GSI v. Hudson

Opinion

20CA0987 GSI v Hudson 10-07-2021

COLORADO COURT OF APPEALS

Court of Appeals No. 20CA0987

Adams County District Court No. 19CV41

Honorable Robert W. Kiesnowski, Jr., Judge

GSI Enterprises, Inc.,

Plaintiff-Appellant,

v.

Hudson Real Estate Co.,

Defendant-Appellee.

ORDER AFFIRMED

Division VII

Opinion by JUDGE GROVE

Navarro and Pawar, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced October 7, 2021

Fortis Law Partners LLC, David Olsky, Henry M. Baskerville, Denver, Colorado,

for Plaintiff-Appellant

Volant Law LLC, Tobin D. Kern, Englewood, Colorado, for Defendant-Appellee

1

¶ 1

Plaintiff GSI Enterprises, Inc., appeals the district court’s

judgment dismissing its complaint against defendant Hudson Real

Estate Co. for lack of standing. We affirm.

I. Background

¶ 2

We draw the following facts from GSI’s amended complaint.

¶ 3

In the summer of 1992, GSI, along with co-investors Carlos

Saurini and Christopher Erskine, purchased the Riviera apartment

complex located in Northglenn. Each co-owner took a minority

interest in the complex matching their contribution to the purchase

price: GSI held 42.5%; Saurini held 42.5%; and Erskine held 15%.

The co-owners agreed that after collection of rents, payment of

operating expenses, maintenance, repair, and management fees,

they would split the Riviera’s net revenue in proportion to their

ownership interests.

¶ 4

In August 2008, the co-owners agreed to hire Hudson as their

property manager for Riviera. Each co-owner signed the

management agreement, but they were collectively identified as

“Owner” in the document. According to the agreement, Hudson was

to pay the net profit from the operation of the apartment complex to

each co-owner based on their respective ownership percentages.

2

¶ 5

In 2014, mold was discovered in some of the buildings at the

Riviera. Hudson supervised an initial remediation of this issue, but

an additional inspection uncovered more problems. GSI, Saurini,

and Erskine could not agree on how Hudson should proceed

regarding the necessity, scope, method, and cost of remediation.

The relationship among the co-owners became so highly

dysfunctional that Erskine requested, and the co-owners were

granted, a court-appointed receiver. After the co-owners stipulated

to the sale of the apartment complex, the receiver sold the property

and distributed the net proceeds to them in proportion to their

ownership interests.

¶ 6

GSI then sued Saurini, Erskine, and Hudson, alleging that

both Saurini and Erskine’s lack of investment in, and Hudson’s

mismanagement of, the Riviera had reduced its fair market value.

In its original complaint, GSI asserted multiple claims for relief

against Saurini and Erskine, including breach of partnership

agreement and breach of fiduciary duty to the partnership. GSI

specifically alleged the formation and existence of a partnership in

its filing.

3

¶ 7

In response, Hudson filed a motion to dismiss for lack of

subject matter jurisdiction pursuant to C.R.C.P. 12(b)(1), asserting

that GSI lacked standing to sue because (1) any injuries that it

alleged belonged to the partnership; (2) GSI was a minority member

of the partnership and was not authorized by the other members of

the partnership to sue; and (3) GSI did not assert unique claims

that it could assert separate from the partnership.

¶ 8

GSI then amended its complaint, dropped Saurini and Erskine

as defendants, and removed allegations that the co-owners had

been members of a partnership. However, the underlying facts

regarding GSI, Saurini, and Erskine’s investment in the business of

the Riviera remained largely the same. Hudson again moved to

dismiss. Concluding that the factual allegations in the amended

complaint established the existence of a partnership, the district

court granted the motion because the existence of a partnership

deprived GSI of standing to sue in an individual capacity.

II. Standard of Review

¶ 9

In considering a district court’s dismissal for lack of subject

matter jurisdiction under C.R.C.P. 12(b)(1), we review the district

court’s legal conclusions de novo and its factual determinations, if

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any, for clear error. See Monez v. Reinertson, 140 P.3d 242, 244

(Colo. App. 2006). Where, as here, there are no disputed issues of

material fact, we review de novo a C.R.C.P. 12(b)(1) motion to

dismiss for lack of subject matter jurisdiction. Tulips Invs., LLC v.

State ex rel. Suthers, 2015 CO 1, ¶ 11.

III. Legal Standard

¶ 10

Standing is a jurisdictional prerequisite to every case.

Espinosa v. Perez, 165 P.3d 770, 772 (Colo. App. 2006). At the

district court level, the plaintiff bears the burden of proving

jurisdiction. City of Boulder v. Pub. Serv. Co., 2018 CO 59, ¶ 14.

¶ 11

C.R.C.P. 12(b)(1) governs motions to dismiss based on a lack

of subject matter jurisdiction. Asphalt Specialties, Co. v. City of

Commerce City, 218 P.3d 741, 744 (Colo. App. 2009). In reviewing

an order dismissing a complaint under Rule 12(b)(1), we examine

the substance of the claim based on the facts alleged and the relief

requested. City of Aspen v. Kinder Morgan, Inc., 143 P.3d 1076,

1078 (Colo. App. 2006).

IV. Analysis

¶ 12

The sole question before us is whether GSI has standing to

bring a claim against Hudson. We conclude that GSI does not have

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standing to bring its claim because the facts that it alleged in the

amended complaint, if proven, would establish that it was a

minority member of a general partnership, and GSI did not receive

consent from a majority of the general partners to initiate the

lawsuit.

A. General Partnership

¶ 13

As a threshold matter, we consider whether the facts in the

amended complaint, if proven, would establish that GSI is a

member of a general partnership, or whether, as GSI contends, they

merely demonstrate the existence of a tenancy in common.

¶ 14

Because GSI, Saurini, and Erskine acquired Riviera in 1992,

the Uniform Partnership Law (UPL), § 7-60-101 to -154, C.R.S.

2020, applies. See Adams v. Land Servs., Inc., 194 P.3d 429, 431

(Colo. App. 2008) (explaining that the UPL applies to partnerships

formed prior to 1998); see also § 7-64-1205(1)(a), C.R.S. 2020

(explaining that the Colorado Uniform Partnership Act applies to

partnerships formed after January 1, 1998).1 The UPL defines a

1 Without providing much detail in their briefing, both GSI and

Hudson concede that the UPL governs our analysis.

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partnership as “an association of two or more persons to carry on,

as co-owners, a business for profit . . . .” § 7-60-106(1), C.R.S.

2020; Reid v. Pyle, 51 P.3d 1064, 1066 (Colo. 2002).

¶ 15

Ordinarily, a partnership is voluntarily formed by an

agreement between two or more persons or entities. Yoder v.

Hooper, 695 P.2d 1182, 1187 (Colo. App. 1984), aff’d, 737 P.2d 852

(Colo. 1987). But even in the absence of a formal agreement or

other evidence detailing the express intentions of the parties, a

partnership may be legally inferred based on the conduct of the

parties involved. Id.

¶ 16

Profit sharing is the “‘primary attribute’ of, and a ‘necessary

condition’ for, a partnership.” Colo. Performance Corp. v. Mariposa

Assocs., 754 P.2d 401, 405 (Colo. App. 1987) (quoting Judson

Adams Crane & Alan Bromberg, Law of Partnership 66 (1968)). An

agreement to pool resources into a business and share the profits

and losses of that business is generally sufficient to establish that a

partnership has been formed. See In re S & D Foods, Inc., 144 B.R.

121, 158 (Bankr. D. Colo. 1992) (“[A partnership is] defined as an

express or implied contract between two or more persons to place

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their money, skill, effects or labor into a business, and to share the

profit and losses. No express agreement is necessary.”).

¶ 17

Based on the facts alleged in the amended complaint, we agree

with the district court’s conclusion that GSI entered a partnership

with Saurini and Erskine.

¶ 18

As required by the definition of partnership in the statute, GSI

entered into business with Saurini and Erskine (by associating with

“two or more persons”) as co-owners of Riviera (“a business for

profit”). § 7-60-106(1). The parties pooled resources into a

business (the Riviera); actively managed it by hiring (and firing) a

string of management companies, culminating with Hudson; shared

its net profits; and shared responsibilities for ongoing expenses and

debts. See In re S & D Foods, Inc., 144 B.R. at 158.

¶ 19

We acknowledge that mere common ownership of property

does not itself establish a partnership. See § 7-60-107(1)(b), C.R.S.

2020; Brown v. Miller, 111 Colo. 327, 331, 141 P.2d 682, 684

(1943). But nor does common ownership prevent a partnership

from existing. Indeed, “partnerships are often created in which a

‘silent’ partner contributes money, credit, or property,” and a

partnership can be formed even if the partners are “not active in the

8

day-to-day operation or management of the business.” In re Lamb,

36 B.R. 184, 189 (Bankr. E.D. Tenn. 1983). Where co-owners are

actively involved in the management of a property — or delegate

that work to an agent whose work they oversee — a partnership

typically exists. See Vohland v. Sweet, 433 N.E.2d 860, 864 (Ind.

Ct. App. 1982) (explaining that a “partnership may be formed by the

furnishing of skill and labor by others”); Matlins v. Sargent, No. 86

CIV. 0370 (MJL), 1991 WL 79219, at *5 (S.D.N.Y. May 7, 1991)

(unpublished opinion) (finding that a co-owner of a business was a

partner partly because he “had a voice in the management” of a

business).

¶ 20

Therefore, we agree with the district court and determine that

a partnership existed.

B. Standing

¶ 21

Having determined that a partnership existed between GSI,

Saurini, and Erskine, the question of GSI’s standing is

straightforward. In a case with similar facts, a division of this court

determined that minority members of a partnership did not have

standing to bring an action either on behalf of the partnership or in

an individual capacity. See Adams, 194 P.3d at 432-33. We agree

9

with the analysis in Adams, and therefore hold that, because a

majority of the ownership interest in the partnership did not

authorize GSI’s lawsuit, GSI does not have standing to assert its

claim either on behalf of the partnership or an individual capacity.

¶ 22

For a member of a partnership to have standing to sue in an

individual capacity, that member must suffer unique losses not

shared by the other partners. Id. at 433. If no unique losses exist,

“claims for redress belong to the partnership and cannot be

asserted by a partner in his or her individual capacity.” Id.2 GSI

does not claim that its losses were unique. Therefore, we conclude

that the district court did not err by concluding that GSI did not

have standing to sue in its individual capacity.

2 In its reply brief, GSI cites C.R.C.P. 17(a) and two cases (Monks v.

Hemphill, 121 Colo. 1, 3, 212 P.2d 1004, 1005 (1949), and Erickson

v. Oberlohr, 749 P.2d 996, 1000 (Colo. App. 1987)) in support of the

proposition that it can sue Hudson in an individual capacity to

recover damages based on a diminution in the value of its share of

the property. We decline to address this argument because it was

raised for the first time in the reply brief, and, therefore, it is not

properly before us. Flagstaff Enters. Constr. Inc. v. Snow, 908 P.2d

1183, 1185 (Colo. App. 1995). In any event, we are not persuaded

by either case, especially when we consider them in light of Adams

v. Land Services, Inc., 194 P.3d 429 (Colo. App. 2008), which is

directly on point.

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V. Conclusion

¶ 23

The order is affirmed.

JUDGE NAVARRO and JUDGE PAWAR concur.