Luria v. Board of Directors of Westbriar Condominium Unit Owners Association, 277 Va. 359

Summary

The Supreme Court of Virginia considered whether a managing member of a limited liability company owed a fiduciary duty to a condominium association as a potential statutory warranty claimant and creditor. The court held that creditor status required actual notice of a specific potential statutory warranty claim, which was not established until March 2003, after the improper distributions had occurred. The judgment on the fiduciary-duty and illegal-distribution counts was therefore reversed and final judgment entered.

Holdings

1. A potential statutory warranty claimant becomes a creditor only when the putative debtor has actual notice of a specific potential statutory warranty claim; constructive notice or a standard based on what the debtor should have known is insufficient.
2. The evidence was insufficient to establish that the Association was a creditor when the challenged transfers and distributions were made because Luria lacked actual notice of a specific potential statutory warranty claim at that time.
3. The circuit court's judgments against Luria on breach of fiduciary duty and illegal distributions must be reversed because the Association was not a creditor when the challenged distributions occurred.

Questions Presented

1. Whether a potential statutory warranty claimant may qualify as a creditor for purposes of imposing a fiduciary duty on a managing member of a limited liability company.
2. What type of notice is required before a potential statutory warranty claimant qualifies as a creditor.
3. Whether the evidence established that the Association was a creditor when Luria made the challenged transfers and distributions.

Disposition

reversed