Title: John B. Simmons, Jr. v. Mike Ball
Citation: N/A
Docket Number: 1090066
State: Alabama
Issuer: Alabama Supreme Court
Date: March 4, 2011

Rel: 03/04/2011
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2010-2011
____________________
1090066
____________________
John B. Simmons, Jr.
v.
Mike Ball
Appeal from Autauga Circuit Court 
(CV-06-373)
PARKER, Justice. 
John B. Simmons, Jr., appeals from a summary judgment
entered in favor of Mike Ball.  The trial court's judgment
permanently enjoined Simmons from enforcing the mortgage that
gave rise to this controversy by foreclosing on the mortgaged
property.  We reverse and remand.
1090066
2
Facts and Procedural History
On May 10, 2005, two brothers, Kelly Andrew Ball ("Andy")
and Mike, organized a limited-liability company known as Hard
Ball, LLC ("Hard Ball"), in which they were the sole members.
Article VII.a. of the articles of organization placed "[a]ll
affairs, business, functions, and dealings of Hard Ball, LLC
... under the managerial control of the member: Andy Ball." 
Article VII.b. assumed that Article VII.a. appointed Andy as
the manager of Hard Ball, referring to "[t]he manager named in
Article VII(a)."  Andy's managerial authority was specifically
extended by Article VIII.c., which stated that "Andy Ball as
a Member of Hard Ball, LLC ... has been granted authority to
sign any such documents, including but not limited to
conveying, mortgaging, buying, selling and encumbering of real
property"; however, Article VIII.c. did not refer to Andy's
status as manager of the limited-liability company. 
Also on May 10, 2005, Andy and Mike executed an operating
agreement.  The operating agreement required the members of
the limited-liability company, among other things, to "execute
such documents and take such action as may be necessary to
maintain the Company's status as a limited liability company
1090066
3
under the [Limited Liability Company] Act[, § 10-12-1 et seq.,
Ala. Code 1975,] ... and to carry out the business purposes of
the Company."  The operating agreement also named Andy as the
manager, registered agent, and organizer of Hard Ball. 
Hard Ball's sole business function was "flipping" houses;
specifically, Hard Ball purchased houses with funds supplied
by Mike; Andy then, after repairing and cleaning the houses,
attempted to sell them for a profit.  Among the houses
purchased by Hard Ball was one located at 1128 Deatsville
Highway, Millbrook, in Elmore 
County 
("the 
Deatsville
property").  During the summer of 2006 there was a
disagreement 
between 
Andy and 
Mike; Andy subsequently
"disappeared for several weeks," and Mike, acting on the
advice of his lawyers, attempted to preserve Hard Ball's
assets by transferring them into his name.  On August 1, 2006,
Mike executed a deed on behalf of Hard Ball purporting to
convey the Deatsville property to himself; he recorded that
deed in the Elmore County Probate Office on August 4, 2006.
He also executed and recorded deeds purporting to transfer to
himself other real property owned by Hard Ball.  In December
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4
2006, Mike filed an application in the Autauga Circuit Court
seeking the dissolution of Hard Ball.
In May 2007, the trial court entered the following
notation on the case-action-summary sheet in the action
seeking the dissolution of the limited-liability company:
"Court directs that all LLC property be placed back in the LLC
name--Only to be transferred by Court Order--All proceeds to
be held in escrow pending order of this Court."  In response
to the trial court's order, Mike and Andy agreed that the
deeds to the properties Mike had attempted to convey to
himself would be signed, but not recorded, before finding a
third-party buyer and obtaining authorization from the trial
court to sell the properties.  On July 23, 2007, Mike signed
a deed conveying the Deatsville property to Hard Ball.  When
he signed the deed, Mike did not intend for the deed to be
delivered or the property conveyed.  However, a copy of that
deed (stamped "COPY") was given to Andy's lawyer, who in turn
gave it to Andy; on November 14, 2007, Andy recorded that copy
as if it were the original deed.
On November 28, 2007, Simmons loaned Hard Ball $52,000
and in return received from Andy, acting as Hard Ball's
1090066
5
manager, a mortgage on the Deatsville property.  In an
affidavit attached to the mortgage, Andy assured Simmons that
the property had been transferred from Mike to Hard Ball by
the July 23, 2007, deed.  When Hard Ball defaulted on the loan
payments, Simmons attempted to foreclose on the Deatsville
property.  Mike learned of the mortgage on the Deatsville
property on November 24, 2008, when he received a notice of
that foreclosure.  Mike immediately moved the trial court to
join Simmons as a necessary party to the dissolution action.
He also requested that the trial court stay the foreclosure
proceedings.  The trial court joined Simmons as a defendant
and stayed the foreclosure proceedings; thereafter, Simmons,
Mike, and Andy each filed a motion for a summary judgment.
On August 28, 2009, the trial court entered a summary
judgment in Mike's favor, dissolving Hard Ball, disposing of
its assets, and permanently enjoining Simmons from foreclosing
on the Deatsville property.  The trial court found "that the
deed ... with the word 'COPY' in bold print at the top thereof
was sufficient to put [Simmons] ... on notice of further
inquiry as to the location of the original deed and the reason
the original deed was not recorded."  Simmons appealed.
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6
Standard of Review
"'[O]n appeal a summary judgment carries no
presumption of correctness,' Hornsby v. Sessions,
703 So. 2d 932, 938 (Ala. 1997).  '"In reviewing the
disposition of a motion for summary judgment, we
utilize the same standard as that of the trial court
in determining whether the evidence before the court
made out a genuine issue of material fact" and
whether the movant was entitled to a judgment as a
matter of law.' Ex parte General Motors Corp., 769
So. 2d 903, 906 (Ala. 1999) (quoting Bussey v. John
Deere Co., 531 So. 2d 860, 862 (Ala. 1988)).  'Our
review is further subject to the caveat that this
Court must review the record in a light most
favorable to the nonmovant and must resolve all
reasonable doubts against the movant.' Hobson v.
American Cast Iron Pipe Co., 690 So. 2d 341, 344
(Ala. 1997)."
Harper v. Coats, 988 So. 2d 501, 503 (Ala. 2008).
Discussion
Several issues are raised on appeal, but we need address
only one.  The dispositive issue in this case is whether the
deed Mike executed on August 1, 2006, transferred ownership of
the Deatsville property from Hard Ball to Mike. 
Simmons argues that under §§ 10-12-21 and 10-12-23, Ala.
Code 1975, a part of the Alabama Limited Liability Company
Act, § 10-12-1 et seq., Ala. Code 1975, Mike acted without
authority when he signed the August 1, 2006, deed as a member
of Hard Ball because, Simmons says, Andy, as the manager of
1090066
7
Hard Ball, was the only person who had the authority to
transfer title to any of Hard Ball's property.  Simmons argues
that Mike's lack of authority to transfer title to any of Hard
Ball's assets makes the August 1, 2006, deed void.  Thus,
Simmons argues, title to the Deatsville property remained in
Hard Ball and was never transferred to Mike. 
As 
this 
Court 
has 
previously 
explained, 
"[l]ike
corporations and limited partnerships, limited liability
companies are creatures of statute."  Harbison v. Strickland,
900 So. 2d 385, 389 (Ala. 2004).  Section 10-12-21(b)(1)
provides, in relevant part, that when a limited-liability
company’s articles of organization provide that management of
the company is vested in a manager, then "[n]o member, acting
solely in the capacity as member, is an agent for the limited
liability company."  As we noted in Clement Contracting Group,
Inc. v. Coating Systems, L.L.C., 881 So. 2d  971 (Ala. 2003),
when the articles of organization provide for a manager, even
the sole member of a limited-liability company should sign
documents "in his capacity as manager rather than in his
capacity as member." 881 So. 2d at 974. 
1090066
8
The reservation of authority to the manager or managers
of a limited-liability company is even more explicit when the
transfer of property of the limited-liability company is
involved. Section 10-12-23, Ala. Code 1975, entitled "Limited
Liability Company Property," provides in subsection (d): 
"If the articles of organization provide that
management of the limited liability company is
vested in a manager or managers, title to property
of the limited liability company that is held in the
name of the limited liability company may be
transferred by an instrument of transfer executed by
any manager in the name of the limited liability
company; but a member, acting solely as a member,
shall not have that authority."  
(Emphasis added.)  Both §§ 10-12-21(b)(1) and 10-12-23(d) are
applicable in this case. 
Hard Ball's articles of organization appointed a manager
for the limited-liability company; that manager was Andy.
Because Andy was the manager and Mike was only a member of
Hard Ball, Mike had no authority to transfer the Deatsville
property from Hard Ball to himself.  The issue then is whether
the August 1, 2006, deed executed by Mike without authority to
do so is voidable at Hard Ball's option but enforceable
against Simmons and other third-party purchasers or simply
1090066
9
void, having no legal effect on the title to the Deatsville
property. 
Simmons admits in his brief to this Court that "some
deeds which were improperly executed [are] voidable rather
than void," including deeds that are "obtained through undue
influence."  (Simmons's brief, at 18.)  Simmons goes on to
argue, though, that "[n]o case or statutory support has been
found for Mike Ball's position which would contradict the
plain meaning of the statute and the LLC organizational
documents."  (Simmons's brief, at 18.)  Simmons's assertion is
correct; this is a question of first impression for this
Court.
Mike compares the facts in this case to the transfer of
property by a minor, noting that "[s]uch a transfer is not
void, but only voidable at the instance of the minor."  (Mike
Ball's brief, at 28.)  However, because he cites no authority
in support of the bare analogy, we disregard that argument.
"We have unequivocally stated that it is not the function of
this Court to do a party's legal research or to make and
address legal arguments for a party based on undelineated
general propositions not supported by sufficient authority or
1090066
10
argument."  Dykes v. Lane Trucking, Inc., 652 So. 2d 248, 251
(Ala. 1994). 
Mike does direct this Court's attention to cases holding
that an instrument executed by an agent of a corporation who
has a personal interest in the transfer is voidable by the
corporation, but not by third parties. See Mike Ball's brief,
at 26-29, citing Mobile Land Improvement Co. v. Gass, 142 Ala.
520, 39 So. 229 (1904), and National Union Life Ins. Co. v.
Ingram, 275 Ala. 310, 154 So. 2d 666 (1963).  Mike argues that
this Court should apply a similar rule by analogy in this
case.
Mike's reliance on those cases is misplaced, however. In
Mobile Land Improvement Co., the secretary of the corporation,
H.R. Gass, participated in the corporate meeting authorizing
the transfer of corporate property to him personally.  Because
the sale of that property created a conflict between his
personal interest and the interests of the corporation, this
Court concluded that the corporation could properly void the
transaction and rescind the deeds giving Gass title to the
property at issue.  Specifically, this Court stated:
"'"Now the purchase of property by an
agent or trustee, or by any person acting
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11
in a fiduciary capacity, is not void ab
origine and absolutely. It is voidable
only. It is made subject to the right of
the 
principal 
or 
beneficiary, 
in 
a
reasonable time, to say that he is not
satisfied with it."'"
142 Ala. at 528, 39 So. at 232 (quoting other cases).  Unlike
Mike, who, as a member of the limited-liability company but
not the managing member, lacked authority to act on behalf of
Hard Ball, Gass's status as an agent of the corporation and
his resulting authority to transfer the property on behalf of
the corporation was never in question. 
Mike also cites National Union Life Insurance, in which
F.R. Ingram, the sole shareholder of the corporation, signed
a contract between himself and the corporation both on behalf
of the corporation and in his individual capacity.  This Court
held that such a contract was voidable, but only by the
corporation; a third party like National Union could not
object to the conflict.  275 Ala. at 317, 154 So. 2d at 670-
71.  Like Gass, however, and unlike the facts before us today,
Ingram had the authority to act on behalf of the corporation;
as the sole shareholder, Ingram could execute documents on
behalf of the corporation without formal authorization.  By
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12
contrast, Mike's one-half interest in Hard Ball did not give
him such authority.
Mike argues that this Court should create a similar rule
for transfers of property by non-manager members of a limited-
liability company.  Such a rule would permit Hard Ball to
declare the deed signed by Mike to be void, if it decided to
do so, but would give Simmons no opportunity to challenge the
validity of the deed.  Simmons's mortgage would therefore be
worthless, because "[o]ne cannot be bona fide purchaser where
his grantor did not have the legal title to convey."  Hess v.
Hodges, 201 Ala. 309, 310, 78 So. 85, 86 (1918).  
We start with the text of the statute.  The language of
§§ 
10-12-21(b) 
and 
10-12-23(d), 
Ala. 
Code 
1975, 
is
unambiguous: if a manager has been appointed, the members of
the limited-liability company no longer have the authority to
act on the company's behalf.  Those Code sections indicate an
intent not simply to protect the limited-liability company,
but also to protect third parties with whom it deals. If the
deeds executed by the non-managing members are voidable rather
than void, however, only the limited-liability company would
be 
protected; 
third 
parties 
would 
be 
bound 
by 
such
1090066
Several other courts have considered this question, and
1
the majority have concluded that the action of a member of a
limited-liability company that is beyond that member's
authority is void. In 1230 Park Associates, LLC v. Northern
Source, LLC, 48 A.D.3d 355, 355, 852 N.Y.S.2d 92, 93 (2008),
the Supreme Court of New York County declared several loans
from one limited-liability company to another "null and void"
because the part owner "had no authority to enter into the
relevant loan transactions."   Similarly, in Halstead
Brooklyn, LLC v. 96-98 Baltic, LLC, 49 A.D.3d 609, 854
N.Y.S.2d 437 (2008), a brokerage agreement signed on behalf of
the limited-liability company by someone other than a manager,
in violation of the company's operating agreement, was
unenforceable.  In Cement-Lock v. Gas Technology Institute,
618 F. Supp. 2d 856 (N.D. Ill. 2009), misconduct of non-
manager members was not attributable to the limited-liability
company when those members had no authority under the terms of
the operating agreement or the applicable Illinois statute.
Most recently, in Bankplus v. Kinwood Capital Group, L.L.C.,
430 B.R. 758 (2009), a bankruptcy court held that, under
Mississippi's corresponding statutory provision, a deed,
executed on behalf of the limited-liability company by a
member who lacked that authority, "was void ab initio."  43
B.R. at 759.  This case is currently on appeal to the United
13
transactions, even though the limited-liability company is
not.  Without clear indication that the legislature intended
that result, this Court declines to interpret  §§ 10-12-21(b)
and 10-12-23(d), Ala. Code 1975, in such a way and therefore
declines to adopt the rule advocated by Mike in this case.  We
hold that a transaction, such as the one at issue here, by a
member of a limited-liability company in contravention of the
authority vested by the company's articles of organization in
a manager of the limited-liability company is void.   Thus,
1
1090066
States Court of Appeals for the Fifth Circuit, which has in
turn certified this very question to the Mississippi Supreme
Court.  In re Northlake Dev., L.L.C., 614 F.3d 140 (5th Cir.
2010).  At least one court, however, has considered a similar
statute and reached the opposite conclusion.  In Livonia
Property Holdings, L.L.C. v. 12840-12976 Farmington Road
Holdings, L.L.C., 717 F. Supp. 2d 724 (E.D. Mich. 2010), a
provision in the Massachusetts Limited Liability Company Act
that made certain recordable instruments binding on the
limited-liability company if the instrument was signed by
someone with authority was interpreted to permit the lack of
authority to be cured by "[r]atification or adoption." 717 F.
Supp. 2d at 738. 
14
Mike's attempt to transfer title to the Deatsville property to
himself was ineffective, and the deed signed on August 1,
2006, was void. 
The trial court's decision relied on the notice given to
Simmons by the previous deeds, and the parties' briefs also
raise the question whether Simmons had adequate notice of
Mike's interest in the Deatsville property.  However, because
we conclude that the conveyance of the Deatsville property to
Mike was void, we need not reach the question whether Simmons
was a mortgagee without notice under Alabama law.
Conclusion
As a non-manager member of Hard Ball, Mike lacked the
authority to transfer title to the Deatsville property from
the limited-liability company to himself; his attempt to
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15
transfer title was therefore ineffective.  Simmons therefore
received title to the property by the mortgage from Hard Ball,
regardless of whether he had notice of previous transactions
regarding the property. We therefore reverse the trial court's
order and remand this case for proceedings consistent with
this opinion.
REVERSED AND REMANDED.
Cobb, C.J., and Stuart, Shaw, and Wise, JJ., concur.