UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 15-2345

In Re: MIN SIK KANG; MAN SUN KANG,

Debtors.

-----------------------------------

YEON K. HAN,

Creditor – Appellant,

v.

OFFICIAL COMMITTEE OF UNSECURED CREDITORS,

Creditor,

and

RAYMOND A. YANCEY,

Trustee – Appellee.

Appeal from the United States District Court for the Eastern 

District of Virginia, at Alexandria. Leonie M. Brinkema, 

District Judge. (1:15-cv-00953-LMB-IDD; 10-18839-RGM; 12-01496-

RGM)

Submitted: October 5, 2016 Decided: November 29, 2016

Before SHEDD, DUNCAN, and FLOYD, Circuit Judges.

Affirmed by unpublished per curiam opinion.
2

Timothy J. McGary, Vienna, Virginia, for Appellant. Todd M. 

Brooks, Baltimore, Maryland, Bradford F. Englander, WHITEFORD 

TAYLOR & PRESTON LLP, Falls Church, Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
3

PER CURIAM:

Appellant Yeon Han challenges the district court’s order 

affirming the bankruptcy court’s grant of summary judgment to 

Appellee Raymond Yancey, the Chapter 11 Trustee in this 

bankruptcy case. The bankruptcy court entered a declaratory 

judgment invalidating a purported transfer of ownership 

interests to Han in one of the bankruptcy debtors’ LLCs, on the 

grounds that the transfer violated the LLC’s operating 

agreement. Because we agree that the purported transfer is null 

and void, we affirm.

I.

A.

Although the ownership transfer at issue here took place in 

2009, it has its origins in events tracing back to 2004. In 

February 2004, Grand Centreville, LLC (“Grand Centreville”) was 

created for the sole purpose of acquiring, developing, and 

managing a retail shopping center in Centreville, Virginia. At 

the time of its formation, Grand Centreville had one member: a 

shell company called Grand Equity, LLC (“Grand Equity”). Grand 

Equity, in turn, was managed by its sole member, Grand 

Development, LLC (“Grand Development”), another shell company. 

Grand Development was wholly owned and managed by the Debtors, 

Min and Mik Kang.
4

In June 2005, Grand Centreville refinanced an existing loan

and executed a “Deed of Trust, Assignment of Leases and Rents 

and Security Agreement” (“2005 Deed of Trust”). The 2005 Deed 

of Trust prohibited specific transactions that could threaten 

the lender’s interests. In particular, (1) Grand Centreville’s 

direct and indirect owners could not transfer more than a 

49% interest in Grand Centreville; (2) Grand Centreville could 

not incur debts outside the ordinary course of business, and 

(3) Grand Centreville could not encumber the property with

additional security interests.

During the course of the refinancing, the Debtors 

incorporated another entity, Grand Formation, Inc. (“Grand 

Formation”), which became the managing member of Grand 

Centreville and acquired a 0.5% ownership interest. Grand 

Equity (99.5% owner) and Grand Formation (0.5% owner) created a 

new operating agreement (“the 2005 Operating Agreement”), which 

listed “Ronnie C. Kim” as an Independent Member. Kim, however,

testified that he was never a member of the entity. J.A. 1757–

64. The 2005 Operating Agreement incorporated requirements from 

the 2005 Deed of Trust, including restrictions on the transfer 

of ownership interests, incurrence of debts, and encumbrance 

with additional liens on the property.

As relevant to the Trustee’s standing, the State 

Corporation Commission of Virginia canceled the existence of 
5

Grand Equity and Grand Development for nonpayment of annual 

registration fees as of December 31, 2008. Virginia law 

provides that when an LLC is canceled, its property “shall pass 

automatically to its managers, . . . members, . . . or holders 

of interest, . . . as trustees in liquidation.” See Va. Code 

§ 13.1-1050.2(C).1 Thus, because the Debtors wholly owned Grand 

Development, which wholly owned Grand Equity, the interests in 

Grand Centreville held by the canceled LLCs “pass[ed]

automatically” to the Debtors, as trustees in liquidation.

On March 16, 2009, the purported transfer at issue here 

took place (“the 2009 Sale”). In the 2009 Sale, the Debtors 

agreed to effectively sell 60% of their interests in Grand 

Centreville and Grand Formation to Han2 and James Sohn,3 in 

 1 Citations throughout are to the current version of the 

Virginia Limited Liability Company Act (the “Act”). The Act was 

amended in 2008, effective April 1, 2009, which resulted in the 

renumbering of certain provisions related to the cancellation of 

an LLC’s certificate due to nonpayment of registration fees and 

the process of winding up when such a cancellation occurred. 

See 2008 Va. Acts 155, ch. 108. No substantive changes were 

made, and the process now in effect is substantially similar to 

the process then in effect. See Gen. Tech. Applications, Inc. 

v. Exro Ltda, 388 F.3d 114, 119-20 (4th Cir. 2004).

2 Han pleaded guilty on May 15, 2013 before Judge Gerald 

Bruce Lee in the Eastern District of Virginia to two counts of 

conspiracy to commit wire fraud, including participation in the 

creation of false HUD-1 settlement statements in connection with 

the 2009 Sale. See J.A. 1985.

3 Sohn settled with the Trustee after the bankruptcy court 

ruled on summary judgment.
6

violation of the terms of the 2005 Operating Agreement. The 

Debtors also purported to issue a promissory note in favor of 

Han and Sohn, which was secured by a security interest in the 

shopping center.

B.

On October 19, 2010, the Debtors jointly filed for 

Chapter 11 bankruptcy. The Office of the United States Trustee 

appointed the Official Committee of Unsecured Creditors (“the 

Committee”) in early December 2010, which instituted the 

underlying adversary action to reverse several transactions the 

Debtors entered into prior to the bankruptcy. In January 2013, 

the Office of the U.S. Trustee then appointed Appellee Yancey as 

the Chapter 11 Trustee, and he took over the Committee’s claims 

against Sohn and Han. The Trustee filed a second-amended 

complaint, seeking, among other relief not relevant here, a 

declaration that the 2009 Sale was invalid.

The parties filed cross-motions for summary judgment on 

this claim, with the Trustee arguing that the 2009 Sale was null 

and void because it violated the 2005 Operating Agreement. At 

the summary judgment hearing, the bankruptcy court determined 

that, if the 2005 Operating Agreement was effective, then the 

2009 Sale was void. The court held a trial to resolve the 

factual dispute as to whether the 2005 Operating Agreement was 

effective. After trial, the court concluded that the agreement 
7

was effective, and that the purported transfer was null and void 

because it violated the agreement. The district court affirmed 

the bankruptcy court’s ruling invalidating the 2009 Sale.

II.

On appeal, Han argues that: (1) the Trustee lacks standing;

(2) the 2005 Operating Agreement never became effective and 

therefore did not govern the 2009 Sale; and (3) even if the 2005 

Operating Agreement governed, the 2009 Sale was not null and 

void.

In reviewing a bankruptcy order, “we apply the same 

standard of review that the district court applied when it 

reviewed the bankruptcy court’s decision.” In re Jenkins, 

784 F.3d 230, 234 (4th Cir. 2015) (quoting In re Nieves, 

648 F.3d 232, 237 (4th Cir. 2011) (per curiam)). We thus review

the bankruptcy court’s factual findings for clear error and 

legal conclusions of both the bankruptcy court and district 

court de novo. Id.

A.

We begin with the threshold issue of standing. Han 

contends that the Trustee does not have standing to bring the 

instant claim because the Debtors, in whose shoes the Trustee 

stands, did not have a direct interest in Grand Centreville, but 

only an interest in the entities that controlled Grand 
8

Centreville--Grand Equity and Grand Development. Thus, 

according to Han, the Trustee is impermissibly attempting to 

assert the rights of corporate entities rather than rights 

belonging to the Debtors. This argument is without merit.

A Chapter 11 Trustee has the power to assert the rights of 

the debtor and creditors, as defined by state law. SteyrDaimler-Puch of Am. Corp. v. Pappas, 852 F.2d 132, 135 (4th Cir. 

1988). Under Virginia law, the property of canceled LLCs 

“pass[es] automatically” to the managers, members, or holders of 

interest, who act as trustees in liquidation to distribute the 

company’s assets after the LLC is wound up and all liabilities 

and obligations are satisfied. Va. Code § 13.1-1050.2(c).

When Grand Development and Grand Equity were canceled in 

2008, their interests in Grand Centreville were held in trust by 

Mr. Kang “as trustee[] in liquidation” for himself and 

Mrs. Kang, the ultimate owners. Id. Because there is no 

evidence to suggest that the LLCs were anything but pass-through 

entities with no business to wind up or outstanding debts to 

pay, the interests they held in Grand Centreville passed 

directly to the Debtors. Stepping into the Debtors’ shoes, the 

Trustee therefore has standing to pursue its claim that the 2009 

Sale is null and void.
9

B.

Han next argues that because Ronnie Kim never agreed to the 

2005 Operating Agreement, it never became effective. See Va.

Code § 13.1-1023(B)(1) (providing that “[a]n operating agreement 

must initially be agreed to by all of the members”). There is 

no basis for this argument.

It is true that the 2005 Operating Agreement lists Ronnie 

Kim, together with Grand Formation and Grand Equity, as a member 

of Grand Centreville. J.A. 1345. However, membership in an LLC 

is a matter of assent, and a person cannot become a member 

without agreeing to do so. Cf. Broyhill v. DeLuca (In re 

DeLuca), 194 B.R. 65 (Bankr. E.D. Va. 1996).4 Ronnie Kim

testified that he had never been a member of Grand Centreville, 

and had not seen the 2005 Operating Agreement prior to preparing 

for his deposition, nor even heard of Grand Centreville before

 4 Han argues that Broyhill does not support the district 

court’s conclusion that “a member [must] have knowledge of and 

consent[] to the membership interest.” Appellant’s Br. at 11. 

Although Broyhill does not directly touch on the issue in the 

present case, the court there did conclude that an entity became 

a member of an LLC through the assent of all its members. And 

Han even concedes that she “is not suggesting that Mr. Kim be 

made an ‘involuntary member.’” Appellant’s Br. at 12. Her 

argument that the remaining members’ assent to the 2005 

Operating Agreement is meaningless without Kim’s inclusion is 

belied by the remaining members’ conduct--they never sought 

Kim’s input on decisionmaking or his consent to the 2009 Sale. 

Simply put, there is no indication they actually intended for 

Kim to be a true member. Cf. In re Williams, 455 B.R. 485, 496 

(Bankr. E.D. Va. 2011).
10

then. J.A. 1757–64; J.A. 1823–27. And no testimony or other 

evidence suggested otherwise. Thus, because Kim was never a 

member of Grand Centreville, the 2005 Operating Agreement became 

effective without his agreement.5

C.

Finally, Han argues that the lower court erred by holding 

that the transfer was null and void. She contends that 

violations of the 2005 Operating Agreement only rendered the 

transaction voidable, which would allow her to raise equitable 

defenses such as estoppel. See Richard L. Deal & Assoc., Inc. 

v. Commonwealth, 299 S.E.2d 346, 349 (Va. 1983). In particular, 

she argues that an operating agreement is merely an agreement 

among its members, and that just as the Debtors could be 

estopped from denying they had the power to consummate the 

2009 Sale, so too can the Trustee. We disagree.

Under Virginia law, an operating agreement binds the 

parties to the agreement. Mission Residential, LLC v. Triple 

Net Props., LLC, 654 S.E.2d 888, 891 (Va. 2008). And the 

members can, through the operating agreement, “provide rights to 

any person, including a person who is not a party to the 

 5 By not arguing it on appeal, Han waived any contention

that the 2005 Operating Agreement was not effective because of a

missing signature page for Grand Equity. We therefore do not 

address that argument further.
11

operating agreement, to the extent set forth in the operating 

agreement.” Va. Code § 13.1-1023(A)(1).

Here, Han concedes that the restrictions in the 

2005 Operating Agreement were designed to benefit the lender. 

Appellant’s Br. at 13. She also concedes that “[t]he transfer 

would have violated the transfer of control provisions contained 

in the 2005 operating agreement.” Id. And yet, without citing 

any authority, she argues that the violations would only give 

the lender the right to void the 2009 Sale, not render it null 

and void. Although few courts appear to have spoken on the 

issue, the courts that have addressed it conclude that actions

that violate an LLC’s operating agreement are null and void. 

See, e.g., Kapila v. Deutsche Bank AG (In re Louis J. Pearlman 

Enters., Inc.), 398 B.R. 59, 65 (Bankr. M.D. Fla. 2008) (“The 

purported transfer is void and of no effect pursuant to the 

Operating Agreement.”).

We are likewise persuaded that such actions are without 

legal effect because they exceed the scope of authority

conferred by the operating agreement.6 As the district court 

 6 Han’s reliance upon News-Register Co. v. Rockingham Pub. 

Co., 86 S.E. 874 (Va. 1915), to argue otherwise is misplaced. 

First, News-Register Co. pre-dated the existence of LLCs, and 

concerned two corporations that entered into a partnership 

agreement. Second, as the court there stated, “[t]he main, 

indeed the sole, contention in this case centers upon the 

question whether, under the laws of Virginia, two corporations 

(Continued)
12

recognized, operating agreements define the authority of LLCs, 

and companies that engage in transactions with an LLC 

appropriately look to these agreements during the due-diligence 

process to determine such authority. Actions taken outside the 

authority conferred by the operating agreement are thus ultra 

vires and without legal effect.7 Because there is no dispute 

that the 2009 Sale violated the 2005 Operating Agreement, it is 

null and void.

 

can form a partnership.” Id. at 876. The court concluded that 

the two corporations could validly form a partnership, and only 

suggested in dicta that a corporate actor could be estopped from 

arguing that it was without power to enter into such an 

agreement after amending its corporate charter to expressly 

allow it to do so and undertaking the transaction in good faith. 

Among the other factors making the case inapposite, the 

transaction here was not undertaken in good faith, but expressly 

designed to obscure the fact that it violated the 2005 Operating 

Agreement. See J.A. 1728.

7 As the Trustee argues, the Fifth Circuit’s decision in 

Kinwood Capital Group, LLC v. BankPlus (In re Northlake Dev., 

LLC), 643 F.3d 448 (5th Cir. 2011), further supports this 

conclusion. In BankPlus, a minority member of an LLC purported 

to transfer the LLC’s property to another company that he 

created, without any authority under the LLC’s operating 

agreement. He then used that property as collateral to obtain a 

loan for his new company, and the bank sought to retain the 

property after the new company filed for bankruptcy. Relying on 

an opinion from the Mississippi Supreme Court, the Fifth Circuit 

concluded that the purported transfer was void and of no legal 

effect because the minority member, as an agent of the LLC, 

acted without authority. Id. at 451.
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III.

For the foregoing reasons, we affirm the order of the 

district court.8

AFFIRMED

 8 We dispensed with oral argument because the facts and 

legal conclusions are adequately presented in the materials 

before this court and argument would not aid in the decisional 

process.