McGuire v. Lindsay

496 S.W.3d 599, 2016 WL 2901580, 2016 Mo. App. LEXIS 513
CourtMissouri Court of Appeals
DecidedMay 17, 2016
DocketNo. ED 102773
StatusPublished
Cited by13 cases

This text of 496 S.W.3d 599 (McGuire v. Lindsay) is published on Counsel Stack Legal Research, covering Missouri Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McGuire v. Lindsay, 496 S.W.3d 599, 2016 WL 2901580, 2016 Mo. App. LEXIS 513 (Mo. Ct. App. 2016).

Opinion

KURT S. ODENWALD, Judge

Introduction

Appellants (referred to collectively as “Lindsay”) appeal the judgment of the trial court entered after a bench trial. The individual parties to this appeal, Daniel McGuire (“McGuire”), James Lindsay (“Lindsay”), and Susan Gray (“Gray”) are the sole Members of MAC Meetings & Events, L.L.C. (“MAC”), The trial court found that Lindsay and Gray, in their capacity as Managers1 of MAC, breached MAC’s Operating Agreement by hiring Lindsay as a salaried employee. Lindsay’s appeal focuses primarily on two issues. First, Lindsay argues that the trial court committed reversible error by relying on a report prepared by the Special Master appointed to make an accounting of MAC’s financial records because the trial court failed to administer an oath to the Special Master as required by Rule 68.01(d). Second, Lindsay argues that the trial court erred in interpreting MAC’s Operating Agreement to preclude the payment of a salary to Lindsay. Lindsay also raises two points arguing that the trial court erred in admitting parol evidence and hearsay into evidence at trial.

Because the trial court complied with the requirements of Rule 68.01(d) in administering the oath to the Special Master, the trial court did not commit reversible error in relying on the Special Master’s report. Because MAC’s Operating Agreement unambiguously prohibits Lindsay from receiving payment for services rendered to MAC, the trial court did not err in finding that MAC’s payments to Lindsay were over-distributions to Lindsay, and ordering Lindsay to return the over-distribution to MAC. Finally, assuming arguendo that the trial court improperly admitted parol evidence and hearsay, such evidence was harmless because other competent and substantial evidence supported the trial court’s judgment. Accordingly, we affirm the trial court’s judgment.

Factual and Procedural History

I. MAC Meetings & Events, L.L.C.2

MAC is a Missouri limited liability company consisting of three Members: McGuire, Lindsay, and Gray, MAC is primarily engaged in organizing, planning, and presenting business gatherings, conventions, and other “events.” Under the Operating Agreement’s “Sharing Ratio,” McGuire and Lindsay each receive 48.78% of MAC’s distributions, and Gray receives the remaining 2.44%.

MAC was created in 2001. The original Members of MAC were McGuire, Lindsay, Gray, and Patricia Schaumann (“Schau-mann”). At that time, McGuire and Lindsay each received 40% of MAC’s distributions, Schaumann received 18%, and Gray received 2%. When MAC was initially organized as an L.L.C., Schaumann and Gray were hired as employees of MAC and were paid a salary.

MAC’s original Operating Agreement was amended in 2005. Both the original and the amended Operating Agreement contained identical versions of the relevant language in Sections 5.13 and 7.2(D), which state:

5.1 Exercise of Management.

[602]*602A. Except as otherwise provided in this Agreement, the management and control of the business and affairs of the Company shall be vested exclusively in the Managers, who shall have the right and authority to manage the affairs of the Company and make all decisions with respect thereto. In addition to the rights and duties of the Managers set forth elsewhere in this Agreement, but subject to the other provisions of this Agreement, the Managers are hereby authorized to:
(i) Control the day to day operations of the Company;
(ii) Hire or appoint employees, agents, independent contractors, or officers of the Company;
|7.2(D) ] Payments to Members for Services : The Members shall not receive any sums of money for services. (Underlining in original.)

The “Managers” of MAC, as defined in Section 5.1, changed numerous times throughout the years. Lindsay and Schaumann were the original Managers in 2001. Schaumann vacated her position as Manager when she left the company in 2007. As of 2011, Lindsay and Gray were the Managers.

In 2011, Lindsay’s role with MAC transitioned from handling small responsibilities related to the upkeep of the books and records of MAC to a more substantial operational role. In connection with this change, trial court found that Lindsay and Gray, in their capacity as Managers of MAC, made Lindsay a salaried employee. MAC paid Lindsay a salary and health insurance benefits for his services, and also paid the employment taxes associated with his salary.

II. Underlying Lawsuit

McGuire filed suit alleging two counts for equitable accounting and injunctive relief. In the lawsuit, McGuire alleged inter alia that Lindsay, as a Member of MAC, received improper payments from MAC by virtue of being paid a salary. On July 3, 2013, the trial court entered an interlocutory order for an accounting and appointed Jack Fitter, CPA, PC, as a special master (“Special Master”) to conduct the accounting. On February 25, 2014, the Special Master filed his report with the trial court. Shortly thereafter, Lindsay filed exceptions to the report, claiming inter alia that the Special Master failed to take the oath required by Rule 68.01(d) before investigating and authoring the report. At a hearing conducted on March 5, 2014, the trial court acknowledged this fact and administered the Special Master’s oath that day:

THE COURT: Do you solemnly swear that you faithfully heard and examined the matters at issue, and made a just and impartial and true report in accordance with the order of appointment and reference?
MR. FITTER: I do.

On May 6, 2014, the trial court held a hearing and called the Special Master as the Court’s expert witness. The trial court permitted plaintiff’s counsel and defense counsel to cross-examine the Special Master. The trial court reserved ruling on whether to adopt the Special Master’s report and proceeded to trial on the merits. Before trial, Lindsay filed a motion to strike the Special Master’s report, which the trial court denied.

III. Trial

The trial court held a bench trial on McGuire’s petition on August 4, 2014. McGuire, Lindsay, and Gray testified. A key issue in McGuire’s claims was the payment of a salary to Lindsay. McGuire contended that Section 7.2(D) of the Operating Agreement prohibited Lindsay from receiving a salary for his services because [603]*603he was a member of MAC. Lindsay countered that Gray and Schaumann, who were also Members of MAC, had been paid as salaried employees since MAC was formed.

During the trial, Lindsay objected to certain portions of McGuire’s testimony as violating the parol evidence rule. In describing his understanding of the 2001 Operating Agreement, McGuire testified that the “[original agreement -with [Gray] and [Schaumann] and [Lindsay] and myself was that the two ladies [Gray and Schau-mann] would get a salary. They were— they worked there. They — they ran the company.” As to McGuire and Lindsay’s agreement, McGuire testified, “Our agreement was that [Lindsay] and myself got a quarterly distribution based on net profits of the company ... We were to get no salary.

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496 S.W.3d 599, 2016 WL 2901580, 2016 Mo. App. LEXIS 513, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mcguire-v-lindsay-moctapp-2016.