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Klein v. Tiburon Development LLC

Court of Appeals of Colorado, Fourth Division

August 10, 2017

James Klein and Beth Klein, Plaintiffs-Appellants,
Tiburon Development LLC, a Colorado corporation; and David Sell, Defendants-Appellees.

         City and County of Denver District Court No. 13CV33733 Honorable Catherine A. Lemon, Judge

          Ridley, McGreevy & Winocur, PC, Robert T. Fishman, Denver, Colorado, for Plaintiffs-Appellants

          Roy W. Penny, Jr., P.C., Roy W. Penny, Jr., Denver, Colorado, for Defendant-Appellee Tiburon Development LLC

          The Law Office of Lauren A. Burnett, P.C., Lauren A. Burnett, Avon, Colorado, for Defendant-Appellee David Sell



         ¶ 1 This is this case's second visit to this court. Last time around, a division of this court affirmed the district court's judgment on the merits. The present appeal involves the district court's decision to award one side their attorney fees and deny the other side theirs. Specifically, Beth and James Klein (the Kleins) appeal the district court's judgment refusing to award them their attorney fees and costs pursuant to a line of credit agreement (LOC) between them and Tiburon Development LLC (Tiburon). They also appeal certain parts of the attorney fees award entered against them and their law firm in favor of David Sell (Sell). We affirm in part, reverse in part, and remand for further proceedings.

         I. Background A. History Preceding Prior Appeal

         ¶ 2 In 2005, the Kleins and their friends, David King, Betty King, Sell, and Sell's brother, formed a limited liability company, Tiburon, to build a vacation home in Costa Rica. The Kleins, the Kings, Sell, and Sell's brother (the members) each owned 25% of Tiburon.

         ¶ 3 In 2011, Tiburon acquired a Costa Rican corporation that owned a vacation home (VC5) in Costa Rica. In conjunction with the acquisition, the members entered into an operating plan to govern Tiburon's use of VC5. The members agreed to split the operating costs for VC5 in proportion to their shares in Tiburon.

         ¶ 4 The operating plan incorporated the LOC executed by the members as a means of paying for furnishing and outfitting VC5. Under the LOC, the Kleins and the Kings each loaned Tiburon $15, 000, with interest to accrue on any unused outstanding balance at a rate of 5.25% per year.

         ¶ 5 The members furnished the Costa Rican corporation with funds from the LOC and by making purchases for VC5 with their own money. When a member purchased something for VC5, the member would send the receipt to David King (who voluntarily did the accounting for Tiburon), and he would credit that purchase to the purchasing member's Tiburon capital account.

         ¶ 6 All was not well in paradise. Disagreements between the members arose when they began decorating VC5. And those disagreements worsened over time.

         ¶ 7 In December 2012, the Kleins purchased their own vacation home in Costa Rica and stopped using VC5. In July 2013, the Kleins offered their interest in Tiburon for purchase by the other members, with the offer remaining open for thirty days. The other members did not accept the offer. Also in July, the Kleins requested that the outstanding balance on the LOC be paid. David King performed the accounting necessary to calculate the outstanding balance on the LOC by equalizing all of the members' capital contributions over the years. According to that accounting, Sell and his brother collectively owed the Kleins $4686 to satisfy the outstanding balance on the LOC. Sell and his brother paid the Kleins $4686 on August 7, 2013.

         ¶ 8 In August 2013, the Kleins stopping paying their share of VC5's operating costs.[1] They sued Tiburon, asserting the following claims: (1) request for a judicial dissolution of Tiburon; (2) request for an independent accounting; (3) breach of the LOC; and (4) civil theft. The Kleins also sued Sell for civil theft. Tiburon counterclaimed for 25% of VC5's operating costs, alleging that the Kleins had failed to pay such sums since August 2013. All parties requested awards of attorney fees and costs.

         ¶ 9 While the case was pending, the district court dismissed the Kleins' claim for judicial dissolution because they had caused an extrajudicial dissolution of Tiburon.

         ¶ 10 In October 2014, following a trial to the court, the court ruled as follows on the remaining claims:

. Tiburon did not breach the LOC by offsetting the members' capital contributions against the outstanding balance. The contracts governing Tiburon provided for the members' capital contributions to be equalized and David King's accounting satisfied that provision.
. Tiburon breached the LOC by not paying the Kleins interest on the loan. The Kleins, however, failed to prove actual damages for this breach; thus, the court awarded them nominal damages of one dollar.
. David King's accounting was substantially fair and accurate, and any inaccuracies were immaterial. Therefore, an independent accounting was unnecessary.
. The Kleins' civil theft claims against Tiburon and Sell were meritless. There was no evidence that any member had stolen the Kleins' personal property or that the Kleins had been denied access to VC5.
. The Kleins breached the operating plan by not paying their share of VC5's operating costs. The court awarded Tiburon $2510 - 25% of VC5's operating costs since August 2013.
. Tiburon and Sell were entitled to their costs as prevailing parties.
. It was premature to make a determination regarding attorney fees, and the parties were free to file appropriate ...

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