Opinion ID: 1591711
Heading Depth: 2
Heading Rank: 1

Heading: Contractual-Rights Theory

Text: Steele contends that the oral agreement between Elkins and him constituted an executory contract for the purchase of a one-third membership interest in Rosenfeld, to be fully performed upon payment in full of the agreed-upon price for the third floor of the building. Furthermore, Steele insists that Elkins and he reached an oral agreement after the fire, that is, a second oral agreement, to the effect that the balance of the purchase price due Elkins [from Steele under the original oral agreement] would be paid from `Steele's share' of the insurance proceeds.  Steele's brief, at 38 (emphasis added; footnote omitted). Under the second oral agreement, according to Steele, Steele's purchase price was paid in full  as soon as Elkins received Nationwide's check, which was issued on December 21, 2001, and at that point Steele was entitled to full membership in Rosenfeld and a right to a portion of the remaining insurance proceeds and the proceeds from the sale of the Rosenfeld building. Steele's brief, at 38 (emphasis added). Thus, he contends that the executory contract has been fully performed and that he is entitled to a share of the proceeds. In the alternative, Steele contends that he need not be a full member of Rosenfeld, as member is defined in the Alabama Limited Liability Company Act, Ala. Code 1975, § 10-12-1 et seq. (the Act), to acquire a right to a one-third distribution of the insurance proceeds. Steele's brief, at 37. Ala.Code 1975, § 10-12-2(j) defines a member as [a] person reflected in the required records of a limited liability company as the owner of some governance rights of a membership interest in the limited liability company. (Emphasis added.) Steele does not assert that he ever had any governance, i.e., voting, rights in Rosenfeld before Rosenfeld received the insurance proceeds. Instead, he argues that the rights of membership in an Alabama limited liability company may essentially be bifurcated into financial rights and full membership (i.e., governance) rights. Steele's brief, at 33. Under this theory, according to Steele, a [full] member assigns his [financial] interest to another party, which party is not made a substituted member until completing the formalities of the Operating Agreement and Act, but [who] does obtain the financial rights of the transferor, who retains formal membership, and thus, voting rights. Id. In this manner, Steele insists, he obtained financial rights when [Rosenfeld] was formed, and had contracted, once his payments to Elkins were complete, to obtain full membership (i.e., governance) rights as well. Id. Thus, he contends, in essence, that his initial affiliation with Rosenfeld involved two independent contracts: the first being fully executed for the transfer of financial rights; the second being executory for the eventual transfer of voting rights. [2] He argues that the declaratory judgment must be reversed, based on the trial court's failure to find the existence of a fully executed enforceable contract. Elkins contends, however, that his oral agreement with Steele, standing alone, is insufficient, under [the Act] and under the terms of the governing [instruments] of [Rosenfeld], to give Steele [an interest] in [Rosenfeld]. Elkins's brief, at 24. In that connection, Ala.Code 1975, § 10-12-33, provides, in pertinent part: (a) Except as otherwise provided in the operating agreement: (1) An assignee of an interest in a limited liability company may become a member only if the other members unanimously consent. The consent of a member may be evidenced in any manner specified in the operating agreement, but in the absence of such a specification, consent shall be evidenced by a written instrument, dated and signed by the member.  (Emphasis added.) Article VI of the articles states:  Additional members may be admitted but only upon the unanimous written consent of the then existing members. (Emphasis added.) Similarly, § 9.1(B) of the operating agreement prohibits the admission of additional members without the prior written consent of Members holding at least seventy-five (75%) of the membership interests (other than the Member who is the transferor of such transferee). (Emphasis added.) [3] It is undisputed that there is no writing purporting to constitute the assent of Glover, who, the trial court found, owned one third of Rosenfeld. Elkins argues that the fact that no ... written [approval of the purported] assignment was ever executed is fatal to [Steele's] attempt to claim any benefits of membership in [Rosenfeld]. Elkins's brief, at 33 (emphasis added). We agree. The clear and unambiguous provisions of the Act, the articles, and the operating agreement require the written consent of Glover to Steele's becoming a member of Rosenfeld. Section 9.3 of the operating agreement states: Transfers in violation of the provisions of this Article shall be null and void and of no effect for any purpose.  (Emphasis added.) Assuming, without deciding, the legal validity of bifurcating the rights of membership as Steele advocates, Steele does not explain how  in the absence of compliance with the provisions for transfers  the purported assignment of the whole or any part of a package of interests is effective. Steele says only that the parties' failure to comply with the requirements cannot now be used by [Elkins] to his advantage and Steele's detriment. Steele's brief, at 36. However, he cites no authority in his principal brief for the proposition that this Court can ignore noncompliance with those requirements. Authority for this argument appears for the first time in Steele's reply brief. The law of Alabama provides that where no legal authority is cited or argued, the effect is the same as if no argument had been made.  Bennett v. Bennett, 506 So.2d 1021, 1023 (Ala.Civ.App.1987) (emphasis added). [A]n argument may not be raised, nor may an argument be supported by citations to authority, for the first time in an appellant's reply brief. Improved Benevolent & Protective Order of Elks v. Moss, 855 So.2d 1107, 1111 (Ala.Civ.App. 2003), abrogated on other grounds, Ex parte Full Circle Distribution, L.L.C., 883 So.2d 638 (Ala.2003). Where an appellant first cites authority for an argument in his reply brief, it is as if the argument was first raised in that reply brief, and it will not be considered. [4] For these reasons, Steele has failed to demonstrate that he has a contractual right to a portion of the proceeds.