Ratliff v. Cochise Agricultural Properties, LLC

MEMORANDUM

Harlan (“Jeff’) and Theresa Ratliff (“the Ratliffs”) entered into a business venture, Cochise Agricultural Properties (“CAP”), with their close Mends Todd Campbell and Stephanie McRae (“the Campbells”) in which they improved a parcel of land that the Ratliffs had previously purchased and then resold it. CAP’s operating agreement recited that the parties made equal capital contributions and had equal participation percentages. The agreement further provided that all distributions were to be used first to pay off any capital contribution, and then divided equally according to the parties’ participation percentages (i.e., 50/50). The property, which was originally purchased in February 2004 for $427,539, was officially transferred to CAP in June 2005 and then sold to N.K. of Casa Grande, LLC (“NK”) in October 2005 for $3.52 million. The NK contract provided for an initial payment of $1.1 million, which was used to pay off an underlying loan, with the balance payable over five years.

Meanwhile, the Ratliffs took a personal loan from Wells Fargo, which was guaranteed first by a deed of trust on the land and later by the NK note, with the consent of the Campbells and CAP.…