Summary
The Montana Supreme Court held that a member of a limited liability company could not be held jointly and severally liable for the LLC's contractual obligations absent evidence that the member personally breached a contract or committed a tort. The court reversed the imposition of personal liability on C.R. Weaver while leaving the remainder of the judgment intact and remanding for entry of an amended judgment.
Topics
Practice areas
Questions Presented
- Whether an LLC member may be held personally liable for the LLC's contractual obligations solely because the member owned property involved in the transaction, knew of the transactions, arranged some payments, or sued the creditor.
- Whether the District Court erred by holding Weaver jointly and severally liable for Mikart Transport, LLC's obligations to Tri-County, including attorney fees and costs.
Holdings
- Under Montana law, an LLC member or manager is not personally liable for the LLC's debts or obligations solely because of that status or because the member acted as an agent of the company. Personal liability may be imposed only when the member engaged in conduct that would independently create contract or tort liability if the member had acted in an individual capacity.
- Weaver could not be held individually liable for breach of contract because he had no agreement with Tri-County concerning the vehicle repairs and did not guarantee Mikart's payment obligations.
- Weaver's conduct did not constitute an actionable tort, and the possibility that Mikart could not pay its debts did not itself establish wrongful conduct sufficient to impose individual liability.
Key quotations
“However, this liability shield is not absolute and does not provide immunity to a member for his own wrongful conduct.” (¶ 12)
“In other words, did Weaver personally breach a contract obligation or commit a tort with regard to Tri- County?” (¶ 15)
“It is critical here to distinguish between Mikart’s failure to pay its own debts on the one hand, and Weaver’s failure to pay Mikart’s debts, on the other, when he had no contractual obligation to Tri-County to do so.” (¶ 17)
Factual background
Weaver formed Mikart Transport, LLC, whose members or managers included Weaver and Michael Smith. Smith obtained a credit account from Tri-County on Mikart's behalf, and Tri-County performed work on two trucks, leaving $6,357.90 unpaid. One truck was titled in Weaver's name, but the agreements for the repairs were between Tri-County and Mikart, and Weaver did not guarantee Mikart's payments or make other promises concerning the repairs. The District Court nevertheless imposed joint and several liability on Weaver individually.
Procedural history
Weaver filed a complaint concerning payments allegedly misapplied by Tri-County and Tri-County's retention of his Volvo. Tri-County counterclaimed against Weaver and filed third-party claims against Mikart and Michael Smith. The District Court granted summary judgment for Tri-County, entered judgment against Mikart for unpaid vehicle-related charges and attorney fees and costs, and held Mikart, Smith, and Weaver jointly and severally liable. Weaver appealed only the imposition of personal liability on him. The Montana Supreme Court reversed that portion of the judgment and remanded for entry of an amended judgment.
Remand instructions
The District Court must enter an amended judgment eliminating Weaver's joint and several personal liability for the vehicle work and the attorney fees and costs assessed under the credit application. The remainder of the judgment is unaffected.