McGuire v. Lindsay
2016 Mo. App. LEXIS 513
| Mo. Ct. App. | 2016Background
- MAC Meetings & Events, LLC is a three-member Missouri LLC (McGuire, Lindsay, Gray) with an Operating Agreement allocating distributions and vesting management in “Managers.”
- Operating Agreement provisions at issue: Section 5.1 (Managers may hire employees, subject to other provisions) and Section 7.2(D) (“The Members shall not receive any sums of money for services.”).
- In 2011 the Managers (Lindsay and Gray) made Lindsay a salaried employee; MAC paid salary, benefits, and employment taxes to Lindsay from 2011–2014. McGuire sued for an accounting and injunctive relief claiming improper payments to Lindsay.
- A Special Master prepared an accounting; Lindsay objected that the Special Master had not taken the Rule 68.01(d) oath before preparing the report. The trial court later administered the oath, admitted the report, and held a bench trial.
- Trial court found the Operating Agreement unambiguously barred Members from receiving payments for services, concluded Lindsay’s salary payments were improper over‑distributions, and ordered repayment. Lindsay appealed.
Issues
| Issue | Plaintiff's Argument (McGuire) | Defendant's Argument (Lindsay) | Held |
|---|---|---|---|
| Whether Special Master’s report could be relied on where oath was administered after report | Rule 68.01(d) requires an oath before hearing testimony; trial later swore Special Master and report was properly used | Oath was not given before the Special Master began work, so report adoption was reversible error | Court: Rule requires oath before hearing testimony; Special Master did not hear sworn testimony, and the court later administered the exact oath — reliance on report was proper (Point One denied) |
| Whether Operating Agreement permits paying a Member a salary when hired as an employee by Managers | 7.2(D) prohibits Members receiving sums for services; Managers’ authority under 5.1 is subject to other provisions, so payments to a Member are barred | Section 5.1 authorizes Managers to hire employees; a Member could be paid in capacity as employee (not as Member) — provision should be read harmoniously | Court: Provisions unambiguous; 7.2(D) unqualifiedly bars Members from receiving money for services; 5.1 is expressly subject to other provisions — salary to Lindsay was prohibited (Point Three denied) |
| Admissibility of parol evidence about past practice/consent to pay other Members (Gray, Schaumann) | Parol/hearsay evidence showed unanimous consent was required or that past practice allowed Member salaries | Such extrinsic evidence cannot override an unambiguous contract; hearsay objections raised | Court: Even if admission was error, it was harmless because Operating Agreement and Special Master’s accounting alone supported judgment (Points Two & Four denied) |
| Sufficiency/weight of evidence supporting judgment | Trial record, Operating Agreement, Special Master computations support finding of over‑distributions to Lindsay | Evidence of longstanding practice of paying other Members showed ambiguity and supports Lindsay | Court: Judgment supported by substantial competent evidence and not against weight of evidence |
Key Cases Cited
- R.J. v. S.L.J., 732 S.W.2d 574 (Mo. App. 1987) (Rule 68.01(d) requires master take an oath)
- Murphy v. Carron, 636 S.W.2d 30 (Mo. banc 1982) (standards for appellate review in equity bench trials)
- Rouner v. Wise, 446 S.W.3d 242 (Mo. banc 2014) (contract ambiguity and de novo review of legal construction)
- Devino v. Starks, 132 S.W.3d 307 (Mo. App. W.D. 2004) (court will not supply omitted contract terms)
- AB Realty One, LLC v. Miken Techs., Inc., 466 S.W.3d 722 (Mo. App. E.D. 2015) (extrinsic evidence cannot create ambiguity)
- In re Estate of English, 691 S.W.2d 485 (Mo. App. W.D. 1985) (admission of parol evidence harmless where other competent evidence supports decision)
- Whispering Oaks Farms, LLC v. Lebanon Livestock Auction S&T, LLC, 466 S.W.3d 717 (Mo. App. S.D. 2015) (hearsay is reversible only if prejudicial; harmless if other competent evidence supports judgment)