Departing members of a limited liability company (“SFPCC” or, the “LLC”) are not liable for a pro rata share of a balance due under notes issued by SFPCC of which the members were accommodation parties. Palma v South Florida Pulmonary & Critical Care, LLC, 307 So.3d 860 (Fla. Ct. App. 2020)
In 2016, three physician-members (the “Members”) of SFPCC signed onto a series of loan documents from Marquis Bank (the “Bank”) as co-makers, alongside SFPCC. Shortly thereafter, the Members departed and SFPCC demanded a proportional payment due under the notes according to each Member’s respective membership and departure date. The Members claimed that they bore no individual liability to SFPCC for the debt. At trial, a lower court ruled in favor of SFPCC.
On appeal, the court reversed and remanded, relying on Florida’s adoption of the Uniform Commercial Code (the “UCC”) and the provisions of the LLC agreement to determine that the Members were accommodation parties who were neither liable to the accommodated party under the loan agreements or liable to the LLC itself upon their departure. The court noted that Florida statute 673.4191(1) provides that an accommodation party, one that signs a financial instrument to incur liability thereunder but without being a direct beneficiary of the instrument, is thereby exculpated from liability to the accommodated party, the party receiving the direct benefit of the financial instrument. Here, the court found that the salary and bonuses received by Members did not sufficiently demonstrate that the Members had in fact received a direct benefit from the loan and therefore met the definition of an accommodation party and were thus shielded from liability from SFPCC under the loan. Further, looking to the LLC agreement (the “Agreement”), the court stated that the Agreement, and specifically the termination provisions, amounted to the entirety of the understanding between the Members and SFPCC at point here. As such, by the court’s plain reading of the termination provisions of the Agreement, the court determined that SFPCC was barred from collecting any outstanding balances owed to the Bank from the departing Members.
To SFPCC’s demand of equitable relief, the court held that principles of equity may supplement, but not supplant, the UCC. Considering this determination, the court declined to allow the equitable claim to advance because it would stand to upset the legislative scheme for loss allocation set forward by Florida’s liability shield for accommodation parties.
Courtesy of Jeff Dutson (King & Spalding LLP)