Mark E. McDonough v. Patrick M. McDonough & a. , 169 N.H. 537 ( 2016 )

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Merrimack
No. 2015-0694
MARK E. McDONOUGH
v.
PATRICK M. McDONOUGH & a.
Argued: September 14, 2016
Opinion Issued: December 23, 2016
Sheehan Phinney Bass & Green, Professional Association, of Manchester
(James P. Harris on the brief and Christopher N. Cole orally), for the plaintiff.
Orr & Reno, P.A., of Concord (James F. Laboe and Jeffrey C. Spear on
the joint brief, and Mr. Laboe orally), for defendant TASC Technical Services,
LLC.
Cook, Little, Rosenblatt & Manson, PLLC, of Manchester (Arnold
Rosenblatt and Kathleen M. Mahan on the joint brief), for defendant Patrick M.
McDonough.
Matthew J. McDonough, self-represented defendant, by joint brief.
DALIANIS, C.J. The plaintiff, Mark E. McDonough, appeals an order of
the Superior Court (McNamara, J.) denying him summary judgment and
granting summary judgment to the defendants, TASC Technical Services, LLC
(TASC), Patrick M. McDonough, and Matthew J. McDonough. The trial court
ruled that TASC was not required to dissolve on September 30, 2015. We
affirm.
I. Background
The trial court found that the following facts were not disputed. In 1992,
brothers Mark, Matthew, and Patrick McDonough established TASC, a
corporation that provides technical engineering services. In September 1995,
the brothers converted TASC to a Limited Liability Company (LLC). As of
January 2014, the New Hampshire Revised Limited Liability Company Act (the
Act), RSA chapter 304-C (2015 & Supp. 2016), governs TASC. See RSA 304-
C:5, II (2015).
The brothers had a falling out. As a result, Mark sued the defendants
seeking a declaration that TASC must dissolve by September 30, 2015,
pursuant to its certificate of formation and operating agreement. TASC’s
certificate of formation states that “[t]he latest date on which the limited
liability company is to dissolve is September 30, 2015.” Section 5 of TASC’s
operating agreement states: “The Company shall have a term beginning on the
date the Certificate of Formation is filed . . . and shall continue in full force and
effect for a term of twenty (20) years, unless sooner terminated or continued
pursuant to the further terms of this Agreement.” On August 7, 2015,
Matthew and Patrick—constituting a majority of TASC’s members—voted to
dissolve TASC and then immediately voted to revoke the dissolution.
Both parties moved for summary judgment. After a hearing, the trial
court ruled that: (1) the August 7 dissolution and revocation had no effect on
TASC’s governing documents; and (2) TASC was not required to dissolve
because its operating agreement permits a majority of its members to continue
the company. Consequently, it denied summary judgment to Mark and
granted summary judgment to the defendants. This appeal followed.
On appeal, Mark argues that: (1) the trial court erred when it determined
that a majority of TASC’s members could continue TASC beyond September 30,
2015; and (2) permitting a majority of TASC’s members to continue the
company causes him substantial harm because the company is not obligated
to pay him any consideration if he withdraws.
II. Standard of Review
In reviewing a trial court’s rulings on cross-motions for summary
judgment, “[w]e consider the evidence in the light most favorable to each party
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in its capacity as the nonmoving party and, if no genuine issue of material fact
exists, we determine whether the moving party is entitled to judgment as a
matter of law.” Conant v. O’Meara, 167 N.H. 644, 648 (2015) (quotation
omitted). “If our review of that evidence discloses no genuine issue of material
fact and if the moving party is entitled to judgment as a matter of law, then we
will affirm the grant of summary judgment.” Id. (quotation omitted). “We
review the trial court’s application of the law to the facts de novo.” Id.
(quotation omitted).
TASC is governed by both its operating agreement and the Act. See RSA
304-C:25, I (2015) (stating that “[t]he laws of . . . New Hampshire govern . . .
[t]he internal affairs of a[n] [LLC]”); RSA 304-C:16 (2015) (defining “operating
agreement” to mean an agreement of the members “as to the internal affairs of
a[n] [LLC] or the conduct of its business”); RSA 304-C:41, I (2015) (making an
LLC’s operating agreement binding upon its members). Therefore, to resolve
the issues in this appeal, we need to construe both the Act and TASC’s
operating agreement.
“We review matters of statutory interpretation de novo.” JMJ Properties,
LLC v. Town of Auburn, 168 N.H. 127, 130 (2015). “On questions of statutory
interpretation, we are the final arbiters of the intent of the legislature as
expressed in the words of a statute considered as a whole.” Id. “We first
examine the language of the statute and ascribe the plain and ordinary
meanings to the words used.” Id. “We interpret legislative intent from the
statute as written and will not consider what the legislature might have said or
add language that the legislature did not see fit to include.” Id. “Furthermore,
we interpret statutes in the context of the overall statutory scheme and not in
isolation.” Id. “Our goal is to apply statutes in light of the legislature’s intent
in enacting them and in light of the policy sought to be advanced by the entire
statutory scheme.” Id.
“Because the operating agreement is a form of contract, we will apply the
general rules of contract interpretation.” Lakes Region Gaming v. Miller, 164
N.H. 558, 562 (2013). “When interpreting a written agreement, we give the
language used by the parties its reasonable meaning, considering the
circumstances and the context in which the agreement was negotiated, and
reading the document as a whole.” Birch Broad. v. Capital Broad. Corp., 161
N.H. 192, 196 (2010). “We give an agreement the meaning intended by the
parties when they wrote it.” Id. “Absent ambiguity, however, the parties’ intent
will be determined from the plain meaning of the language used in the
contract.” Id. (quotation omitted). “The interpretation of a contract, including
whether a contract term is ambiguous, is ultimately a question of law for this
court to decide.” Id. “Accordingly, we review a trial court’s interpretation of a
contract de novo.” Id.
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III. Discussion
Mark first argues that TASC’s operating agreement and the Act required
the company to dissolve by September 30, 2015. We disagree.
The Act requires an LLC’s members to dissolve the company as provided
for in the company’s operating agreement. See RSA 304-C:129, I (2015) (“A[n]
[LLC] shall be dissolved as provided in the operating agreement.”). Section 5 of
TASC’s operating agreement provides: “The Company shall have a term
beginning on the date the Certificate of Formation is filed . . . and shall
continue in full force and effect for a term of twenty (20) years, unless sooner
terminated or continued pursuant to the further terms of this Agreement.”
(Emphasis added.)
Mark argues that, unless amended, the plain language of TASC’s
operating agreement required dissolution by September 30, 2015.
This argument, however, overlooks the language “unless sooner terminated or
continued pursuant to the further terms of this Agreement.” Although Mark is
correct that the members could unanimously amend section 5 of TASC’s
operating agreement to remove or change the dissolution clause, that does not
preclude other means of continuing TASC. If TASC’s members had intended
that the only means of continuing the company would be an amendment of
section 5, they could have explicitly said so. Instead, they chose to more
broadly state that TASC would exist for 20 years unless the company was
“continued pursuant to the further terms of this Agreement.”
In this case, TASC’s operating agreement and the Act provide such a way
for TASC’s members to continue the company. Section 4 of TASC’s operating
agreement authorizes TASC to “have and exercise all powers now or hereafter
conferred by [the Act].” This includes RSA 304-C:130, III (2015), which
provides: “After the members have dissolved the limited liability company
under RSA 304-C:129, I, they may revoke the dissolution at any time before
completing the wind-up of the limited liability company.” Thus, TASC’s
members have two means to avoid the effects of the September 30, 2015
dissolution. They can either revoke the dissolution pursuant to RSA 304-
C:130, III, or unanimously amend section 5 of TASC’s operating agreement.
Mark argues that a decision to revoke a dissolution pursuant to RSA
304-C:130, III also requires a unanimous vote. He asserts that because the
legislature specifically included the word “majority” in RSA 304-C:130, I, the
omission of that word in RSA 304-C:130, III demonstrates legislative intent
that the phrase “the members” in paragraph III refers to all members of an
LLC. Because accepting Mark’s interpretation would require us to ignore the
plain language of RSA 304-C:67, I (Supp. 2016), and add a unanimity
requirement to RSA 304-C:130, III that is not present in the words of the
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statute, we conclude that a majority of members may revoke a dissolution
pursuant to RSA 304-C:130, III.
RSA 304-C:130, I, is one of a number of provisions in RSA chapter 304-C
specifying that certain member decisions must be made by a majority vote.
See, e.g., RSA 304-C:48, II, :50, II, :94, :129, II, :150, IV, :156, I, :188, II (2015).
Other provisions in RSA chapter 304-C specify that the decisions to which they
refer must be made by a unanimous vote. See, e.g., RSA 304-C:100, IV-V,
:120, :121, I, :122, I, :124 (2015). Still other provisions, like RSA 304-C:130,
III, do not specify whether the member decision at issue must be made by
majority or unanimous vote. See, e.g., RSA 304-C:34, II, :66, I (2015), :210
(Supp. 2016).
When a provision does not specify whether the member decision to which
it refers must be made by majority or unanimous vote, RSA 304-C:67 applies.
RSA 304-C:67, I, provides that, unless RSA 304-C:67, II or certain other
enumerated provisions apply, or unless “the operating agreement provides
otherwise, all matters that [the Act] reserves for decision by the members shall
be decided by majority vote of the members.”
Thus, to determine whether the decision to revoke a dissolution under
RSA 304-C:130, III may be made by majority or unanimous vote, we first
examine whether that decision is one of the decisions listed in RSA 304-C:67,
II. RSA 304-C:67, II provides that, unless the operating agreement states
otherwise, a unanimous vote of all of an LLC’s members is required to: (1)
amend a certificate of formation; (2) amend an operating agreement; (3) amend
a promise to make a contribution; (4) grant additional membership rights to a
member; or (5) admit a new member. Because the decision to revoke a
dissolution is not one of the decisions enumerated in RSA 304-C:67, II, we then
examine whether RSA 304-C:130, III is one of the provisions that RSA 304-
C:67, I specifies is exempt from its provisions. Because RSA 304-C:130, III is
not exempt, RSA 304-C:67, I, applies.
Pursuant to RSA 304-C:67, I, we must examine the operating agreement.
Section 5 of TASC’s operating agreement does not specify whether TASC may
be continued by majority or unanimous vote. Likewise, TASC’s operating
agreement is silent regarding how its members may decide to revoke a
dissolution. Therefore, because TASC’s operating agreement does not provide
otherwise, RSA 304-C:67, I, controls, and TASC’s members may by majority
vote revoke a dissolution pursuant to RSA 304-C:130, III.
Mark next argues that, even if a majority of TASC’s members had the
power to revoke the September 30, 2015 dissolution, they have not yet done so.
Even though the trial court ruled that the August 7 voluntary dissolution and
subsequent revocation had no effect on whether TASC was required to dissolve
by September 30, 2015, the trial court still ruled that TASC was not required to
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dissolve by September 30, 2015, because its members could continue the
company pursuant to the terms of the operating agreement. Although at the
time of the trial court’s order, Matthew and Patrick had not voted to revoke the
September 30, 2015 dissolution, they still have time to do so. See RSA 304-
C:130, III (providing that an LLC’s members may revoke a dissolution “at any
time before completing the wind-up of the [LLC]”). Matthew and Patrick
represented to the trial court that they intend to continue TASC. Based upon
these facts, the trial court could conclude that Matthew and Patrick intended
to revoke the dissolution. Accordingly, we cannot conclude that the trial court
erred by granting summary judgment to Matthew and Patrick even though they
had not yet voted to revoke TASC’s dissolution.
Mark next argues that TASC’s certificate of formation requires, without
exception, that the company dissolve after 20 years. Specifically, he argues
that: (1) the plain language of the certificate of formation requires dissolution;
and (2) allowing TASC’s members to continue TASC without amending the
certificate of formation renders the certificate of formation meaningless.
TASC’s certificate of formation states that “[t]he latest date on which the
limited liability company is to dissolve is September 30, 2015.” However, the
Act does not require an LLC’s members to dissolve the company when the
duration listed in the certificate of formation expires. See RSA ch. 304-C. The
Act requires an LLC’s members to dissolve the company only as provided in its
operating agreement. See RSA 304-C:129, I. Thus, there is no requirement
that TASC’s members dissolve the company after the twenty-year duration
stated in its certificate of formation.
Furthermore, we disagree with Mark’s argument that this interpretation
renders the certificate of formation superfluous. Under the Act, an LLC’s
certificate of formation and its operating agreement are distinct documents that
are separately defined and serve different purposes. See RSA 304-C:16
(defining operating agreement); RSA 304-C:31 (Supp. 2016) (stating certificate
of formation requirements).
The primary purpose of an LLC’s operating agreement is to govern how
the parties will manage the internal affairs of the LLC and the LLC’s business.
See RSA 304-C:16. By contrast, the primary purpose of the certificate of
formation is to serve as notice to the secretary of state and the public that the
company is operating as a New Hampshire LLC. See RSA 304-C:33 (2015).
The certificate of formation is not rendered superfluous just because the Act
looks to an LLC’s operating agreement, not its certificate of formation, to
determine when the LLC’s members must dissolve the company.
Mark next argues that the trial court erred when it determined that
“[t]here is no unfairness in requiring [him] to comply with the operating
agreement” because “Mark, or for that matter any dissatisfied member, can
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withdraw from the LLC and obtain his share of the LLC[’s] assets.” Mark
argues that this was error because “[w]hile the Superior Court was correct that
the Act allows for members to voluntarily withdraw, . . . [it] overlooked the
financial consequences of such a withdrawal” in that “[t]he Operating
Agreement does not obligate the Company to pay any consideration or buy-out
to [Mark] if he elects to withdraw” and the “Act . . . states that [Mark] would not
be entitled to any compensation for his membership interest upon his
withdrawal.” See RSA 304-C:105, II (2015) (providing that, unless the
operating agreement otherwise provides, “a dissociating member is not entitled
to receive any payment for the value of the member’s membership rights,
including the member’s limited liability company interest, as of the date of
dissociation”).
We decline to address the merits of this argument because Mark has not
provided a record demonstrating that he preserved it for our review. It is
Mark’s burden, as the appealing party, to demonstrate that he raised his
appellate arguments before the trial court. Dukette v. Brazas, 166 N.H. 252,
255 (2014).
In his reply brief, Mark argues that he preserved his argument by
arguing before the trial court that forcing him “into a perpetual relationship
with his brothers” would be “fundamentally unfair” because “his interests in
the company are restricted and inalienable, as he has no open market for
them.” Mark’s argument that his interests in the LLC “are restricted and
inalienable,” such that he has “no open market” for them is a different
argument from the argument he raises on appeal. Mark’s argument that there
is “no open market” for his interests in the LLC did not preserve, for our review,
his appellate argument that the trial court erred when it stated that, upon
withdrawal, he could obtain his share of the LLC’s assets because RSA 304-
C:105, II precludes the LLC from paying him compensation should he
withdraw.
To preserve the argument that Mark now raises on appeal, Mark would
have had to present it in a motion for reconsideration, which he did not do.
The trial court must have had the opportunity to consider any issues asserted
by the appellant on appeal; thus, to satisfy this preservation requirement, any
issues which could not have been presented to the trial court prior to its
decision must be presented to it in a motion for reconsideration. See
LaMontagne Builders v. Bowman Brook Purchase Group, 150 N.H. 270, 274
(2003); N.H. Dep’t of Corrections v. Butland, 147 N.H. 676, 679 (2002).
Because Mark did not preserve his appellate argument for our review, we
decline to address its merits.
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IV. Conclusion
We have reviewed the remainder of Mark’s arguments and conclude that
they do not warrant further discussion. See Vogel v. Vogel, 137 N.H. 321, 322
(1993). Therefore, for the reasons stated above, we hold that TASC’s operating
agreement and the Act permit a majority of TASC’s members to continue the
company beyond September 30, 2015. Accordingly, we affirm the trial court’s
grant of summary judgment in favor of the defendants.
Affirmed.
HICKS, CONBOY, and LYNN, JJ., concurred.
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