Burkhalter v. SMS Financial P, LLC, 2026 WL 1870939 (Ga.App., June 29, 2026).
Opinion 2026 Georgia Exemption Conflicts Site.Opinion2026GeorgiaChargingOrderExemptionConflictofLaws
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AI Synopsis
♦ The Court of Appeals of Georgia affirmed a superior court order charging a judgment debtor’s 50 percent ownership interest in a Georgia limited liability company, Burkhalter Rentals, LLC, to satisfy an unpaid personal judgment. The judgment debtor, Harry Burkhalter, and his wife formed the LLC while residing in Florida and argued that Florida law should apply because membership interests are personal property determined by the owner's domicile. Under Florida law, they claimed to hold their interest as tenants by the entirety, meaning each owned 100 percent of the entity, which would insulate the asset from a unilateral creditor. The judgment creditor, SMS Financial P, LLC, sought the charging order under Georgia law, which does not recognize tenancy by the entirety. The appellate court rejected Burkhalter's argument and applied the "internal affairs" choice-of-law doctrine rather than the traditional rule for personal property. The court reasoned that the nature and allocation of membership ownership interests directly impact the inter se rights and duties of the members, particularly regarding how the LLC calculates and executes pro rata distributions. Furthermore, the court noted that the LLC’s own operating agreement undermined Burkhalter's tenancy by the entirety claim by explicitly stating that upon a member's death, the interest would pass via a will or Georgia intestacy law rather than automatically vesting in the surviving spouse. Consequently, because the LLC was a Georgia entity governed by Georgia law for its internal affairs, the court held that Burkhalter and his wife owned the company as tenants in common, leaving his 50 percent interest subject to the charging order. ♦
Burkhalter v. SMS Financial P, LLC, 2026 WL 1870939 (Ga.App., June 29, 2026).
Only the Westlaw citation is currently available.
Court of Appeals of Georgia.
BURKHALTER
v.
SMS FINANCIAL P, LLC, Assignee of RBC Bank (USA).
A26A0196
June 29, 2026
Attorneys and Law Firms
Leon Strickland Jones, William Mitchell Gooding, Atlanta, for Appellant.
James Franklin Failey Carroll, Atlanta, for Appellee.
Opinion
Watkins, Judge.
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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. fn1 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.
fn1. 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).
Because this appeal involves a legal question, we review both the record and the decision of the superior court de novo. fn2 The record shows that, in 2011, RBC Bank (USA) f/k/a RBC Centura Bank domesticated a foreign judgment against Burkhalter. fn3 RBC later assigned the judgment to SMS, and SMS revived it in 2019.
fn2. 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.”).
fn3. See OCGA § 9-12-133.
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.fn4
fn4. 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.
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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 fn5) to determine his membership interest in the LLC. He contends that, because a limited liability company interest is personal property, fn6 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.
fn5. See In re Watford, 427 B.R. 552, 555–57(III)(a) (Bankr. SD Fla. 2010).
fn6. 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.”).
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. fn7 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. fn8
- 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. fn9
“Internal affairs are those that concern the relations inter se of the corporation, its shareholders, directors, officers or agents.” fn10
fn7. See Mbatha, 356 Ga. App. at 751(2)(c), 848 S.E.2d 920.
fn8. 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[.]”).
fn9. 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.”).
fn10. 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).
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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. fn11
fn11. See OCGA § 14-11-100 et seq. (Georgia Limited Liability Company Act).
Second, the matter at hand relates directly to the inter se rights of the LLC's members fn12 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. fn13
fn12. 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.”).
fn13. 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.).
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. fn14 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[.]” fn15
fn14. See generally Loumpos v. Bank One, 423 So.3d 856, 859(I) (Fla. 2025) (characteristics of tenancy by the entirety).
fn15. (Emphasis added.)
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. fn16
fn16. See Gaslowitz v. Stabilis Fund I, LP, 331 Ga. App. 152, 154–55(1), 770 S.E.2d 245 (2015).
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2. In light of our conclusion in Division 1, we need not reach Burkhalter's remaining claims of error.
Judgment affirmed.
McFadden, P. J., and Padgett, J., concur.