Appearances can be deceiving.
That, essentially, was the argument made in two recently decided cases involving claims for judicial dissolution. In one, an LLC member with bad credit assigned her 50% interest to the other 50% member who then, representing herself as the 100% owner, secured a mortgage loan from a bank from which the assignor and assignee concealed a written side agreement stating their intent to remain “equal partners” in the LLC.
In the other, the buyer under a stock purchase agreement assigning a 75% share in a restaurant business claimed that he actually acquired a 100% interest. According to the buyer, he acquired and paid for the other 25% in the form of a contemporaneous no-show employment agreement done for tax purposes.
In the first case, the court denied summary judgment and left for trial the determination whether enforcement of the side agreement was permissible. In the second case, the court refused to treat the employment agreement as a disguised vehicle for conveyance of the remaining 25% and granted the dissolution petition.