Blanch v. Farrell
2018 UT App 172
Utah Ct. App.2018Background
- Five family members equally owned Five Blanch Property LLC, a member-managed LLC holding real property and irrigation shares (the Assets).
- The LLC’s articles provided a three-year term; no operating agreement was ever adopted and the company expired in 2008 but never wound up or distributed assets.
- In October 2015, four members (80%) executed a Written Consent authorizing winding up, sale of all Assets, and designating Jan Farrell to negotiate and sell the Assets.
- Blanch refused to consent, filed suit in late 2015 seeking to enjoin the sale, to partition his 20% share, and alternatively to obtain court-ordered winding up and distribution.
- The district court granted defendants’ Rule 12(b)(6) motion, relying on the Written Consent (signed under the Old LLC Act), concluding the Old Act governed the October 2015 action, the Consent met the two‑thirds voting rule, and Blanch failed to state a claim; this appeal followed.
Issues
| Issue | Blanch’s Argument | Appellees’ Argument | Held |
|---|---|---|---|
| Whether the district court properly considered the Written Consent on a Rule 12(b)(6) motion | Blanch: court erred by considering an extrinsic document without converting to summary judgment | Appellees: Written Consent was before the court because Blanch attached it and referenced it | Waived by Blanch; he attached the Consent and failed to object, so appellate court considers it |
| Whether the Written Consent required unanimous member approval or two‑thirds under applicable statute | Blanch: New Act (effective Jan 1, 2016) requires unanimous consent for acts outside ordinary course, so Consent would be ineffective after New Act | Appellees: Consent executed Oct 2015 while Old Act governed; Old Act required two‑thirds, which Appellees satisfied (80%) | Held: Old Act governed the October 2015 Consent; the Consent satisfied the Old Act two‑thirds requirement and properly authorized winding up and sale |
| Whether the New Act’s later effective date (Jan 1, 2016) retroactively voided the Written Consent | Blanch: New Act supersedes and invalidates prior authorizations after its effective date | Appellees: New Act did not retroactively void prior valid corporate actions; Consent remained valid | Held: No statutory language or authority supports retroactive invalidation; court declines to void the Consent on that basis |
| Whether Blanch stated a claim for judicial supervision of winding up under the New Act (good cause) | Blanch: petition pleaded prima facie good cause for court supervision under §48-3a-703 | Appellees: Petition tied to relief (distribution/partition) premised on invalidating the Consent; no preserved request for supervision | Held: Blanch did not adequately preserve or present judicial-supervision claim; dismissal was proper as to his pleaded relief |
Key Cases Cited
- Biedermann v. Wasatch County, 362 P.3d 287 (Utah Ct. App. 2015) (pleading facts accepted as true on Rule 12(b)(6))
- Oakwood Village LLC v. Albertsons, Inc., 104 P.3d 1226 (Utah 2004) (Rule 12(b)(6) admits complaint facts but tests right to relief)
- Hudgens v. Prosper, Inc., 243 P.3d 1275 (Utah 2010) (draw all reasonable inferences for plaintiff on dismissal)
- Bylsma v. R.C. Willey, 416 P.3d 595 (Utah 2017) (appellate review for correctness of Rule 12(b)(6) dismissal)
- DePatco, Inc. v. Teton View Golf Estates, LLC, 339 P.3d 126 (Utah Ct. App. 2014) (statutory interpretation is a question of law reviewed for correctness)
- OLP, LLC v. Burningham, 185 P.3d 1138 (Utah Ct. App. 2008) (LLC Act provisions are default rules unless operating agreement modifies them)
- Bagley v. Bagley, 387 P.3d 1000 (Utah 2016) (statutory interpretation starts with plain language to ascertain legislative intent)
- Bank of Am. v. Adamson, 391 P.3d 196 (Utah 2017) (appellant must cite legal authority and analyze its application)
- State v. Johnson, 416 P.3d 443 (Utah 2017) (issue preservation rule requires giving the trial court an opportunity to rule)
- Donjuan v. McDermott, 266 P.3d 839 (Utah 2011) (to preserve an issue, present it timely with authority and evidence)
- Allen v. Friel, 194 P.3d 903 (Utah 2008) (arguments raised first in reply brief are not considered)