Leoff v. S & J Land Company

FILED
United States Court of Appeals
Tenth Circuit

UNITED STATES COURT OF APPEALS November 4, 2015

Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court

RICHARD CHANCE LEOFF,

Plaintiff - Appellee/
Cross-Appellant,

v. Nos. 14-1146 and 14-1158
(D. Colorado)
S AND J LAND COMPANY, a Colorado (D.C. No. 1:08-CV-02112-RPM-MEH)
limited liability company,

Defendant - Appellant/
Cross-Appellee.

ORDER AND JUDGMENT*

Before KELLY, HARTZ, and GORSUCH, Circuit Judges.

We are presented with the second appeal in this case. On the first appeal we

affirmed the district court’s ruling that Richard Leoff and S and J Land Company (S & J)

had formed a partnership that was dissolved by the court’s decree on December 21, 2010.

We also affirmed the rulings that Leoff had wrongfully filed a mechanic’s lien on the

*
This order and judgment is not binding precedent, except under the doctrines of law of
the case, res judicata, and collateral estoppel. But it may be cited for its persuasive value.
See Fed. R. App. P. 32.1; 10th Cir. R. 32.1.
White House condominiums (the partnership’s sole project); that Leoff owed S & J a

$1,000 statutory penalty for his improper filing of a lis pendens; and that neither partner

had proved a breach of fiduciary duty by the other. But we reversed and remanded in

part because the court had failed to conduct a final accounting of the partnership assets

and liabilities and had neglected to award S & J its attorney fees in voiding the

mechanic’s lien.

On remand the district court ordered Leoff to repay (with interest) a $50,000

advance on partnership profits that he had received from S & J; and it awarded

$24,788.65 to S & J for its district-court attorney fees and costs in voiding the mechanic’s

lien. But it again failed to conduct a full accounting and, apparently through oversight, it

failed to include in its judgment the $1,000 previously ordered as a penalty against Leoff

for improperly filing a lis pendens. We reverse and remand again for the district court to

conduct an accounting and to correct its judgment by including the $1,000 penalty. We

also award $5,000 to S & J for its attorney fees in defending on the first appeal the

judgment in its favor on the mechanic’s lien.

I. ACCOUNTING

Our decision on the first appeal ordered the district court “to conduct a final

partnership accounting.” Leoff v. S & J Land Co., 503 F. App’x 630, 631 (10th Cir.

2012). That court had declared the partnership dissolved. But after dissolution the

partnership must be wound up. See Colo. Rev. Stat. § 7-64-802(1) (1997) (“[A]

partnership continues after dissolution only for the purpose of winding up its business.”).
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It must use its assets to pay off creditors, see id. § 7-64-807(1) (“In winding up a

partnership’s business, the assets of the partnership . . . shall be applied to discharge or

provide for partnership obligations to creditors . . . .”), and reasonably compensate the

winding-up partner “for services rendered in winding up the business of the partnership,”

id. § 7-64-401(8). The resulting net worth (or debt) must then be apportioned among the

partners in accordance with their agreement and an accounting. See id. § 7-64-807(2)

(“Each partner is entitled to a settlement of all partnership accounts upon winding up the

partnership business. In settling accounts among the partners, the profits and losses that

result from the liquidation of the partnership assets shall be credited and charged to the

partners’ accounts.”); see also Tucker v. Ellbogen, 793 P.2d 592, 597–98 (Colo. App.

1989) (describing partnership dissolution procedures).

The district court did order a sale of the partnership’s sole asset, the White House

property, which occurred on January 28, 2011. See Leoff, 503 F. App’x at 634. But the

court did not conduct an accounting to determine the partnership’s final value and

apportion that amount (positive or negative) between the two partners. Rather, it said,

“[a]ccepting that there was an effective dissolution of this partnership before construction

began [in May 2007], it would be incongruous to hold Leoff liable for losses that S & J

incurred in pursuing the project to completion and sale after litigation,” and “[t]here is no

conceivable basis for any finding that Leoff would be liable as a general partner to any

creditor of S & J after May, 2007, and he should have no liability to S & J for its losses

3
after that date.” R., Vol. XI at 2273 (Findings, Conclusions and Order, Leoff v. S & J

Land Co., No. 08-cv-02112-RPM (D. Colo. Mar. 21, 2014)).

But the law is otherwise. As stated in our decision on the first appeal, until the

partnership is wound up, a partner (like Leoff) must share in any decrease in the value of

partnership assets, even if the partner cannot be “blamed” for the decrease. See Leoff,

503 F. App’x at 637. Of course, each partner owes a fiduciary duty to treat the other

partner fairly as the assets are disposed of. See Colo. Rev. Stat. § 7-64-404(2)–(3);

Tucker, 793 P.2d at 597–98. But the district court had previously found that neither

partner had proved a breach of fiduciary duty by the other. Absent misconduct by S & J,

we fail to see any basis on which the court could limit Leoff’s share of the partnership

losses.

Leoff’s brief on appeal presents no argument that the district court conducted an

accounting. He suggests (in one sentence) only that the district court properly ignored

evidence of S & J’s pro forma tax returns. This argument fails in two respects. First, the

court’s findings and conclusions on remand said nothing about rejecting the tax-return

evidence. Second, even if the court rejected some evidence, it still would need to conduct

an accounting, or explain why it could not do so.

“[A] district court must comply strictly with the mandate rendered by the

reviewing court.” Ute Indian Tribe of Uintah & Ouray Reservation v. Utah, 114 F.3d

1513, 1521 (10th Cir. 1997) (internal quotation marks omitted). That was not the course

taken by the district court. The court did require Leoff to repay a $50,000 advance on
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partnership profits; but it made no attempt to apportion losses between partners during

the full existence of the partnership. We therefore must reverse again and remand with

the same direction to conduct a full accounting, which should include compensation to

S & J for any reasonable services during the partnership winding up.

II. ATTORNEY FEES

This litigation began when Leoff filed a mechanic’s lien against the White House

property and then sued to enforce the lien. S & J prevailed on this claim, obtaining a

partial summary judgment that the lien was invalid because the property was owned by a

partnership of Leoff and S & J and a partner cannot file a mechanic’s lien against

partnership property. We affirmed that ruling but ordered the district court on remand to

award S & J attorney fees in defending against the lien, as required by Colo. Rev. Stat.

§ 38-22-128 (1975). The court then awarded attorney fees for S & J’s effort in obtaining

the partial summary judgment.

On this appeal S & J contends that it should also be entitled to fees incurred in

defending against Leoff’s efforts to challenge the existence of a partnership in

proceedings after the partial summary judgment, both in district court and on the first

appeal. But the district court awarded S & J all it requested in attorney fees incurred in

district court, so that leaves only its request for its fees for the first appeal. Although its

briefs on the first appeal requested appellate attorney fees, we did not expressly address

that issue. We now award $5,000 to S & J for defending the partial summary judgment

on appeal. See JW Const. Co. v. Elliott, 253 P.3d 1265, 1273 (Colo. App. 2011)
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(awarding fees under Colo. Rev. Stat. § 38-22-128 “for defending the appeal of the

excessive lien award”).

III. STATUTORY PENALTY

S & J argues that the $1,000 statutory penalty for Leoff’s improper filing of a lis

pendens was erroneously omitted from the district court’s judgment. We agree. See

Leoff, 503 F. App’x at 640. The penalty should be included in the judgment on remand.

IV. LEOFF’S CROSS-APPEAL

In his cross-appeal Leoff raises what he terms equitable estoppel.1 Citing Extreme

Construction Co. v. RCG Glenwood, LLC, 310 P.3d 246 (Colo. App. 2012), he argues:

[A] party that disaffiliates a former partner, as S and J did as to Mr. Leoff,
then proceeds with executing a project on an entirely different basis from
the initial intention of the partners, cannot be heard to claim damages
measured by a fictitious accounting fabricated to show alleged losses had
the project continued on a vector long since abandoned for a more
profitable scenario.

Aplee. Br. at 10–11.

1
Leoff also argues (in two sentences) that the district court was correct in exercising
judicial discretion to interpret contracts. But he fails to explain how contract
interpretation is relevant to any of the issues on appeal. He then argues (in one sentence)
that the court “correctly concluded that Colorado’s statutory scheme for partnership
winding-up was inapposite to the remand.” Aplee. Br. at 14. But the court made no such
determination, and Leoff fails to argue why the statute would not apply. We need not
respond to these undeveloped arguments. See Bronson v. Swensen, 500 F.3d 1099, 1104
(10th Cir. 2007) (“[W]e routinely have declined to consider arguments that are . . .
inadequately presented[] in an appellant’s opening brief.”). Also, in his reply brief on
cross-appeal, Leoff argues that S & J breached its fiduciary duty to him. We need not
reach this argument because it was not in his opening brief. See id. (“[T]he omission of
an issue in an opening brief generally forfeits appellate consideration of that issue.”).
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 We reject the argument. To begin with, Extreme Construction is not on point. It

holds only that if a contract term is ambiguous, a party’s delay in disputing the other

party’s interpretation may equitably estop it from later contesting that interpretation. See

Extreme Constr., 310 P.3d at 252. To make out a case for equitable estoppel by reason of

delay, Extreme Construction requires establishing “(1) the other party had full knowledge

of the facts, (2) the other party unreasonably delayed in asserting an available remedy,

and (3) the party asserting the doctrine relied on the other party’s delay to its detriment.”

Id. Leoff does not explain how Extreme Construction is relevant here. He does not point

to an ambiguous contract term, explain how S & J unreasonably delayed, or assert any

reliance.

Second, Leoff did not raise this issue in district court. Although we occasionally

permit a party to seek affirmance of a district-court judgment on a ground not raised

below, we consistently refuse to do so when the new argument is fact-dependent because

the opposing party has not had an opportunity to present contrary or countervailing

evidence. See Elkins v. Comfort, 392 F.3d 1159, 1162 (10th Cir. 2004) (“In exercising

[discretion to affirm on a ground not adopted by the district court] we consider whether

the ground was fully briefed and argued here and below, whether the parties have had a

fair opportunity to develop the factual record, and whether, in light of factual findings to

which we defer or uncontested facts, our decision would involve only questions of law.”

(brackets, citations, and internal quotation marks omitted)); Dist. 22 United Mine

Workers of Am. v. Utah, 229 F.3d 982, 991 (10th Cir. 2000) (“[W]e decline to affirm the
7
judgment of the district court on this alternate ground due to the factual nature of the

statute of limitations inquiry in this case.”). That is the situation here, because equitable

claims are always quite fact-based. See Extreme Constr., 310 P.3d at 252 (“Whether the

circumstances of a particular case support the application of the equitable estoppel

doctrine is a question of fact . . . .”).

V. CONCLUSION

We REVERSE the district court’s refusal to conduct a final partnership accounting

and its failure to include the $1,000 penalty in its judgment; and we REMAND to correct

these errors. We also AWARD $5,000 to S & J against Leoff for its attorney fees on the

first appeal relating to the mechanic’s lien, and we DENY Leoff’s emergency motion for

a remand. Costs should be reassessed by the district court in light of the change in the

judgment. See Stichting Mayflower Recreational Fonds v. Newpark Res., Inc., 917 F.2d

1239, 1248 (10th Cir. 1990) (“Because our opinion alters the relief obtained by the

parties to some degree, on remand the district court should exercise its discretion and

determine what, if any, changes should be made to the original assessment of costs.”).

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Finally, on remand the case should be assigned to a different district judge.2

ENTERED FOR THE COURT

Harris L Hartz
Circuit Judge

2
The accounting dispute has been pursued simultaneously in both state and federal court.
After the district court’s order on remand, the San Miguel County District Court held a
trial on the issue of a final accounting, finding that Leoff must contribute $377,294 to
settle partnership accounts. Leoff has appealed the judgment to the Colorado Court of
Appeals. The district court may wish to stay its proceedings until the Colorado Court of
Appeals rules on Leoff’s appeal.
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