Hogue v. Hogue.
2025 COA 5. No. 23CA1837. Limited Liability Partnerships—Colorado Uniform Limited Partnership Act of 1981—Judicial Dissolution.
January 16, 2025
In 1999, the Hogues and their four sons, Chuck, Frank, Mike, and John, formed a Colorado limited liability limited partnership known as the Hogue Ranch Limited Partnership (the partnership). As relevant here, the partnership owned the Hogue Ranch (the ranch). The Hogue Ranch Partnership Agreement (the agreement) stated that the partnership’s purpose concerned ranching and related real and personal property. After the Hogues died, their sons amended the agreement to make themselves general partners, providing that if they could not agree, final decision-making authority was assigned to the “Managing General Partner.” But the amendment did not name a managing general partner. The brothers’ relationships deteriorated, and in 2021, Chuck sued Frank, Mike, and John, requesting judicial dissolution of the partnership and a winding up of its assets. The district court issued findings of fact and conclusions of law and determined, pursuant to the seven factors listed in Gagne v. Gagne, 2014 COA 127, ¶ 35 (Gagne I), that it was not reasonably practicable for the partnership to continue in conformity with the agreement. The district court ruled in Chuck’s favor, judicially dissolved the partnership, and ordered liquidation of its assets and distribution of the sale proceeds. As relevant here, the court rejected Mike and Frank’s request to partition the ranch or distribute interests in the ranch to the General Partners as tenants in common because the action was not one for partition and the agreement explicitly included a “Waiver of Partition.” The district court also rejected Mike and Frank’s unclean hands affirmative defense.
On appeal, Mike argued that the district court erred by concluding that the partnership could not be dissolved by ordering the ranch’s partition or distributing the property to the brothers as tenants in common to allow for a later partition action. He asserted that (1) the district court failed to follow the statutory procedures for property partition in CRS §§ 38-28-101 to -110; (2) the court erred because partition in kind is favored over partition by sale; and (3) the agreement’s waiver-of-partition-rights provision did not prevent the district court from ordering partition because the court could have dissolved the partnership and made the general partners tenants in common, allowing them to later seek partition of the ranch. First, the district court did not err because Chuck raised a claim for judicial dissolution, not partition, so the court did not have to follow the partition statutes’ procedures or considerations associated with partition actions. Further, the brothers only had interests in the partnership, so none of them could have requested partition because none had an interest in the property at issue. Accordingly, the court of appeals addressed whether the district court abused its discretion by choosing to liquidate the partnership’s assets (the ranch) after the partnership’s dissolution and whether this was a proper equitable remedy. Here, because the partnership was an LLLP formed in 1999 that has not elected to be governed by CRS Title 7, Article 64, it is primarily governed by Title 7, Article 62. The court concluded that the factors applicable to LLCs provided in Gagne I may be used to determine whether judicial dissolution of a limited partnership under CRS § 7-62-802 is appropriate, and the court’s decision is reviewed for an abuse of discretion. Section 7-62-803 does not require the district court to use a specific approach when winding up a partnership’s business; rather the court may wind up the partnership’s business by crafting a solution to fit the situation. Here, consistent with the Gagne I factors, the court found that dissolution was appropriate, and its choice to wind up the partnership’s business by liquidating its assets by selling the ranch was consistent with the parties’ intent in the agreement, best fit the property’s circumstances, and helped prevent further litigation. Accordingly, the district court did not abuse its discretion by liquidating the partnership’s assets rather than ordering a partition of the ranch.
Mike also contended that the district court erred by rejecting his unclean hands affirmative defense. He maintained that judicial dissolution is discretionary and that the unclean hands doctrine has been applied to similar partnership dissolution cases in the past. Assuming, without deciding, that the district court erred by finding that the right to judicial dissolution is absolute and unclean hands cannot be used as an equitable defense to judicial dissolution claims, any such error was harmless because the evidence would not have supported a finding that Chuck requested a judicial dissolution with unclean hands; and the record supports the conclusion that the party seeking the judicial dissolution neither manufactured nor solely caused the parties’ deadlock.
The judgment was affirmed.