Holliman v. Midpoint Development

F IL E D United States Court of Appeals Tenth Circuit PUBLISH October 31, 2006 UNITED STATES COURT OF APPEALS Elisabeth A. Shumaker Clerk of Court TENTH CIRCUIT

IN RE: M ID PO IN T D E V E LO P M E N T , L .L .C .

Debtor,

CLAUDIA S. HOLLIM AN and G A RY W EST, Trustee of the 1990 Grieser Trust,

A ppellees. v. No. 05-6046

M IDPOINT D EVELO PM ENT, L.L.C .,

Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FO R T H E W E ST ER N D IST RIC T O F O K L A H O M A (D .C . N o. C V -04- 1509-R ) (Bankruptcy C ourt N o. 04-16795-BH )

B obbie Bayless of B ayless & Stokes, H ouston, Texas, (M ichael Paul Kirschner and Lorrie A. Corbin of Kirschner, Kisner, Lee, PLLC, Oklahom a City, Oklahom a, also on the briefs), for A ppellant.

H arvey D . Ellis, Jr. of Crow e & Dunlevy, O klahom a City, O klahom a (Jim m y G oodm an, W illiam H . H och, and Reagen D . A llen of Crow e & D unlevy, O klahom a City, O klahom a; D ouglas N . G ould, O klahom a City, O klahom a, also on the b rief), for A ppellees.

B efore T A C H A , C hief C ircuit Judge, BR ISC O E, and H A R T Z , Circuit Judges.

B R ISC O E , C ircuit Judge.

M idpoint D evelopm ent, L .L .C ., (“M idpoint”) appeals the district court’s dism issal of M idpoint’s C hapter 11 bankruptcy petition. The district court dism issed M idpoint’s bankruptcy petition after concluding that M idpoint had ceased to legally exist prior to its bankruptcy filing. W e exercise jurisdiction pursuant to 28 U .S.C . § 158(d) and affirm the district court.

I.

O n N ovember 14, 2003, M eredith B row n, the sole mem ber of M idpoint, executed “A uthorization of D issolution of L.L .C . upon unanim ous consent of members,” and “A rticles of D issolution of an O k l a h o m a L i m i t e d L i a b i l i t y C o m p a n y. ” T h e a u t h o r i z a t i o n o f d i s s o l u t i o n stated, in relevant part:

The purpose of this action is to effect a dissolution of the L.L.C ., pursuant to 18 O.S. § 2037, by action of all M embers. The sole M ember of the L.L.C . has determ ined . . . that the L.L.C . should be dissolved, and articles of dissolution filed w ith the O klahom a Secretary of State, in compliance w ith 18 O .S. § 2041.

The articles of dissolution stated, in relevant part:

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T he undersigned, for the purpose of dissolving an O klahoma lim ited liability company pursuant to the provisions of Title 18, Section 2041, does hereby execu te the fo llow ing articles:

1. The name of the lim ited liability company is: M idpoint D evelopment, L.L.C ..

2. T he date of filing of its articles of organization: June 4, 1996.

3. The reason for filing the articles of dissolution: cessation of business and w inding up of affairs.

4. The effective date of the articles of dissolution if they are not to be effective upon filing of these articles: N ovember 14, 2003. (Emphasis added).

B row n filed the articles o f d issolution w ith the O klaho m a S ecretary of State on N ovember 14, 2003 and received a “C ertificate of D issolution o f L i m i t e d L i a b i l i t y C o m p a n y. ” O n t h e s a m e d a y , a f t e r f i l i n g t h e a r t i c l e s o f dissolution w ith the O klahoma Secretary of State, B row n petitioned the D i s t r i c t C o u r t f o r O k l a h o m a C o u n t y, O k l a h o m a , f o r t h e a p p o i n t m e n t o f a receiver to com plete the “w inding up” of M idpoint’s affairs. B row n attached to the petition an executed application for the appointm ent of a receiver to do the follow ing:

all such acts as m ay be necessary for the final settlement of the business of the L.L .C ., including, but not lim ited to . . . prosecution of all litigation in w hich the L .L.C . is a party Plaintiff, defense of all litigation in w hich the L .L.C . is a party D efendant, prosecution of all claim s of the L.L.C . for the benefit of its creditors and M ember, and defense of the w rongful claim s against the L.L .C . for the benefit of its creditors and m em bers.

-3-The document also nominated and consented to the appointment of David P a yn e a s r e c e i v e r “ t o w i n d u p t h e b u s i n e s s o r a f f a i r s o f t h e L . L . C . , a s conferred by 18 O .S. § 2039 and 2040, and as conferred upon a receiver by 12 O .S. § 1551, et seq.” O n the same day, the state court entered an u n c o n t e s t e d o r d e r a p p o i n t i n g P a yn e a s M i d p o i n t ’ s r e c e i v e r .

O n June 22, 2004, M idpoint filed a petition for bankruptcy relief in the United States Bankruptcy Court for the W estern District of Oklahoma pursuant to T itle 11 of the U nited States B an krup tcy C ode.1 C reditors C lau dia H ollim an and G ary W est (“C reditors”) filed a joint m otion to dism iss M idpoint’s C hapter 11 petition, arguing that M idpoint w as ineligible to be a debtor because it ceased to legally exist after the effective date of its articles of dissolution. T he bankruptcy court denied the motion to dism iss, concluding that M idpoint w as eligible for bankruptcy relief becau se a lim ited liab ility co m pan y is em pow ered to w ind up its affairs a f t e r d i s s o l u t i o n , i n c l u d i n g f i l i n g f o r b a n k r u p t c y. I n r e M i d p o i n t D e v . , L .L .C ., 313 B .R . 486, 488-89 (B ankr. W .D . O kla. 2004). T he district court reversed the bankruptcy court’s order because it determ ined that M idpoint ceased to legally exist after the effective date of its articles of dissolution.

1 M idpoint, along w ith several other entities, previously filed for bankruptcy on M arch 18, 2003. T his action w as dism issed for cause on November 10, 2003.

-4-In R e M idpoint D ev., L .L .C ., N o. 04-1509-R , slip op. at 7 (W .D . O kla. Feb. 3, 2005).

II.

M idpoint argues that the district court erred in concluding that an O klah om a limited liability com pany ceases to exist upon the effective date of articles of dissolution. M idpoint contends that a dissolved L .L .C . m aintains a legal existence through the w inding up process initiated by filing articles of dissolution. The issue for us to resolve is w hether an O klahoma lim ited liability company’s legal existence term inates upon the effective date of filing articles of dissolution w ith the Secretary of State or whether the L.L.C. continues to exist for the purpose of winding up its a f f a i r s , i n c l u d i n g t h e r i g h t t o f i l e f o r b a n k r u p t c y.

“O n an appeal of a bankruptcy case, w e review the legal conclusions of the bankruptcy court and the district court de novo.” M cK ow en v. Internal R evenue Serv., 370 F.3d 1023, 1025 (10th C ir. 2004). “In the c o n t e x t o f v o l u n t a r y b a n k r u p t c y, t h e U n i t e d S t a t e s S u p r e m e C o u r t h a s consistently held that a corporation’s ability to avail itself of the bankruptcy law s depends on how the state in w hich it w as incorporated defines its existence after dissolution.” In re A nderson, 94 B .R . 153, 156 (B ankr. W .D . M o. 1988). Therefore, w e look to O klahoma law to determ ine

-5-w hether a limited liability com pany ceases to exist after the effective date of its articles of dissolution.

T he O klah om a L im ited L iab ility C om pany A ct (“O L L C A ”), passed in 1992 and amended in 2004, governs the form ation, operation, and dissolution of O klahoma lim ited liability companies. The issue on appeal is therefore determ ined by an exam ination of the relevant provisions of the O LLC A . “[T]o ascertain the intention of the legislature, ‘all the various portions of the legislative enactm ents on the particular subject, including subsequent enactm ents, should be construed together and given effect as a w hole.’” A shby v. H arris, 918 P.2d 744, 748 (O kla. 1996) (quoting Indep. School D ist. v. O klahoma C ity Fed. of Teachers, 612 P.2d 719, 721 (O kla. 1980)).

B ecause M idpoint filed its articles of dissolution and its bankruptcy petition before the November 1, 2004 amendments to the OLLCA became effective, the p re-2004 O L L C A ap plies to the c urrent action. H ow ev er, because the O klahoma Suprem e C ourt “recognizes that by amending a statute the Legislature may have intended (1) to change existing law or (2) to clarify ambiguous law,” this court may consider the 2004 amendments in determ ining w hether, under the O LLC A , an L.L.C . ceases to exist upon the effective d ate of its articles of d issolution. Sam m an v. M ultiple Injury

-6-Trust Fund, 33 P.3d 302, 307 (O kla. 2001).

A n O klahoma L .L .C . comes into legal existence w ith the filing of executed articles of organization w ith the O ffice of the Secretary of State. 18 O .S. § 2004(A ) and (B ). Section 2007, in relevant part, provides: “upon the effective date of articles of dissolution or a decree of judicial dissolution, the articles of organization are cancelled.” 18 O .S. § 2007(B ). A lthough not explicitly stated, it is reasonable to conclude that an L .L .C . ceases to exist w hen its articles of organization are cancelled. W e agree w ith the district court’s conclusion that “these tw o provisions, taken together, suggest that the leg al ex istence of an O klah om a limited liability company ceases to exist upon the effective date of articles of dissolution or a decree of judicial dissolution.” In re M idpoint D ev., N o. 04-1509 at 3. T his conclusion is further bolstered by the post-2004 amended Section 2004(B )(1), w hich clarifies the original Section 2004 and states, in relevant part:

A lim ited liability company form ed under this act is a separate legal e n t i t y, t h e e x i s t e n c e o f w h i c h a s a s e p a r a t e l e g a l e n t i t y c o n t i n u e s until cancellation of the lim ited liability company’s articles of organization. 18 O .S. § 2004(B)(1).

B ecause a subsequent amendm ent to an act can be used to ascertain the m eaning of a prior statute w here the meaning of the prior statute is subject to serious doubt and has not been judicially determ ined, w e can consider

-7-this amended provision in determ ining the meaning of the original Section 2004. Q uail C reek Golf and Country C lub v. O klahoma T ax Com m ’n, 913 P.2d 302, 304 (O kla. 1996). T his section clarifies the earlier provision by expressly indicating w hen an L.L .C . ceases to exist; the prior provision m erely indicated w hen an L.L .C . came into being.

M idpoint argues that the district court m isinterpreted the meaning of 18 O .S. § 2007(B ), both before and after the 2004 amendm ents. The 2004 amendm ents redesignated subsection B as C and amended it to read as follow s:

Unless a later effective date or time, which shall be a specified date or tim e no later than a tim e on the nineteenth day after the filing, as provided in the articles, articles of am endm ent, m erger, consolidation, conversion or dissolution are effective at the tim e of their filing w ith the Secretary of State. 18 O .S. § 2007(C ).

B ecause it is a leg al impossibility for a com pany to w ind up its affairs in n i n e t e e n d a ys , M i d p o i n t c l a i m s t h a t t h e l e g a l i n t e n t o f 1 8 O . S . § 2 0 0 7 cannot be read to require an O klahoma lim ited liability company to be im m ediately cancelled or have little to no tim e to w ind up its affairs after filing articles of dissolution. R ather, it asserts that this new language m e r e l y c l a r i f i e s t h e O k l a h o m a l e g i s l a t u r e ’ s i n t e n t , w h i c h h a s a l w a ys view ed dissolution as a three part process, including: (1) an act of dissolution; (2) filing of the articles of dissolution, and; (3) a w inding up

-8-period.

W e are unpersuaded by this interpretation of Section 2007. Because the 1992 version of Section 2007 is unambiguous, w e view the 2004 a m e n d m e n t a s a c h a n g e i n t h e l a w , r a t h e r t h a n a c l a r i f yi n g a m e n d m e n t , a n d w ill not apply it retroactively to M idpoint. See Samm an, 33 P.3d at 307(noting that w hen earlier version of statute definitely expresses clear and unambiguous intent, legislative amendm ent is presum ed to change existing law ). The pre-2004 Section 2007, which applies to M idpoint, expressly provides that articles of organization are cancelled upon the effective d ate of articles of dissolution. M idpoint’s argum ent still fails, even with a consideration of the amended provision, because nothing in the amended language suggests that an L.L .C . continues to legally exist and has an unspecified amount of time to wind up its affairs after the effective date of articles of dissolution.

T he express language of Section 2007 is further clarified by other sections of the statute, including Sections 2037, 2041, and 2055, w hich w hen read together indicate that dissolution and the w inding up period should precede the effective date of articles of dissolution, w hich ultim ately term inates an L.L.C .’s legal existence by cancelling its articles of organization. Section 2037 w as amended in 2004, but in no w ay m aterial

-9-to this case; Sections 2041 and 2055 w ere not amended in 2004.

Section 2037 provides, in relev ant part, that “[a] lim ited liability company is dissolved and its affairs shall be w ound up upon the earlier of . . . the w ritten consent of all the mem bers.” 18 O .S. § 2037. Filing articles of dissolution must be authorized by action of all the members of an L.L.C . In the present case, M idpoint’s sole mem ber, M eredith B row n, entered her w ritten consent to file articles of dissolution for M idpoint w ith an effective date of N ovember 14, 2003. Therefore, M idpoint’s affairs should have been w ound up prior to filing articles of dissolution w ith an im m ediate effective date.

Section 2041 provides:

A f t e r t h e d i s s o l u t i o n o f t h e l i m i t e d l i a b i l i t y c o m p a n y, p u r s u a n t t o Section 2037 of this title, the limited liability com pany shall file articles of dissolution in the O ffice of the Secretary of State upon p a ym e n t o f t h e f i l i n g f e e r e q u i r e d b y S e c t i o n 2 0 5 5 o f t h i s t i t l e , t h e articles of dissolution shall set forth: . . .

4. T he effective d ate of the articles o f d issolution if they are not to be effective upon the filing. 18 O .S. § 2041.

This provision expressly states that an L.L.C . m ay choose to file its articles of dissolution on a certain date, but indicate a date in the future for the articles to become effective, thereby allow ing tim e for a w inding up of the L.L.C.’s affairs. M idpoint’s interpretation of the statute w ould render this provision m eaningless, as there w ould be no reason to designate an

-10-effective date for articles of dissolution if the designated date had no legal effect upon the existence of the lim ited liability company. A n L .L .C . is not free to take an unspecified amount of tim e to w ind up its affairs after filing articles of dissolution; it must w ind up its affairs prior to the effective date of the articles of dissolution.

F i n a l l y, S e c t i o n 2 0 5 5 s t a t e s i n r e l e v a n t p a r t t h a t “ [ t ] h e S e c r e t a r y o f State shall charge and collect the follow ing fees . . . for filing articles of dissolution an d issuing a certificate of cancellation, a fee of F ifty D ollars ($50.00).” 18 O .S. § 2055. In addition Section 2055.2 (F) provides:

A dom estic lim ited liability company that has ceased to be in good standing by reason of its neglect, refusal or failure to file an annual certificate w ith the Secretary of State or pay the registered agent fee to the Secretary of State shall rem ain a dom estic limited liability company form ed under this act until dissolution of its articles of organization. 18 O .S. § 2055.2 (F).

Taken together and read as a whole, these provisions of the OLLCA indicate that the legislature intended that an O klahoma L .L .C . dissolve and w ind up its affairs (§ 2037) prior to the effective date of its articles of dissolution (§ 2041). B ecause the statute indicates that articles of dissolution cancel the articles of organization (§§ 2007(B ), 2055), w hich created the L .L.C ., an O klah om a limited liability corporation ceases to exist upon the date that articles of dissolution become effective.

M idpoint asserts that Sections 2012.1, 2039, and 2040 contradict this

-11-interpretation and instead indicate that an L.L .C . continues to exist after articles of dissolution are filed and after the effective date of articles of dissolution. Section 2012.1 states, in relevant part, that “[t]he articles of organization shall be canceled upon the dissolution and the completion of w i n d i n g u p o f a l i m i t e d l i a b i l i t y c o m p a n y. ” M i d p o i n t a r g u e s t h a t t h i s p r o v i s i o n d e m o n s t r a t e s t h a t w i n d i n g u p c o n t i n u e s b e yo n d t h e f i l i n g o f a r t i c l e s o f d i s s o l u t i o n a n d b e yo n d t h e e f f e c t i v e d a t e o f t h e a r t i c l e s o f dissolution. W e con clude this provision supp orts, rather than con tradicts, our interpretation of the statute. O ther provisions of the statute (§§ 2007(B ), 2055) state that articles of dissolution cancel articles of organization, w hich has the effect of term inating an L.L .C .’s legal existence. W hen Section 2012.1 is read in harm ony w ith those statutes, the im port of Section 2012.1 is that an L.L .C . should w ind up its affairs prior to the effective date of its articles of dissolution.

Sections 2039 an d 2040 dictate how an L .L .C . can w ind up its affairs a n d h o w t h e c o m p a n y’ s a s s e t s s h o u l d b e d i s t r i b u t e d u p o n w i n d i n g u p . Neither of these provisions demonstrate that an L.L.C. continues to legally exist after the effective date of its articles of dissolution. They merely describe the w inding up process, w hich the statute indicates should precede the date upon w hich articles of dissolution become effective.

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Even if this court w ere persuaded by M idpoint’s interpretation of the O L L C A , its o w n act of designating N ovem ber 14, 2003 as the effective date of its articles of dissolution left M idpoint w ith no period in w hich to w ind up its affairs. If M idpoint sought a significant period of time to wind up its affairs, including filing for bankruptcy, it should have begun w inding up its affairs prior to filing articles of dissolution or set the effective date for its articles of dissolution far in the future.

F i n a l l y, M i d p o i n t a r g u e s t h a t i t d e m o n s t r a t e d a c l e a r i n t e n t t o w i n d u p its affairs after filing its articles of dissolution. H ow ever, M idpoint cites no authority to support its assertion that its intent in filing articles of dissolution w ould trump the legal effect granted to the document by statute. In any event, M idpoint w ould not have been able to change the effective date of its articles of dissolution. Section 2012 permits an LLC to file articles of correction if “any docu m en t” filed w ith the S ecretary of S tate’s o f f i c e p u r s u a n t t o t h e O L L C A “ c o n t a i n s a n y t yp o g r a p h i c a l e r r o r , e r r o r o f transcription, or other technical error.” 18 O .S. § 2012(A ). H ow ever, that section expressly provides that the articles of correction “may not . . . [c]hange the effective date of the document being corrected . . . or . . . [a]ffect any right or liability accrued or incurred before its filing.” Id.

W e conclude that M idpoint ceased to exist as a legal entity upon the

-13-effective filing date of its articles of dissolution, w hich w as N ovember 14, 2003. B ecause M idpoint did not file for bankruptcy until June 22, 2004, over seven months after filing its articles of dissolution, its bankruptcy filing w as a nullity and subject to dismissal.

III.

M idpoint filed a motion to certify the question on appeal to the O klahoma Suprem e C ourt. T enth C ircuit R ule 27.1(A ) governs certification of questions of state law and provides that “[w ]hen state law p e r m i t s , t h i s c o u r t m a y: ( 1 ) c e r t i f y a q u e s t i o n a r i s i n g u n d e r s t a t e l a w t o t h a t state’s highest court according to that court’s rules; and (2) stay the case in this court to aw ait the state court’s decision of the certified question.” 10th C ir. R . 27.1(A ). O klaho m a state law perm its the O klaho m a S uprem e C ourt to answ er questions of state law certified to it “by a court of the U nited States . . . if the answ er m ay be determ inative of an issue pending litigation i n t h e c e r t i f yi n g c o u r t a n d t h e r e i s n o c o n t r o l l i n g d e c i s i o n o f t h e S u p r e m e C ourt . . ., constitutional provision, or statute of this state.” 20 O .S. § 1602 (2005).

W e “gen erally w ill not certify questions to a state su prem e court w hen the requesting party seeks certification only after having received an adverse decision from the district court.” M assengale v. O klahom a B d. O f

-14-E x a m ’ r s i n O p t o m e t r y, 3 0 F . 3 d 1 3 2 5 , 1 3 3 1 ( 1 0 t h C i r . 1 9 9 4 ) . M i d p o i n t d i d not seek certification until after it received an adverse decision from the district court. W e conclude that certification is not m erited here and deny M idpoint’s motion.

IV.

W e A FFIRM the district court’s order and D EN Y the motion for certification.

-15-05-6046, In re: M idpoint D evelopm ent, L.L.C . H A R T Z, C ircuit Judge concurring:

I join in parts I, III, and IV of the opinion. In m y view , the pre-2004 statute, particularly 18 O .S. § 2007(B ), unambiguously provides that the legal existence of an L.L .C . ends upon the effective date of articles of dissolution.