Tracy Barkalow v. Jeffrey Clark, Bryan Clark, Joseph Clark, and Outside Properties, LLC

IN THE COURT OF APPEALS OF IOWA
_______________

No. 25-1074
Filed May 13, 2026
_______________

Tracy Barkalow,
Plaintiff–Appellant,
v.
Jeffrey Clark, Bryan Clark, Joseph Clark and Outside Properties, LLC,
Defendants–Appellees.
_______________

Appeal from the Iowa District Court for Johnson County,
The Honorable John Telleen, Judge.
_______________

AFFIRMED AND REMANDED
_______________

William W. Graham (argued), Wesley T. Graham, and Tanner J. Berger of
Duncan Green, P.C., Des Moines, attorneys for appellant.

Kevin J. Caster (argued), Jackson C. Blais, Laurie L. Dawley, and Kate E.
Thorne Jewell of Shuttleworth & Ingersoll, PLC, Cedar Rapids, attorneys
for appellees.
_______________

Heard at oral argument
by Tabor, C.J., Sandy, J., and Doyle, S.J.
Telleen, S.J., takes no part.
Opinion by Tabor, C.J.

1
TABOR, Chief Judge.

Tracy Barkalow and his brothers-in-law—Jeffrey, Bryan, and Joseph
Clark—continue to tussle over their limited liability company, Outside
Properties, LLC.1 In 2019, the district court ordered the company dissolved
and the capital contributions of each member reclassified as debt. Barkalow
v. Clark, 959 N.W.2d 410, 417 (Iowa 2021). The supreme court reversed
those orders and remanded with instructions for the members to continue
operating Outside Properties. Id. at 422–23.

A year later, Barkalow petitioned for declaratory judgment, seeking to
judicially dissolve the company. In November 2024, the four owners agreed
to judicial dissolution of Outside Properties. The district court held a bench
trial on stipulated facts and exhibits to determine how the company’s
remaining assets should be distributed.

The issue before us is whether Outside Properties’ surplus assets
should be distributed per capital (based on the owners’ financial contributions
to the company) or per capita (equally between the owners). The district court
found the operating agreement called for per capital distributions. Barkalow
contends the operating agreement was silent on the method of distribution,
so the surplus should be divided in equal shares under the “default rule” in
Iowa Code chapter 489 (2022). He argues the district court wrongly relied
on documents outside the company’s operating agreement to reach its
contrary conclusion.

1
In the district court, Joseph sided with Barkalow. But he did not file a notice of
appeal, so the supreme court disallowed his joinder motion. We refer to the brothers
individually as needed or all three collectively as the Clarks, as determined by context.

2
On our de novo review, we find the operating agreement for Outside
Properties included not only the four-page document entitled Operating
Agreement, but also the Management Certificates, the Certificate of
Organization, and the Minutes of the Organizational Meeting—all signed in
August 2009. Read together, those four documents adopt a per capital
distribution plan for the operation of the company. And as the district court
determined, that same plan applied to distribution of the company’s surplus
at the time of dissolution. Thus, we affirm.

I. Facts and Prior Proceedings

Barkalow and the Clark brothers operated Outside Properties as a real
estate investment for over fifteen years. It started when they bought property
on Melrose Avenue in Iowa City, hoping to capitalize on the market for
rentals close to Kinnick Stadium. See Barkalow, 959 N.W.2d at 412–13. They
formed the business as a limited liability company (LLC) with each member
expected to contribute $41,000 as the first capital investment. Id. at 413
(noting that amount covered a $37,500 down payment plus an initial
installment). Barkalow couldn’t come up with the cash, so the Clarks offered
a loan, which he repaid. Id.

On August 25, 2009, Barkalow and the Clarks launched the LLC by
signing the Minutes of Organizational Meeting. At that meeting, they
decided that Barkalow would be “primarily responsible for the business” of
the company. The same day, they each signed Management Certificates
declaring their equal contributions “representing a 25% ownership interest”
for each contributor. Those certificates stated: “capital contribution and
proportionate equity interest is subject to change and is reflected in the books
and records of the company.”

3
While labeled Management Certificates, other provisions called the
documents Certificates of Ownership. Those certificates listed several
restrictions. For example, they gave the company and then current members
the first right to acquire additional equity by transfer, and they required
remaining members to agree before a transferee could participate in the
management of the business. If the members did not agree, the transferee
would “only be entitled to receive the share of the profit or other
compensation by way of income and the return of contributions” to which
the departing member would have been entitled.

Less than a week later, the four owners signed a document entitled
Operating Agreement. Explaining the powers of the members, the agreement
provided that formal action of the LLC required a majority vote of a quorum
of members. It defined a quorum as “a majority of the equity interests, as
determined by the capital contribution of each member as reflected on the
books of the company.” The article of the agreement governing distribution
of profits stated:
The members may from time to time unanimously declare, and the
company may distribute, accumulated profits that the members agree are
not necessary for the cash needs of the company’s business. Unless
otherwise provided, retained profits shall be deemed an increase in the
capital of the company.

But the agreement did not specify the method of distributing profits, and
Outside Properties never made any distributions to its members.

As the final act to create the LLC, Barkalow and the Clarks filed a
Certificate of Organization with the State of Iowa in October 2009.2 It

2
The October filing was the second draft. Barkalow and the Clarks also prepared
and signed a draft on August 25, alongside the Management Certificates and Meeting
Minutes. After they signed the Operating Agreement, their attorney suggested edits,

4
specified that they each chipped in $41,000 and that “no additional capital
contributions” would be required. Additional provisions noted that new
members would be admitted only by the unanimous consent of the existing
members. On a member’s “death, retirement, resignation, expulsion, [or]
bankruptcy” or the dissolution or termination of a membership, the
remaining members could continue operating the business. In that event, the
certificate provided that
[t]he return of capital and the distribution of profits shall be determined
from the company’s books, as of the effective date of withdrawal, based on
generally accepted accounting practices, and paid as soon as practicable
without diminishing the prospects of the company’s ventures and subject
to the limitations of . . . chapter 489 of the Code of Iowa, as amended.

The certificate did not specify what sections of chapter 489 were relevant. As
far as daily operations, the certificate left it to the members or their designees
to determine “in the manner described in the company’s operating
agreement.”

For several years, Barkalow and the Clarks split duties related to
Outside Properties, on top of running their individual companies. See
generally id. at 412–17. In 2010, they agreed to amend the Operating
Agreement to create class “B” non-voting interests, and each owner gave
shares to their family members. The four original owners remained the only
voting members.

commenting, “Some of the issues that I have raised in this letter are addressed by statute,
although I think that it is generally better to spell them out specifically if they are of
significant importance.” The filed Certificate of Organization incorporated a few of the
attorney’s minor edits but none of the substantive ones. Of relevance, the attorney noted,
“There is no provision for adjustment of Capital Accounts on a periodic basis for
additional capital contributions and withdrawals.” He also suggested a provision to clarify
the adjustment of voting rights with capital account ratios.

5
Also in 2010, the company acquired several other properties near
Kinnick Stadium. See id. at 413. The Clarks provided a loan for the down
payment from their family company, and the seller provided financing of
around $1 million with a balloon payment due in December 2015. Id.

Around 2013, Barkalow’s relationship with Jeff and Bryan began to
fray. See id. at 414. In 2015, when the balloon payment came due, Barkalow
wouldn’t help the Clarks address it. Id. So Bryan, Jeff, and Joseph agreed to
make capital contributions to Outside Properties to cover the payment. Id.
Barkalow again declined to contribute. Id. But the Clarks each invested
$333,956.62 more in capital. Id.

In early 2016, the Clarks proposed several solutions to ease the
tensions in the company, including offering to buy out Barkalow’s share,
using third-party financing to cover loans, and contributing more capital.
Barkalow rejected these offers. Later that year, the Clarks voted to repay their
own company’s loan to Outside Properties. Id. at 415. When Joseph backed
out of that agreement, Jeff and Bryan split his share, making additional
contributions totaling $474,999 each.

By summer 2017, the situation escalated into litigation. Barkalow sued
the Clarks—seeking to remove them as members, to dissolve the company,
and to obtain a damage award. Id. The Clarks counterclaimed, asserting
Barkalow had transferred money from Outside Properties to his own
ventures. After a five-day bench trial, the district court denied Barkalow’s
claims and found he had improperly converted assets from Outside
Properties. It also ordered the judicial dissolution of the company. In doing
so, it reclassified the capital contributions that the Clarks made in 2015 and
2016 as company debt. Id. at 417–18.

6
In its May 2021 decision, the supreme court affirmed the conversion
rulings but reversed the dissolution and reclassification orders, finding the
situation did not meet the stringent standard for judicially dissolving the
company. Id. at 423 (“Dissolution under Iowa Code section 489.701(d)(2) is
not a wide-ranging mechanism for doing equity, but a drastic remedy to be
ordered when an LLC is truly in an unmovable logjam or cannot as a practical
matter carry on its contracted purpose. Neither circumstance is present
here.”).

Barkalow filed this action in October 2022 seeking declaratory and
injunctive relief and to dissolve the company and appoint a receiver. He
argued that, after the return of each member’s individual capital
contributions, the surplus assets of Outside Properties should be distributed
in equal shares among the members, according to the default statutes. In
February 2024, on the Clarks’ motion, the court granted partial summary
judgment, finding Barklow was “precluded from relitigating issues decided”
in the first appeal.3 Before trial, they stipulated to the judicial dissolution of
the company.

The district court held a bench trial on stipulated facts, exhibits, and
briefs, deciding only how the surplus assets should be distributed. At trial,
Joseph joined in Barkalow’s cause, advocating for an equal four-way split. But
the court ruled that the assets should be distributed according to the owners’
capital contributions based on its interpretation of the Operating Agreement,

3
Two months later, the parties transferred the case to the Iowa Business Court,
sitting in Johnson County.

7
the Management Certificates, the Certificate of Organization, as well as the
2010 amendment to the Operating Agreement.4

Barkalow appeals.

II. Scope and Standard of Review

Because the declaratory judgment action was equitable in nature, our
review is de novo. Barkalow, 959 N.W.2d at 418 (“Judicial dissolution is an
equitable proceeding and our review is de novo.”). Although interpretations
of contracts and statutes would typically be reviewed for errors at law, here
they fall under the de novo umbrella. See Rector v. Alcorn, 241 N.W.2d 196,
199 (Iowa 1976) (“[O]nce equity has obtained jurisdiction of a controversy, it
will determine all questions material or necessary to accomplish full and
complete justice between the parties, even though in doing so it may be
required to pass upon some matters ordinarily cognizable at law.” (citation
omitted)). In equity cases, we give weight to the district court’s factual
findings, but we are not bound by them. Iowa N. Ry. Co. v. Floyd Cnty. Bd. of
Supervisors, 29 N.W.3d 307, 311–12 (Iowa 2025).

III. Analysis

Barkalow contends that after its dissolution, Outside Properties’
surplus assets should be distributed based on the number of owners, not on
the proportion of their contributions to the company’s capital. He insists that
because the company’s operating agreement is silent on the manner of
distribution, the method prescribed by Iowa Code chapter 489 controls. See
Iowa Code § 489.110(2) (2009) (explaining that when the operating

4
Barkalow moved to reconsider. The court did adjust its recitation of Barkalow’s
position at trial. But that adjustment was immaterial to its findings, so the court denied
his request to change any legal conclusions.

8
agreement does not otherwise provide for a matter, chapter 489 governs).5
That chapter provides that, after the payment of debts and the return of the
individual members’ capital contributions, the surplus assets are to be
distributed “[i]n equal shares” to the members of the limited liability
company. Iowa Code § 489.708(2)(a), (b).6

Iowa adopted the Revised Uniform Limited Liability Company Act
(RULLCA) in 2008. See 2008 Iowa Acts ch. 1162 (codified at Iowa Code
chapter 489). Under that act, the governance of an LLC is typically
“controlled by an operating agreement agreed to by the members.” Hunter
Three Farms, LLC v. Hunter, 18 N.W.3d 1, 6 (Iowa 2025) (quoting Iowa Code
§§ 489.104(1), .105(1)). “If the company has an operating agreement, it is
binding.” Id.; see also Homeland Energy Sols., LLC v. Retterath, 938 N.W.2d
664, 687 (Iowa 2020) (“Iowa law dictates that an LLC is bound by its
operating agreement.”).

5
The code lists these matters within the scope of an operating agreement:
a. Relations among the members as members and between the
members and the limited liability company.

b. The rights and duties under this chapter of a person in the
capacity of manager.

c. The activities of the company and the conduct of those activities.

d. The means and conditions for amending the operating
agreement.

Iowa Code § 489.110(1).
6
Our record does not include the books of the company, so we don’t know whether
there will be surplus assets to distribute. If an LLC lacks “sufficient surplus to comply”
with section 489.708(2), “any surplus must be distributed . . . in proportion to the value
of [the members’] respective unreturned contributions.” Iowa Code § 489.708(3).

9
To address Barkalow’s claim, we must examine Outside Properties’
operating agreement. To begin, the parties dispute which documents
comprise that agreement. Barkalow takes a narrow view. He argues that the
search for the proper method of distribution must begin and end with the
document labeled “Operating Agreement,” which the four owners signed on
August 31, 2009. According to Barkalow, nothing in the Minutes of
Organizational Meeting of the Members of Outside Properties (signed
August 25), the Management Certificates (signed August 25), or the
Certificate of Organization (signed August 25, amended and filed October 2)
refers to operational agreements. In short, Barkalow asserts: “there is only
one document comprising the Operating Agreement of Outside Properties.”
Jeff and Bryan disagree. They characterize Barkalow’s interpretation as
“myopic” and maintain that the company’s operating agreement was
broader than one document.

To settle the parties’ debate, we start with the statutory definition of
“operating agreement” included in the chapter governing LLCs:
the agreement, whether or not referred to as an operating agreement and
whether oral, in a record, implied, or in any combination thereof, of all the
members of a limited liability company, including a sole member,
concerning the matters described in section 489.110, subsection 1. The
term includes the agreement as amended or restated.

Iowa Code § 489.102(15). This definition embraces a broad range of
communications any of which or “any combination thereof” can comprise
an operating agreement “whether or not referred to” with that label. Id.; see
also Revised Unif. Ltd. Liab. Co. Act § 102 cmt (Unif. L. Comm’n 2006)
(“The definition in Paragraph 13 is very broad and recognizes a wide scope
of authority for the operating agreement . . . . Moreover, the definition puts
no limits on the form of the operating agreement.”).

10
The breadth of the RULLCA’s definition supports Jeff and Bryan’s
position. Barkalow’s exclusive focus on the four-page Operating Agreement
is too constricted where other communications reveal insights into matters
governed by an operating agreement. We conclude that the intent of the
operating agreement reached by the members of Outside Properties can be
discerned from the combination of the Operating Agreement, the
Management Certifications, and the Certificate of Organization, as well as
the meeting minutes from August 2009.7

Resisting that conclusion, Barkalow points out that neither the
meeting minutes nor the Operating Agreement mention “any extraneous
documents” being incorporated into the agreement. But the lack of
incorporation does not dissuade us from reviewing these founding
documents in tandem. We may do so because nothing in the Operating
Agreement says that the members intended it to stand as the exclusive
summary of their agreement on how to conduct the activities of the company.
What’s more, there are cross references. For example, the Management
Certificates refer to the Certificate of Organization and “all Operating
Agreements as may be in force”; and the minutes name Barkalow as the
business’s manager whose rights and duties are enumerated in the Operating
Agreement.

As for timing, the proximity of signing all four documents shows the
members intended the combined provisions to constitute the operating
agreement for Outside Properties. See Taylor Enter., Inc. v. Clarinda Prod.

7
The district court analyzed the Operating Agreement separately but noted when
discussing the other documents that the Operating Agreement’s lack of an integration
clause meant that the court could consider extrinsic evidence, citing Alta Vista Props., LLC
v. Mauer Vision Ctr., PC, 855 N.W.2d 722, 729 (Iowa 2014). While we take a different route
than the district court, we reach the same destination.

11
Credit Ass’n, 447 N.W.2d 113, 115 (Iowa 1989) (“Instruments relating to the
same transaction which are contemporaneously executed should be
construed together.”). Thus, we construe the parties’ intent from the whole
agreement as it existed at the formation of the LLC. See Walsh v. Nelson, 622
N.W.2d 499, 503 (Iowa 2001). The matters discussed in those documents
make up the operating agreement for Outside Properties in 2009.

So what does that operating agreement say about how the company
should distribute any surplus assets as it winds up its business? Because the
operating agreement is a contract, we turn to the principles of contract
interpretation. See Revised Unif. Ltd. Liab. Co. Act § 102 cmt. We apply
those principles to determine the intent of the parties when they entered their
agreement. Retterath, 938 N.W.2d at 687. The language used by the parties is
the most important proof of their intentions, and therefore, we strive to give
effect to all provisions of the agreement. Id.

Barkalow argues that Outside Properties’ operating agreement
contains no direct expression of how assets are to be distributed at
dissolution. But the district court thought otherwise. It ruled that “the
Operating Agreements expressly adopt a per capital ownership and
distribution scheme, which, in turn, requires per capital asset disbursement
when winding up.” The court discerned that intent in the Operating
Agreement provisions defining a quorum as “a majority of the equity
interests, as determined by the capital contribution of each member as
reflected on the books of the company” and specifying that the act of a
majority of the members present with a quorum “shall be the act of the
members.” The court also saw that intent in the provision that, “[u]pon
demand of any member, voting on a particular issue shall be in proportion to
the capital contributions of each member to the company, as adjusted from

12
time to time to reflect any additional contributions or withdrawals.” As the
court reasoned, these provisions tied the individual owners’ “equity
interests” to their “capital contribution.”

And the court took insight from the Management Certificate clauses
that “[t]he stated capital contribution and proportionate equity interest is
subject to change,” stating, “The Court interprets the ‘equity
interests’ . . . as identical with the term ‘transferable interest’ in Iowa Code
§ 489.102.” (Footnote omitted.) That section defines “transferable interest”
as “the right, as initially owned by a person in the person’s capacity as a
member, to receive distributions from a limited liability company, whether or
not the person remains a member or continues to own any part of the right.”
Iowa Code § 489.102(30)(a) (2024). The court concluded, “[F]rom the
beginning of the LLC, the parties’ right to receive distributions was
proportionate to their individual capital contributions.”

Finally, the court relied on the “Continuity of Life” provision in the
Certificate of Organization. That paragraph discussed the right of the
remaining members to continue the business when another owner’s
membership is terminated. In that event, “The return of capital and the
distribution of profits shall be determined from the company’s books . . . .”

Barkalow rejects the district court’s extrapolation of the members’
intent from those scattered provisions. He contends that where the Operating
Agreement addresses distributions, it only empowers the members to vote
for a distribution with accumulated profits, otherwise retained profits
become part of the company capital. He criticizes the court’s reading of the
quorum rule and the rules allocating voting rights arguing, “These sections
do not discuss the distribution of profits to the members.”

13
But those sections—and the others highlighted by the district court—
provide necessary context for the whole agreement. See Degeneffe v. Home
Pride Contractors, Inc., 16 N.W.3d 501, 507 (Iowa 2025) (“In interpreting
contracts, we give effect to the language of the entire contract according to
its commonly accepted and ordinary meaning. Moreover, particular words
and phrases are not interpreted in isolation. Instead, they are interpreted in a
context in which they are used.” (citation omitted)). Voting rights is a good
example of this context-interpretation rule. On the one hand, under the
Operating Agreement, a majority of a quorum of voting members ordinarily
can approve an act of the LLC. On the other hand, “[u]pon demand of any
member, voting on a particular issue shall be in proportion to the capital
contributions of each member to the company, as adjusted from time to time
to reflect any additional contributions or withdraw[al]s.” Thus, allocation of
voting power per capital is enshrined in the Operating Agreement.

We also see the members’ intent to follow a per capital ownership and
distribution scheme from the Management Certificates. Those certificates
provide that each member’s “capital contribution and proportionate equity
interest is subject to change and is reflected in the books and records of the
company that are prepared and kept.” As Jeff and Bryan contend, this
language reveals that “a member’s equity and interest in the company is
based off of his capital contributions, which are subject to change.”

Read as an integrated package, these operating agreement documents
contemplate changing interests proportional to the capital contribution of the
individual member. See Barkalow, 959 N.W.2d at 414 n.3 (“Barkalow pursued
[the argument that the creation of class B stock diluted his voting power] at
trial and the district court ruled against him. The district court found that
under the ‘demand’ vote provision in the operating agreement, voting is in

14
proportion to ‘capital contributions,’ not units or interests. Barkalow has not
appealed this issue.”). These documents reflect that the members’
ownership and equity interests were subject to change and were in proportion
to capital contributions, even when transferred by a voting member to a non-
voting member.

From the company’s inception, its members acknowledged that
capital contributions could potentially become unequal and accepted that
voting power within the company and the right to distributions would be
allocated to account for that disparity. As our bottom line, we reach the same
conclusion as the district court. The documents comprising Outside
Properties’ operating agreement show that members intended distribution of
the company’s surplus assets on dissolution to be in proportion to the capital
contributions—per capital—not equal for all members—per capita. Thus, we
affirm the district court ruling and remand for further proceedings and
appropriate orders.

AFFIRMED AND REMANDED.

15