## F I L E D United States Court of Appeals Tenth Circuit 

### JUN 17 1998 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

In re: VILLA WEST ASSOCIATES,

Debtor.

DARCY D. WILLIAMSON, Trustee,

Plaintiff - Appellee,

v. FRED C. KAY,

Defendant - Third-PartyPlaintiff - Appellant,

v. THOMAS W. VANDYKE; LESLIE M. BURNES; KIRK W. CARPENTER; PAUL R. VIRDEN; BERNARD HAINEN; E. JEROME HANSON, M.D.; C. THOMAS HITCHCOCK, M.D.; JERRY WARDEN; JAMES C. BRENNEMAN; STEVEN R. DUVALL; JUDE NALLY; H. ELVIN KNIGHT, JR.; L. KENNETH HUBBELL; JOHN A. ALHOLM; DON C. FREBURG,

Third-Party-Defendants - Appellees, Nos. 96-3133 and 96-3425-2-

DOUGLAS KAY and ANN KAY,

Third-Party-Defendants - Appellants,
MN ASSOCIATES,

Claimant - Appellee.

In re: VILLA WEST ASSOCIATES,

Debtor.

DARCY D. WILLIAMSON, Trustee,

Plaintiff - Appellee, v. FRED C. KAY,

Third-Party-Plaintiff - Appellant,

v. JOHN A. ALHOLM; L. KENNETH HUBBELL; THOMAS W. VANDYKE; DON C. FREBURG; BERNARD HAINEN; C. THOMAS HITCHCOCK; KIRK W. CARPENTER; H. ELVIN KNIGHT, JR.; PAUL VIRDEN; JAMES C. BRENNEMAN; E. JEROME HANSON; LESLIE M. BURNS; JERRY WARDEN; JAMES L. GLASSER; MN No. 96-3135-3-

ASSOCIATES; GLENDA HAINEN; DONNA NALLY; JAMES C. GLASSER,

Third-Party-Defendants - Appellees,
DOUGLAS KAY and ANN KAY,

Third-Party-Defendants - Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS (D.C. NOS. 91-4044-SAC and 95-4089-RDR)

Cynthia L. Reams, Weisenfels & Vaughan, Kansas City , Missouri (Jan Hamilton, Hamilton, Peterson, Tipton & Keeshan, Topeka, Kansa s, with her on the briefs), for Defendant - Third-Party-Plaintiff - Appellant a nd Third-Party-Defendants - Cross-Claimants - Appellants. Robert J. Bjerg, Seigfreid, Bingham, Levy, Selzer & Gee, P.C., Kansas City, Missouri, for Third-Party- Defendants - Appellees. Patricia A. Reeder, Woner, Glenn, Reeder & Girard, Topeka, Kansas, for Plaintiff - Appellee.

Before ANDERSON , EBEL , and KELLY , Circuit Judges.

ANDERSON , Circuit Judge.-4-

This consolidated appeal arises from an adversary p roceeding brought in the bankruptcy of Villa West Associates, a Kansas l imited partnership. (“Villa West” or “Partnership”). The first issue we must d etermine is whether the provision in the Villa West limited partnership agr eement that governs calls for additional capital contributions allows the general partner, on behalf of the Partnership, to bring a suit for money damages agai nst a limited partner who fails to contribute when a call is made. The bankruptcy court found that, because the obligation to contribute is mandatory, any limited partner who fails to contribute is liable for money damages. Appellants’ App., Tab 10 at 106-12. The district court reversed, finding, inter alia , that the limited partnership agreement set forth the agreed-upon remedies in the event of a default, and that a money damages suit was not one of the listed remedies. Id. , Tab 16 at 422. For the reasons set forth below, we agree with the district court. The secon d issue we address is whether, under Kansas law, the limited partners owed a fiduc iary duty to one another in the circumstances of this case. The bankruptcy court f ound that such a duty existed, and that the appellees had breached that duty. The district court reversed. Again, we agree with the district court. Finally on the t hird issue, whether the district court erred in assessing $2,612.50 in attorneys fee s as sanctions against the1 Unless otherwise specified, all citations to the Internal Revenue Code refer to the

provisions which were in effect at the time the partnership was created. -5- appellants for filing a second premature appeal, we conclude that there is no reversible error.

BACKGROUND Both the bankruptcy court and the district court have exhaustively set forth the undisputed facts surrounding this nearly nine-y ear-old litigation. We summarize as follows. The Partnership was formed i n 1983 to purchase and operate a shopping center in Topeka, Kansas. It wa s designed as a tax shelter, which, under then-existing tax laws, would permit a n individual limited partner to claim against his or her individual income a share of the Partnership losses, up to the amount the respective limited partner was “at r isk.” Appellants’ Br. at 13, 15; Appellees’ Br. at 2; see I.R.C. §§ 465, 752. 1 The general partner was Fred C. Kay (“F. Kay”), who also held a limited partnership int erest. Ultimately, there were eighteen limited partners, including F. Kay, and hi s parents, Doug and Ann Kay (“D. & A. Kay”). The limited partners’ interests v aried, depending upon the number of partnership units purchased. At the time of investment, each limited partner sig ned both a subscription agreement for a specified share of the Partnership and a combined signature page-6-

and participation agreement. These were delivered to F. Kay, together with the limited partner’s check in half payment of the init ial capital contribution and an executed recourse promissory note for the subscript ion balance. At the same time, each limited partner also executed a continui ng guarantee, capped at 125% of the limited partner’s interest in the Partnershi p, in favor of Metro North State Bank (“Metro Bank”) as security for two promissory notes made by the Partnership and payable to Metro Bank (the “Notes”) , in the respective amounts of $300,000.00 and $225,000.00. Both Notes were re course notes as to the Partnership and were signed by F. Kay as general pa rtner. Appellants’ Br. at 14. The limited partnership agreement authorized F. Kay to demand additional capital contributions from the limited partners und er certain conditions. Appellees’ Br. at 16, 32. In particular, Paragraph 9 of the partnership agreement addressed the partners’ ability to deduct Partnersh ip losses by referencing a “risk” for Partnership debts through conditional provision s for Additional Capital Contributions to the Partnership to fund operating deficits. Appellants’ Br. at 15; Appellees’ Br. at 2; see I.R.C. §§ 465, 752. By 1987, the partnership was in serious financial s traits. Pursuant to paragraph 9, on November 9, 1987, F. Kay wrote to t he limited partners demanding additional capital contributions totaling $150,000 to cover an existing operating deficit. None of the limited partners ho nored the call, and, apparently,-7-

F. Kay did nothing. Appellants’ Br. at 16; Appella nts’ App., Tab 49 at 1050-59. On March 17, 1988, F. Kay again wrote the limited p artners, advising that additional substantial capital contributions would be necessary to avoid foreclosure. Again, no partner contributed; F. Kay apparently did nothing. Finally, unable to raise the needed funds, F. Kay, sought bankruptcy protection for the Partnership under Chapter 11. Eventually, the mortgagee of the shopping center foreclosed on its nonrecourse loan. Additio nally, the two Notes given by the Partnership to Metro Bank, and guaranteed by th e limited partners, went into default, and Metro Bank demanded payment in full. At that time, unbeknown to F. Kay and D. & A. Kay, all the other limited partner/Note guarantors formed a separate partnersh ip, MN Associates (the “Note partnership” or “Note partners”), which purchased t he Notes from Metro Bank for $541,669.18. As assignee of the Notes, they then d emanded full payment from F. Kay as general partner, and from D. & A. Kay, to th e extent of their guarantees, and they also filed a proof of claim against the Pa rtnership in the bankruptcy court. After receiving the Note partners’ demand, on March 24, 1989, F. Kay again called upon all limited partners for an addit ional capital contribution, this time to cover that demand. None of the limited partners honored the call. The bankruptcy was converted to Chapter 7, a Trustee wa s appointed, and this adversary proceeding ensued.-8-

The issues in this case present an all or nothing approach by the parties. According to F. Kay’s reading of the partnership ag reement, he would never be subjected to any general partner liability for the Notes so long as the limited partners had any money, because he could simply cal l for additional capital from the limited partners to pay the Partnership’s oblig ation on the Notes. On the other hand, under the limited partners’ approach, their g uarantees on the Notes are meaningless so long as either the partnership or th e general partner had any money. They could either buy the Notes outright, o r, as guarantors, subrogate with respect to any demand by the bank on their gua rantees. Either tactic would allow them to seek full payment from the primary ob ligor, the partnership, and in turn the general partner, and under the terms of th e partnership agreement escape liability to the Partnership or the general partner

.

DISCUSSION On appeal from a district court’s decision in its c apacity as bankruptcy appellate court, we independently review the bankruptcy court's decision, applying a “clearly erroneous” standard to bankrupt cy court's findings of fact and a “de novo” standard to its conclusions of law. Ph illips v. White (In re White) , 25 F.3d 931, 933 (10th Cir. 1994).2 The Note partners also contend that Paragraph 10 applies. Inasmuch as we

determine that the limited partner’s have no personal liability for additional capital calls on the bases of Paragraphs 9 and 14, we neither set out Paragraph 10 nor discuss our conclusion that the paragraph is inapplicable to this case.

3 Despite the Note partners’ belated and persuasive argument respecting this term, our thorough review of the record before the bankruptcy court convinces us that the Note partners did not timely raise any argument as to the meaning of the term operating deficit as used in this paragraph. -9- A. Relevant Provisions of the Partnership Agreement A limited partnership agreement constitutes a contr act between the parties.
See Beverly v. McCullick , 505 P.2d 624, 632 (Kan. 1973). If a contract is unambiguous, its construction and interpretation pr esents a question of law which we review de novo. Milk 'N' More, Inc. v. Beavert , 963 F.2d 1342, 1345 (10th Cir. 1992); see Sunflower Park Apartments v. Johnson , 937 P.2d 21, 23 (Kan. Ct. App. 1997). In this case, although the parties int erpret its provisions differently, they both argue that the partnership agreement is u nambiguous, and they generally base their legal positions upon Paragraphs 9 and 14 (c). 2 Paragraph 9, which F. Kay invoked when he made the calls for additional capital contributions, provides as follows:

Additional Capital Contributions . In any year in which the Partnership incurs operating deficits , 3 and funds for the payment thereof are not available and cannot be borrowed on terms acceptable to the General Partner, then each partner , general or limited, shall be required to contribute his proportionate share of s uch deficit as an additional capital contribution (determined in accordance with the percentages for the division of profits and losses provided in Paragraph 8 hereof, as subsequently modified by anyother provisions-10-

in this Agreement) in an amount not to exceed his p roportionate share of the excess of operating expenses and mortg age payments over gross revenues from the property. In the even t any partner fails to make any such required contribution within thirty (30) days following the receipt of written notice of the requ irement to make such a contribution, such partner shall be deemed i n default and the remaining Limited Partners shall have the right to make such additional capital contribution pro rata and thereb y increase their percentage interests in the capital of the partners hip. In the event all Limited Partners have declined to provide all or any portion of such additional capital, then notwithstanding anything t o the contrary herein contained, the General Partner is authorized to admit additional Limited Partners as necessary to raise t he additional capital. The percentage interests in the capital and profi ts and losses of the Partnership shall be adjusted to reflect suc h additional cash capital contributions of the existing Partners and the admission and cash capital contributions of any Limited Partners to be added. Appellants’ App., Tab 50 at 1165 (emphasis added). Additionally, paragraph 14(c) provides as follows: Management, Duties and Restrictions. (c) Limited Partners. No Limited Partner shall participate in the management of the partnership business. No Lim ited Partner or General Partner shall have the right to withdraw hi s capital contribution. Except as otherwise provided in Para graph 22 hereof, no Limited Partner shall have the right to demand o r receive property other than cash in return for his interest in the P artnership. No Limited Partner shall have priority over any other Limited Partner. No Limited Partner shall be personally liable for a ny of the debts of the Limited Partnership or any of the losses thereo f beyond the amount committed by him to the capital of the Limit ed Partnership and his share of undistributed profits of the Limit ed Partnership. Id. at 1169 (emphasis added).4In their reply brief, the Kays further contend that the Note partners have conceded

their liability on pages 16 and 32 of their Appellees’ Brief. However, we interpret the Note partners’ statements to concede only the general partner’s authority to make calls; nowhere do they concede their personal liability upon failure to honor the calls. -11- B. Limited Partnership Agreements and Liability fo r Additional Contributions The Kays argue that the district court erred in fin ding that the partnership agreement provided an exclusive remedy of dilution or forfeiture in the event that a limited partner failed to make a capital contribu tion when required to do so under Paragraph 9 of the limited partnership agreem ent. The Note partners respond that any reading of the limited partnership agreement which would subject them to suit for failure to make additional contributions is inconsistent with the concept of being a limited partner. 4 “The cardinal rule of contract interpretation is th at the court must ascertain the parties’ intention and give effect to that inte ntion when legal principles so allow.” Ryco Packaging Corp. v. Chapelle Int’l, Lt d. , 926 P.2d 669, 674 (Kan. Ct. App. 1996) (citing Hollenbeck v. Household Bank , 829 P.2d 903, 906 (Kan. 1992)). Where two or more instruments are executed by the same parties at or near the same time in the course of the same transa ction and concern the same subject matter, they will be read and construed tog ether to determine the intent, rights, and interests of the parties. Akandas, Inc . v. Klippel , 827 P.2d 37, 51 (Kan. 1992). “Reasonable rather than unreasonable interpretations of contracts-12-

are favored,” and “‘[r]esults which vitiate the purpose or reduce the terms of a contract to an absurdity should be avoided.’” Kans as State Bank & Trust Co. v.
DeLorean , 640 P.2d 343, 349 (Kan. Ct. App. 1982) (quoting W einer v. Wilshire Oil Co ., 389 P.2d 803, 808 (Kan. 1964)). “Kansas follows the traditional rule that parties who are mentally competent may contract on their own terms unless the contract is illegal, contrary to public policy, or obtained by fraud, mistake, overreaching, or duress.” Hartford v. Tanner , 910 P.2d 872, 878 (Kan. Ct. App. 1996). A party who has voluntarily entered into a contract is bound by its terms, even though the contract may prove to be unwise or disadvantageous to him. Corral v. Rollins Protective Servs. Co. , 732 P.2d 1260, 1263 (Kan. 1987).

1. Specific Statutory Authorization as to Limited Partner’s Liability for Agreements to Make Future Contributions and Vil la West’s Tax Shelter Design The Kays contend that Paragraph 9 of the partnershi p agreement constitutes a promise to make additional contributions which is enforceable under Kansas law. In support they cite Kan. Stat. Ann. § 56-1a3 02 which provides that a limited partner is obligated to the partnership forhis written promises to contribute as follows:

Liability for contributions. (a) No promise by a l imited partner to contribute to the limited partnership is enforce able unless set out in a writing signed by the limited partner. (b) Except as provided in the partnership agreement , a partner is obligated to the limited partnership to perform any enforceable promise to-13-

contribute cashor property or to perform services, even if the pa rtner is unable to perform because of death, disability or a ny other reason. . . . (c) Unless otherwise provided in the partnership ag reement, the obligation of a partner to make a contribution . . . may be compromised only by consent of all the partners. Notwithstandi ng the compromise, a creditor of a limited partnership who extends credi t to the partnership may enforce the original obligation if the creditor ext ends credit . . . after the filing of the certificate of limited partnership . . . which . . . reflects the obligation, and before [any] amendment . . . refle ct[ing] the compromise. Id. (emphasis added). Thus, the Kays argue that Kansa s law specifically contemplates agreements which obligate limited part ners to make future contributions and also permits the partnership to s ue a limited partner who fails to make those promised contributions. We agree. Howe ver, the cited provision of Kansas law also makes it clear that the language of the particular partnership agreement will determine whether such an obligation and remedy are in fact created. In this case, the Kays argue that the language is c lear, but they further contend that the Partnership’s tax sheltering purpo se informs the partnership provisions and unequivocally establishes the Note p artners’ personal liability for calls related to the Notes. The Kays are correct i n their assertion that, in order to qualify for a pass-through deduction at the time th at the Partnership was formed, the relevant tax laws required a limited partner to be “at risk”, i.e. , the limited partner had to assume personal and ultimate liabili ty for certain debts. See Pritchett v. Commissioner , 827 F.2d 644, 646-47 (9th Cir. 1987) (finding that5 In a slightly different context, Goatcherconcerned the “at risk” requirements of

I.R.C. § 465, and we observe that, when the Villa West Partnership was formed, the § 465 “at risk” rules did not apply to nonrecourse debt involved in real estate activities. See former I.R.C. § 465(c)(3)(D) (deleted bythe Tax Reform Act of 1986, Pub. L. 99-514). Significantly, however, the Notes represent recourse, rather than nonrecourse debt. Therefore, pass-through deductibility of the liability is governed by I.R.C. § 752, which had requirements similar to § 465 respecting ultimate personal liability. SeeGefen v Commissioner, 87 T.C. 1471, 1499 (1986); Abramson v. Commissioner, 86 T.C. 360, 374 (1986); see alsoArthur Kalish & Jeffrey J. Rosen, The Risky Basis for Partnership Allocations , 38 Tax Law. 119, 128, 131 (1984) (noting that Treasury Reg. § 1.752-1(e) “treat[s] a limited partner like a general partner to the extent that he too can be obligated to use his personal assets to satisfy a partnership liability,” and that “the key to a limited partner’s share of recourse liabilities is his obligation to make additional contributions to the capital of the partnership”). -14- limited partner’s obligation to make additional cap ital contributions under the partnership agreement satisfied the “at risk” requi rement of I.R.C. § 465); Gefen v. Commissioner , 87 T.C. 1471, 1499-1502 (1986) (same, both under I.R.C. § 465 and under § 752); cf. Goatcher v. United States , 944 F.2d 747, 750 (10th Cir. 1991) (finding that taxpayers, subchapter S shareho lders, as mere guarantors of debt to corporation, were not “at risk,” and theref ore not entitled to deductions). 5 In fact, in the context of tax shelters, there are abundant examples of limited partnership agreements which contain additi onal assessment clauses that have been held to be enforceable. See, e.g. , Dayton Sec. Assoc. v. Securities Group 1980 (In re Sec. Group 1980) , 74 F.3d 1103, 1105-06 (11th Cir. 1996) (allowing bankruptcy trustee to sue limited partner s in tax shelter based upon provision for additional contributions to cover spe cified recourse indebtedness up-15-

to three times limited partner’s original investmen t); Federal Deposit Ins. Corp. v. Nanula , 898 F.2d 545, 551-52 n.10 (7th Cir. 1990) (allowi ng creditor to recover from limited partner in tax shelter based on provis ion to make additional contributions to cover obligations of specified not es and assumption agreements); Continental Illinois Nat’l Bank & Trust Co. v. Alle n , 811 P.2d 168, 172-73 (Utah 1991) (allowing creditor to enforce limited partner ’s obligation to contribute additional capital to satisfy specifically referenc ed guarantee); Coventry Manor Phase II Assoc., L.P. v. Hainen , 904 S.W.2d 279, 282-83 (Mo. Ct. App. W.D. 1995) (interpreting language identical to Villa Wes t agreement, and holding that obligation to contribute was mandatory upon general partner’s call); Contraband Cove v. Daly , 527 So. 2d 534, 535, 537 (La. Ct. App. 3d Cir. 19 88) (construing obligation to pay installments on initial subscript ion, noting that agreement specifically provided that general partner would have no obligation to make up any deficiency, and finding paragraph setting forth penalties both as to subscription installments and additional contributi ons to be nonexclusive). Faced with such examples, we conclude that certain business and tax considerations may induce a limited partner to ente r into agreements which expand his or her otherwise limited liability. Sig nificantly, however, all of the examples we discovered, except Coventry Manor , involve provisions which expressly specified the amount to be contributed, o r which set caps on the-16-

contribution requirements, or which specified the p articular partnership debt for which the limited partner assumed liability. Nonet heless, we accept the Kays’ contention that in order to be “at risk,” so as to qualify for the related passthrough deductions which they claimed, the Villa We st limited partners needed to unconditionally obligate themselves to make additio nal capital contributions to cover their proportionate share of losses and expen ses associated with the Notes.

2. Interpretation of Villa West Partnership Agreem ent Having concluded that a limited partner’s agreementto make additional capital contributions to cover certain indebtedness is entirely consistent with Kansas law and policy, as well as then-existing taxconsiderations, we now determine whether the Villa West partnership agreem ent did in fact include an unconditional promise that the limited partners wou ld make additional contributions. a. Paragraph 9. According to Paragraph 9, “[i]n any year in which the Partnership incurs operating deficits,” e ach limited partner “shall be required to contribute his proportionate share of s uch deficit,” and if “any partner fails to make any such required contribution . . . such partner shall be deemed in default. ” Appellants’ App., Tab 50 at 1165 (emphasis added ). The remainder of the paragraph grants the other limited partners the right to make pro rata additional contributions due from the defaulting pa rtner(s), which contributions-17-

will increase the interests of those partners who s tep in. If the limited partners decline to step in for the defaulting partner’s obl igation, the general partner is authorized to admit additional limited partners. I d. We agree with the bankruptcy court’s implicit concl usion that a contract need not expressly set forth common law remedies fo r default, and we also agree with its finding that Paragraph 9 created a mandato ry duty to contribute. However, we disagree that, in this case, a default triggered liabilities or penalties beyond those expressly listed in the paragraph itse lf. To the contrary, we read Paragraph 9 as a single, integrated unit which plai nly sets out the consequences of a limited partner’s default of his mandatory duty t o contribute. That is, the paragraph specifies the agreed-upon penalty—the lim ited partner faces dilution of his partnership interest if he chooses not to make additional contributions in the face of increasing capital costs. The fact that an action at law for money damages is a standard breach of contract remedy does not co mpel us to interpolate it here. Rather, Paragraph 9 is complete as written, and an action for money damages would be inconsistent with its express provisions. In this case, such a reading6In a different context, we might be inclined to find the contract ambiguous.

However, in this case as we have mentioned above, the parties have stipulated that the contract is unambiguous and have argued that it must be interpreted according to its clear language. Although the language could be clearer, we have no problem finding that, even if the parties may have had other intentions, the contract as written simply does not provide for the open-ended liability which F. Kay asserts against the limited partners. See discussion of Paragraph 14(c) infra . Moreover, under Kansas law, if there were any doubtful terms, they would have to be construed against the Partnership as drafter of the document. Metropolitan Life Ins. Co. v. Strnad , 876 P.2d 1362, 1366 (Kan. 1994). Likewise, if any ambiguity existed, the maxim expressio unius est exclusio alterius—the mention or inclusion of one thing implies the exclusion of another, would dictate the same result we reach by interpreting the contract’s plain language. Id.

7 The Kays attempt to discredit the limited partners’ argument that such a reading essentially converts the limited partners into general partners. Thus, the Kays note that in any event, the limited partners are not liable to third party creditors. Appellants’ Br. at 38. We disagree. As noted previously, Kan. Stat. Ann. § 56-1a302(c) expressly permits a creditor to enforce a limited partners’ promise to contribute. Seequoted statute and cases cited, supra , discussion section B.1. -18- comports with the clear language of the paragraph 6 and is also consistent with our reading of Paragraph 14(c).

b. Paragraph 14(c). Paragraph 14(c) states that “[n]o Limited Partner shall be personally liable for any of the d ebts of the Limited Partnership or any of the losses thereof beyond the amount comm itted by him to the capital of the Limited Partnership .” Appellants’ App., Tab 50 at 1170 (emphasis adde d). According to the Kays, that limitation takes into a ccount and includes all the indeterminate amounts which the limited partners ag reed to contribute under Paragraph 9. 7We disagree.8 Consequently, despite the limited partners’ desire to qualify for certain tax

benefits respecting the Notes, the form they chose may be problematic on that point. See (continued...) -19- The phrase “amount committed” suggests a finite, qu antifiable sum, and, in any event, the Kays’ contrary argument makes the se ntence either absurd or meaningless. That is, the Kays’ argument bootstrap s the “amount committed” limitation in Paragraph 14(c) to their contention t hat Paragraph 9 makes the limited partners liable for anynegative cash flow which the general partner cannot finance. See Appellants’ Br. at 28. Thus, according to the Kay s, the paragraphs must be read in conjunction—even though Paragraph 14(c) clearly purports to express a limitation of liability, it a ctually means that the limited partners shall be personally liable for their share of all unpaid debts and losses which the Partnership could not pay under Paragraph9. In other words, Paragraph 14(c) sets no limit on liability. As pre viously noted, Kansas law favors reasonable rather than unreasonable interpretations of contracts, and it avoids results which reduce the terms of a contract to an absurdity. DeLorean , 640 P.2d at 349. Thus, we decline to construe Paragraph 14( c) so as to render it meaningless or absurd. Accordingly, we conclude that Paragraph 14(c) limit s personal liability to the amount of the original subscription, and this l imitation necessarily informs and buttresses our interpretation of Paragraph 9. 88 (...continued)

Goatcher, 944 F.2d at 752 (refusing to disregard the form of the transaction so as to allow the desired tax benefit). -20- C. Fiduciary Duty D. & A. Kay contend that the district court erred i n finding that the Villa West limited partners who formed the Note partnersh ip did not owe them a fiduciary duty. Essentially, D. & A. Kay argue that the principles by which general partners are held to a fiduciary duty shoul d also apply to limited partners, and they also cite cases which have found certain l imited partners to have owed a fiduciary duty to the other partners. The Note partners concede that a general partner owes a fiduciary duty to the partnership an d his partners. However, they dispute that the same principles apply to limited p artners. Additionally, they distinguish the cases cited by D. & A. Kay on the b asis that those cases involve instances in which the limited partner 1) exercised control over the partnership; 2) had an otherwise confidential relationship (such as attorney); or 3) acted in concert with the general partner. Whether a fiduciary duty exists is a question of law which we review de
novo. See Fowler Bros. v. Young (In re Young) , 91 F.3d 1367, 1373 (10th Cir. 1996). Kansas courts have not directly addressed t he issue of whether a limited partner owes fellow limited partners a fiduciary du ty. However, the cases have clearly set forth what criteria must exist in orderto establish a fiduciary-21-

relationship. Gillespie v. Seymour , 796 P.2d 1060 (Kan. Ct. App. 1990), rev’d in part on other grounds , 823 P.2d 782 (Kan. 1991), recites the necessary e lements: “It has been recognized that a fiduciary relationsh ip between parties does not depend upon some technical relation creat ed by, or defined in, law. It exists in cases where there has been a special confidence reposed in one who, in equity and good conscience, is bound to act in good faith and with due regard for the interests of the one reposing the confidence. [Citations omitted.] “Fiduciary relationships recognized and enforceable in equity do not depend upon nomenclature; nor are they necessarily the product of any particular legal relationship. [Citations omitted.] They may arise out of conduct of the parties evidencing an a greement to engage in a joint enterprise for the mutual benefit of the parties. [Citations omitted.] But they necessarily spring from an atti tude of trust and confidence and are based upon some form of agreemen t, either expressed or implied, from which it can be said the minds have met in a manner to create mutual obligations. [Citatio ns omitted.] “For the plainest of reasons, agreements establishi ng fiduciary relationships, if not in writing, must be clear and convincing. Because of the acuteness of the equitable remedies, courts will not reach out to establish legal relationships from wh ich enforceable equitable rights may flow. A confidential relatio nship is never presumed, and the burden of proof is upon the partyasserting it. [Citation omitted.] “Mere concert of action, without more, does not est ablish a fiduciary relationship. [Citations omitted.] Undoubtedly, p arties may deal at arm’s length for their mutual profit. It is only when, by their concerted action, they willingly and knowingly actfor one another in a manner to impose mutual trust and confidence t hat a fiduciary relationship arises.” Id. at 1063 (quoting Paul v. Smith , 380 P.2d 421, 426 (1963)).9Neither party has favored us with any explanation, either as to any disadvantages

that D. & A Kay faced by reason of the Note partners’ tactic, or as to any advantages the Note partners sought to gain by excluding them. In any event, the Note partners have had to expend funds to cover the portion of the Notes that represent the obligation of D. & A. Kay under the guarantees, and D. & A. Kay will have rights of subrogation against F. Kay.

10At trial, F. Kay stated that one of the Note partners had been the attorney for the Partnership when it was formed and had drafted the partnership documents. However, nothing in the record suggests that the attorney-client relationship continued beyond the initial formation. SeeAppellants’ App., Tab 52 at 1300, 1379. Also, F. Kay testified that another of the Note partners was the real estate broker who initially brought the Villa West shopping center to his attention, provided an economic analysis of the property, and assisted in obtaining the original financing. Id. at 1299-1300, 1329. However, nothing in the record suggests that the broker continued to act for the Partnership in any confidential or agent/principal capacity. -22- Summarizing the relevant considerations, the Gilles pie court concluded that a “fiduciary relationship requires confidence of on e in another and a certain inequity or dependence arising from weakness of age , mental strength, business intelligence, knowledge of facts involved, or otherconditions which give one an advantage over the other.” Id. In this case, D. & A. Kay neither alleged nor prese nted facts which support a conclusion that they were in a position of inequi ty or dependence vis à vis the Note partners. 9 Furthermore, D. & A. Kay failed to present facts sufficient to support a finding that the Note partners, either in dividually, or acting as a dominant group, held a position of confidence with, 10 or exercised control over, the Partnership at any relevant time. Cf. Southern Pac. Co. v. Bogert , 250 U.S. 483, 491 (1919) (finding that when majority stockho lders act so as to exercise-23-

control over the corporation, they stand in a fiduc iary relationship with the corporation and the minority shareholders). Under the circumstances, D. & A. Kay’s bare allegat ion that a fiduciary duty exists fails. Accordingly, we agree with the district court’s conclusion that the bankruptcy court erred in holding that the Note partners owed a fiduciary duty to D. & A. Kay. D. Appellate Sanctions As their final claim of error, the Kays contend that the district court lacked jurisdiction to determine sanctions pursuant to ourremand following the Kays’ second appeal. Alternatively, the Kays contend that the imposition of sanctions is contrary to Tenth Circuit law. We disagree. In relevant part Tenth Circuit Rule 46.5 provides t hat this court “may impose . . . an appropriate sanction” upon parties who make improper filings. In connection with the Kays’ first appeal, we issued adetailed order which fully explained our reasons for finding that we lacked ju risdiction. Appellants’ App., Tab 20. Although nothing had occurred to change th e conclusion based upon that reasoning, the Kays filed a second appeal prior to the time that the matters had been fully adjudicated below. Moreover, almost con temporaneously with their appeal, the Kays filed a motion to dismiss their ow n appeal, noting that “Appellants do not, in their best judgment, and on review of the applicable law,-24-

believe this Court to have jurisdiction at this tim e over their Appeal.” Appellants’ App., Tab 32 at 516. Following our ord er for briefing, the Kays further stated that “[i]t seems elementary that sin ce the remanded matters now determined by the Bankruptcy Court have themselves result[ed] in an appeal to the District Court, th[e]n the Judgment is still no t ripe for appeal to the 10th Circuit.” Id. , Tab 34 at 531. Filings which are not warranted by existing law or a good faith argument for the extension or modification of such law waste the resources both of this court and the parties. Accordingly, in response to the Note partners’ motion for costs, including reasonable attorney fees under Ten th Circuit Rule 46.5, we dismissed the appeal and remanded to the district c ourt “for a determination of whether and in what amount attorney fees should be granted.” Appellants’ App., Tab 36. While our order might have been clearer, certainly we did not intend to delegate to the district court the threshold decisi on of whether the requesting party had a right to sanctions in the first instanc e. Rather, having ourselves concluded that imposition of a sanction to pay atto rney fees was warranted, we remanded to the district court to determine whetherthere were mitigating circumstances not apparent in the record before us, and whether any amounts claimed were reasonable in light of all factors. “ [T]he determination of the right-25-

to sanctions . . . for conduct during an appeal is reserved to the appellate court, although it may allow the trial court to fix the am ount of the fees and costs.” Morris by Rector v. Peterson , 871 F.2d 948, 951 (10th Cir. 1989) (citation omitted). Following full briefing on remand, the district cou rt found that the Note Partners were entitled to its reasonable attorney f ees in the amount of $2,612.50. We find no error in the district court’s determinat ion.

CONCLUSION Therefore, for the reasons stated, we AFFIRM the di strict court’s judgment.