Opinion ID: 160788
Heading Depth: 1
Heading Rank: 3

Heading: Partnership Accounting, Dissolution

Text: Defendant first claims that the district court erred in entering summary judgment in favor of Plaintiffs on their breach of contract claim. Defendant contends that Plaintiffs’ action must be dismissed because Plaintiffs failed to include a specific claim for a partnership accounting, as required by Boner v. L.C. Fulenwider, Inc. , 513 P.2d 730, 732 (Colo. Ct. App. 1973). The Boner court declared the general rule that individual members of a partnership “cannot maintain an action for damages against another member unless there has been an accounting.” Id. However, Colorado courts have enumerated several exceptions to the Boner rule. The Colorado Supreme Court has held that “where a partnership has been dissolved, or where its business has been concluded, or where a partnership exists for a single venture or special purpose . . . the rule does not apply.” Morris v. Redak , 234 P.2d 908, 914 (Colo. 1951). In the instant case, although the parties dispute the exact date of dissolution, both concur that the partnership was dissolved before Plaintiffs brought suit. In addition, prior to this litigation all partnership business had concluded with the dissolution and sale of the partnership’s property. Finally, the partnership and joint venture existed for only one purpose: to manage the -5- investment in a single piece of real property. Thus, by any of these three exceptions, Plaintiffs were not required to make a specific claim for accounting under Colorado law. 1 Defendant next claims that a genuine issue of material fact existed as to the exact date of dissolution of the Tri L partnership. He asserts that his declaration to the Plaintiffs that “It’s over” acted to dissolve the partnership on June 9, 1988, as opposed to December 31, 1990, the date in which Plaintiffs formally acted to dissolve both the joint venture and the partnership. The earlier dissolution date was essential to Defendant’s statute of limitations defense. 2 The district court found that Defendant claimed partnership losses on his 1988, 1989, and 1990 tax returns. 3 In addition, on February 9, 1990, Defendant 1 We further note that some years after this suit was instigated, Colorado adopted § 405 of the Uniform Partnership Act, which allows a partner to maintain actions against other partners without an accounting to enforce the partner’s rights under the partnership agreement. See C OLO . R EV . S TAT . § 7-64-405 (2000). 2 The Colorado Court of Appeals has recently ruled that a two-year catch-all statute of limitations applied to a withdrawing partner’s action for partnership accounting because the amount due from accounting was not capable of ascertainment by reference to partnership agreement or by simple computation derived from agreement. See Tafoya v. Perkins , 932 P.2d 836, 838 (Colo. Ct. App. 1996). The district court had held that the applicable time frame for Plaintiffs to bring suit in this action under Colorado law was six years. See Order of May 27, 1993 (App. at 51-57). As Defendant points out, the court erred in making this finding. It should 3 have determined that such losses were claimed in 1987, 1988, and 1989. Since (continued...) -6- signed a “Consent and Ratification” regarding the sale of the Giddings Building in which he declared four separate times that he was a partner of Tri L and a joint venturer of Tejon-Kiowa. The district court cited In re S & D Foods, Inc. , 144 B.R. 121, 159 (Bankr. D. Colo. 1992), for the proposition that a party is estopped from denying the existence of a partnership where he has held himself out as a partner by executing documents in behalf of the partnership. The court further noted that under Colorado law, a party holds himself out as a partner if he claims partnership losses on his tax returns. See Roberts v. Roberts , 155 P.2d 155, 157 (Colo. 1945). Thus, the court held, Defendant was estopped from arguing that dissolution occurred on June 9, 1988. On appeal, Defendant contends that Roberts is inapposite because, in contrast to the defendant in Roberts , he does not deny the existence of a partnership, only that his status as a partner was changed through dissolution. However, Defendant asserts a distinction without a meaningful difference. While Roberts dealt specifically with an individual denying the existence of a partnership, its principle is equally applicable to individuals denying their status in an existing partnership. The essential rule of Roberts is that an individual cannot acquire the benefits of partnership without simultaneously assuming its 3 (...continued) Defendant endorsed the Consent and Ratification as a partner in 1990, the error was harmless. -7- corresponding liabilities. Colorado courts have affirmed this rule since at least 1892: “It is well settled that where a person, with his knowledge and consent, has been held out to the person having a claim or to third parties as a partner, liability as a partner is fastened upon him.” Butler v. Hinckley , 30 P. 250, 252 (Colo. 1892). Defendant cannot deny his status as a partner of Tri L for a period in which he induced the Internal Revenue Service and two banks to believe that he had the right, as a partner, to receive tax refunds and manage partnership property. This inducement of third parties to change position detrimentally in reasonable reliance on the inducing party’s actions is the very purpose for estoppel. Cont’l W. Ins. Co. v. Jim's Hardwood Floor Co., Inc. , 12 P.3d 824, 829 (Colo. Ct. App. 2000). Since Defendant was estopped from denying his status as a partner after June 9, 1988, and presented no other evidence refuting Plaintiffs’ claim that dissolution occurred on December 31, 1990, the court held that December 31, 1990, was the proper dissolution date. We agree.