BURKHALTER v. SMS FINANCIAL LLC RBC USA (2026)

Harry Burkhalter appeals from an order charging his 50 percent ownership interest in a Georgia limited liability company with payment of an unsatisfied judgment against Burkhalter personally.¹ In issuing the charging order, the superior court rejected Burkhalter's argument that, under Florida law, he and his wife each held a 100 percent membership interest in the LLC as tenants by the entirety. For the reasons set forth below, we affirm.

Because this appeal involves a legal question, we review both the record and the decision of the superior court de novo.² The record shows that, in 2011, RBC Bank (USA) f/k/a RBC Centura Bank domesticated a foreign judgment against Burkhalter.³ RBC later assigned the judgment to SMS, and SMS revived it in 2019.

In 2025, SMS filed an application for a charging order against Burkhalter's interests in Burkhalter Rentals, LLC (“the LLC”). SMS provided a copy of the 2024 annual registration of the LLC, filed with the Georgia Secretary of State, which listed Burkhalter as a member. Burkhalter moved to dismiss the application, arguing that he and his wife each had a 100 percent interest in the LLC, which they held as tenants by the entirety.

Burkhalter testified that he and his wife were residents of Pensacola, Florida when they formed the LLC in 2007. The “Articles of Organization for Georgia Limited Liability Company” list the “name and address of each organizer(s)” of the LLC as Harry W. Burkhalter at an address in Griffin, Georgia, and Sandra S. Burkhalter at the same address. Below that, an “optional provision[ ]” added: “The management of the company is vested in the members. The members are a married couple who are Florida residents and own their interests in the company as tenants by the entirety.”

The LLC's Operating Agreement, executed the same day, lists the “name and address of the Initial Members” as Harry W. Burkhalter and Sandra S. Burkhalter at the Griffin address. Under Article 7, “[a]ll distributions of cash or other property shall be made to the Members pro rata in accordance with their respective Ownership Interests[,]” which is a defined term in the Operating Agreement:

“Ownership Interest” shall mean the proportion that a Member's positive Capital Account bears to the aggregate positive Capital Accounts of all Members whose Capital Accounts have positive balances as may be adjusted from time to time. The Initial Ownership Interests of the Members are as follows:

HARRY W. BURKHALTER and SANDRA S. BURKHALTER, a married couple, 100% interest as Tenants by the Entirety.

Following two hearings, the superior court found that the Burkhalters’ representation on the LLC's Operating Agreement that their address was in Georgia was binding on them; thus, they could not take advantage of Florida law. The court additionally found that because the LLC was a Georgia limited liability company, it was governed by Georgia law as to its Operating Agreement. The court thus concluded that Burkhalter and his wife each owned a 50 percent interest in the LLC as tenants in common and that Burkhalter's interest in the LLC was subject to a charging order up to the amount owed on the judgment.⁴

As part of the charging order, the superior court directed the LLC not to make any distributions to Burkhalter. Instead, the LLC:

shall pay over to [SMS] all funds and assets whatsoever which, by virtue of whatever interest [Burkhalter] may have, or is later determined to have, as a partner in, member in, or owner of an interest in the [LLC], would have been distributed to [Burkhalter] in the normal course of business of the [LLC] or otherwise, up to the amount owed on the Judgment.

This appeal followed.

1. In related claims of error, Burkhalter argues that the superior court erred in applying Georgia law (which the parties agree does not recognize tenancy by the entirety ⁵ ) to determine his membership interest in the LLC. He contends that, because a limited liability company interest is personal property,⁶ such interest should be determined under the law of Florida, where he and his wife were domiciled when they formed the LLC. According to Burkhalter, the superior court erred in finding that Georgia law applied on the ground that the nature of the ownership interest was part of the “internal affairs” of the LLC. We discern no error in the trial court's ruling.

In the context of divorce and property division, Georgia applies the traditional choice of law rule. Under this rule, interests in personal property are determined under the law of the owner's domicile at the time the property was acquired.⁷ In the context of deciding issues peculiar to the interpretation and enforceability of provisions of a corporation's operating agreement, however, Georgia applies the “internal affairs” choice of law rule.⁸

The internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation's internal affairs — matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders — because otherwise a corporation could be faced with conflicting demands.9

“Internal affairs are those that concern the relations inter se of the corporation, its shareholders, directors, officers or agents.”¹⁰

In support of his position that we should apply the traditional choice of law rule, rather than the internal affairs rule, Burkhalter argues:

[T]he internal affairs of a limited liability company refers to the relationship between the members, managers, agents, and the company, not the property interests of the members itself. This type of relationship refers to the duties that the members, manager, agents, and the company have to each other under the operating agreement. In short, the internal affairs of a limited liability company concern how the LLC shall be operated. ․ Whether the Burkhalters own their interests as tenants by the entirety or tenants in common does not concern the conduct of the LLC's business.

We are not persuaded.

First, Burkhalter has not cited, and we have not found, any authority applying the traditional choice of law rule where the personal property is a membership interest in a Georgia limited liability company, which is specifically regulated by Georgia law.¹¹

Second, the matter at hand relates directly to the inter se rights of the LLC's members ¹² and involves a matter peculiar to the LLC. Indeed, the Operating Agreement specifies that “[a]ll distributions ․ shall be made to the Members pro rata in accordance with their Ownership Interests.” Thus, the LLC necessarily has to interpret the Burkhalters’ membership interests — as between themselves — before making any distributions.¹³

And significantly, the provision in Article VIII (“Transferability”) of the Operating Agreement regarding “Transfer Upon Death of Member” directly contradicts Burkhalter's position that (under Florida law) he and his wife each hold a 100 percent ownership interest as tenants by the entirety.¹⁴ Section 8.2 provides: “Upon the death of a Member, that Member's interest shall pass to the beneficiary specified in any will ․ or under the laws of intestate succession in the State of Georgia. The recipient of a deceased Member's interest shall become an Economic Interest Owner[.]”¹⁵

In light of the foregoing, we conclude that the internal affairs doctrine is applicable to the question presented in this case; thus, the superior court did not err in applying Georgia law and charging Burkhalter's interest in the LLC with payment of SMS's unsatisfied judgment.¹⁶

2. In light of our conclusion in Division 1, we need not reach Burkhalter's remaining claims of error.

Judgment affirmed.

FOOTNOTES

1.   See OCGA § 14-11-504(a). See generally Merrill Ranch Props., LLC v. Austell, 336 Ga. App. 722, 729(2), 784 S.E.2d 125 (2016) (explaining the nature of a charging order).

2.   See Mbatha v. Cutting, 356 Ga. App. 743, 747(2), 848 S.E.2d 920 (2020) (“A trial court's choice of law is a legal question which we review de novo.”).

3.   See OCGA § 9-12-133.

4.   The charging order also charged any membership interest in Burkhalter's other LLCs and enjoined Burkhalter from transferring or encumbering any of his interests. Burkhalter does not challenge either of these rulings.

5.   See In re Watford, 427 B.R. 552, 555–57(III)(a) (Bankr. SD Fla. 2010).

6.   See OCGA § 14-11-501(a) (“A limited liability company interest is personal property. A member has no interest in specific limited liability company property.”).

7.   See Mbatha, 356 Ga. App. at 751(2)(c), 848 S.E.2d 920.

8.   Burkhalter does not challenge the superior court's conclusion that this choice-of-law rule equally applies to Georgia limited liability companies. Accordingly, we assume without deciding that it does. See generally OCGA §§ 14-11-204(b) (“The articles of organization may set forth: (1) That management of the limited liability company is vested in one or more managers; and (2) Any other provisions not inconsistent with law.”); 14-11-701(a) (“The laws of the jurisdiction under which a foreign limited liability company is organized govern its organization and internal affairs[.]”).

9.   Edgar v. MITE Corp., 457 U.S. 624, 645(V)(B), 102 S.Ct. 2629, 73 LE2d 269 (1982). See generally McDermott, Inc. v. Lewis, 531 A.2d 206, 216(III)(B) (Del. 1987) (“[A]pplication of the internal affairs doctrine is not merely a principle of conflicts law. It is also one of serious constitutional proportions — under due process, the commerce clause and the full faith and credit clause.”).

10.   Multi-Media Holdings, Inc. v. Piedmont Ctr., 15 LLC, 262 Ga. App. 283, 286(2), 583 S.E.2d 262 (2003) (citation and punctuation omitted).

11.   See OCGA § 14-11-100 et seq. (Georgia Limited Liability Company Act).

12.   See Inter se, Ballantine's Law Dictionary (3d ed. 1969) (“Among or between themselves.”); Inter se rights, Ballantine's Law Dictionary (3d ed. 1969) (“Rights as between themselves, such as rights as between the shareholders in a business trust.”).

13.   See Practice Benefits, LLC v. Entera Holdings, LLC, 340 Ga. App. 378, 381(2), 797 S.E.2d 250 (2017) (LLC member was allowed to bring a direct action against the LLC and its manager where the member alleged that the operating agreement required any return of capital contribution in the form of distributions to be made pro rata based on each member's percentage interest.).

14.   See generally Loumpos v. Bank One, 423 So.3d 856, 859(I) (Fla. 2025) (characteristics of tenancy by the entirety).

15.   (Emphasis added.)

16.   See Gaslowitz v. Stabilis Fund I, LP, 331 Ga. App. 152, 154–55(1), 770 S.E.2d 245 (2015).

Watkins, Judge.

McFadden, P. J., and Padgett, J., concur.