Larimer County District Court No. 12CV56. Honorable Devin R.
Bedingfield & Peters, LLC, Jennifer Lynn Peters, Timothy R.
Odil, Lia Szasz, Greeley, Colorado, for Plaintiff-Appellee.
Simpson Eldredge Hersh & Jardine, P.C., David P. Hersh, Diane
Vaksdal Smith, Lisa R. Marks, D. Dean Batchelder, Nelson
Boyle, Englewood, Colorado, for Defendant-Appellant.
and Grove, JJ., concur.
Paula Gagne appeals the district court's judgment
dissolving four limited liability companies in which she and
one of her sons, Richard Gagne, were the only members (the
contends that the district court erred by dissolving the four
LLCs, in determining how the dissolutions would occur, and in
calculating each member's portion of the LLCs'
assets. She hasn't convinced us, however, that the
district court erred in any respect, and so we affirm the
judgment and remand for the court to determine Richard's
reasonable attorney fees incurred on appeal.
[¶2] Some of the factual background relevant
to this case is set forth in the prior division's
decision in Gagne v. Gagne, 338 P.3d 1152, 2014 COA
127 (Gagne I). We repeat it only as necessary and add to it
developments occurring after the prior division's remand.
[¶3]Paula and Richard are mother and son. In
the mid-2000s, they agreed to a joint business venture in
which Paula would buy apartment complexes and Richard would
manage them. They created three LLCs in 2006 to buy and
manage three such properties and created a fourth LLC in 2008
to buy and manage a fourth such property. (All of the
apartment buildings are in Fort Collins.) The district court
found, with ample record support, that the primary purpose of
these LLCs was " to provide a joint business between
[Richard] and [Paula], so that the parties would be partners
in a business and so that [Richard] would have an occupation
and a means to support his family." The initial LLC
operating agreements provided that Paula and Richard would
own each LLC fifty-fifty, but that Richard would have
fifty-one percent voting rights in each.
[¶4] It didn't take long, however, for
Paula and Richard's relationship, already strained, to
devolve into a more or less constant state of acrimony.
Litigation ensued, with Paula claiming that Richard was using
the LLCs' funds for his personal benefit. The parties
settled. They entered into new operating agreements in August
2010. They remained fifty-fifty owners, but this time Paula
got fifty-one percent voting rights. As now relevant, each of
the identical operating agreements also provides as follows:
• Paula's contributions are money (in specified
amounts), while Richard's are " in-kind." The
parties acknowledged that these in-kind contributions had
caused appreciation of the LLCs' equity in the apartment
• The success of the venture " requires the active
interest, support, cooperation, and personal attention
of" both Paula and Richard.
• Paula is " Chief Executive Manager" of the
LLC, with " primary responsibility for managing"
• The Chief Executive Manager " shall perform [her]
[m]anagerial duties in good faith, in a manner [she]
reasonably believe[s] to be in" the LLC's
best interests. (Emphasis added.)
• The Chief Executive Manager is liable to the LLC and
its members for any loss resulting from her "
fraud, gross negligence, willful misconduct, or . .
. wrongful taking ." (Emphasis added.)
• Richard's company, Home Solutions, Inc. (HSI),
will manage the property for a minimum of two years, with
possible extensions. Should a new property manager be
desired, HSI has a right of first refusal.
• If the property is sold, Paula has " a preferred
status for the distribution of net revenues from the
sale" to repay her cash capital contribution and any
other loans or advances. If any proceeds remain, they will be
• Paula has " the sole right and discretion to
sell" the property, subject to certain conditions.
• Paula has " the sole right and discretion to
refinance" the LLC's property, again subject to
certain conditions, including that she act consistently with
her status as a " fiduciary for the members."
[¶5] Unfortunately, the hatchet didn't
stay buried for long. There were arguments and allegations,
confrontations and criticisms — a continual pattern of
regrettable behavior that left the parties on hostile terms.
Perhaps inevitably, Richard sued, seeking judicial
dissolution of the LLCs under section 7-80-810(2), C.R.S.
2018, as well as a declaratory judgment as to his and
Paula's respective rights and obligations vis-a-vis the
[¶6] The district court appointed a receiver
for the LLCs, but later decided that the receiver should act
as a custodian during the litigation. Some time down the
road, the court granted Paula's motion for summary
judgment on the dissolution claim. Following a trial, the
court resolved the remaining issues.
Neither Richard nor Paula was entirely satisfied. Both
[¶7]The prior division held that the
district court hadn't applied the right test in
determining whether dissolution was appropriate. Drawing
primarily on case law from other jurisdictions, it gave a
nonexclusive list of seven factors that a court must
consider. Gagne I, ¶ 35 . It remanded the case for
additional proceedings to resolve genuine issues of fact
material to those factors.
[¶8] On remand, the court held another trial
on the judicial dissolution claim. The court entered a
thorough, well-reasoned order concluding that dissolution is
appropriate. Following another evidentiary hearing, the court
entered another thorough, well-reasoned order setting forth
how the dissolutions will proceed, essentially saying who
will get what (and why). In brief, the court ordered that
Richard and Paula will each receive two of the apartment
buildings — an in-kind distribution of LLC assets. This
is to be accomplished by a so-called " drop and
swap" exchange. Finding that Paula had engaged in a
great deal of self-dealing misconduct, the court adjusted the
parties' respective shares of the assets' values to
account for money Paula had wrongfully pulled out of the
[¶9] Only Paula appeals.
[¶10]Paula's contentions on appeal fall
into three general categories. First, she contends that the
court erred, both legally and factually, in ordering
dissolution of the LLCs. Second, she contends that the court
erred in ordering an in-kind distribution of the LLCs'
assets, rather than ordering the assets sold and resulting
proceeds distributed to the members. Third, she contends that
the court erred in ordering various adjustments to each
member's side of the ledger. We aren't persuaded that
the district court erred in any respect.
Court Properly Ordered Dissolution
[¶11] Section 7-80-810(2) provides that
[a] limited liability company may be dissolved in a
proceeding by or for a member or manager of the limited
liability company if it is established that it is not
reasonably practicable to carry on the business of the
limited liability company in conformity with the operating
agreement of said company.
[¶12] In Gagne I, the division held
that " to show that it is not reasonably practicable to
carry on the business of a limited liability company, a party
seeking a judicial dissolution must establish that the
managers and members of the company are unable to pursue the
purposes for which the company was formed in a reasonable,
sensible, and feasible manner." Gagne I, ¶ 31 .
In determining whether the party seeking judicial dissolution
has met this burden, the court should consider the following
seven nonexclusive factors:
(1) whether the company's managers are unable or
unwilling to pursue the purposes for which the company was
(2) whether a member or manager has committed misconduct;
(3) whether it's clear that the members aren't able
to work with each other to pursue the ...