Weissmann, J.
Andrew Nemeth and three brothers—William, Thomas, and Phillip Panzica (the Panzica Brothers)—allegedly agreed to form a limited liability company (LLC) for the purpose of developing and leasing out a piece of commercial real estate. Nemeth filed articles of organization for the company, dubbed NP3, LLC after himself and the three Panzica Brothers. But nearly six months later, the Panzica Brothers seemingly sought to exclude Nemeth from the project by executing a backdated operating agreement for NP3 that listed the Panzica Brothers’ separately owned company, Panzica Investments, LLC, as NP3’s sole member. Nemeth therefore sued NP3 and the Panzica Brothers (collectively, Defendants) for breach of oral contract and unjust enrichment.
The trial court entered summary judgment in favor of Defendants on Nemeth’s breach of contract claim, essentially concluding a written operating agreement is required to establish LLC membership. Nemeth’s unjust enrichment claim was then tried to the bench, despite his request for a jury trial, and the court entered judgment in Defendants’ favor. On appeal, Nemeth argues that an LLC’s initial membership can be established by oral contract and that there exist genuine issues of material fact as to whether Nemeth and the Panzica Brothers orally agreed to form NP3 as equal members. Nemeth also argues that he was entitled to a jury trial on his unjust enrichment claim. We agree on all counts and therefore reverse.
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A. A Pre-formation Oral Contract May Establish a Limited Liability Company’s Initial Membership
Codified as Article 18 of Title 23 of the Indiana Code, the Business Flexibility Act controls the creation, operation, and dissolution of LLCs in Indiana. Brant v. Krilich, 835 N.E.2d 582, 592 (Ind. Ct. App. 2005). The Act’s stated policy is “to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements of limited liability companies.” Ind. Code § 23-18-4-13. Case law applying its provisions is sparse, but the Act reveals the following principles regarding LLC formation.
First, nothing more than the filing of articles of organization is required to form an LLC.…
Second, an LLC must have at least one member at the time of formation…
Third, the person who executes and files an LLC’s articles of organization need not be a member of the company…
Fourth, an LLC’s articles of organization need not identify the company’s initial membership…
These principles collectively beg the question: How is an LLC’s initial membership established? Nemeth argues that a pre-formation oral contract is sufficient. Defendants contend, as the trial court concluded, that the Act requires a written instrument.
Defendants point to Indiana Code § 23-18-1-15, which defines “member” as “a person admitted to membership in a limited liability company under IC 23-18- 6-1 . . . .” Defendants in turn rely on Indiana Code § 23-18-6-1..
The problem with Defendants’ argument is that the Membership Acquisition Statute presupposes the existence of LLC members. Without existing members to either execute a written operating agreement or provide their written consent, a membership interest cannot be acquired directly from the LLC under the statute…
We therefore conclude the Membership Acquisition Statute does not control the establishment of an LLC’s initial membership. Moreover, we find no provision in the Act that specifically addresses the initial membership issue…
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Without a provision in the Business Flexibility Act that specifically addresses the initial membership issue, we have only the formation principles set forth above to guide us. Most notable among them is that an LLC must have at least one member at the time of its formation. See Ind. Code § 23-18-6-0.5; Ind. Code § 23-18-9-1.1(c). From this, we conclude an LLC’s initial membership must be established before the company’s formation. And considering that the Act’s stated policy is, in part, “to give the maximum effect to the principle of freedom of contract,” Ind. Code § 23-18-4-13, we see no reason why a pre-formation oral contract cannot be the means of establishing that membership.
B. Genuine Issues of Fact Remain as to the Existence of a Pre-formation Oral Contract
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II. Unjust Enrichment Claim
Turning to the trial court’s bench trial judgment on Nemeth’s unjust enrichment claim, Nemeth argues that the court violated his right to a jury trial under the Indiana Constitution. Article 1, Section 20 provides that, “[i]n all civil cases, the right of trial by jury shall remain inviolate.” Ind. Const. art. 1, § 20…
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Nemeth argues that he was entitled to a jury trial on his unjust enrichment claim because it sought legal relief, in the form of damages, based on a theory of contract implied-at-law. Nemeth also claims the trial court’s finding of unclean hands did not render harmless the court’s failure to conduct a jury trial because the equitable doctrine of unclean hands is not available as a defense to a legal claim in Indiana. Again, we agree with Nemeth on both issues.
A. Nemeth Was Entitled to a Jury Trial on His Unjust Enrichment Claim
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As Nemeth contends, the theory underlying his unjust enrichment claim is that of contract implied-at-law, also known as quasi-contract and quantum meruit…
This Court long ago recognized that contract implied-at-law, quasi-contract, and quantum meruit were “triable at law and not in equity” in 1851; therefore, a claimant was “entitled to jury trial upon them.” Nehi Beverage Co. v. Petri, 537 N.E.2d 78, 85 (Ind. Ct. App. 1989). Indeed, our own research reveals that a court of law, not a court of chancery, was the “proper tribunal” to resolve a claim in the “nature of a quantum meruit” before Indiana adopted its current constitution in 1852. McKinney v. Springer, 6 Blackf. 511, 515 (1843).
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As similarly explained in Nehi, contract implied-at-law, quasi-contract, and quantum meruit are “legal fictions.” 537 N.E.2d at 85 (emphasis in original). The theories were created by courts of law “to prevent unjust enrichment, thereby promoting justice and equity.” Id. But they provide a distinctly legal remedy—money damages. Id. “Unjust enrichment . . . is but the equitable reason for requiring payment for value of goods and services received.” Id. (emphasis in original). [Footnote omitted.]
Accordingly, we conclude Nemeth was entitled to a jury trial on his unjust enrichment claim under Article 1, Section 20 of the Indiana Constitution.
B. The Denial of Nemeth’s Right to a Jury Trial Was Not Harmless Error
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Conclusion
We reverse both the trial court’s entry of summary judgment in favor of Defendants on Nemeth’s breach of contract claim and its bench judgment in favor of Defendants on Nemeth’s unjust enrichment claim.
Altice, C.J., and Kenworthy, J., concur.