Court Opinion

ID: 6789834
Source: CourtListenerOpinion
Date Created: 2022-07-21 01:08:59.330614+00
Date Added: 2024-06-11T16:03:01.614210
License: Public Domain

Lundberg Stratton, J.,
dissenting.
{¶ 24} I respectfully dissent. I believe that in enacting R.C. 1705.21, the General Assembly simply intended to clarify what rights an executor is entitled to exercise in situations that the operating agreement may not have addressed. Any broader interpretation flies in the face of limited-liability operating agreements. If the operating agreement already defines the rights of the parties upon a member’s death, then no statute can interfere with those contract rights. Therefore, I would reverse the judgment of the court of appeals and hold that the operating agreement of a limited liability company controls the relationship of the remaining members and the executor.
{¶ 25} In this case, Epperson owned a 49 percent interest in Holdeman-Eros, L.L.C., and the decedent owned a 51 percent interest. Thus, in his capacity as the majority member, the decedent had been the managing member and presided over meetings of the board of directors. Through the majority’s interpretation, Mrs. Holdeman, who was never intended by Epperson or the decedent to become a controlling member of the company, effectively becomes a majority member and presumably is permitted to exercise all the rights of a majority member, including presiding over meetings of the board of directors and exercising her majority vote to control the future course of the company. I do not believe that this result was intended by the General Assembly in enacting R.C. Chapter 1705.
{¶ 26} I believe that the majority’s interpretation of R.C. 1705.21(A) is contrary to the express language contained in other sections of R.C. Chapter 1705, which delineates the conditions under which one may exercise the right to participate in the management of a limited liability company. See R.C. 1705.12, 1705.14, 1705.15, 1705.18, and 1705.20. Interpreting R.C. 1705.21(A) in pari materia with the remaining sections of R.C. Chapter 1705 mandates the conclusion that an executor has only the rights of an assignee of a member and not the full rights of a member unless the operating agreement provides otherwise.
{¶ 27} For example, R.C. 1705.15(E) addresses the effect of the death of a member:
{¶ 28} “Except as approved by the specific written consent of all members at the time, a person ceases to be a member of a limited liability company upon the occurrence of any of the following events of withdrawal:
{¶ 29} “* * *
*558{¶ 30} “(E) Unless otherwise provided in writing in the operating agreement, a member who is an individual dies, or is adjudicated an incompetent.” (Emphasis added.)
{¶ 31} Thus, as of the date of his death, the decedent is considered by statute to have withdrawn from the company and to have lost his membership status.
{¶ 32} In the event that, unlike here, no operating agreement exists, I agree that pursuant to R.C. 1705.21(A), the executor of an estate of a deceased member of a limited liability company has all rights that the member had prior to death, “for the limited purpose of settling the member’s estate or administering his property.” But by merely reciting the language of the statute, the majority fails to determine the actual rights of an executor in this situation and therefore fails to delineate the full effect of exercising those rights.
{¶ 33} If R.C. 1705.21(A) controls over the operating agreement, then the parties need guidance as to the last phrase of the statute, “for the purpose of settling [the member’s] estate or administering his property.” Does this language mean merely collecting assets, assessing value, and determining the amount due the estate, which are essentially similar to the economic rights as an assignee and are duties of an executor? Or can the executor, especially if the decedent was a member who had majority control, make decisions that go to the heart of the company’s operations, such as changing the direction of the business, hiring or firing other employees, and suing other parties, all under the guise of “administering his property”? After all, under the majority’s interpretation, the executor is now a majority member of the board with authority to control the company, even though the executor may be unqualified for the task.
{¶ 34} I believe that by failing to clarify the statutory language, we duck the real controversy in this case, which is what actions are allowed in the executor’s role of settling the estate of a deceased member of a limited liability company. We give no guidance to the executor in this situation, and in essence by assigning full membership rights to the executor, we give our blessing to any actions that she might take. I believe that we should define the statutory phrase “settling the member’s estate or administering his property” as taking only those actions necessary to collect, evaluate, and distribute the assets due the estate, which is, effectively, fulfilling the duties of an executor.
{¶ 35} As noted by the concurrence of Judge Young in the appellate opinion below, “a partnership is a voluntary association and when the result as envisioned by the opinion of this court is that a minority partner becomes subject to a control of a majority partner which was not voluntarily elected[,] the result is manifestly immoral and unfair. * * * [The General Assembly] should consider adopting something akin to the Oklahoma amendment cited by the [appellate] opinion[,] which limits the rights of personal representatives to those of an *559assignee of the member’s interest.” Holdeman v. Epperson, Clark App. No. 2004-CA-49, 2005-Ohio-3750, 2005 WL 1714210, ¶ 58-59.
Martin, Browne, Hull & Harper, P.L.L., Glenn W. Collier, and Randall M. Comer, for appellee.
Chernesky, Heyman & Kress, P.L.L., and Thomas L. Czechowski, for appellant Holdeman-Eros L.L.C.
Freund, Freeze & Arnold and Neil F. Freund, for appellant Louise Eros Epperson.
{¶ 36} Therefore, I would define the R.C. 1705.21(A) phrase “settling [the member’s] estate or administering his property” narrowly. Because the majority fails to define the statutory language at all, I would call upon the General Assembly to clarify whether R.C. 1705.21(A) controls when there is a clear operating agreement of the parties in effect on a member’s death, and if so, the extent of the rights of an executor. I respectfully dissent.
O’Donnell, J., concurs in the foregoing dissenting opinion.