Skip to main content



In Re Dwek

2011 WL 336139 (Bkrtcy. D. N.J. 2011) (Unpublished)

LIMITED LIABILITY COMPANIES; MEMBERS — Where a limited liability company’s operating agreement grants broad discretion to a member to change ownership by any reasonable means, a change of ownership can be effectuated by an oral agreement of sale.

A limited liability company (LLC) engaged in numerous business transactions with an individual, many of which were fraudulent. In most of the fraudulent transactions, the member transferred money to the individual using a trust account under a false name. The LLC owned a piece of real property and the LLC’s member agreed to transfer its sole ownership in the LLC to the individual. The sale was memorialized by a letter that the member sent to his accountant. The member stopped collecting rent on the property and ceased insuring the property. The member, however, asserted that the transfer of ownership never occurred because the individual never paid the balance of what was supposedly due to him. The buyer claimed that the balance had been paid from the fraudulent account.

At trial, the Bankruptcy Court looked at the LLC’s operating agreement. The operating agreement articulated how the company’s ownership interests were to be transferred. No specific procedure was detailed for a member to sell his or her interest. Rather, the agreement granted broad discretion to the sole member to change ownership by any reasonable means, including by an oral agreement of sale combined with the signed letter to his accountant. Further, the member’s testimony made clear that he took actions consistent with having sold his ownership interest in the LLC.

The member’s sole argument rested on an interpretation of the letter to his accountant as a conditional agreement of sale, conditioned upon payment by the individual. That interpretation was untenable because the letter stated that the sale had already taken place. Further, the letter detailed the previous satisfaction of a mortgage by the individual, so the member knew that the transfer was, at a minimum, partially effectuated.


MEISLIK & MEISLIK
66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 • info@meislik.com