Blechman v. Estate of Blechman

• Decision Date: 01 April 2015
• Docket Number: No. 4D13–4801.,4D13–4801.
• Citation: 160 So.3d 152
• Parties: Robert BLECHMAN and Cathy Blechman Chermak, Appellants, v. ESTATE OF Bertram BLECHMAN, Appellee.
• Court: Florida District Court of Appeals

160 So.3d 152

Robert BLECHMAN and Cathy Blechman Chermak, Appellants

v.ESTATE OF Bertram BLECHMAN, Appellee.

No. 4D13–4801.

District Court of Appeal of Florida, Fourth District.

April 1, 2015.

Laura Bourne Burkhalter of Hark Burkhalter Yon, PL, Boca Raton, for appellants.

Katherine S. Dely of Law Offices of Katherine S. Dely, P.L., Lighthouse Point, for appellee.

ON MOTION FOR REHEARING

GROSS, J.

We grant the motion for rehearing in part, withdraw our previous opinion, and reissue the following opinion.¹

In this probate administration case, the children of Bertram Blechman (“the Decedent”)—Robert Blechman and Cathy Blechman Chermak—challenge an order determining their father's ownership interest in a limited liability company to be part of his probate estate. By virtue of a provision in the operating agreement of the limited liability company, the Decedent's membership interest immediately vested with his children upon his death, so that the interest was not a part of the probate estate. Accordingly, we reverse.

Factual Background

This dispute arises from the Decedent's testamentary devise of his 50% ownership interest in Laura Investments, LLC, a limited liability company created in New Jersey. In August 2009, the Decedent and his sister formed the LLC and executed an operating agreement (“the Agreement”), which outlined the business's basic structure and gave each sibling—as an owner—a 50% “Membership Interest” in the company. As defined by the Agreement, this “interest” consisted of “rights to distributions (liquidating or otherwise), allocations and information, and the right to vote on matters coming before the Members.”

In addition to providing a managerial framework, the Agreement imposed restrictions upon each member's ability to convey his or her interest in the company. The Agreement's Section 6, which governs the “transferability of membership interests,” conditions each member's ability to transfer “all or any portion of his or her Membership Interest in the Company” on obtaining “the prior written consent of all of the other Members,” unless limited exceptions applied. One such exception arises where the member transfers, “during lifetime or at death, all or any portion of his or her Membership Interest outright or in trust to or for the benefit of any member and/or any person or persons who are a member of the immediate family of the Member.” The member's “immediate family,” in this context, is comprised of his or her “living children and issue of any deceased child,” not parents, spouses, stepchildren, or paramours.

Upon a member's death, the Agreement's Section 6.3 controls the disbursement of a membership interest. As amended on April 30, 2010,² section 6.3(a) provides:

6.3 Death of Member

(a) Unless (i) a Member shall Transfer all or a portion of his or her Membership Interest in accordance with 6.1 or 6.2 hereof, or (ii) a Member bequeaths the Membership Interest in the Member's last will and testament to members of the Immediate Family of the respective Member, or (iii) all such Membership Interests of a deceased Member are inherited, or succeeded to, by Members of the Immediate Family of the deceased Member, then in the event of a death of a Member during the duration of this Agreement, the Membership Interest of the deceased Member shall pass to and immediately vest in the deceased Member's then living children and issue of any deceased child per stirpes.

Under this section, if a member fails to transfer his or her interest in one of the three ways enumerated in Section 6.3(a)(i)-(iii), then ownership “immediately” vests in the deceased member's children.

The Litigation in the Circuit Court

On February 25, 2011, the Decedent passed away, leaving behind his estranged wife of sixty years and two adult children—appellants Robert Blechman and Cathy Blechman Chermak. Two months after the Decedent's death, the trial court admitted his will³ into probate, which appointed his son, Robert, as personal representative and directed that the residue of his estate be marshaled into “The Bertram Blechman Revocable Living Trust, dated December 12, 2000.” (the “Trust”). Since the will contained no provision pertaining to the Decedent's 50% ownership interest in the LLC, if that interest were part of the probate estate, it would have “poured over” pursuant to Article V of the will into the Decedent's previously unfunded Trust.

As originally crafted in December 2000, the Trust was silent regarding the LLC and provided only for the Decedent's children and their issue. However, on August 20, 2010, the Decedent amended the Trust to provide a “specific gift” of his residence and “one half of the distributions from the LLC, to” a trustee for the benefit of Arlene Roogow—the Decedent's girlfriend since 2003. Pursuant to the amendment, Roogow could remain in the residence “for as long as she shall live or until she cohabitates with another male for six (6) months.” To pay for the residence's expenses, $5,000 was to be deposited from the Laura Investments, LLC distributions into “an account designed by ... [R]oogow.”⁴ All remaining distributions from the company—either at the year's end or at the close of Roogow's interest—would be disbursed to the Decedent's children.

Following the Decedent's death, Robert—in his capacity as personal representative—transferred the Decedent's monthly distributions from the LLC to the estate, depositing them into the estate's restricted account to be used for estate expenses. Relying on the Trust amendment, Roogow moved to compel Robert to transfer the funds to her account for the maintenance of her residence. The trial court agreed with Roogow in part, entering a November, 2011 written order stating:

C. The Personal Representative shall obey the directions of Article V of the Last Will & Testament of Bertram Blechman until such time as this Court orders otherwise.

D. The provisions of the Amendment to the Bertram Blechman Revocable Living Trust, Dated August 20, 2010, shall be complied with until such time as this Court orders otherwise.

The following week, Robert submitted an inventory for the estate, listing the Decedent's “50% membership interest in Laura Investments, LLC” as an estate asset.

In July, 2012, Roogow moved for an order to show cause, asserting that Robert violated the November 2011 order by failing to transfer the LLC distributions pursuant to the Trust amendment. The trial court issued an order to show cause and set a hearing. On the advice of counsel, Robert did not personally appear at the scheduled hearing and, as a result, the trial court removed him as personal representative. This Court has since reversed that decision, remanding with instructions that Robert be reinstated to his prior post. See Blechman v. Dely, 138 So.3d 1110, 1115 (Fla. 4th DCA 2014).

After being removed, Robert submitted a final accounting, in which he noted that the Decedent's 50% interest in Laura Investments, LLC had been “incorrectly listed” as an estate asset. In line with this belief, Robert and his sister, Cathy, filed a petition seeking reimbursement of the $89,500.00 in LLC distributions deposited into the estate's restricted account. According to their petition, since the Decedent's Trust amendment did not “convey all of his Membership Interest to his Immediate Family,” the Decedent's interest in the LLC immediately vested in his children upon his death, placing the asset outside of his probate estate.

Following a hearing, the trial court entered a written order confirming the Decedent's interest in the LLC as an estate asset, articulating the following findings:

2. The Operating Agreement (OA) for [Laura Investments, LLC (“LI”) ] shows Decedent owned a 50% Membership Interest in LI at his death. The OA and its Amendment are valid and enforceable.

3. The Decedent bequeathed his interest in LI to members of his immediate family in his will, admitted to probate on April 7, 2011. Under the terms of that will, Decedent's residual probate estate passes to the Trust executed by the Decedent December 12, 2000.

4. Decedent's Membership Interest in LI is an asset of Decedent's probate estate. That interest does not, and never did, automatically pass to or vest in Decedent's children at the time of his death (See Amendment to OA Section 6.3[a], executed April 30, 2010). This Court makes no ruling as to the extent or value of this Membership Interest at this time.

5. Distributions of money from LI since the Decedent's death should have gone to the Decedent's estate. Any distributions taken or received by any other person or entity had been wrongfully received and are to be replaced into the Estate immediately....

It is this order that the Blechman children challenge on appeal.

Standard of Review

Like articles of incorporation and corporate bylaws, operating agreements for limited liability companies are construed applying principles of contract interpretation. See Berkowitz v. Delaire Country Club, Inc., 126 So.3d 1215, 1218 (Fla. 4th DCA 2012). Accordingly, since there is no disagreement regarding this case's historical facts, the trial court's interpretation of the Agreement—and its effect on the Decedent's probate estate—is a legal matter, subject to de novo review. See Chipman v. Chipman, 975 So.2d 603, 607 (Fla. 4th DCA 2008) (“The trial court's interpretation of a contract is a matter of law subject to a de novo standard of review.” (citations omitted)); cf. SPCA Wildlife Care Ctr. v. Abraham, 75 So.3d 1271, 1275 (Fla. 4th DCA 2011) (“Where the trial court's decision is based on the interpretation of the language of a will, the standard of review is de novo.” (citing Timmons v. Ingrahm, 36 So.3d 861, 864 (Fla. 5th DCA 2010) )).

Analysis

The Decedent's children—Robert and Cathy—assert the trial court erred in confirming their father's 50% membership interest in the LLC as an estate asset because that interest passed to them outside of probate upon his death. As below, the children argue that the Decedent's ...