Nicolazzi v. Bone, ED 106292

• Citation: 564 S.W.3d 364
• Decision Date: 20 November 2018
• Docket Number: No. ED 106292,ED 106292
• Parties: Peter A. NICOLAZZI, et al., Appellants, v. Laura L. BONE, Respondent.
• Court: Court of Appeal of Missouri (US)

564 S.W.3d 364

Peter A. NICOLAZZI, et al., Appellants,
v.
Laura L. BONE, Respondent.

No. ED 106292

Missouri Court of Appeals, Eastern District, DIVISION FOUR.

Filed: November 20, 2018

Edward A. Gilkerson, 11647 Gravois Rd. Ste. 100, St. Louis, MO 63126, John A. Kilo, Timothy W. Callahan, 5840 Oakland Ave., St. Louis, MO 63110, For Plaintiffs/Appellants.

Michael E. Donelson, Margaret D. Gentzen, One South Memorial Dr. 12^th Floor, St. Louis, MO 63102, For Defendant/Respondent.

564 S.W.3d 367

OPINION

Colleen Dolan, Judge

Peter A. Nicolazzi ("Appellant") appeals the trial court’s judgment in favor of Laura L. Bone ("Respondent") in Appellant’s suit against Respondent asserting claims involving the parties' limited liability company, Young in Spirit Adult Day Care, LLC (the "LLC"). After a three-day bench trial, the trial court entered judgment in favor of Respondent, finding that Appellant had breached the LLC’s operating agreement by failing to make the required capital contribution and by soliciting purchase of his interest in the LLC by a third party without Respondent’s consent; the court further found that Appellant had withdrawn from the LLC and that Respondent was the LLC’s sole member. Appellant offers five points on appeal. Appellant argues that the trial court’s judgment finding that Respondent was the sole member of the LLC because Appellant had withdrawn was against the weight of the evidence (Point I) and was a misapplication of the law (Point II). Appellant further asserts that the trial court’s judgment finding that Appellant breached the LLC’s operating agreement by failing to make the required capital contribution was against the weight of the evidence (Point III). And finally, Appellant contends that the trial court’s judgment finding that he breached the LLC’s operating agreement by discussing the sale of his interest in the LLC with a third party without Respondent’s consent was a misapplication of the law (Point IV) and was against the weight of the evidence (Point V).

We affirm in part, reverse in part, and remand in part.

I. Factual and Procedural Background

The following facts were adduced at trial. The parties formed the LLC, an adult daycare business, in 2005. At that time, Appellant had a college degree and work experience in social work, while Respondent had a college degree and work experience in nursing. The parties signed the LLC’s operating agreement on September 8, 2005. The operating agreement, in relevant part, states the following:

1. Members. The Members, who shall in all respects be equal, are LAURA L. BONE and PETER A. NICOLAZZI.

2. Profits and Losses. The net profits of the LLC shall be divided equally between the Members, and the net losses shall be borne by them in equal proportions. Distributions shall be made at such time or times and in such amount or amounts as the Members shall agree.

3. Capital. The Members shall contribute in equal amounts whatever amount of capital that the LLC may require from time to time for its investments and operations and that the Members shall unanimously agree in writing to contribute. Failure to make such contributions at the agreed date or prior to such time shall constitute an election to dissolve the LLC and shall have the same effect as a written notice of election to dissolve as specified below. The initial contributions agreed to are stated in Appendix A to this Agreement. Any withdrawals of capital from the LLC shall be such amounts and at such times as shall be agreed upon by the Members.

4. Management. The Members each shall individually be authorized to act on behalf of the LLC in the conduct of its operations as the LLC’s agent. LAURA L. BONE shall be the "tax matters partner" (as defined in Section 6231(a)(7) of the Internal Revenue Code ) for all appropriate federal tax purposes and such matters in connection therein. The

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Members shall have equal rights and responsibilities in the overall management policy of the LLC operations.

5. Voluntary Dissolution. Either Member may initiate a dissolution of the LLC after 30-days' written notice to the other Member, in which case the affairs of the LLC shall be wound up as soon as is reasonably possible and all remaining assets divided as provided for by law. The Members agree to prepare Articles of Dissolution once the winding up has occurred, and the LLC shall be dissolved upon the acceptance of same for filing by the Secretary of State.

6. Death or Involuntary Dissolution. If one Member dies or other events of dissolution as specified by law occur, the remaining Member (or, if no Members remain, the personal representative or representatives of the Members) shall wind up the affairs of the LLC and file Articles of Dissolution as above specified for an event of voluntary dissolution.

7. Non-Assignability of Membership Interest. Neither of the Members shall, without the written consent of the other Member, sell, assign, pledge, mortgage, or otherwise transfer [his] [her] interest in the LLC....

11. Applicable Law. The LLC and this Agreement shall be governed by the laws of the State of Missouri.

However, the LLC’s operating agreement notably lacks any language establishing what constitutes "withdrawal" by a member or dictating the amount or method for determining the amount to be paid to a member who withdraws from the LLC. In Appendix A, which is referenced within paragraph 3 of the operating agreement, the parties also agreed to contribute an initial amount of $50,000 each; however, no due date was ever set for when the parties were required to pay this amount. According to James Sailor ("Sailor"), a certified public accountant who prepared the LLC’s annual tax returns and financial statements, Respondent contributed $59,250 cash to the business in the years following execution of the operating agreement (and had therefore satisfied her capital contribution requirement), but Appellant had only contributed $25,700 to the business during that time (and had therefore not fulfilled his capital contribution requirement). Additionally, Sailor further identified non-cash/start-up contributions from Respondent in the amount of $5,380 and from Appellant in the amount of $5,365.

Immediately following the formation of the LLC, the parties were the business’s only workers. Appellant mainly performed tasks associated with providing service to the LLC’s customers, including transportation, preparing meals, organizing activities, cleaning, and other basic responsibilities. Respondent primarily performed managerial and nursing duties, which included completing office work, managing the business’s finances, paying bills, handling medical licensing, and handling Medicaid paperwork and billing. As the business progressively expanded, Respondent’s duties grew, while Appellant’s tasks were increasingly handled by employees that the business had hired.

In the spring of 2011, Appellant approached a competitor about buying his interest in the LLC, notwithstanding the operating agreement’s provision that prohibited sale, assignment, pledge, mortgage, or other transfer to a third party without the other LLC member’s approval; Appellant did not seek Respondent’s permission to inquire about a buyer for his share of the LLC. As time went on, the parties' business relationship steadily deteriorated. On April 30, 2011, Appellant effectively stopped participating in the operation of the business, while Respondent continued as the business’s sole operator. On June

564 S.W.3d 369

20, 2011, Respondent filed articles of incorporation with Missouri’s Secretary of State for "Young in Spirit Adult Day Center, Inc.," and notified Appellant on June 21, 2011, that the adult daycare business would continue under this new entity and that she would be dissolving the LLC.

On June 30, 2011, Appellant filed his three-count petition against Respondent, naming himself and the LLC as plaintiffs. In his Count I, Appellant requested a declaratory judgment determining whether Respondent was still a member of the LLC and whether she had misappropriated LLC funds and resources for her personal use and for creation of the new business entity. Appellant further asked the trial court to order Respondent to reimburse Appellant for distributions of profits that Appellant claimed exceeded Respondent’s fifty percent share and for any funds that Respondent had used for her own personal use and creating the new business entity. In his Count II, Appellant requested that the court order Respondent to provide a complete accounting of the LLC’s accounts and those of the new business entity. And in his Count III, Appellant asked the court to establish and impose a constructive trust for the losses, expenses, and damages that Respondent owed to Appellant for his interest in the LLC. In Respondent’s amended counterclaim, Respondent asserted four counts asking that the trial court enter judgment against Appellant and find that he was no longer a member of the LLC because Appellant: breached the LLC’s operating agreement by failing to make his required capital contribution (Count I); breached the LLC’s operating agreement by failing to perform his management duties (Count II); breached the LLC’s operating agreement by soliciting purchase of his interest in the LLC by a third...