Kinwood Capital Group, L.L.C. v. Northlake, 643 F.3d 448

Kinwood Capital Group, L.L.C. owned a 520-acre Mississippi tract via Kiniyalocts and Kiniyalocts Family Partners; Earwood controlled Northlake Development, LLC and acted without Kinwood’s authorization.
Earwood purportedly conveyed Kinwood’s Property to Northlake via a Kinwood Deed as Kinwood’s managing member; Northlake obtained BankPlus financing secured by a deed of trust on the Property.
BankPlus loaned Northlake approximately $300,000; a title certificate to the Property was obtained from Earwood’s firm; Earwood misused loan proceeds for personal use.
Northlake filed for Chapter 11 in 2005, later converted to Chapter 7; a trustee and bankruptcy court found Earwood lacked authority to convey Kinwood’s Property.
BankPlus and Kinwood challenged the conveyance; the bankruptcy court voided both the Kinwood Deed and BankPlus Deed and ordered cancellation in county records; the district court affirmed.
The Mississippi Supreme Court accepted the certified question and answered that the Kinwood-Deed transfer was void and of no legal effect due to lack of authority and lack of ratification, and the Fifth Circuit affirmed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Authority to convey Kinwood’s Property	Kinwood contends Earwood had authority via Kinwood’s operating agreement	Northlake argues Earwood acted within Kinwood’s scope	Void; Earwood had no actual or apparent authority
Effect of lack of authority on transfer	Transfer should be valid pro tanto despite lack of authority	Without authority, transfer is void ab initio	Void and of no legal effect
Ratification by Kinwood	Kinwood’s conduct could ratify conveyance	No ratification occurred; Kinwood remained unbound	No ratification; rights in Property unaffected

In re Northlake Dev., L.L.C., 614 F.3d 140 (5th Cir. 2010) (agency authority governs transfers of LLC property; lack of authority voids transfers)