Senior Law Clerk
A recent Florida Third District Court of Appeal decision highlights a point that often gets overlooked in business and estate planning: when a trust owns an LLC, and the governing documents give trustees/managers broad authority to act independently, courts will generally enforce that authority as written—even in the middle of a personal dispute.
In KADA 13, LLC v. Georgetown Holdings, Inc., the Third District affirmed a trial court’s ruling that one trustee/manager had authority to transfer LLC-owned real property to a lender entity, based on the plain language of the trust agreement, the LLC operating agreement, and Florida’s Revised LLC Act.
The dispute arose after a couple executed estate-planning documents and business governance documents as part of a larger personal and financial plan. The LLC owned real property, and the couple had executed a promissory note connected to another property purchase, with the Miami property pledged as part of the structure.
In January 2022, the spouses signed a trust agreement and an LLC operating agreement that made a trust the LLC’s sole member. Both spouses were named trustees. What mattered most later was how those documents handled decision-making authority—including whether either trustee/manager could act unilaterally.
After the relationship deteriorated and the parties separated, one spouse withdrew substantial funds from a joint account. The other spouse—concerned about repayment exposure on the outstanding debt—transferred the Miami property to the lender entity (Georgetown). Each side then filed competing amendments to the company’s annual report attempting to establish manager control. Litigation followed.
The Third District’s analysis centered on the trust agreement and the LLC operating agreement:
Trust agreement: The trustees were authorized to “act independently” and were granted broad discretionary powers to deal with trust property, including buying, selling, pledging, exchanging, or leasing property and executing deeds and other instruments. The agreement also expressly contemplated that a trustee could exercise powers even where the trustee might also be acting individually or for another interested person or entity.
Operating agreement: In their capacities as trustees, the spouses executed the LLC operating agreement, which granted each trustee (as manager) broad authority to manage the company and bind it. The agreement included the authority to sell, mortgage, pledge, or otherwise transfer company property, and it stated that each manager/trustee could act individually without needing the other’s signature or consent. Those provisions were the backbone of the court’s holding: the documents, as drafted, allowed one trustee/manager to execute a transfer without the other trustee/manager signing off.
The LLC (through the spouse challenging the transfer) sued asserting claims including quiet title, slander of title, declaratory relief, civil theft, and conspiracy. After a nonjury trial, the trial court resolved disputed facts in favor of the defendants and concluded that the transferring trustee/manager had authority to convey the property to address the outstanding promissory note. The Third District affirmed.
The Third explained that operating agreements are central under Florida’s LLC Act. Florida’s Revised LLC Act treats the operating agreement as the primary source for defining rights, duties, and authority of managers and members, and courts interpret operating agreements using standard contract principles.
Moreover, conflicts of interest are not automatically fatal. Under the Act, a conflict-of-interest transaction is not automatically void or voidable solely because a manager or member has a financial or other interest in the transaction, so long as some other member also has some financial interest in the transaction. This means that even if the operating agreement did not grant such broad authority because a member was satisfying a note that both members owed personally, arguments of breach of fiduciary duty or conflict interest were estopped.
Thus, broad unilateral authority in operating and trust agreements should be intentional. If your trust agreement and operating agreement authorize each trustee/manager to act independently, that can include executing deeds and transferring property without the other fiduciary’s consent. If you want checks and balances, draft for them. Dual-signature requirements, written consent thresholds for specified actions, or limitations on transfers to satisfy personal obligations should be addressed explicitly. Lastly, be careful who you intertwine your business operations and finances with. Even if you cover yourself through carefully drafted operating agreements and estate documents, Florida law may still allow LLC members to make radical self-interested transactions with business funds if the court deems that it benefits other members, even if the other members disagree.
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