Leoff v. S & J Land Co.

503 F. App'x 630
Court of Appeals for the Tenth Circuit·Decided November 29, 2012·No. Nos. 11-1293, 11-1311·Published·Cited by 1 cases

Opinion

ORDER AND JUDGMENT*

HARRIS L. HARTZ, Circuit Judge.

Richard “Chance” Leoff and S and J Land Company (S & J) went into business together to build condominiums in Telluride, Colorado. When the project faltered and the relationship soured, Leoff filed a mechanic’s lien against the property and sued in federal district court for damages and to enforce the lien. S & J responded with a counterclaim seeking damages for wrongful filing of a mechanic’s lien and breach of contract, a declaration that S & J and Leoff had formed a partnership, and a winding up of the partnership and an accounting of the partners’ rights and obligations. The district court granted partial summary judgment to S & J, holding that the parties had formed a partnership and that under Colorado law a partner cannot place a mechanic’s lien on partnership property. Leoff filed an amended complaint asserting fraud and breach of fiduciary duty, and he also filed with the court and recorded with the county clerk a notice of lis pendens. S & J filed an amended counterclaim, adding a claim for damages from the allegedly improper filing of the notice of lis pendens.

After a bench trial on the remaining claims and counterclaims, the court decreed the partnership to be dissolved and ordered the sale of the condominium development. It refused, however, to conduct a final accounting of the partners’ respective rights and liabilities. And although it held that Leoff s mechanic’s lien and notice of lis pendens had been wrongfully filed, it also refused to award S & J actual damages or attorney fees resulting from those filings, instead awarding only a minimum statutory penalty of $1,000. Both parties appealed. Although we affirm on most of the issues, we reverse and remand for the district court to conduct a final partnership accounting and to permit S & J to present evidence of the attorney fees incurred as a result of Leoff s wrongful mechanic’s lien.

I. BACKGROUND

In 2004 three men agreed to develop a condominium project on a piece of land in Telluride, Colorado. Two of them, Stephen Finger and Jeffrey Lehrer, were the only members of S & J, a Colorado limited-liability company. Finger was a Telluride resident with some experience in developing local real estate; Lehrer lived in Scottsdale, Arizona, but had worked with Finger on two earlier local projects. The third man was Leoff, who then lived in Telluride and who knew Finger and Lehrer socially. They referred to the proposed condominiums as the White House Project. [632] S & J paid for the land, and the title was in S & J’s name.

Although at first Leoff and S & J did not formally delineate the division of responsibilities for the White House Project, both parties now agree that Leoff was at least in charge of obtaining certain government approvals necessary to begin construction. Leoff apparently maintains that his duties were limited to this task, whereas S & J claims that Leoff was expected to supervise construction as well. Leoff did obtain a building permit sometime in 2006.

Leoff and S & J finally memorialized their arrangement in a document titled “Management Agreement,” which was executed on March 14, 2006. R., Vol. IX Ex. A-2 at 1. It recited the parties’ prior understanding that “Chance Leoff would manage the project from time of land acquisition to the sale and completion of all units.” Id. It said that Leoffs specific duties as Manager included the following:

(1) To manage and oversee the acquisition of the property, the design of development property improvements, including hiring and management of all architects, engineers, and other consultants, to secure a general contractor, and to manage the entitlement and approval process through all required municipalities.
(2) To execute and deliver required permits, licenses, agreements, contracts, leases, documents and other instruments appropriate in furthering the acquisition, development, design, construction, management and completion of the development property improvements in accordance with the plans, specifications and budgets approved by the members.
(3) To manage and oversee the construction and development of development property improvements on the development property.

Id. The Agreement then declared that the parties agreed “that Duty 1, as specified above, has been completed and that Leoff is entitled to 30% of all profits or losses of S & J, as defined in III-R of the Operating Agreement of S & J, and to be distributed as per Section 6 in the same agreement.” Id. S & J’s “Development Agreement and Operating Agreement,” also executed on March 14, described S & J’s governance; Leoff was not a signatory. Id. Ex. A-l at 1-18. The Management Agreement also specified that Leoff would be entitled to receive $100,000 before construction was completed; half of that amount was designated as a fee, and the other half would count as an advance on Leoffs share of S & J’s profits. Because $10,000 of the $100,000 had already been paid in 2005, the remaining $90,000 was to be paid in monthly installments of $9,000 for each of the ten months after the bank loan for the White House Project became funded.

The White House Project was a troubled one. In July 2006 S & J signed an agreement with a contractor, High Mark Development, Inc., which would be paid its costs plus 15% for building the condominiums. According to S & J, the project ran into a host of snags thereafter, allegedly because Leoff delayed in providing the contractor with plans, failed to ensure those plans complied with local building codes, had an uneasy relationship with the architect, and generally neglected to keep either himself or S & J abreast of the day-to-day details of construction. Leoff tells a different story. No sooner had he signed the Management Agreement in March 2006, he claims, than S & J “took control of and assumed complete responsibility for the White House Project.” Aplee. Br. at 23. In Leoffs version, S & J negotiated the construction contract, obtained the financing, supervised High Mark and reported on [633] progress to the lending bank, wrote the checks, and marketed the condominiums to potential buyers. Leoff disclaims any responsibility for overseeing construction, asserts that S & J’s members never blamed him for problems during construction, and insists that any difficulties were the fault of High Mark, which was supposed to be supervised not by him but by Lehrer.

Whatever the explanation, the cost of the project soon overran the budget as construction continued. S & J was able to negotiate a $200,000 reduction in High Mark’s fee, but the various purchasers who had entered into preconstruction contracts to buy condominiums at the White House Project terminated those contracts.

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Leoff v. S & J Land Co., 503 F. App'x 630 (10th Cir. 2012).

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