## Facts

- Robert DeShazo and Douglas Landwer claimed rights in an Eagle, Idaho parcel purchased by Paul B. Clayton and later transferred to the Paul B. Clayton Trust.
- In November 2000, DeShazo obtained an exclusive purchase agreement with the then-owner of the property.
- On May 4, 2001, Clayton purchased the property in his own name, before any limited liability company had been formed.
- In August 2001, Clayton, DeShazo, and Landwer formed Berkshire West, LLC through articles of organization and a written operating agreement.
- The operating agreement contained an integration clause stating it superseded prior agreements among the members regarding the LLC.
- The operating agreement did not identify the property as an LLC asset or describe Clayton as holding it for the LLC or the other members.
- In February 2004, Clayton transferred the property to the Paul B. Clayton Trust.
- Clayton died in April 2005, and the trust proceeded with development without involving DeShazo or Landwer.
- Plaintiffs sued in federal diversity jurisdiction asserting claims tied to an alleged ownership or beneficial interest in the property (including contract, fraud, tortious interference, and equitable estoppel theories).

## Issues

1. Whether plaintiffs produced evidence creating a genuine dispute that the property was owned by, contributed to, or held for Berkshire West, LLC (or the individuals collectively), rather than owned by Clayton and then his trust.
2. Whether alleged pre-operating-agreement oral understandings about the property survived the LLC operating agreement’s integration clause under Idaho contract law.
3. Whether plaintiffs could sustain breach of contract, fraud, tortious interference, and equitable estoppel claims absent proof of an enforceable underlying property or contract right in the property.

## Decision

- The magistrate judge recommended granting defendants’ motion for summary judgment on all claims.
- The court concluded no genuine issue of material fact showed the property was an LLC asset or was ever effectively transferred or committed to the LLC.
- The court concluded the integrated operating agreement superseded inconsistent prior oral or informal understandings.
- Because plaintiffs failed to establish an underlying enforceable right in the property, their related contract, fraud, interference, and estoppel theories could not proceed.

## Legal Principles

- Property acquired in an individual’s name before an LLC exists remains that individual’s property absent competent evidence of a later contribution or transfer to the LLC.
- A fully integrated operating agreement supersedes prior member understandings regarding the LLC’s assets and obligations; parol evidence cannot be used to add to or contradict unambiguous integrated terms.
- Contract and property claims concerning real estate require objective, admissible evidence of a binding obligation (e.g., a deed, assignment, or enforceable agreement), not only recollections of informal assurances or generalized future intentions.
- Tortious interference and equitable estoppel claims premised on a supposed property or contract right generally fail when the plaintiff cannot first prove the existence of that underlying right and reasonable reliance on it.

## Conclusion

The court recommended summary judgment for the estate and trust because the land was purchased by Clayton before the LLC was formed, was never documented as an LLC asset, and the later integrated operating agreement foreclosed reliance on earlier oral understandings; without an enforceable underlying interest, plaintiffs’ derivative tort and equitable claims also failed.


DeShazo v. Clayton, No. 1:04-cv-00425, 2006 WL 1794735 (D. Idaho June 28, 2006)