Jim Spangler et al. v. Mack McClung

At issue in this appeal are claims for unjust enrichment and breach of a limited liability company’s operating agreement. The plaintiff, individually and on behalf of the LLC, filed the complaint against his business partner. The complaint alleged that the defendant breached the LLC’s operating agreement by executing a promissory note to satisfy a foreclosure deficiency and by securing that note with a deed of trust on the LLC’s remaining real estate. After a bench trial, the court dismissed the plaintiff’s claims with prejudice. The court found that the promissory note was an extension or renewal of the LLC’s existing loan and that the defendant’s actions were authorized by a “written consent,” which allowed the defendant “to do any acts, including but not limited to the assignment, delivery, pledge, or hypothecation . . . of any or all assets of this LLC to secure such Loan, renewals and extensions.” Thus, the court concluded that the defendant did not breach the operating agreement. And because the parties had a valid and enforceable contract, the court determined that the plaintiff had no claim for unjust enrichment. But the court denied the defendant’s request for an award of attorney’s fees under the operating agreement’s fee-shifting provision. The court reasoned that the action was not “to secure enforcement” of the operating agreement, as required by the operating agreement. We affirm the court’s judgment on the plaintiff’s claims, albeit for different reasons with respect to the unjust enrichment claim but reverse the trial court’s denial of the defendant’s request for attorney’s fees.