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<p class="MsoNormal"><span style="color:#1F497D">I think I get that. I agree that with a multiple member LLC, the transferee of a transferable interest can't get in as a member (with voting and management and control rights) without more, because the other
members still vote and do all the management.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">But for a <u>single member</u> LLC, a foreclosure and transfer of the member's transferable interest means the LLC no longer has
<u>any</u> members. The last (only) member is deemed to have dissociated because of the transfer, under
<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=25.15&full=true#25.15.131">RCW 25.15.131(1)(b)</a>. And if the LLC has
<u>no</u> remaining members, then the <u>transferee(s)</u> can vote on membership, per RCW 25.15.265(4). Et voila, the transferee becomes a member. No?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">Also, again per RCW 25.15.265(4), if 90 days pass post-foreclosure and the transferee(s) don't vote in at least one new member, then the LLC
<u>automatically</u> dissolves because it no longer has any members. Then I think it's a fight on who is control of the winding up, based on interpretation of
<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=25.15.297">RCW 25.15.297</a> Subsections (3) versus (4). But I think the creditor should just vote itself in as a member within the first 90 days, and take control that way.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<div>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Sincerely,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Eric<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Eric C. Nelsen<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">SAYRE LAW OFFICES, PLLC<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">1417 31st Ave South<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Seattle WA 98144-3909<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">phone 206-625-0092<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">fax 206-625-9040<o:p></o:p></span></p>
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<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
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<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">From:</span></b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif""> wsbarp-bounces@lists.wsbarppt.com [mailto:wsbarp-bounces@lists.wsbarppt.com]
<b>On Behalf Of </b>Robert Pampell<br>
<b>Sent:</b> Tuesday, November 07, 2017 10:55 AM<br>
<b>To:</b> 'WSBA Real Property Listserv'<br>
<b>Subject:</b> Re: [WSBARP] Execution on judgment<o:p></o:p></span></p>
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</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">The key here is the term “transferable interest.” As defined in Section 25.15.006(19) a ‘transferable interest" means a member's or transferee's right to receive distributions of the limited liability company's assets.” The holder or
a mere transferable interest does not have the right, without more, to be admitted as a member or to vote or otherwise exercise management rights with respect to the company.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">That said, yes, some courts have disregarded that distinction and allowed the creditor to exercise the ownership and management rights of the debtor member. Subsection (5) is supposed to prevent that, but it does not always work out.
Contrast some other versions of RULLCA, in which a specific carve-out from (5) is provided as to SMLLCs. To your point, the creditor’s judgment might attach to liquidating distributions under 25.15.305, but how would the creditor be able to bring about the
dissolution of the LLC? The creditor is not a member or manager and has no standing to commence a judicial dissolution under 25.15.274 and maybe not even 25.15.265.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">This may be among the reasons that charging order lien foreclosures are extremely rare in the real world.
<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><u>In re Huber</u>, cited by Rob Rowley, is a bankruptcy case, which is a whole different ball game. It is same to assume that an SMLLC is toast in the event of the member’s bankruptcy.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Interesting discussion.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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<div style="border:none;border-top:solid #E1E1E1 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b>From:</b> <a href="mailto:wsbarp-bounces@lists.wsbarppt.com">
wsbarp-bounces@lists.wsbarppt.com</a> [<a href="mailto:wsbarp-bounces@lists.wsbarppt.com">mailto:wsbarp-bounces@lists.wsbarppt.com</a>]
<b>On Behalf Of </b>Eric Nelsen<br>
<b>Sent:</b> Tuesday, November 07, 2017 8:49 AM<br>
<b>To:</b> WSBA Real Property Listserv <<a href="mailto:wsbarp@lists.wsbarppt.com">wsbarp@lists.wsbarppt.com</a>><br>
<b>Subject:</b> Re: [WSBARP] Execution on judgment<o:p></o:p></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style="color:#1F497D">Wait, maybe I am all wet, but as I read that statute, it
<b><i>is</i></b> possible to foreclose on the member's transferable interest in the LLC, per
<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=25.15&full=true#25.15.256">RCW 25.15.256(2)</a>. Subsection 1 allows a charging order akin to a garnishment on the member's interest, and subsection 2 allows foreclosure and sale/seizure of the interest itself.
Yes?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">Admittedly the foreclosure only takes the debtor's "transferable interest," but if it's a single member LLC, if I represented a creditor I would foreclose on the 100% transferable interest. Then the creditor
would be a 100% transferee, there would be no existing "members" with voting rights, and therefore the creditor has the right to vote to be admitted as a member within 90 days after the transfer, per
<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=25.15&full=true#25.15.265">RCW 25.15.265(4)</a>. The judgment creditor would thus effectively seize ownership and control of the LLC and its assets.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">Do you think that would work?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<div>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Sincerely,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Eric<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Eric C. Nelsen<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">SAYRE LAW OFFICES, PLLC<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">1417 31st Ave South<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">Seattle WA 98144-3909<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">phone 206-625-0092<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;color:#1F497D">fax 206-625-9040<o:p></o:p></span></p>
</div>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
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<div style="border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in">
<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">From:</span></b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">
<a href="mailto:wsbarp-bounces@lists.wsbarppt.com">wsbarp-bounces@lists.wsbarppt.com</a> [<a href="mailto:wsbarp-bounces@lists.wsbarppt.com">mailto:wsbarp-bounces@lists.wsbarppt.com</a>]
<b>On Behalf Of </b>Robert Pampell<br>
<b>Sent:</b> Monday, November 06, 2017 10:43 PM<br>
<b>To:</b> 'WSBA Real Property Listserv'<br>
<b>Subject:</b> Re: [WSBARP] Execution on judgement<o:p></o:p></span></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">No. See RCW Sec. <span lang="EN">25.15.256, esp. subsection (5). Known as “charging order exclusivity,” this subsection was added in the amendments effective 1/1/16.<o:p></o:p></span></p>
<p class="MsoNormal"><span lang="EN"><o:p> </o:p></span></p>
<p class="MsoNormal"><span lang="EN">While you are at it, your client should be advised, as should all LLC clients should be, that single member LLCs “make lousy asset protection vehicles”, to quote a prominent national creditor rights/asset protection expert.
He was addressing the typical veil-piercing and alter ego flavor of asset protection, rather than the so-called “reverse veil-piercing” variety addressed by the section cited above.<o:p></o:p></span></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style="font-size:6.0pt;font-family:"Arial","sans-serif";color:#1F497D"><o:p> </o:p></span></p>
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<p class="MsoNormal"><span style="font-size:6.0pt;font-family:"Arial","sans-serif";color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D">Robert Pampell, Attorney<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D">21st Century Law Office (r)<o:p></o:p></span></p>
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<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#365F91">Bothell, WA 98011<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D">voice: 425-329-2629<br>
fax: 877-640-6403<br>
cell: 425-501-4784<br>
email: </span><span style="color:#1F497D"><a href="mailto:rpampell@swcp.com" title="mailto:rpampell@swcp.com"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:blue">rpampell@swcp.com</span></a></span><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><a href="http://www.linkedin.com/in/robertpampell"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:blue">http://www.linkedin.com/in/robertpampell</span></a></span><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><a href="http://www.21stlawoffice.com/"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:blue">www.21stLawOffice.com</span></a></span><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><b>From:</b> <a href="mailto:wsbarp-bounces@lists.wsbarppt.com">
wsbarp-bounces@lists.wsbarppt.com</a> [<a href="mailto:wsbarp-bounces@lists.wsbarppt.com">mailto:wsbarp-bounces@lists.wsbarppt.com</a>]
<b>On Behalf Of </b>Craig Gourley<br>
<b>Sent:</b> Monday, November 06, 2017 3:41 PM<br>
<b>To:</b> <a href="mailto:wsbarp@lists.wsbarppt.com">wsbarp@lists.wsbarppt.com</a><br>
<b>Subject:</b> [WSBARP] Execution on judgement<o:p></o:p></p>
</div>
</div>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Listmates, <o:p></o:p></p>
<p class="MsoNormal">Client has a judgment against him personally and wants to acquire real property in a single member LLC. I know the judgment does not attach directly to the real property. My recollection is that the creditor can obtain a charging order
against the LLC and any distributions to the member would go to the judgment creditor. Can the judgment creditor execute against the personal property interest of the “ membership” thereby taking ownership of the LLC and the property it contains? Thanks
in advance for your insight. <o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><b><span style="font-size:14.0pt">Gourley Law Group<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-size:12.0pt">Snohomish Escrow<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-size:12.0pt">The Exchange Connection<o:p></o:p></span></b></p>
<p class="MsoNormal"><b><span style="font-size:14.0pt"><o:p> </o:p></span></b></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial Rounded MT Bold"">1002 10<sup>th</sup> Street / PO Box 1091<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial Rounded MT Bold"">Snohomish, WA 98291<o:p></o:p></span></p>
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<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial Rounded MT Bold"">360.568.5065<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial Rounded MT Bold"">360.568.8092 fax<o:p></o:p></span></p>
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