Opinion ID: 2639041
Heading Depth: 1
Heading Rank: 3

Heading: Present Controversy

Text: The present controversy concerns certain Company expenses incurred from October 21, 1996, through May 30, 2002, which obviously includes the time the case was on appeal before this court, i.e., March 13, 1998, to October 29, 1999. According to the withdrawing members, the expenses generally included certain attorney fees and costs related to the Company's defense of the lawsuit; interest and other expenses regarding a Company loan; and certain marketing, surveying, and miscellaneous expenses. The expenses totaled approximately $240,869. The withdrawing members allege that almost all of the expenses were incurred after December 20, 1996, when the remaining members voted to remove Alfred and Mark as managers, retained Donald, and added Donald's son Reed as a manager. The expenses, other than attorney fees of approximately $175,000, included attempts to find a purchaser or purchasers for the property. They also included payment of principal and interest on funds drawn against a $245,000 line of credit for Company expenses with First National Bank of Kansas. This line of credit was authorized by the December 22, 1997, vote at a meeting of the remaining members and secured by a mortgage on part of the property, the Company's only asset. Mark Simpson attended the meeting and objected to the proposed action. The attorney fees were primarily incurred by the Company when it defended the litigation in the district court. These efforts included, but were not limited to, answering the October 15, 1996, lawsuit; responding to the plaintiffs' motion for a temporary restraining order filed in April 1997, which sought to preclude the Company from incurring any liquidation expenses; and responding to plaintiffs' motion to enforce judgments filed July 17, 1998, while the case was on appeal and ultimately journalized on June 30, 2000 (journal entry re plaintiffs' motion to enforce judgments) after our decision in Investcorp I. The attorney fees were also incurred by the Company when it filed a motion for declaratory relief in April 2000 and responded to plaintiffs' cross-motion for declaratory relief filed June 27, 2000, which resulted in the court's memorandum ruling on opposing motions for declaratory judgment dated January 8, 2002, denying both motions. The attorney fees were also incurred by the Company when it responded to the May 30, 2002, motion for limited declaratory relief filed by the withdrawing members. There, they asked the court to order that they not be required to share in paying the expenses incurred by the managers, Donald and Reed, and that the remaining members who had selected these managers should alone bear the loss. The district court denied the motion in a memorandum order on August 6, 2002, which it modified on September 20, 2002. According to the withdrawing members' notice of appeal, they appeal only from the August 6, 2002, memorandum order, as later modified.