion to the extent that the order required petitioner to violate the 

terms of the company’s operating agreement, which specified the

valuation process to be used in the case of a member’s divorce and 

allowed a nonmember spouse to contest the valuation during the 

divorce process, since respondent had no interest in the company but

members of his family did and respondent had a history of litigating 

against his family members; therefore, the appellate court reversed the 

trial court’s order and directed petitioner to pay respondent the value 

of petitioner’s interest as arrived at by the company’s accountant 

pursuant to the terms of the operating agreement; furthermore, based 

on this ruling, adjustments were directed to be made for the parties’

payments for postdissolution payments of taxes and capital 

contributions and receipts of postdissolution profits.

Decision Under 

Review

Appeal from the Circuit Court of Boone County, No. 10-D-38; the 

Hon. Brendan A. Maher, Judge, presiding.
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Judgment Reversed in part and vacated in part; cause remanded.

Counsel on

Appeal

Nancy Grimme Schilling and Erin E. Walsh, both of Schilling & 

Walsh, LLP, of Rockford, for appellant.

Robert C. Pottinger, of Barrick, Switzer, Long, Balsley & Van Evera, 

LLP, of Rockford, for appellee.

Panel JUSTICE JORGENSEN delivered the judgment of the court, with 

opinion.

Justices Schostok and Birkett concurred in the judgment and opinion.

OPINION

¶ 1 The trial court entered a judgment of dissolution of the marriage between Larisa D. and 

Bruce E. Schlichting. The court deemed Larisa’s membership interest in Rockton Rock, LLC 

(the LLC), to be marital property. It awarded Bruce, a nonmember, all of Larisa’s 

membership interest, but it ordered him to pay Larisa $19,500 in exchange. Larisa appeals, 

arguing that the trial court abused its discretion because the award required her to violate the 

LLC’s operating agreement. This court stayed enforcement of the trial court’s judgment 

pending appeal. For the reasons that follow, we reverse the trial court’s judgment concerning 

the LLC. Accordingly, we also vacate the trial court’s corresponding order that Bruce make 

capital contributions reflecting his membership interest and be awarded certain profits.

¶ 2 I. BACKGROUND

¶ 3 A. Judgment of Dissolution and Memorandum of Decision

¶ 4 On April 1, 2011, the trial court entered the judgment of dissolution, ending the parties’

10-year marriage. The parties had no children, and the case mainly concerned property 

division. Of particular interest was the LLC, which owned and operated a quarry. Larisa held 

a 20% membership interest and several of Bruce’s family members also held interests but 

Bruce did not. The record does specify why Bruce was not a member. However, there are 

several indications that Bruce had a history of litigating against his family. For example, 

Bruce’s exhibit No. 31 is an agreed order stating that Bruce was to dismiss two pending 

lawsuits against two family members, who (personally or through other business 

relationships) happened to be members of the LLC.
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¶ 5 The LLC’s operating agreement contained a transfer restriction that prohibited Larisa, or 

any member, from selling to Bruce, or any person, a membership interest absent the 

unanimous written consent of the other members:

“16.1A Member will not assign, sell, transfer, pledge, or otherwise encumber its 

Membership Interest, or any portion of its Membership Interest[,] without the 

unanimous prior written consent of the other Members.”

¶ 6 The trial court determined that Larisa’s membership interest in the LLC was marital 

property. The LLC had been discussed at trial, but very little evidence was presented 

concerning its value. The LLC’s manager, Robert Schlichting, stated incidentally that he 

“felt” the company was worth approximately $400,000. The scarcity of valuation evidence 

was due to the parties’ interpretation of the two-part valuation formula and buyout procedure 

contained in sections 16.6 and 16.4 of the LLC’s operating agreement, which, in their view, 

rendered pointless the introduction of valuation evidence prior to the court’s judgment of 

dissolution.

¶ 7 Section 16.6 stated in part:

“16.6 In the event of a Member’s divorce (if applicable), the same buyout 

procedure set forth in Section 16.4 shall apply, except that the value shall be the 

greater of said determination [by the LLC’s accountant] or that amount determined by 

the final non-appealable decision in the divorce [by the court]. In the event the final 

non-appealable decision [by the court] concerning value is higher than the value 

calculated in Section 16.4 [by the LLC’s accountant], the divorcing Member shall 

execute a promissory note payable to the [LLC] for the difference in valuation, which 

note shall be due and payable within ninety (90) days of said order.” (Emphasis 

added.)

¶ 8 Section 16.4 stated in part:

“16.4 In the event that a Member dies, declares bankruptcy, or receives a court 

declaration of incompetence, he or she shall receive the fair value of his or her 

membership interest as of the effective date of his or her resignation as may be 

determined by the accounting firm regularly employed by [the LLC], utilizing the 

customary practices and principles associated with the operation and valuation of [the 

LLC’s] assets and liabilities to the date of resignation.” (Emphasis added.)

¶ 9 Therefore, in Larisa’s view, there was no need to present valuation evidence, because, 

upon execution of the judgment of dissolution, that value would be “determined by the 

accounting firm regularly employed by [the LLC].” (Nor would it be in her interest to pursue 

a higher valuation, lest she be required to reimburse the LLC.)

¶ 10 In Bruce’s view, there was no need to present valuation evidence, because, even if he 

were able to convince the court that the LLC was worth more than the amount determined by 

the LLC’s accountant, he and Larisa would need to pay the LLC the difference in valuation.

As Bruce argued at the trial:

“It’s all in the [operating agreement], though. There’s going to be a fair value that’s 

provided by *** whoever they designate as the accountant. *** So the point is that if 

we went through all the exercise of a valuation and all that cost ***, which would 

have been thousands of dollars, and we said it was something other than [the amount 

determined by the accountant] ***. The court would just find the value, and if it came 
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in higher then that would have been an obligation of the parties[1] to now write a note 

back to the LLC and pay it ***, so it’s really a poison.” (Emphasis added.)

¶ 11 On August 31, 2011, the trial court entered its memorandum of decision. In it, the court 

awarded 65% of the “potential cash distribution from equity interest in the LLC” to Larisa 

and 35% to Bruce. This division was in keeping with an approximate 65/35 split of the entire 

marital estate. The trial court stated that the current value of the LLC was unknown:

“The only evidence in the record with respect to the ‘fair market value’ of [the LLC] 

comes in the form of [LLC manager] Robert Schlichting’s testimony that his ‘feeling’

is that the company is worth ‘around $400,000.00.’ According to the [LLC’s 

operating agreement,] its fair market value will be determined by its accountant, Karl 

Barnes, upon completion of the parties’ divorce.”

¶ 12 On September 21, 2011, the trial court entered an “order on remaining issues.” As to the 

LLC, the court again stated: “[Larisa] is awarded 65% of the cash distribution from the 

equity interest in [the LLC]; [Bruce] is awarded 35% of the cash distribution from the equity 

interest in [the LLC].” Numerous motions and rulings followed the entry of the order and 

they can be divided into two groups: those aimed at effectuating the 65/35 split and those 

aimed at seeking reimbursement of expenses.

¶ 13 B. Effectuating the 65/35 Split

¶ 14 On October 11, 2011, Larisa moved to reconsider and for clarification. As to the LLC, 

she noted that there had not yet been a valuation, the implication being that she was unsure 

how to proceed. She stated that her membership interest had been valued (not necessarily 

before the court) as low as $15,000 and as high as $80,000.

¶ 15 On October 21, 2011, Bruce moved to reconsider. As to the LLC, he asked that the court 

enter additional orders to effectuate the liquidation of Larisa’s membership interest, which 

the parties referred to as a cash distribution:

“The undisputed evidence is that the LLC is required to purchase the interest at 

fair market value. The issue becomes the enforcement of the Order and who should 

take the necessary steps to enforce the rights of the marital estate. Testimony was 

undisputed that Larisa wished to continue to hold her interest in [the LLC], whereas 

Bruce desired the interest be sold. *** Larisa does not have [any] interest in forcing 

the sale of the interest according to the terms of the Operating Agreement.”

Although Bruce was not a member of the LLC, he requested that the court “enter an [o]rder 

requiring [him to] take all steps commercially necessary and reasonable to force the purchase 

of the shares [thereby allowing him to acquire a membership interest] according to the 

[o]perating [a]greement and the marital estate should reimburse [him] for any legal fees or 

other professional fees he incurs in [so doing].”

¶ 16 On December 15, 2011, as to the motions to reconsider, the court ordered that “[Larisa] 

shall not liquidate, transfer, encumber[,] or otherwise dispose of any interest or contractual 

rights in [the LLC].” The court continued the matter as to the LLC.

 

1We note that section 16.6 actually states that the divorcing member, which Bruce was not, shall 

pay back the difference in valuation.
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¶ 17 On January 25, 2012, Larisa moved to set the value of the LLC. Larisa noted that Barnes 

had determined the value to be $150,000, meaning that Larisa’s cash distribution would be 

$19,500 ($150,000 x 0.20 x 0.65) and Bruce’s cash distribution would be $10,500 ($150,000 

x 0.20 x 0.35). Larisa stated that she and Bruce were entitled to be paid these amounts by the 

LLC.

¶ 18 As part of the posttrial process, the parties deposed Barnes. Barnes explained the 

$150,000 valuation. Barnes performed the valuation based on the “capitalization of earnings”

method. This method is based on cash flows. It is a standard method, because “earnings 

inherently incorporate the assets and liabilities of a corporation.” However, the method can 

be thought of as limited, because it does not necessarily account for the value of the assets 

independent of the manner in which they are used by the business. For example, the LLC’s 

quarry might be worth more than its present use by the business reflects. The hypothetical 

offered was that there could be an undiscovered platinum mine underneath the quarry.

Despite this limitation, Barnes preferred the capitalization-of-earnings method to any other, 

and he thought it fair for a 20% owner to be bought out for $30,000 (which, again, would 

result in $19,500 for Larisa and $10,500 for Bruce).

¶ 19 On February 15, 2012, in regard to the pending motions, the court entered an order 

stating that it “neither grant[ed] [n]or den[ied]” Bruce’s requested relief concerning the LLC.

Rather, it “specifically reserv[ed] issues relating to the liquidation of the [LLC] stock, 

including *** the distribution of the proceeds of any such liquidation and/or the right of one 

party to ‘buy out’ the other party’s interest in the [LLC] *** by full payment to the selling 

party of the amount to which the selling party is entitled pursuant to the formula applied 

under the [o]perating [a]greement.”

¶ 20 On March 6, 2012, Bruce responded to Larisa’s motion to set the value of the LLC.

Bruce stated that the value was “significantly higher” than $150,000. As such, he requested 

that the trial court allow him to buy out Larisa’s membership interest for $19,500, and that 

Larisa be ordered to “transfer all right, title[,] and interest in [the LLC], including and 

without limitation, an irrevocable power of attorney to pursue any and all rights [she] has had 

in the past, has currently[,] or will acquire in the future as a result of her ownership interest in 

[the LLC].” In Bruce’s view, acquiring a membership interest would enable him to pursue a 

greater buyout based on a valuation closer to the $400,000 mentioned at trial.

¶ 21 On March 16, 2012, at the hearing on the pending matters, Larisa responded to Bruce’s 

request to buy her membership interest for $19,500. Larisa did not believe that the court had 

authority to dispose of the interest in that manner, stating:

“The LLC is under its own operating agreement, which prohibits any transfers 

without approval by the other members of the LLC. *** It is my understanding *** 

that the other members of the LLC have said they don’t want Bruce to be part of the 

LLC, and, therefore, don’t approve of transferring [Larisa’s] rights to [Bruce].”

While Larisa did not believe that the operating agreement allowed for Bruce to buy her 

membership interest, she did believe that she could pay Bruce for his 35% share of the cash 

distribution. She was already a 20% member; the other members did not need to approve her 

membership. Larisa proposed that she, rather than the LLC, would provide Bruce with a 

$10,500 payment. This would allow her to retain her 20% membership interest.

¶ 22 Regarding its authority to grant Bruce’s request to buy Larisa’s membership interests for 

$19,500, the trial court stated:
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“[T]o address the *** issue of whether I have *** authority to do it, people assign 

*** rights to other people all the time. *** In divorce court[,] I get to assign *** 

people’s interest in things. *** And those rights presumably include the right to 

litigate, the ability to say we don’t think the valuation was done correctly. We think 

that, you know, we’re contesting valuation. And we’re now, by way of assignment in 

the dissolution case, we get to stand in her shoes and argue whatever she would have 

under this.”

¶ 23 On March 20, 2012, the trial court entered what it thought would be its final order to 

effectuate a 65/35 cash distribution of the membership interest. On September 11, 2012, on 

Larisa’s motion to reconsider, it finalized its plan to effectuate the cash distribution. In it, the 

court summarized the parties’ positions to date:

“From April 2012 to the present, the parties, through their respective counsel, have 

made efforts to reach an agreement ***. *** Larisa has, through that process, made it 

clear that she does not want to litigate against the LLC with Bruce [in his attempt to 

maximize the value of the LLC]; instead, she wants to be paid the value of her 

membership interest in the LLC and be absolved of further potential liability that may 

arise in connection with any efforts Bruce may make to avoid the effect of Karl 

Barnes’s valuation under the LLC’s operating agreement.”

With the parties’ wishes in mind, the court essentially ordered that the cash distribution be 

effectuated through an intermediate step, wherein Larisa would sell her membership interest 

directly to Bruce. Bruce then would be free to pursue a higher valuation of the LLC and, by 

exercising his right as a member, effectuate a cash distribution at a later date.

¶ 24 Specifically, the order stated in pertinent part: (1) “based specifically on Larisa’s express 

request to be paid $19,500 as and for the value of her share of the LLC ***, the court 

GRANTS Larisa’s ‘Motion to Set Value of Rockton Rock, LLC ***’ at the sum of 

[$150,000] and finds that she is entitled to $19,500”; (2) Bruce shall pay Larisa $19,500, 

effectuating the cash distribution as to Larisa; (3) as to Bruce, “[u]pon payment to Larisa of 

$19,500, Bruce is (to the extent this court is authorized to make such an award under the 

[dissolution statute]) awarded all of Larisa’s marital right, title[,] and interest in and to her 

membership/stock interest in the LLC, including all of her rights and responsibilities under 

the LLC’s operating agreement. This final order does not purport to award Bruce any greater 

or lesser rights than Larisa has or has had as a member of the LLC; rather, this final order 

*** only permits Bruce to ‘stand in Larisa’s place’ for purposes of negotiating with, or 

litigating against, the LLC”; and (4) Bruce will defend, indemnify, and hold Larisa harmless 

from any and all costs, expenses, or judgments incurred as a result of Bruce’s efforts to avoid 

the effect of Barnes’s valuation of Larisa’s membership interest and to otherwise maximize 

the value of that interest. The trial court concluded that its order disposed of the “ ‘last 

pending post-judgment motion directed against [the parties’ Order on Remaining Issues].’ ”

Further, “[w]ith the entry of this Final Order on reconsideration, the last issue this Court 

‘reserved’ within the September 21, 2011, *** February 15, 2012, *** and *** March 20, 

2012, [orders] has been resolved and decided, subject only to enforcement proceedings.

[Citations.]” The trial court did not make a finding pursuant to Illinois Supreme Court Rule 

304(a) (eff. Feb. 26, 2010).

¶ 25 On October 10, 2012, Larisa filed her notice of appeal, and this court stayed enforcement 

of the trial court’s judgment pending the outcome.
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¶ 26 C. Pending Motion for Reimbursement

¶ 27 Meanwhile, as the court was entering the aforementioned series of orders aimed at 

effectuating the 65/35 distribution of the membership interest, Larisa filed a motion 

requesting relief for shouldering the responsibility of preserving her membership interest 

although the court had deemed it marital property.

¶ 28 Specifically, on August 8, 2012, Larisa filed a motion for reimbursement of expenses.

The expenses pertained to capital contributions she paid to the LLC in her capacity as a 

member, minus profit distributions she received from the LLC. Larisa listed the dates of the 

contributions, some of which were paid prior to the 2011 judgment of dissolution and some 

of which were paid after. In 2010, Larisa contributed $24,200 and received no profit 

distributions. Because the contribution was made prior to the dissolution, she sought a 50% 

reimbursement from Bruce in the amount of $12,100. In 2011, subsequent to the judgment 

(but before the August 31, 2011, memorandum of decision), Larisa contributed $11,600 and 

received $4,200 in profit distributions. (The $11,600 contribution was made with the court’s 

express permission as part of the judgment of dissolution. The court stated that the $11,600 

contribution was to be made at Larisa’s “discretion.”) Because the contribution was made 

subsequent to the dissolution, she sought from Bruce a 35% reimbursement in the amount of 

$4,060 ($11,600 x 0.35), minus 35% of the profit distribution, in the amount of $1,470 

($4,200 x .35), for a total of $2,590. (The parties represent that, although Bruce did not pay 

the $4,060 for the capital contribution, he did receive the $1,470 profit distribution.)

¶ 29 On August 22, 2012, the trial court set the motion for hearing. The scheduled date was 

September 19, 2012.

¶ 30 On August 29, 2012, Bruce filed, under section 2-615 of the Code of Civil Procedure, a 

motion to dismiss Larisa’s motion for reimbursement. 735 ILCS 5/2-615 (West 2012). Bruce 

argued that it was “impossible” for him to respond to Larisa’s motion, because she cited no 

statutory provision to support it. Additionally, each fact she cited occurred before the close of 

evidence in this case. Bruce further argued that it was not clear whether Larisa’s motion: (1) 

intended, but failed, to state a cause of action and was, therefore, subject to a section 2-615 

dismissal; or (2) intended to seek enforcement of a judgment.

¶ 31 On September 11, 2012, as mentioned above, the trial court entered its final order to 

effectuate the 65/35 split, claiming to dispose of all postjudgment motions directed against 

the September 21, 2011, order on remaining issues. However, the court did not address 

Larisa’s motion for reimbursement. (Again, that matter had been set for hearing the next 

week on September 19, 2012. For whatever reason, that hearing was postponed.)

¶ 32 On October 3, 2012, Larisa filed a response to the motion to dismiss. This time in support 

of her motion for reimbursement, she cited section 503(d)(1) of the Illinois Marriage and 

Dissolution of Marriage Act, which states that, in dividing marital property, the court shall 

consider the contribution of each party to the preservation of the value of the property. 750 

ILCS 5/503(d)(1) (West 2010). She did not answer Bruce’s question as to whether, in her 

motion for reimbursement, she intended to file a cause of action or a motion for enforcement.

¶ 33 Larisa raised arguments similar to those she raised in her motion for reimbursement.

However, she clarified that the 2010 contribution had been paid out of the “Alpine Asset 

Management Account,” which the court had subsequently deemed marital property. She 

criticized as hypocritical Bruce’s minimization of the importance and relevance of her 

request, noting that Bruce, too, had earlier asked the court to account for the LLC’s 2011 
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profits and losses. As to Bruce’s request, on February 15, 2012, the court had held that it 

could not yet account for 2011 profits and losses, as it did not yet have any evidence as to 

what they were. As to the 2010 contribution, it had instructed that, in order to maintain the 

65/35 division (and to whatever extent Larisa had personally paid the 2010 contribution), 

Bruce must incur 50% of the burden. Likewise, Bruce would be entitled to 50% of the 

profits.

¶ 34 On October 19, 2012, the trial court conducted a hearing on Larisa’s motion for 

reimbursement. However, the court stated that it had no jurisdiction to decide the matter 

because, as of Larisa’s October 10, 2012, notice of appeal, jurisdiction belonged with the 

appellate court.

¶ 35 D. Appeal No. 2-12-1117

¶ 36 Larisa appealed the trial court’s September 11, 2012, order, which had attempted to 

effectuate the 65/35 split of the interest in the LLC. In re Marriage of Schlichting, 2013 IL 

App (2d) 121117-U, ¶ 2. However, this court held that the appeal was premature. Id. ¶ 45. No 

Rule 304(a) finding accompanied the order and therefore Larisa’s pending motion for 

reimbursement deprived this court of jurisdiction. Id. ¶ 44. We dismissed the appeal, leaving 

jurisdiction with the trial court. Id. ¶ 45.

¶ 37 E. Ruling on the Motion for Reimbursement

¶ 38 On November 7, 2013, Larisa noticed up her prior motion for reimbursement. On 

November 8, 2013, Larisa moved more specifically for reimbursement for capital 

contributions incurred after the 2011 judgment of dissolution.

¶ 39 On January 22, 2014, the trial court granted Larisa partial relief by ordering that, from 

August 31, 2011,2forward (presumably until the September 11, 2012, order that required her 

to sell her membership interest to Bruce), Larisa and Bruce share, in a 65/35 division, both 

the burden of capital contributions and taxes and the benefit of profit distributions. The court 

denied Larisa reimbursement for the $11,600 contribution she made with personal funds after 

the dissolution but before August 31, 2011. It also denied Larisa reimbursement for 

contributions she made prior to the dissolution, noting that Larisa had used marital funds to 

preserve a marital asset.

¶ 40 Also on January 22, 2014, the trial court tied up remaining matters related to the 

September 11, 2012, order. It denied Larisa’s renewed motion to reconsider. As a precaution, 

it entered a Rule 304(a) finding. Finally, it denied Larisa’s request to stay enforcement of the 

order pending appeal. This court then reversed the denial of the stay, and we now accept 

Larisa’s appeal.

¶ 41 II. ANALYSIS

¶ 42 Larisa appeals both the trial court’s September 11, 2012, order requiring her to sell to 

Bruce her membership interest and the January 22, 2014, order denying her reimbursement 

of capital contributions.

 

2On August 31, 2011, the court ordered a general 65/35 split of the cash distribution. However, the 

dissolution occurred earlier, on April 1, 2011.
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¶ 43 A. The September 11, 2012, Order

¶ 44 As to the September 11, 2012, order, Larisa complains that the court ordered her to 

violate the operating agreement’s transfer restriction, which stated that a member could not 

transfer or sell any portion of his or her membership interest without the unanimous written 

consent of the other members (section 16.1). Larisa argues that the court-ordered sale was 

particularly unnecessary because the operating agreement, through its two-part valuation 

formula and buyout procedure, already provided for the distribution of a member’s interest 

upon divorce (sections 16.6 and 16.4). Larisa acknowledges that the question before us is not 

whether the trial court itself was absolutely required to abide by the terms of the operating 

agreement. Rather, the question is whether the court’s manner of distribution, which required 

Larisa to violate the operating agreement, constituted an abuse of discretion. In re Marriage 

of Banach, 140 Ill. App. 3d 327, 331 (1986).

¶ 45 As will be explained, we agree that the court’s order to violate a reasonable operating 

agreement was an untenable resolution, particularly where other options were available.

Based on this and other factors, such as the court’s indulgence in the parties’

misinterpretation of the valuation formula and buyout procedure and the court’s failure to 

mitigate against future conflict, we find that the court abused its discretion.

¶ 46 1. The Court Ordered Larisa to Violate the Operating Agreement

¶ 47 As a threshold matter, we determine that the trial court clearly ordered Larisa to violate 

the terms of the LLC’s operating agreement. Again, the operating agreement prohibited the 

sale of any portion of a membership interest without the unanimous written consent of the 

other members (section 16.1). Contrary to this provision, the court ordered Larisa to sell her 

membership interest to Bruce without the unanimous consent of the other members. The 

operating agreement also required that the LLC buy out a divorcing member’s interest 

(sections 16.6 and 16.4). Contrary to these terms, the court did not allow the LLC to buy out 

Larisa’s interest; rather, it allowed Bruce, a nonmember, to buy out Larisa’s interest.

¶ 48 Bruce intimates, without citation to the record or legal authority, that his purchase of 

Larisa’s interest without the unanimous consent of the other members did not violate the 

operating agreement’s transfer restriction, because, in his view, Larisa herself had no interest 

aside from her right to a cash distribution or buyout. See Ill. S. Ct. R. 341(h)(7) (eff. Feb. 6, 

2013) (arguments must be supported by citation to authority). Forfeiture aside, even if 

Bruce’s premise is true, his argument fails because the transfer restriction prohibits the sale 

of “any portion” of a membership interest without the unanimous consent of the other 

members. Larisa’s right to a cash distribution or buyout represents at least a “portion” of her 

membership interest.

¶ 49 2. Misinterpretation of the Operating Agreement’s

Valuation Formula and Buyout Procedure

¶ 50 We next address an error that occurred relatively early in the proceedings, a 

misinterpretation of the valuation formula and buyout procedure (sections 16.6 and 16.4).

This error is important because the trial court crafted its September 11, 2012, order so that 

Bruce could pursue a valuation greater than that submitted by Barnes. The court apparently 
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entertained Bruce’s view that, if the court entered a greater valuation, the LLC would, 

subsequent to the divorce proceedings and outside the court’s oversight, require Bruce and 

Larisa to pay back the difference in valuation. Contrary to the parties’ interpretation, the 

court did not need to award Bruce a membership interest in order to provide Bruce with a 

means by which to pursue a greater valuation.

¶ 51 Again, in Bruce’s view, there was no need to present valuation evidence, because, even if 

he were able to convince the court that the LLC was worth more than the amount determined 

by Barnes, the operating agreement would require that he and Larisa pay the LLC the 

difference in valuation. In Larisa’s view, there was no need for the court to make a value 

determination because, upon entry of the judgment of dissolution, that value would be 

determined by Barnes.

¶ 52 For the reasons that follow, however, these views, particularly Bruce’s, are not in keeping 

with the clear and unambiguous terms of the valuation formula and buyout procedure. When 

interpreting the agreement, we must give its clear and unambiguous terms their ordinary and 

natural meaning. Owens v. McDermott, Will & Emery, 316 Ill. App. 3d 340, 344 (2000).

¶ 53 Again, the valuation formula and buyout procedure states:

“16.6 In the event of a Member’s divorce (if applicable), the same buyout 

procedure set forth in Section 16.4 shall apply, except that the value shall be the 

greater of said determination [by the LLC’s accountant] or that amount determined by 

the final non-appealable decision in the divorce [by the court]. In the event the final 

non-appealable decision [by the court] concerning value is higher than the value 

calculated in Section 16.4 [by the LLC’s accountant], the divorcing Member shall 

execute a promissory note payable to the [LLC] for the difference in valuation, which 

note shall be due and payable within ninety (90) days of said order.” (Emphasis 

added.)

And:

“16.4 In the event that a Member dies, declares bankruptcy, or receives a court 

declaration of incompetence, he or she shall receive the fair value of his or her 

membership interest as of the effective date of his or her resignation as may be 

determined by the accounting firm regularly employed by [the LLC], utilizing the 

customary practices and principles associated with the operation and valuation of [the 

LLC’s] assets and liabilities to the date of resignation.” (Emphasis added.)

¶ 54 Contrary to Bruce’s view, section 16.6 states that the divorcing member, which Bruce is 

not, shall pay back the LLC the difference in valuation. Therefore, if the court set a higher 

valuation, the LLC would be required to buy out Larisa at that valuation, and only Larisa 

would be required to pay back the LLC the difference in valuation. In other words, a 

divorcing member is bound by the LLC’s accountant’s valuation, but the divorcing 

nonmember gets to walk away with his or her share of the higher, court-ordered valuation. It 

would not have been pointless for Bruce to have submitted evidence in hopes of obtaining a 

higher, court-ordered valuation.

¶ 55 For example, without ruling that the trial court itself was bound by the operating 

agreement, we illustrate how a separate action to enforce the operating agreement would 

likely play out. In a best-case scenario for Bruce, if the trial court had valued the LLC at 

$400,000, then the LLC would buy out Larisa at $80,000 ($400,000 x 0.20). The court 
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deemed the 20% membership interest to be marital property, so Bruce would receive $28,000 

($80,000 x 0.35). Bruce would walk away with that $28,000, which is $17,500 more than the 

$10,500 he would have received under Barnes’s $150,000 valuation. Larisa would then have 

to reimburse the LLC in the amount of $50,000 ($80,000 - $30,000, the difference between 

the buyout under the court’s valuation and the buyout under Barnes’s valuation).

¶ 56 Contrary to Larisa’s view, the operating agreement explicitly contemplates a value 

determination from a divorce court, even if that valuation amounts to an endorsement of the 

accountant’s valuation. Section 16.6 states that the valuation “shall be the greater of said 

determination [by the LLC’s accountant] or that amount determined by the final 

non-appealable decision in the divorce [by the court].”

3

(Emphases added.) Which valuation 

is greater cannot be determined unless the court makes a valuation based on the evidence.

Moreover, had the court made an independent valuation at an earlier stage in the proceedings, 

it would have been in a better position to offset Larisa’s foreseeable reimbursement to the 

LLC by awarding her other marital assets, thereby effectuating its intended overall 65/35 

distribution scheme. See, e.g., Banach, 140 Ill. App. 3d at 331 (where property, such as a 

business, is not susceptible to division in kind or where such division would lead to 

inequities, the court may, in its discretion, award the property to one spouse, subject to 

payment to the nonacquiring spouse for the interest lost, either by offsetting other marital 

property or by cash).

¶ 57 We recognize that Bruce would be impacted by a reimbursement to offset a difference in 

valuation if the parties used marital funds to reimburse the LLC for any difference. However, 

we see no reason why that need be the case. Just as postdissolution capital contributions can 

come from (Larisa’s) personal funds, a postdissolution reimbursement for a difference in 

valuation, if applicable, can also come from (Larisa’s) personal funds.

¶ 58 3. The Court Abused Its Discretion

by Ordering Larisa to Violate the Operating Agreement

¶ 59 Having established that the trial court ordered Larisa to violate the operating agreement 

and that this was not necessary to allow Bruce to pursue a higher valuation, we now explain 

why the order constituted an abuse of discretion, requiring reversal.

¶ 60 While no Illinois case requires a court to distribute marital property in accordance with 

an operating agreement binding one or both of the parties in their business activities, existing 

case law, both within and outside Illinois, comes together to establish that the failure to do 

so, where compliance is easily possible, constitutes an abuse of discretion. See, e.g., Shrock 

v. Meier, 2012 IL App (1st) 111408-U, ¶ 23 (in considering whether the trial court abused its 

discretion in modifying an injunction, the appellate court considered whether the trial court’s 

ruling was consistent with the terms of the operating agreement by which the parties were 

bound).

¶ 61 Generally, when distributing marital property, the court should seek a high degree of 

finality so that the parties can plan their future with certainty and are not encouraged to return 

to court. In re Marriage of Hellwig, 100 Ill. App. 3d 452, 459 (1981). Distribution of a 

 

3We take the phrase “non-appealable decision” to mean a determination that stands after avenues 

for review have been exhausted.
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business interest can present difficulties, and the court should be mindful that divorcing 

parties might be unable to work together in a continued business association. In re Marriage 

of Moll, 232 Ill. App. 3d 746, 754 (1992). In Castonguay v. Castonguay, 306 N.W.2d 143, 

146 (Minn. 1981), the court held that, even though the company’s operating agreement did 

not apply to court-ordered transfers, the trial court could not simply transfer without 

restriction shares of the business to the nonmember spouse. The court stated that to do so 

constituted an abuse of discretion; the forced admittance of an unwelcome ex-spouse to the 

affairs of a closely held corporation could be disruptive. Id. Therefore, the court remanded,

directing the trial court to effectuate the placement of the nonmember spouse’s shares in a 

voting trust so as to lessen the potential discord in the business. Id. As Moll and Castonguay

caution, a trial court should craft an order not only so as to avoid a return to divorce court, 

but also so as to avoid future conflict in general. To terminate litigation in one court only to 

precipitate it in another is not in keeping with the general policy in favor of finality.

¶ 62 Here, although the trial court discouraged future litigation involving Larisa, it did not 

discourage future litigation involving Bruce. To the contrary, the court’s order allowed and 

even encouraged Bruce, who already had a history of initiating litigation against the family 

business(es), to pursue future litigation: “this final order *** permits Bruce to ‘stand in 

Larisa’s place’ for purposes of negotiating with, or litigating against, the LLC.” Additionally, 

although the court’s aim was to allow for an eventual cash distribution, its order did not 

effectuate with finality the cash distribution. Instead, it effectively passed jurisdictional 

oversight of the matter to the general civil courts, should Bruce rely upon his membership 

interest to establish standing to pursue litigation against the LLC.

¶ 63 Also, generally, an LLC operating agreement is to be enforced according to general 

contract principles, unless it conflicts with a statute. See, e.g., Downs v. Rosenthal Collins 

Group, L.L.C., 385 Ill. App. 3d 47, 52 (2008) (operating agreement to be treated as contract); 

1 Larry Ribstein & Robert Keatinge, Limited Liability Companies § 4:16 (2d ed. 2013). And, 

a court should not interfere with the terms of a contract that parties entered into freely. See, 

e.g., Prudential Insurance Co. of America v. Van Martre, 158 Ill. App. 3d 298, 311 (1987) (a 

party cannot enlist the support of the judiciary to reform a contract).

¶ 64 The provisions at issue here, section 16.1 and sections 16.6 and 16.4 together, may be 

thought of as a buy-sell agreement. Creating a buy-sell agreement is a means by which to 

coordinate estate and family planning with business succession goals. Jonathan C. Lurie & 

Edwin G. Schuck, Jr., Valuation, A.L.I.-A.B.A. Course of Study, Estate Planning in Depth, 

¶ 100.1 (2007). A buy-sell agreement, whether standing on its own or, as here, part of an 

LLC’s operating agreement, may be used to govern relations between co-owners of a 

business, establishing rules or guidelines for valuing the business, transferring ownership, 

and negotiating a price before the identity of the seller and purchaser are known.

Id. at 1359-60.

¶ 65 Larisa cites authority mandating that transfers occur as set forth in a buy-sell or operating 

agreement. For example, the Limited Liability Company Act (Act) requires that transfers of 

company interest must be made in accordance with the operating agreement or all other 

members’ consent. 805 ILCS 180/30-10 (West 2012). Larisa acknowledges that this 

authority governs transfers, absent a court order, among members or between members and 

other categories of persons or entities (often referred to as voluntary transfers). It does not 
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govern the type of transfer at issue here, a court-ordered transfer (often referred to as an 

involuntary transfer).

¶ 66 Cases specifically addressing potential conflict between a marital dissolution order and 

an operating agreement are few. Illinois courts have approached the issue, flagging it as a 

potential problem but ultimately avoiding a direct ruling. See, e.g., In re Marriage of Devick, 

315 Ill. App. 3d 908, 920 (2000); In re Marriage of Gunn, 233 Ill. App. 3d 165, 182-84 

(1992). In Devick and in Gunn, the court determined that there was no conflict between the 

marital dissolution order and the operating agreement. Thus, the court affirmed the 

court-ordered transfer without reaching the question of whether the trial court would have

abused its discretion had it ordered a transfer that conflicted with the operating agreement.

Specifically, in Devick, the operating agreement’s transfer restriction expressly exempted 

court-ordered transfers. Devick, 315 Ill. App. 3d at 920. Therefore, the trial court remained 

within the bounds of the operating agreement in ordering a transfer that would have been 

prohibited if it had been performed without a court order. Id. (Additionally, in Devick, the 

company was made a third-party defendant in the divorce proceedings so that it was able to 

protect its own interests.) In Gunn, the operating agreement’s valuation formula specified as 

triggering events death, disability, retirement, and termination, but not divorce. In addition, 

the valuation formula did not specify whether it applied to a divorce court’s valuation. Gunn, 

233 Ill. App. 3d at 182-84. Therefore, the divorce court’s valuation process did not 

necessarily conflict with the valuation process set forth in the operating agreement.

¶ 67 Other jurisdictions have taken the issue one step further by stating that, in distributing 

interest in a company, a divorce court should honor the company’s operating agreement and 

any transfer restrictions contained therein. See, e.g., Bryan-Barber Realty, Inc. v. Fryar, 461 

S.E.2d 29, 32 (N.C. Ct. App. 1995); Castonguay, 306 N.W.2d at 146. Although Fryar and 

Castonguay stated this rule, neither directly applied it. Each found that the transfer restriction 

at issue did not apply to court-ordered transfers. Specifically, in Fryar, the court held that an 

operating agreement’s transfer restriction did not apply to court-ordered transfers, unless that 

transfer restriction expressly prohibited court-ordered transfers. Fryar, 461 S.E.2d at 32. In 

Castonguay, the court held the same. Castonguay, 306 N.W.2d at 146.

¶ 68 Here, the buy-sell agreement does apply to, or account for, court-ordered transfers.

Sections 16.6 and 16.4 set forth procedures for the LLC to accommodate a court-ordered 

distribution of a membership interest that will not conflict with the transfer restriction set 

forth in section 16.1. In other words, the buy-sell agreement was drafted to “minimize the 

risk that [the] divorce court [would] cast [it] aside in determining the value of and allocation 

of business interests in divorce.” Raiford D. Palmer, Valuation and Division of Business 

Assets in Divorce, 20 Du Page County Bar Ass’n 10 (2007); cf. Gunn, 233 Ill. App. 3d at 

182-84 (buy-sell agreement set forth triggering events that did not include divorce). We see 

no reason why the trial court should have entered an order that conflicted with the terms of 

the operating agreement when the operating agreement specified the valuation process in the 

event of a divorce and allowed for the nonmember spouse to contest the valuation during 

divorce proceedings. Entering the order was an abuse of discretion.

¶ 69 In sum, our holding is consistent with: (1) existing policy favoring finality in divorce 

proceedings and discouraging future conflict (here, the trial court continued, rather than 

resolved, the debate over valuation, encouraged future litigation in the matter, and inserted an 

ex-spouse into a business environment where he was not wanted by other business members 
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and where he had no rights outside the court order); (2) existing principles concerning the 

freedom to enter into contracts (here, the trial court’s order forced Larisa to violate the terms 

of the operating agreement, and courts should not interfere with the terms of an agreement 

that parties enter into freely); and (3) developing case law concerning the avoidance of 

potential conflict between marital dissolution orders and business operating agreements 

(Devick, Gunn, Fryar, and Castonguay). The trial court abused its discretion in ordering a 

property distribution that would require Larisa to violate the terms of the operating 

agreement where it could have easily and equitably avoided doing so.

¶ 70 The cases cited by Bruce do not convince us otherwise, because, unlike the four 

persuasive cases cited by Larisa (Devick, Gunn, Fryar, and Castonguay), they do not even 

mention potential conflict between the distribution of marital property and an operating 

agreement binding one or both of the parties in their business activities. See, e.g., Banach, 

140 Ill. App. 3d 327 (the court had the authority to grant each spouse an option to buy out the 

other’s interest in their jointly owned restaurant and home); Hellwig, 100 Ill. App. 3d at 459 

(the court’s award to the wife of a 40% interest in the husband’s business was an “illusory 

division” where it did not set the time or manner for valuation and receipt of funds); 

In re Marriage of Simmons, 87 Ill. App. 3d 651 (1980) (where no operating agreement or 

transfer restriction was at issue, the court was authorized to order the husband to execute one 

of two options: transfer stock to the wife or pay her $6,000 for the value of the same).

¶ 71 4. Remedy

¶ 72 Having found that the trial court’s order was made in error, we now turn to the remedy.

Because this court stayed enforcement of the trial court’s order, we do not need to order the 

“undoing” of any transactions effectuating Bruce’s LLC membership. The court’s aim of an 

eventual cash distribution to Bruce was valid; its method of ordering that Bruce would first 

obtain Larisa’s membership interest in the LLC was not valid. In other words, Bruce is 

entitled to a portion of the cash value of the membership interest, but not an actual 

membership interest. This court, therefore, looks for the most efficient way to compensate 

Bruce for his 35% portion of Larisa’s membership interest.

¶ 73 Again, where marital property, such as a business, is not susceptible to division in kind, 

the court may award the property to one spouse, subject to payment to the nonacquiring 

spouse for the interest lost, either by offsetting other marital property or by cash. Banach, 

140 Ill. App. 3d at 331. Here, other marital property is no longer available because the court 

isolated the LLC issue. Cash, by Larisa’s representation, is available. If Larisa happens not to 

have the cash, she can attempt to force a buyout between herself and the LLC per the terms 

of the operating agreement in an independent proceeding. Larisa’s relationship with and 

membership in the LLC is between her and the LLC.

¶ 74 As to the amount of cash due, Bruce is bound by Barnes’s $150,000 valuation resulting in 

a $10,500 payment. Valuation of marital property is a question of fact, not to be disturbed if 

in the range of competent evidence presented at trial. Moll, 232 Ill. App. 3d at 752. It is the 

parties’ burden to present valuation evidence. Id. An appellate court will not remand for an 

evidentiary hearing on value when a party had ample opportunity to present valuation 

evidence and failed to do so. Id.

¶ 75 Here, Bruce recognized that he could have submitted valuation evidence but declined to 

do so. Nevertheless, Bruce challenged Barnes’s valuation, exposing limitations in 
- 15 -

methodology. The trial court considered Barnes’s valuation, ultimately granting Larisa’s 

motion to set the LLC’s value at $150,000. Bruce had an opportunity to present different 

valuation evidence and, based on his erroneous interpretation of the valuation formula, he 

chose not to take it. The only hints in the record that the LLC could be worth significantly 

more were: (1) Robert Schlichting’s comment that he “felt” the LLC was worth $400,000 

(which would have resulted in an increase of $17,500 to Bruce); and (2) the possibility that 

the quarry could be worth more if used in a different manner (presumably meaning if it were 

used for something other than standard excavating). These do not prompt us to overlook the 

rule set forth in Moll and to remand, based on equitable considerations, for an evidentiary 

hearing on value. Robert Schlichting’s “opinion” was undeveloped and unchallenged; 

Barnes’s valuation, in contrast, was based on facts and established methodology and was 

subject to cross-examination. The only suggested basis for an increased valuation of the LLC 

was the hypothetical possibility that there might be an undiscovered, underground platinum 

mine. This, of course, is highly speculative.

¶ 76 In sum, we hold that the trial court abused its discretion in its distribution of Larisa’s 

membership interest in the LLC. We reverse that portion of its order and direct Larisa to pay 

Bruce $10,500 for his claim to the interest as marital property. Whether Larisa accomplishes 

this with personal funds or by forcing the LLC to buy her out to free up cash is between her 

and the LLC.

¶ 77 B. The January 22, 2014, Order

¶ 78 Based on this ruling in favor of Larisa, we must vacate that portion of the trial court’s 

January 22, 2014, order requiring Bruce to pay 35% of the postdissolution LLC taxes and 

capital contributions and awarding him 35% of the profits. Any postdissolution capital 

contributions Bruce has made should be returned to him, and any postdissolution profits he 

has received (we note that there was at least a $1,470 distribution) should be returned to 

Larisa. If need be, these amounts may offset or be offset by the $10,500 Larisa will pay 

Bruce. Although the trial court’s order that Larisa alone was responsible for the $11,600 

capital contribution due after the dissolution but before August 31, 2011, might have been 

inconsistent with its order that Bruce obtain the membership interest and receive profits 

during that same time period, any problem caused by this inconsistency is vitiated by our 

overall holding that Bruce should not obtain the membership interest. Bruce should not 

become a member of the LLC; thus he is not responsible for its postdissolution expenses, and 

he is not entitled to its postdissolution profits. Finally, no remedy is needed for the capital 

contributions made prior to the dissolution. As we stated in our last order, Larisa used 

marital funds to preserve a marital asset. Schlichting, 2013 IL App (2d) 121117-U, ¶ 37.

Therefore, Larisa did not incur any personal debt to preserve a marital asset.

¶ 79 III. CONCLUSION

¶ 80 For the aforementioned reasons, the trial court’s September 11, 2012, order as to the LLC 

is reversed; its January 22, 2014, order is vacated in part; and the cause is remanded for 

proceedings consistent with this opinion.

¶ 81 Reversed in part and vacated in part; cause remanded.