Opinion ID: 2549401
Heading Depth: 1
Heading Rank: 3

Heading: Background To Del Bay

Text: Del Bay was originally formed in 1986 to construct a motel on land owned and contributed to Del Bay by Ksebe's now deceased husband. Del Bay also received capital contributions from the William Penn Partnership, Hoyt, and Saliba. The parties divided Del Bay ownership interests as described above. They built the Beacon Motel in 1987 on a four acre site in Lewes, Delaware. It is a three story structure, housing 66 guest units. It is located adjacent to the shops of downtown Lewes. The first floor of the Motel houses small commercial tenants typical of a beach community. It operates on a seasonal basis from May through September. For the three years predating the challenged sale, the Beacon Motel generated a net income stream of approximately $250,000 for Del Bay. Del Bay converted to a Delaware LLC pursuant to an Operating Agreement dated December 23, 1994. The ownership interests of the members of the LLC remained the same as the interest of each partner in the partnership. Under the LLC Operating Agreement, all decisions and approvals of the members required a vote of two thirds of the interests held by the members. [1] The Operating Agreement does not expressly eliminate any fiduciary duties. The Lingos were the initial managers, and the Lingos in fact remained the managers of Del Bay at all times relevant to this case. Under Article VII, the Operating Agreement provided a mechanism for members to dispose of their interest in Del Bay. [2] A member who wished to dispose of his interest could first offer it to Del Bay, and then, if not accepted by Del Bay within 45 days, to the other members, at a price determined by the accountant regularly employed by the Company. [3] A nonselling member would have 30 days to purchase the disposing member's interest if Del Bay's option lapsed unexercised. If a member's offer to the Company or the other members lapsed or was waived, that member could then sell his interest to a third party. Hoyt initially called periodic meetings of the members of Del Bay, but around 1998, Saliba and Ksebe had a falling out with the Lingos with respect to a real estate venture unrelated to this litigation. After the falling out, the Del Bay members ceased meeting together, and in July 2000, Hoyt contacted attorney James Griffin requesting an opinion concerning the disposition and or partition options for his ownership interest under the Operating Agreement. Hoyt indicated to Griffin that he was interested in selling his membership interest to Saliba and he asked whether two thirds of the members could force the sale of the Motel. Griffin did not provide a clear answer to the question of whether two thirds of the members could force a sale, but he did advise that under Article VII, any member who desired to dispose of their interest could do so by offering it to the Company and to the other members at the value determined by the Company's accountant. Hoyt, disappointed with Griffin's opinion, took no action. As of July 2000, neither Ksebe nor Saliba had any interest in selling the Motel. Two offers to purchase the Motel property were presented to Del Bay before the Lingos decided to sell the entire property. In 2001, the Lingos declined an offer for $2 million, and in 2003, they declined an offer for $4 million. They never communicated either offer to Saliba or Ksebe.