Opinion
No. 3D17-2650
03-30-2020
Jorge ESPINOSA, Appellant, v. PAVEL PARDO INVESTMENTS, LLC, etc., et al., Appellees.
Alvarez, Feltman & DaSilva, PL, and Paul B. Feltman, for appellant. Arthur J. Morburger ; Law Offices of Vincent J. Duffy, and Vincent J. Duffy, Miami, for appellees.
Alvarez, Feltman & DaSilva, PL, and Paul B. Feltman, for appellant.
Arthur J. Morburger ; Law Offices of Vincent J. Duffy, and Vincent J. Duffy, Miami, for appellees.
Before SALTER, LINDSEY, and HENDON, JJ.
Judge Hendon did not participate in oral argument.
LINDSEY, J. Jorge Espinosa appeals from a final judgment in which the trial court found, following a bench trial, that Espinosa forfeited his ownership interest in Sanespi, LLC due to theft of company funds. Because neither the Florida Limited Liability Company Act nor Sanespi's Operating Agreement provide for the forfeiture of Espinosa's shares for the alleged theft, we reverse.
Chapter 608, Florida Statutes (2011).
I. BACKGROUND
In 2008, Jorge Espinosa formed Sanespi, LLC for the operation of "Soccer Rooftop," a business specializing in the rental of two soccer fields on the rooftop of an office building. Espinosa obtained a lease, guaranteed the lease, and advanced both the deposit and first month's rent. He then sought investors. According to Sanespi's Operating Agreement, the initial members of the Company were as follows: Espinosa (35% interest); Rosario Salazar (20% interest); Pavel Pardo Investments, LLC (25% interest); Marcio Gomes (10% interest); Jabor, LLC (5% interest); and Brickell Golazo, LLC (5%). Pursuant to the Operating Agreement, Espinosa would serve as Sanespi's manager, and he was not required to make an initial cash contribution.
In June 2009, rumors began circulating that Espinosa was misappropriating Sanespi funds to renovate his home using the same contractor he had hired to build the soccer facilities. Espinosa denied the allegations, but the other members voted to remove him as manager and revoke his ownership interest in the company. Shortly thereafter, the remaining members sold their shares to Pardo Investments.
Espinosa does not challenge his removal as manager.
In response to the forfeiture of his ownership interest, Espinosa sued for breach of contract, breach of fiduciary duty, breach of statutory duty of care, breach of duty of loyalty, breach of implied covenant of good faith and fair dealing, an accounting, constructive trust, and judicial dissolution of Sanespi. As an affirmative defense, Pardo Investments asserted that Espinosa was not entitled to relief because he "diverted and/or otherwise misappropriated monies from SANESPI, LLC for his own personal use and benefit, and otherwise breached the Operating Agreement by among other things failing to carry out his duties, opening a competing business and failing to make the proper contribution."
Although misappropriation was raised as an affirmative defense, the trial court correctly determined there was no counterclaim for theft.
During the bench trial, the court heard testimony from Pavel Pardo, the owner and single member of Pardo Investment, who testified that Espinosa admitted to using Sanespi money to remodel his house. Following the trial, the court found that Espinosa had committed theft of Sanespi funds based on Mr. Pardo's "very credible" testimony and that due to the theft, Espinosa's ownership interest was rightfully revoked. This appeal follows.
II. STANDARD OF REVIEW
We review the trial court's factual findings to determine whether there is competent substantial evidence to support those findings, and we review the trial court's legal conclusions and interpretation of the Operating Agreement de novo. Ferk Family, LP v. Frank, 240 So. 3d 826, 835 (Fla. 3d DCA 2018) (citing Telemundo Media, LLC v. Mintz, 194 So. 3d 434, 435 (Fla. 3d DCA 2016) ; Pages v. Seliman–Tapia, 134 So. 3d 536, 538 (Fla. 3d DCA 2014) ).
III. ANALYSIS
"The rules governing the formation and operation of Florida LLCs are set forth in Florida's LLC Act." Olmstead v. F.T.C., 44 So. 3d 76, 79 (Fla. 2010). Under Florida's LLC Act, a member's interest in an LLC is personal property. § 608.431, Fla. Stat. (2011). The parties agree that Florida's LLC Act does not itself provide a mechanism for Espinosa's involuntary dissociation based on the alleged theft. Instead, Pardo Investments argues that Espinosa's interest could be forfeited pursuant Sanespi's Operating Agreement. We disagree.
The Sanespi members voted to revoke Espinosa's shares in November 2009, and the parties agree that Florida's LLC Act applies in this case. Florida's LLC Act was revised in 2013 (effective January 1, 2014; Florida LLCs in existence before the effective date are subject to the Revised Act beginning January 1, 2015). See Chapter 605, Florida Statutes.
We do not disturb the trial court's finding that Espinosa committed theft because it is supported by competent substantial evidence.
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Pardo Investments relies on Article 5, Section 4 of the Operating Agreement, which specifies certain penalties for failure to make required contributions:
Any Member who fails to make any contribution, which said Member is obligated to make shall be subject to the following penalties or consequences as may be determined by a Majority Investment Share Account Vote of the non-defaulting Members:
....
(iv) The defaulting Member's interest may be forfeited ....
See also § 608.4211, Fla. Stat. (2011) ("The articles of organization or operating agreement of a limited liability company may provide that the interest of any member who fails to make any contribution that the member is obligated to make shall be subject to specified penalties for, or specified consequences of, such failure."). Based on this provision in the Operating Agreement, Pardo Investments asserts that Espinosa's interest was properly forfeited because he was obligated to contribute the full amount of the misappropriated funds.
Although the Operating Agreement specifically allows for a member's interest to be forfeited for failure to make a contribution, we reject Pardo Investments’ argument because Espinosa was not required to make a cash contribution under the Operating Agreement. Since neither the Florida Limited Liability Company Act nor Sanespi's Operating Agreement provide for the forfeiture of Espinosa's shares for the alleged theft, we reverse the final judgment entered in favor of Pardo Investments and remand for further proceedings.
Reversed and remanded.