Opinion ID: 1591711
Heading Depth: 2
Heading Rank: 3

Heading: Equitable-Estoppel Theory

Text: Finally, Steele contends that Elkins should be  estopped to deny Steele's status as a member, or, alternatively, from withholding consent to Steele's becoming a member of Rosenfeld. Steele's brief, at 41 (emphasis added). More specifically, he argues: By presenting Steele with his LLC `package' Elkins, in effect, made the representation to Steele that by performing the terms of the promissory note and agreement to purchase, Steele would become a full member of [Rosenfeld]. Relying on this representation, Steele, who had already contributed $20,000 in the form of a down payment, began making, and Elkins continued accepting, the installment payments required under the note and agreement as well as the . . . payments for taxes and insurance. Steele was also allowed to remain in possession of the third floor of the Rosenfeld Building. . . . According to the arrangement between Elkins and Steele, once the insurance proceeds were paid to Elkins, Steele's obligation to him under the note was completely satisfied. [Elkins] cannot now be allowed to deny the validity of the agreement, or alternatively, to withhold [his] consent. In fact, there was ample evidence before the trial court indicating that both Elkins and Glover knew of and consented to Steele being a member of Rosenfeld, LLC. Steele's brief, at 47-48. Elkins, however, contends that to afford Steele membership status in Rosenfeld in the complete absence of any of the formal requisites imposed by statute or Operating Agreement for the addition of a member would impermissibly afford him membership by estoppel. Elkins's brief, at 42-43. We agree with Elkins. In Vergos v. Waterman Building Partnership, 613 So.2d 383, 389 (Ala.1993), this Court said: The courts of some states have held that, `[a]s between the parties themselves, there may exist an estoppel to allege or deny a partnership relation.' 68 C.J.S. Partnership § 21 (1950). ... This Court has not adopted that position. In Waters v. Union Bank of Repton, 370 So.2d 957, 960 (Ala.1979), we held that a partnership `is never established by implication or operation of law, at least in the situation where the dispute concerning the existence of a partnership is between the parties.' (Emphasis added.) On that basis, this Court refused to entertain an estoppel theory asserted by a seven-member partnership to prevent the dissociation of the signatory of a letter agreement purporting to make the signatory a member, where two of the members had not assented in writing as required by the partnership agreement, notwithstanding that the signatory had `held himself out to third parties as a partner, participated in the management of the Partnership, was provided privileged and confidential Partnership information by the other partners, was treated as a partner and considered to be a partner by the other members of the Partnership.' 613 So.2d at 387. Otherwise stated, among the parties to a partnership, membership cannot be acquired by estoppel. The provisions pertinent to this case are fully consistent with this rule, and we see no reason to apply a different rule in the context of a limited liability company. See Ala.Code. 1975, § 10-12-8(a) (providing that, for statutory purposes, limited liability companies are generally treated as partnerships). Under § 10-12-33(a)(1), membership accretion must be evidenced by a written instrument, dated and signed by all the existing members. (Emphasis added.) Likewise, the articles condition the admission of additional members upon the unanimous written consent of the then existing members. Art. VI (emphasis added). We will not disregard the plain meaning of these provisions in order to afford Steele membership in Rosenfeld on the basis of implied representations and the purported acquiescence of Glover and Elkins in certain actions by Steele.