Court Opinion

ID: 2715390
Source: CourtListenerOpinion
Date Created: 2014-08-06 17:23:24.647681+00
Date Added: 2024-06-11T15:14:30.280392
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

OM ENTERPRISES V LLC;
AMARNATH DEVA, Manager of OM           No. 70118-5-1
                                                             r-3        c/> O
Enterprises V LLC,
                                       DIVISION ONE                     rn„-
                    Appellant,
                                                              ro

             v.

KAMAL TANDON and ANITA TANDON,                                     o       ^
husband and wife and the marital                                   03

community composed thereof;
SUNIL DHAR and RENUKA DHAR,            UNPUBLISHED OPINION
husband and wife, and the marital
community composed thereof; SUNIL      FILED: May 27, 2014
DHAR, TRUSTEE OF SUNIL AND
RENUKA DHAR TRUST; AJAY
KOTTAPALLI and MAHIJA
KOTTAPALLI, husband and wife and
the marital community composed
thereof; CHANDRA BHASKARA and
LAKSHMI RAMASUBRAMANIAN,
husband and wife and the marital
community composed thereof; DINESH
NAKKA and SREEDEVI NAKKA,
husband and wife and the marital
community composed thereof; JAMES
POOLEY and JANE DOE POOLEY,
husband and wife and the marital
community composed thereof; JAMES
POOLEY, TRUSTEE OF ANDERSON
POOLEY FAMILY TRUST;
KAMLAWANTI GOUNDER, a single
person; SHYAMAL GOUNDER, a
single person and in his capacity as
legal guardian of KAMLAWANTI
GOUNDER; BALRAJ BAKSHI and
JANE DOE BAKSHI, husband and wife
and the marital community composed
No. 70118-5-1/2

thereof; SUDERSHAN BAKSHI and
JOHN DOE BAKSHI, wife and husband
and the marital community composed
thereof; KERRY NEWMAN and JANE
DOE NEWMAN, husband and wife and
the marital community composed
thereof; MICHAEL BREWSTER and
JANE DOE BREWSTER, husband and
wife and the marital community
composed thereof; BIDAN BREWSTER
and JANE DOE BREWSTER, husband
and wife and the marital community
composed thereof; TAD BREWSTER
and JANE DOE BREWSTER, husband
and wife and the marital community
composed thereof; MUBARAK GROUP
INC., a Washington corporation; P
THREE COMPANIES LLC, a Virginia
limited liability company;
VARAPRASAD BONAGIRI and
SUSHANI PALADI, husband and wife
and the marital community composed
thereof; RAMPAUL GUPTA and
SAROJ GUPTA, husband and wife and
the marital community composed
thereof; RAMPAUL GUPTA, TRUSTEE
OF SAROJ AND PAUL GUPTA TRUST;
PRASAD ILLAPANI and JANE DOE
ILLAPANI, husband and wife and the
marital community composed thereof;
PRITHIPAL SINGH and RAJINDER
SINGH, husband and wife and the
marital community composed thereof;
PRITHIPAL SINGH, TRUSTEE OF
PRITHIPAL SINGH and RAJINDER K.
SINGH TRUST; RAJNEEL NAICKER
and JANE DOE NAICKER, husband
and wife and the marital community
composed thereof; KUVERAN
NAICKER and GYAN DEVI NAICKER,
husband and wife and the marital
community composed thereof; RAM
KUMAR and GEETA SWAMY, husband
and wife and the marital community
composed thereof; RAM PRASAD
and JANE DOE PRASAD, husband and
No. 70118-5-1/3

wife and the marital community
composed thereof; RAMESH BACHALA
and SARALA BACHALA, husband and
wife and the marital community
composed thereof; RAVI MUMMULLA
and SATYA MUDILI, husband and wife
and the marital community composed
thereof; ROHAN SAMUEL LAM and
JANE DOE LAM, husband and wife and
the marital community composed
thereof; SAMANTHAPUDI RAJU and
MADHAVI RAJU, husband and wife and
the marital community composed
thereof; SREENATH GAJULAPALLI and
ARUNA GAJULAPALLI, husband and
wife and the marital community
composed thereof; SRIKANTH KASAM
and JANE DOE KASAM, husband and
wife and the marital community
composed thereof; SURENDER ZUTSHI
and RUCHI ZUTSHI, husband and wife
and the marital community composed
thereof; SURENDER ZUTSHI,
TRUSTEE of ZUTSHI FAMILY R.
TRUST; MADHUSUDHAN REDDY and
VINAYA REDDY, husband and wife and
the marital community composed
thereof; VIPAN GUPTA and SUNITA
GUPTA, husband and wife and the
marital community composed thereof;
ZAFAR RIZVI and YOSHIKO RIZVI,
husband and wife and the marital
community composed thereof;
HARNINDER SANGHA and JANE DOE
SANGHA, husband and wife and the
marital community composed thereof;
KIRAN ELLANTI and JANE DOE
ELLANTI, husband and wife and the
marital community composed thereof;
MAHIDHAR REDDY and JANE DOE
REDDY, husband and wife and the
marital community composed
thereof; SOVITA RIMAL and RAJ
SHARMA, wife and husband and the
marital community composed thereof;
AMARNATH DEVA and JAYA DEVA,
No. 70118-5-1/4

husband and wife and the marital
community composed thereof; VENU
GOPAUL and JANE DOE GOPAUL,
husband and wife and the marital
community composed thereof; FLOYD
MCEWEN, individually; GILBERT
MCEWEN, individually; ARDELLA
HARN, individually; VIRGINIA
BRAESCH, individually; and LONDA
BLAKE, individually,

                    Defendants,

SHIVANCHAL ENTERPRISES LLC, a
Washington limited liability company;
RAVI MITTAL and RIPU MITTAL,
husband and wife and the marital
community composed thereof;

                     Respondents.

      Becker, J. — In an accounting incident to the winding up of a limited

liability company, each member's capital account is valued. The valuation of a

capital account is distinct from the litigation of any claim the company may have

against the member. The company has a right to reduce the member's capital

account to zero because his withdrawals exceeded contributions. Instead of

recognizing this right, the trial court ruled on summary judgment that the

company was obliged to act as though the member's share consisted of his

contributions without any offset for his improper withdrawals. We reverse. Even

if it was too late for the company to bring a legal claim against the member to

recover the improper withdrawals, the company was entitled to take the

withdrawals into consideration in computing the value of the member's capital

account.
No. 70118-5-1/5

       This case arises out of the dissolution of OM Enterprises V LLC, a

Washington limited liability company—hereafter "OM." The appellants are OM

and Amaranth Deva, the current member manager of the company. The

respondents are Ravi and Ripu Mittal and their solely owned limited liability

company. The Mittals are the successors to the OM account of Kamal Tandon,

the company's founding member manager and initial president. The decision

under review is the order granting the Mittals' motion for summary judgment

dismissal of OM's dissolution plan.

       We review de novo a trial court's decision on summary judgment,

performing the same inquiry as the trial court. Roger Crane & Assocs.. Inc. v.

Felice. 74 Wash. App. 769, 773, 875 P.2d 705 (1994). We consider the evidence in

the light most favorable to OM, the nonmoving party. CR 56. Any findings of fact

or conclusions of law entered by the trial court are superfluous and do not affect

the inquiry on appeal. Skimming v. Boxer. 119 Wash. App. 748, 755, 82 P.3d 707,

review denied, 152 Wash. 2d 1016 (2004). Unless otherwise indicated, our

discussion of the facts is taken from Deva's declaration.

      On September 5, 2005, OM was formed. OM negotiated an agreement

with Papa John's International to operate its franchises in India. OM owned one

subsidiary—OM India. OM's primary function was to raise money to fund the

operations of OM India.

      Tandon was the member manager of OM from formation to March 9,

2007. Deva was the acting vice president. Deva worked in India, overseeing

day-to-day operations of the restaurants. When Tandon resigned, Deva took
No. 70118-5-1/6

over company operations. Deva discovered that Tandon had failed to keep

accurate records of the members' capital accounts and had made several

hundred thousand dollars in unauthorized payments from company funds.

      OM India fell behind on the development schedule required by the

franchise agreement. Papa John's threatened to revoke its agreement with OM.

To avoid revocation or cancellation of the agreement, OM agreed to sell its

shares in OM India and its rights under the franchise agreement to another

company. On May 24, 2007, the members of OM approved the sale. On

September 10, 2007, Deva completed the sale.

      According to the declaration of Ravi Mittal, in July 2006, the Mittals and

their company sued Tandon, his wife, and several commonly held entities

including OM. The Mittals asserted dishonor of checks, securities act violations,

and breach of contract. On December 10, 2007, they received a judgment

against Tandon personally for $116,795.81. On July 9, 2008, the Mittals got a

charging order, charging the Tandons' interest in OM with payment of the

unsatisfied amount of judgment.

      In 2011, OM received the funds from India and commenced the process of

winding up. The OM LLC agreement provides that company assets are

distributed to members according to each member's capital account balance:

             17.3 Winding Up. Liquidation and Distribution of
      Assets. Upon dissolution, the Board of Managers shall
      immediately proceed to wind up the affairs of the Company, unless
      the business of the Company is continued as provided in Section
      17.1.3. The Board of Managers shall sell or otherwise liquidate all
      of the Company's assets as promptly as practicable (except to the
      extent the Board of Managers may determine to distribute any
      assets to the Unit Holders in kind) and shall apply the proceeds of
No. 70118-5-1/7

      such sale and the remaining Company assets in the following order
      of priority:

                     17.3.1 Payment of creditors, including Members and
              Managers who are creditors, to the extent otherwise
              permitted by law, in satisfaction of liabilities of the Company,
              other than liabilities for distributions to Members;

                     17.3.2 To establish any reserves that the Board of
              Managers deems reasonably necessary for contingent or
              unforeseen obligations of the Company and, at the
              expiration of such period as the Board of Managers shall
              deem advisable, the balance then remaining in the manner
              provided below;

                     17.3.3 To the Unit Holders in proportion to the
              positive balances of their respective capital Accounts, as
              determined after taking into account all Capital Account
              adjustments for the taxable year during which the liquidation
              occurs;

                     17.3.4 Any remaining assets shall be distributed to
              the Unit Holders in proportion to their Percentage Interests.

(Emphasis added.) Capital accounts are valued by adding all contributions made

by the member and subtracting any payments made to or on behalf of any

member:

                    10.2.1 Capital Accounts. A capital account
             ("Capital Account") shall be maintained for each Unit Holder.
             The Capital Account maintained for such Unit Holder shall
             be increased by (a) the amount of cash and the Fair Market
             Value of property (net of related liabilities) originally
             contributed to the Company by such Unit Holder as a capital
             contribution, (b) the amount of additional cash or the Fair
             Market Value of additional property (net of related liabilities)
             contributed to the Company by the Unit Holder, and (c) such
              Unit Holder's share of Net Profits and Gain on Sale of the
              Company; and shall be decreased by (x) all distributions to
              such Unit Holder from the Company other than repayment of
              loans or interest thereon, (y) such Unit Holder's share of the
              Net Losses and Loss on Sale of the Company and (z) all
              other payments allocated to such Unit Holder. The foregoing
              provisions defining a Unit Holder's Capital Account are
No. 70118-5-1/8

              intended to comply with capital account maintenance
              provisions of Treasury Regulation 1.704-1 (b) and shall be
              interpreted and applied consistent with such Regulation. In
              the event that the Manager determines that it is prudent to
              modify the manner in which the Capital Accounts, or any
              debits or credits thereto, are computed in order to comply
              with such Regulation, the Manager may make such
              modification, provided that it is not likely to have a material
              effect on the amounts distributable to any Unit Holder or on
              the obligations of any Unit Holder to restore a deficit balance
              in its Capital Account.

(Emphasis added.)

       Tandon did not keep accurate records. The best evidence of members'

capital account balances was an email sent by Tandon dated January 3, 2007,

purporting to list the capital account balances of all members. Deva used the

balances listed in that email as a baseline. He asked each member to provide

affirmative proof of their claimed contributions. This proof included cancelled

checks, transfer slips, deposit slips, wire transfer information, bank records, and

receipts issued by OM itself. Each member was credited with only the

contributions they could prove.

      The January 2007 email listed the value of the Tandon capital account at

$513,400. But Tandon did not provide affirmative proof of his contributions.

Deva reviewed the company's bank records to determine whether deposits were

made on or about the dates and in the amounts identified and attributed to

Tandon in his email. Deva identified $440,800 of deposits that approximately

corresponded with amounts and dates of contributions claimed by Tandon in the

email and were not returned for insufficient funds. Two other members provided

proof that $25,000 of the contributions claimed by Tandon were actually made by

                                         8
No. 70118-5-1/9

them for their own benefit. Deva thus determined that the sum of contributions

possibly made by Tandon was $415,800.

      Deva also found a number of unauthorized payments made by Tandon.

The bank accounts for OM were properly used for two things: (1) to make

payments to OM's two domestic vendors—Papa John's and United Source

One—and (2) to transfer funds into OM India's bank accounts in India. Deva

identified 62 payments or withdrawals made by Tandon between March 25,

2005, and June 2, 2006, totaling $490,401.95, that were unrelated to either of

these purposes. Included were payments to Tandon's personal creditors and to

companies owned by Tandon in which OM was not involved.

      Deva calculated the value of the Tandon capital account by subtracting

the unauthorized payments from the contributions. He relied in part on section

10.2.1 (z) of the LLC agreement which provides that capital accounts are

decreased by "all other payments allocated to such Unit Holder." This resulted in

a balance of -$74,601.95. Deva chose to value the account at zero. If Deva's

valuation is approved, the Mittals—as the holders of a charging order against

Tandon's interest in the company—will receive nothing from proceeds of the sale

of OM when the company's assets are distributed upon dissolution.

      On January 26, 2012, OM filed an action for dissolution. OM and Deva

were the plaintiffs. The defendants were all possible members of the LLC. The

Mittals were among the named defendants. The complaint asked for an order

authorizing dissolution of the company:

              1.1 Plaintiff brings this action for dissolution under Section
       25.15.275 of the Revised Code of Washington (RCW) which
No. 70118-5-1/10

      authorizes this Court to decree dissolution of a limited liability
      company when it is not reasonably practicable to carry on the
      business in conformity with a limited liability company agreement or
      other circumstances render dissolution equitable.

The complaint also requested a declaratory judgment that Deva's system for

calculating capital account values was permissible:

            1.2 Plaintiff brings this action for declaratory judgment under
      RCW Chapter 7.24 declaring the validity of the distribution of
      remaining assets, following the winding up of OM's affairs, to OM's
      members in accordance with their pro rata share of capital
      contributions as shown in Exhibit A attached hereto.

      On November 6, 2012, the Mittals filed a motion for summary judgment,

asking the court to find that OM had no authority to offset Tandon's capital

account contributions by the unauthorized payments.

      On January 23, 2013, the motion was granted. The court ordered the

company to "make returns of capital or distributions, as appropriate, to the Mittals

based on the entire capital account associated with the Tandon share that is

subject to the King County Charging Order." The court denied Deva's request for

approval of his proposed disbursements. The court also denied Deva's motion

for reconsideration. This appeal followed.

       Deva argues that the trial court erred when it found that the company

lacked authority to adjust Tandon's capital account to reflect his unauthorized

withdrawals. The Mittals' arguments in response depend on their assumption

that calculating Tandon's share by subtracting withdrawals from contributions

was an attempt to recover against Tandon on a legal claim for mismanagement.

Deva's position is that the valuation of Tandon's share was a necessary incident

to winding up. Because we agree with Deva that the action is in the nature of an

                                         10
No. 70118-5-1/11

accounting rather than a legal claim against Tandon, the arguments made by the

Mittals in support of summary judgment miss the mark.

       The company filed for dissolution. Under the terms of the operating

agreement, the company has to calculate the value of each member's capital

account to distribute the proceeds of the sale. Even the Mittals acknowledge that

the action is one for winding up. Because the action is for dissolution of the

company, not for a judgment against Tandon, it is appropriate to consider Deva's

calculation of Tandon's share as an accounting, not as a legal action.

                 EFFECT OF THE MITTALS' CHARGING ORDER

       The Mittals hold a charging order against Tandon's interest in OM. The

Mittals argue that, as holders of that charging order, they have the right to

receive distributions to the extent necessary to satisfy their judgment plus

interest. The Mittals insist that Deva is attempting to offset Tandon's interest by

unadjudicated claims and that such an offset is tantamount to holding them liable

for debts associated with membership in contravention of RCW 25.15.250(4).1

       The Mittals are not being held liable for debts associated with

membership. As holders of a charging order, the Mittals are assignees of

       1"Unless otherwise provided in a limited liability company agreement and except
to the extent assumed by agreement, until an assignee of a limited liability company
interest becomes a member, the assignee shall have no liability as a member solely as a
result of the assignment." RCW 25.15.250(4).

                                          11
No. 70118-5-1/12

Tandon's interest. RCW 25.15.255.2 As assignees, the Mittals are entitled to

Tandon's interest and cannot recover more than Tandon could have. See Havsy

v. Flvnn, 88 Wash. App. 514, 519, 945 P.2d 221 (1997).

       In an accounting to wind up the LLC, Tandon's interest is equal to his

capital contributions minus the unauthorized payments. The Mittals' charging

order does not affect the value of Tandon's interest in the LLC. They take from

the company what Tandon has—which is nothing—unless they can show Deva's

computation of Tandon's contributions and withdrawals is inaccurate. As yet,

they have not shown that.

                    EFFECT OF STATUTES OF LIMITATIONS

       The Mittals have argued that the company's action is barred by a three-

year statute of limitation because it is an action to recover on unadjudicated

claims against Tandon. Because this is not a claim against Tandon, but rather

an accounting to wind up business, the statutes of limitation cited by Mittals are

inapplicable.

                      EFFECT OF TANDON'S BANKRUPTCY

       The Mittals argued below that Tandon's liability for negligence or

mismanagement was discharged in bankruptcy by order dated April 5, 2012, and

as a result the company was enjoined from attempting to collect a discharged

debt. Again, the company was winding up its business, not suing Tandon for

          2"Rights of judgment creditor. On application to a court of competent
jurisdiction by any judgment creditor of a member, the court may charge the limited
liability company interest of the member with payment of the unsatisfied amount of the
judgment with interest. To the extent so charged, the judgment creditor has only the
rights of an assignee of the limited liability company interest. This chapter does not
deprive any member of the benefit of any exemption laws applicable to the member's
limited liability company interest." RCW 25.15.255.
                                           12
No. 70118-5-1/13

negligence or mismanagement. To wind up its business, the company calculated

Tandon's capital account as the sum of his contributions minus unauthorized

payments, as called for by the operating agreement. Tandon's unauthorized

payments were made between March 25, 2005, and June 2, 2006. They

exceeded the amount of previous contributions. Thus, the value of Tandon's

interest was negative as of June 2, 2006, almost six years before entry of the

bankruptcy order. The bankruptcy has no effect on the valuation of Tandon's

capital account.

                            AUTHORITY TO OFFSET

      The Mittals argue there is no authority permitting the company an offset

for unadjudicated claims against Tandon. It is unnecessary to consider that

argument because the action is for winding up the LLC, not for collecting on the

company's unadjudicated claims against Tandon. In winding up, a company's

distribution of cash or assets is controlled by the terms of the LLC agreement.

RCW 25.15.205. Here, the agreement provided for company assets to be

distributed to members according to each member's capital account balance.

After payments to creditors and reserve accounts, proceeds from the sale or

liquidation of the company's assets go to "the Unit Holders in proportion to the

positive balances of their respective capital Accounts, as determined after taking

into account all Capital Account adjustments for the taxable year during which

the liquidation occurs." Capital accounts are calculated as Deva proposed, by

adding all contributions made by the member and subtracting any payments

made to or on behalf of that member. The unauthorized payments made by

                                        13
No. 70118-5-1/14

Tandon while he was manager were appropriately treated as payments allocated

to him under section 10.2.1(z).

       The Mittals argue that deducting the unauthorized payments from

Tandon's capital account is contrary to section 17.3.3 of the agreement which

states that the balance of a capital account is to be determined "after taking into

account all Capital Account adjustments for the taxable year during which the

liquidation occurs." They also refer to section 10.2.1, which limits the extent of

modifications OM's management can make to the manner in which a member's

capital account is computed. The Mittals misapprehend the meaning of the

language cited. As Deva explains, the language in section 17 means that

adjustments made in the year of liquidation must be made before the positive

balance (if any) used in the final distribution is determined. The language in

section 12 is inapplicable because OM's management has not modified the

contractual formula for valuing the capital accounts.

                          EFFECT OF RCW 25.15.235(3)

       Upon OM's motion for reconsideration, the trial court ruled that the

adjustment Deva proposed to make to Tandon's capital account was time barred

under RCW 25.15.235(3). RCW 25.15.235 sets out circumstances in which a

member is liable to the company for distributions received when the company

has insufficient funds to pay creditors:

              (1) A limited liability company shall not make a distribution to
       a member to the extent that at the time of the distribution, after
       giving effect to the distribution (a) the limited liability company
       would not be able to pay its debts as they became due in the usual
       course of business, or (b) all liabilities of the limited liability
       company, other than liabilities to members on account of their

                                           14
No. 70118-5-1/15

      limited liability company interests and liabilities for which the
      recourse of creditors is limited to specified property of the limited
      liability company, exceed the fair value of the assets of the limited
      liability company, except that the fair value of property that is
      subject to a liability for which the recourse of creditors is limited
      shall be included in the assets of the limited liability company only
      to the extent that the fair value of that property exceeds that liability.
               (2) A member who receives a distribution in violation of
      subsection (1) of this section, and who knew at the time of the
      distribution that the distribution violated subsection (1) of this
      section, shall be liable to a limited liability company for the amount
      of the distribution. A member who receives a distribution in
      violation of subsection (1) of this section, and who did not know at
      the time of the distribution that the distribution violated subsection
      (1) of this section, shall not be liable for the amount of the
      distribution. Subject to subsection (3) of this section, this
      subsection (2) shall not affect any obligation or liability of a member
      under a limited liability company agreement or other applicable law
      for the amount of a distribution.
              (3) Unless otherwise agreed, a member who receives a
      distribution from a limited liability company shall have no liability
      under this chapter or other applicable law for the amount of the
      distribution after the expiration of three years from the date of the
      distribution unless an action to recover the distribution from such
      member is commenced prior to the expiration of the said three-year
      period and an adjudication of liability against such member is made
      in the said action.

RCW 25.15.235 (emphasis added).

      The Mittals argue that Tandon's account cannot be reduced by his

withdrawals because the company did not bring an action against him to recover

the withdrawn funds within the three-year period specified in subsection (3) of the

statute. The statute does not apply. The company is not bringing an action to

recover distributions from Tandon and is not obligated to. What the company is

doing is giving effect to the provisions of the LLC agreement for winding up. This

requires the calculation of the value of each member's interest and involves

decreasing that value by "payments allocated to" the member. It does not

                                          15
No. 70118-5-1/16

require an action to establish the member's liability to the company under RCW

25.15.235(3).

       Even if the statute could be interpreted to require a recovery action within

three years against a member like Tandon who made withdrawals for his own

benefit, the subsection begins with the phrase, "Unless otherwise agreed." The

LLC agreement expressly directs the company to reduce a member's capital

account balances by subtracting payments allocated to the member from that

member's contributions.

       Our conclusion that summary judgment was improperly granted is

supported by partnership case law. The role of members in a member-managed

LLC is analogous to that of partners in a general partnership, and partners are

held accountable to each other and the partnership as fiduciaries. Maple Court

Seattle Condominium Ass'n v. Roosevelt. LLC. 139 Wash. App. 257, 262, 160 P.3d
1068 (2007). Washington courts use case law interpreting partnership

agreements and partnership statutes to decide limited liability company issues.

Koh v. Inno-Pac. Holdings. Ltd.. 114 Wash. App. 268, 271, 54 P.3d 1270 (2002).

       Our Supreme Court confronted a similar situation in Crofton v. Bargreen,

53 Wash. 2d 243, 332 P.2d 1081 (1958). In that case, Crofton and Bargreen

formed a partnership engaged in a wholesale beer distribution business. Crofton

made an initial capital contribution of $27,900.09. As part of the partnership

agreement, Crofton granted Bargreen the option to repurchase his interest in the

partnership at any time. The terms of repurchase required that Bargreen pay

Crofton his initial capital contribution ($27,900.09) plus interest. Eight years later,

                                          16
No. 70118-5-1/17

Bargreen exercised his right to repurchase Crofton's interest, triggering

dissolution of the partnership. At the time of dissolution, Crofton's account

revealed that, since formation, Crofton's withdrawals totaled $280,718.17 while

his capital account totaled $287,786.23, leaving $7,786.23 in his capital account.

Bargreen filed suit for dissolution and paid Crofton $9,141.84 (the balance of his

capital account plus interest). Crofton demanded he be paid his entire capital

contribution of $27,900.09, plus interest. Bargreen argued that, since Crofton

had overdrawn his share of the profits, he should be required to pay only the

$7,786.23 remaining in Crofton's capital account. The Court of Appeals found for

Crofton. The Supreme Court reversed, finding that it would do violence to the

intent of the parties to compel Bargreen to disregard Crofton's overdrafts and pay

him the same amount as if he had maintained his capital account intact. Crofton.
53 Wash. 2d at 253.

       To find for the Mittals in this case would do more violence to the intent of

the LLC agreement than finding for Crofton in Crofton. Crofton had the authority

to draw funds out of the partnership. Tandon did not have authority to withdraw

funds from OM for his personal use. Unless section 10.2.1(z) is interpreted to

permit subtracting the withdrawn funds from Tandon's original investment when
calculating the value of his capital account, Tandon, through his successors, the

Mittals, will receive a windfall.

       We conclude that OM had authority to decrease the value of Tandon's

share in the company by the amount of his unauthorized withdrawals.

       The order granting summary judgment is reversed.

                                         17
No. 70118-5-1/18

WE CONCUR:

               M        CbXt J.

                   18