Curo Enters., LLC v. Dunes Residential Servs., Inc.
| Decision Date | 02 January 2015 |
| Docket Number | 111,191. |
| Citation | 342 P.3d 948,51 Kan.App.2d 77 |
| Parties | CURO ENTERPRISES, LLC, Appellant, v. DUNES RESIDENTIAL SERVICES, INC., Appellee. |
| Court | Kansas Court of Appeals |
J. Eugene Balloun and Zach Chaffee–McClure, of Shook, Hardy & Bacon L.L.P., of Kansas City, Missouri, for appellant.
Robert W. Tormohlen, Scott A. Wissel, and Daniel R. Luppino, of Lewis, Rice & Fingersh, L.C., of Kansas City, Missouri, for appellee.
Before POWELL, P.J., LEBEN, J., and HEBERT, S.J.
This dispute involves the efforts of the asset manager for the owner of an apartment complex to terminate the services of the property manager for that apartment complex. Curo Enterprises, LLC (Curo), the asset manager, brought an action in Johnson County District Court to remove Dunes Residential Services, Inc. (Dunes) as the property manager. The parties ultimately settled the case, but Curo appeals from the district court's order denying its request for attorney fees pursuant to a fee-shifting provision in the management agreement between the owner of the apartment complex and Dunes. Curo argues the district court erred by finding Curo was not the owner's agent under the terms of the management agreement and was neither a “party” nor a “prevailing party” under the fee-shifting provision. Curo argues it filed suit as the owner's agent and, when the district court approved and incorporated the parties' settlement agreement into an order, the district court qualified Curo as a prevailing party entitled to attorney fees.
Because we agree Curo was acting as the owner's agent when it sought to terminate Dunes as the apartment complex property manager under the terms of the management agreement and because we find Curo qualified as both a party and a prevailing party under the fee-shifting provisions of the management agreement, we reverse the district court and remand to determine attorney fees and costs to which Curo is entitled under the management agreement as the prevailing party.
The Lenexa, Kansas, apartment complex at issue is owned by Dunes Point West Associates, L.L.C. (DPW). Originally, three entities—one of which owns 10% and is the managing member—invested to create DPW. Later, a group of investors acquired the remaining 90% interest and serve as nonmanaging members. A separate entity, NDC Capital Partners (NDC), was appointed the asset manager to oversee the financial aspects of the apartment complex for the benefit of the nonmanaging members.
In 2006, DPW entered into a management agreement with Dunes to manage the apartment complex. Dunes was in charge of day-to-day functions such as leasing, rent collection, and property maintenance. Section 6 of the management agreement provided that either DPW or Dunes could terminate the agreement by giving the other party 30 days advance written notice, with or without cause. Section 14 of the management agreement stated: “This Agreement shall be enforceable by NDC Capital Partners on behalf of [DPW] without any action or consent necessary from the Managing Member of [DPW].” The agreement was signed by the managing member of DPW and by Dunes. Effective June 30, 2012, NDC assigned its interest as the asset manager to Curo Properties, LLC, which, in turn, assigned its interest to Curo.
The dispute began on February 22, 2013, when Curo, as asset manager, notified Dunes by letter of its intent to terminate the management agreement between DPW and Dunes. Dunes responded on March 8, 2013, challenging and rejecting Curo's right to terminate the management agreement. Curo filed suit on March 21, 2013, seeking: (1) a declaratory judgment that Dunes was no longer manager of the property; (2) an order compelling Dunes to step down as property manager; and (3) an order awarding Curo attorney fees and costs pursuant to a fee-shifting provision in the management agreement.
The trial was scheduled to begin September 12, 2013, but on September 7, 2013, Dunes submitted a notice of termination of the management agreement. According to the district court, Dunes' notice claimed to terminate the management agreement without admitting liability or making concessions. Based on this notice, on September 26, 2013, the court ordered the following: (1) another property manager could enter into a management agreement to assume the property management functions and obligations; (2) Dunes must turn over all books, records, files, keys, contracts, agreements, tenant records, financial data, and any other tangible property required to facilitate the transition of all property management duties to the new property manager; and (3) the September 12, 2013, trial was moot but both Curo and Dunes reserved the right to seek an award of legal fees and costs.
On November 13, 2013, Curo filed a motion requesting attorney fees and costs as the prevailing party under Section 21 of the management agreement. The district court found Curo was not entitled to attorney fees and costs because it was a third-party beneficiary to the management agreement and not an agent of DPW. It further found that even if Curo was the agent, Curo did not qualify as a prevailing party. On January 28, 2014, the district court issued a final judgment dismissing Counts 1 (declaratory judgment) and 2 (specific performance) of Curo's petition as moot and denying Curo judgment on Count 3 (attorney fees).
Curo timely appeals.
Section 21 of the management agreement relating to attorney fees provides:
(Emphasis added.)
The district court denied Curo's motion for attorney fees and court costs pursuant to Section 21, finding (1) Curo did not qualify as a “party” to the agreement and (2) even if Curo was entitled to enforce the agreement, it was not the prevailing party. As to the first point, Curo argues it was DPW's agent under the management agreement, making it a party entitled to attorney fees. Conversely, Dunes argues Curo's actions in seeking its removal as property manager were those of a third-party beneficiary, not an agent.
The legal effect of a written instrument is a question of law. It may be construed and its legal effect determined by the appellate court regardless of the construction made by the district court. Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011). What constitutes a principal/agent relationship and whether there is competent evidence reasonably tending to prove such relationship is also a question of law. Barbara Oil Co. v. Kansas Gas Supply Corp., 250 Kan. 438, 446, 827 P.2d 24 (1992). However, resolution of conflicting evidence that might establish the existence of a principal/agent relationship is a question for the finder of fact. Barbara Oil Co., 250 Kan. at 446, 827 P.2d 24. Inasmuch as the parties have not produced conflicting evidence but, instead, disagree on whether the undisputed language in the management agreement established an agency relationship between Curo and DPW, we are therefore confronted with a question of law in which our review is unlimited. See Bunge Milling, Inc. v. City of Atchison, 49 Kan.App.2d 325, 329, 310 P.3d 1064 (2013) ; Town Center Shopping Center v. Premier Mortgage Funding, Inc., 37 Kan.App.2d 1, 6, 148 P.3d 565 (2006), rev. denied 283 Kan. 933 (2007).
While it is true the only signatories to the management agreement were DPW and Dunes, Curo claims it qualifies as a party to the agreement because Section 14 of the agreement established Curo, the assignee of NDC (the prior asset manager), as DPW's agent. The district court rejected this argument and ruled Curo occupied the role of a third-party beneficiary rather than an agent. Curo concedes that if it were merely a third-party beneficiary, then it would be unable to enforce the fee-shifting section of the management agreement. See Intermountain Res., L.L.C. v. Honea, 68 Fed.Appx. 937, 938 (10th Cir.2003) (). But see TST Truck Insurance, Ltd. v. First National Bank of Wamego, 2014 WL 1047993, at *8 (D.Kan.2014) (unpublished opinion) ().
Instead, Curo argues the district court erred by finding Curo was merely a third-party beneficiary rather than a third-party beneficiary and DPW's agent. Curo claims the roles of a third-party beneficiary and an agent are not mutually exclusive. Curo explains it was a third-party beneficiary under the management agreement because the management agreement incorporated DPW's operating agreement which conferred upon the asset manager, Curo, third-party beneficiary rights such as the right to receive payment for executing its duties as asset manager. But Curo also claimed it was an agent of DPW because Section 14 of the management agreement authorized it to enforce the management agreement “on behalf of” DPW.
It is well settled that an agency relationship may be expressed or implied.
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