Opinion ID: 1059475
Heading Depth: 1
Heading Rank: 3

Heading: The Flippos' Suit

Text: In their amended bill of complaint, the Flippos' sought the dissolution of FLTC and in kind distribution of its assets. In Count One, the Flippos asked that FLTC be dissolved pursuant to Code § 13.1-1047 because it is not reasonably practicable to carry on the business of FLTC under the Operating Agreement. In Count Three, the Flippos sought rescission of the Operating Agreement, alleging that CSC fraudulently induced the Flippos to agree to the Operating Agreement by representing that CSC's proposed changes to Article 13 did not materially change the Operating Agreement. The Flippos allege such changes deprived them of a right to resign and receive a distribution in kind of their one-third interest in the assets. The trial court denied the Flippos' requested relief for dissolution and rescission, finding, respectively, that there was no evidence that the Operating Agreement adversely impacted the operation of FLTC's business and that CSC did not make any misrepresentations regarding the changes it proposed to Article 13 of the Operating Agreement. The Flippos have not assigned error to either of these holdings. In Count Two of their amended bill of complaint, the Flippos asserted that the parties were mutually mistaken as to the effect of the changes proposed by CSC to Article 13 and there was no meeting of the minds regarding that provision. In developing this position at trial, the Flippos presented evidence which, in their view, showed that provisions in the previous partnership agreements as well as in Article 13 of the current Operating Agreement were intended to, and did, allow a partner or member to resign, force the dissolution of the entity, and receive the distribution of the entity's assets in kind. To secure the relief requested under Count Two, dissolution and distribution in kind, the Flippos tendered their resignations from FLTC contingent on the trial court concluding that dissolution and distribution in kind were authorized by the Operating Agreement. In response, CSC maintained that although such rights were included in the original partnership agreement, neither the restated partnership agreement nor the subsequent FLTC Operating Agreement ever contained a right to resign, force dissolution of the partnership, and receive distribution of partnership assets in kind. The trial court found that Article 9 of the original partnership agreement for the Flippo Land & Timber Company Partnership specifically allowed a partner to terminate the partnership and receive a distribution in kind, but the court rejected the Flippos' contention that similar provisions were included in the unexecuted restated partnership agreement. The trial court found that CSC had no expectation that such rights were included or were supposed to be included in the restated partnership agreement or in the current Operating Agreement. Furthermore, the trial court found that the Flippos had no such expectation either. According to the trial court, the Flippos instead expected CSC to leave FLTC and be bound by the provisions of the Operating Agreement, which would have given the Flippos the right to purchase CSC's membership share at 85% of its appraised value. Thus, the trial court found that the only mistake harbored by the Flippos was in the prediction of things that are going to happen in the future. Accordingly, the trial court held that [t]here was no mutual mistake of fact or law among the Flippos and CSC regarding the FLTC Operating Agreement. The Flippos do not assign error to this holding. Rather, they assert that the trial court erred in its interpretation of FLTC's Operating Agreement, specifically that Article 13's reference to Article 9 entitles the remaining members to an opportunity to purchase the shares of a resigning member. Article 13 has been characterized as unambiguous by the Flippos, CSC, and the trial court, although the construction of the provision varies with the reader. Article 13 states in relevant part that dissolution of FLTC occurs on the death, resignation, bankruptcy, or dissolution of a Member, ... unless, within 90 days of such event, the procedures of Article 9 are followed resulting in an election to continue the LLC.... Article 9 provides that on the death of a member, the remaining members may elect to purchase the interest of the deceased member, or, if such interest is not purchased, a majority of the remaining members may elect to continue the LLC. If the remaining members do not make either of these elections, the LLC will be dissolved. The Flippos maintain that the word election in Article 13 refers only to the election in Article 9 to continue the LLC and does not include the election procedures in that Article regarding the right of the remaining members to purchase the departed member's shares. We disagree with the Flippos. In construing contracts, we apply familiar principles. The primary goal in the construction of written contracts is to determine the intent of the contracting parties, and intent is to be determined from the language employed, surrounding circumstances, the occasion, and apparent object of the parties. Christian v. Bullock, 215 Va. 98, 102, 205 S.E.2d 635, 638 (1974). It is the duty of the court to construe the contract made between the parties, not to make a contract for them, and The polestar for the construction of a contract is the intention of the contracting parties as expressed by them in the words they have used. Ames v. American Nat'l Bank, 163 Va. 1, 38, 176 S.E. 204, 216. The facts and circumstances surrounding the parties when they made the contract, and the purposes for which it was made, may be taken into consideration as an aid to the interpretation of the words used, but not to put a construction on the words the parties have used which they do not properly bear. It is the court's duty to declare what the instrument itself says it says. 163 Va. at 38, 176 S.E. at 216. Seaboard Air Line R.R. Co. v. Richmond-Petersburg Turnpike Auth., 202 Va. 1029, 1033, 121 S.E.2d 499, 503 (1961). In applying these principles, we first turn to the language of the Operating Agreement and then to the circumstances surrounding its execution. Article 9 refers to two types of elections, either of which, if followed, continues the LLC. The language of Article 13 refers to procedures resulting in an election to continue the LLC. Without further limiting language, Article 13 does not eliminate purchase election of Article 9. Furthermore, an interpretation that eliminates the election to purchase a departed member's share from Article 13 renders the provisions of that Article in conflict with Article 9. Both Articles refer to termination of the LLC on a member's death, and Article 9 unequivocally includes the election to purchase under such a circumstance. The facts and circumstances surrounding the execution of the Operating Agreement and the apparent object of the parties support the above construction. There is no dispute that FLTC's Operating Agreement was to mirror the prior unexecuted restated partnership agreement. The trial court concluded that the resignation and in kind distribution rights sought by the Flippos were not contained in the restated partnership agreement. Because that agreement served as a basis for the current Operating Agreement, the absence of these rights in the Operating Agreement was consistent with CSC's expectations. Thus, CSC's suggestion that a reference to the procedures of Article 9 be included in Article 13 was consistent with its position that resignation forcing distribution in kind was not a part of the restated partnership agreement. Article 13 already contained a provision allowing the members to elect to continue the LLC without purchasing the resigning member's share. Therefore, there was no need to add the Article 9 reference other than to bring Article 13 into compliance with CSC's understanding. Finally, CSC specifically asked the Flippos and MWBB to review the suggested changes, including those made to Article 13, and inform CSC if any are not acceptable. Neither the Flippos nor MWBB raised any question about the changes or indicated that they were not acceptable in any way. Under the trial court's construction of Article 13, on the resignation of a member, FLTC would be dissolved unless the remaining members elected to continue it by purchasing the resigning member's shares or electing to continue it without such purchase by a vote of the remaining members. Whether the Operating Agreement is considered ambiguous or unambiguous, under the terms of the agreement and the record regarding the purpose of the parties and the circumstances surrounding its execution, the trial court's construction of Article 13 is reasonable and we will affirm that portion of the trial court's judgment.