Opinion ID: 812798
Heading Depth: 3
Heading Rank: 2

Heading: Failure to Conduct Accounting

Text: S&J’s first claim on appeal is that the district court, having properly decided that Leoff and S&J formed a partnership, improperly refused to grant a final accounting of the partners’ rights and obligations after the White House property was sold. S&J says that the court erroneously decided that no further judicial action was required after the court had arranged for the sale of the property and determined that neither party could collect against the other for misconduct. According to S&J, regardless of whether any partnership losses were caused by misconduct, the partnership between Leoff and S&J still had losses that must be apportioned between the two parties under Colorado law. We agree with S&J. If there was no misconduct by any partner, surely the partnership’s losses would have to be calculated and then divided between the partners as Colorado’s partnership statute requires. See Colo. Rev. Stat. § 7-64-807 (prescribing the settlement of partnership accounts upon the winding up of the partnership); cf. Tucker v. Ellbogen, 793 P.2d 592, 597 (Colo. App. 1989) (“Generally, a partnership dismantling proceeds through a three-step -15- process: dissolution, winding up, and termination.”). And if there had been partner misconduct causing damages, the same calculation and division would be required but then followed by a further monetary transfer based on the damages. In both circumstances, the accounting would be conducted independently of the determination of fault. We see no reason why the failure of either party to prove damages from the other partner’s misconduct should require the district court simply to preserve the status quo rather than conduct the statutorily required accounting. We note that apparently another reason why the district court refused to conduct an accounting was that S&J’s tax returns were not in evidence even though the Management Agreement provided that Leoff would share in 30% of S&J’s profits or losses based on “the Company’s taxable income or loss for each Fiscal Year or other period.” R., Vol. IX at 1697 (emphasis added). But at a hearing on March 31, 2011, about two months before the district court issued its decision, the court, at the suggestion of Leoff’s counsel, indicated that an examination of the books and records for an accounting was premature. We think that S&J could reasonably infer that it would have a later opportunity to present any documents deemed necessary for an accounting. Leoff does not argue otherwise on appeal. We therefore reverse the denial of an accounting and remand for further proceedings on that matter.