Stevenson v. Dougherty CA3 ( 2013 )

Filed 3/6/13 Stevenson v. Dougherty CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Placer)
----
DEAN STEVENSON et al., C067140
Plaintiffs and Appellants, (Super. Ct. No. SCV21302)
v.
GLENN DOUGHERTY et al.,
Defendants and Respondents.
Following a bench trial on plaintiffs’ complaint for breach of a partnership
agreement and related claims, the trial court entered judgment primarily for the
defendants, concluding there had been no breach of contract or breach of fiduciary duty.
However, the court did enter judgment for plaintiffs on their claims for dissolution of the
partnership and an accounting. Plaintiffs appeal. We affirm the judgment of the trial
court.
1
FACTS AND PROCEEDINGS
Plaintiff Dean Stevenson is in the business of designing custom homes. Defendant
Glenn Dougherty is a general contractor in the business of constructing homes. The two
met in 1989 and worked together on various home construction projects thereafter.
We note that, after first introduction, the parties will sometimes be referred to
herein by their first names for the sake of simplicity and clarity.
In 2001, Dean and Glenn entered into an oral partnership agreement with Wayne
Jensen and his son Matt Jensen for the development of homes (the Jensen partnership).
Under this agreement, Dean would design the homes and get necessary government
approvals, Wayne would provide financing for the project, Glenn and Matt would build
the homes, and the four would share profits evenly. However, before the purchase of any
property for development, Glenn and Wayne had a falling out and the partnership
dissolved.
Dean and Glenn then decided to proceed with the plan without the Jensens. Prior
to November 17, 2003, Dean and his wife, plaintiff Terina Stevenson, (hereafter
collectively the Stevensons) entered into an oral partnership agreement with Glenn and
his wife, defendant Judee Dougherty, (hereafter collectively the Doughertys) for the
purpose of buying raw land, subdividing it, building homes thereon, and selling the
homes. The parties also agreed Judee, who was a licensed real estate agent working at
the time for defendant Valley of California, Inc., doing business as Coldwell Banker
(Coldwell Banker), would represent the partnership in the purchase of property.
Under the terms of the partnership agreement, the Stevensons and the Doughertys
(collectively the partners) would share profits evenly, after payment to each for
contributions of money and time to the enterprise. They also anticipated eventually
forming a limited liability company (LLC) to replace the partnership.
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On November 17, 2003, the partnership offered to purchase a parcel of property
located at 660 Virginiatown in Lincoln (the property) for $200,000. They eventually
agreed with the sellers on a purchase price of $205,000. However, before the close of
escrow, the partners agreed the Stevensons’ names would not be included on the offer
and the grant deed, at least in part because Dean had tax liens against him stemming from
a prior business.
The Doughertys contributed $155,000 toward the purchase price and the
Stevensons contributed the remainder, in part using funds obtained from their son,
plaintiff Nicholas Stevenson. Escrow closed on February 18, 2004, with title to the
property being taken in the names of the Doughertys alone.
The parties thereafter went about obtaining the necessary permits to subdivide the
property into individual lots, with Dean doing most of the work. They also attempted to
purchase adjacent property in order to increase the number of lots they could create and
to enter into a joint venture with another entity, Sundance, that was in the process of
buying other adjacent property.
Following a meeting with Sundance on April 25, 2006, Glenn informed Dean that
he did not think an even split of the partnership was fair, given the uneven contributions
toward purchase of the property. He proposed instead a 75/25 split between the
Doughertys and the Stevensons.
The parties thereafter were unable to agree on how to proceed with their
partnership or the development of the property. They discussed a possible buyout of the
Stevensons’ interest in the partnership, but were unable to reach any agreement on the
terms.
The Stevensons and Nicholas (hereafter collectively plaintiffs) initiated this action
against the Doughertys and Coldwell Banker, alleging seven causes of action. Regarding
Nicholas, the complaint alleged he had become a partner with the others when he
contributed funds toward purchase of the property.
3
The first cause of action alleges breach of the partnership agreement by virtue of
the Doughertys having repudiated the even split of the partnership, delayed development
of the property, and other things. The second cause of action alleges breach of fiduciary
duty both as to the Doughertys as partners and as to Judee and Coldwell Banker as real
estate agents for plaintiffs.
The third cause of action alleges fraudulent misrepresentations as to the
Doughertys’ intent to finance the purchase of the property, transfer ownership of the
property to an LLC, and diligently pursue development, among other things. The fourth
cause of action alleges negligent misrepresentation of these same things.
The fifth cause of action seeks dissolution of the partnership, while the sixth cause
of action (erroneously labeled the seventh) seeks an accounting.
The seventh cause of action (erroneously labeled the eighth) alleges negligence by
Judee and Coldwell Banker in failing to protect plaintiffs’ interest in the partnership
property.
Following a bench trial, the trial court issued a judgment against Nicholas on all
claims, concluding he had not become a party to the partnership. The court entered
judgment for the Stevensons on their dissolution and accounting claims, but for the
Doughertys and Coldwell Banker on all other claims.
On the first cause of action, for breach of contract, the court found the Doughertys
did not repudiate the partnership agreement by proposing a different split of ownership.
Rather, this was a proposed amendment to the agreement, which the Stevensons rejected.
The court also found no breach by virtue of delays in the development, which delays, the
court concluded, were for reasons other than any wrongdoing by the Doughertys.
The court also found no breach of fiduciary duty, as alleged in the second cause of
action, for the same reasons there had been no breach of contract.
The court found no breach of fiduciary duty by Judee or Coldwell Banker for
failing to advise the Stevensons to seek legal advice before having their names taken off
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the title to the property. The court concluded these real estate defendants met their
applicable standard of care. The court also concluded the Stevensons were not harmed in
any event, because the property remains an asset of the partnership, regardless of the
names on the title.
The court also rejected plaintiffs’ misrepresentation claims, finding no
misrepresentations as alleged and nothing by which the Stevensons were misled. The
court also found no negligence by Judee or Coldwell Banker for the same reasons it
rejected plaintiffs’ claim for breach of fiduciary duty by those defendants.
On the fifth and sixth causes of action, the court concluded the Stevensons are
entitled to relief. The court ordered the partnership dissolved and the property sold, with
the proceeds used to repay the initial investments with interest, followed by
reimbursement for the parties’ time on the venture. The court retained jurisdiction to
assure a proper accounting.
DISCUSSION
I
Pertinent Facts
Before addressing the contentions of the parties, a few words on the facts
applicable to this matter are necessary. The three plaintiffs, acting in propria persona,
have filed separate appellate briefs. Dean has included in his opening brief a 16-page
summary of the facts, which the other plaintiffs have adopted as their own. However, in
many instances, Dean has provided no citation to the record for his factual assertions, and
some of the citations he does provide do not in fact say what he indicates.
Further, and more importantly, most of plaintiffs’ contentions concern the
sufficiency of the evidence to support the trial court’s findings. In such case, we consider
the evidence in the light most favorable to the judgment. (Bunch v. Hoffinger Industries,
Inc. (2004) 123 Cal.App.4th 1278, 1303.) A party challenging sufficiency of the
5
evidence has an obligation to summarize the evidence on the points raised, both favorable
and unfavorable. (Roemer v. Pappas (1988) 203 Cal.App.3d 201, 208.) Failure to do so
may be considered a forfeiture of the contentions raised. (Oliver v. Board of Trustees
(1986) 181 Cal.App.3d 824, 832.) In many instances, Dean has provided a one-sided
recitation of the evidence that fails to meet his appellate obligations.
In addition to the foregoing, many of plaintiffs’ citations are not to the evidence in
the record but to the trial court’s amended statement of decision, the same decision they
now challenge as incorrect. They also cite documents in the record that were used as
exhibits in the trial, but fail to cite any testimony authenticating those documents.
For example, on the issue of whether the parties agreed to form an LLC, plaintiffs
assert: “As the partners had not yet formed the LLC prior to an offer being made to
purchase the property, the offer was made in their personal names, with the express
agreement that the LLC would be formed during escrow, with the property then assigned
to the LLC, prior to the close of escrow.” Plaintiffs cite as support a portion of the
amended statement of decision. However, that portion does not pertain to the agreement
between the parties but the earlier agreement on the Jensen partnership. Plaintiffs also
cite Glenn’s testimony. However, Glenn testified that, while the parties agreed “in
theory” to form an LLC, there were no discussions regarding timing.
Plaintiffs also assert that, during escrow, Glenn changed the terms of the
partnership agreement by insisting that the Stevensons contribute to the purchase price.
However, plaintiffs cite no evidence of any agreement that the Doughertys would provide
all the financing. The closest they come is the testimony of the real estate agent for the
Jensen partnership, Robyn Buzdon, who explained that, after the Jensen partnership
dissolved, Glenn told Buzdon to proceed with finding a property to purchase and he
would provide the financing.
Plaintiffs next assert: “In spite of Glenn’s changing of the terms they had
originally agreed to months earlier, Dean & Terina then invested $6,500 and arranged for
6
their son, Nicholas, to join in the partnership and invest $42,000, in order to have the
money necessary to close escrow on the property.” Plaintiffs’ only record citation is to
the amended statement of decision. However, the trial court said nothing about the
Stevensons arranging for Nicholas to become a partner in the venture. On the contrary,
the trial court specifically found Nicholas did not become a partner.
As to the decision to take the Stevensons’ names off the title to the property,
plaintiffs assert this had been done at Glenn’s request. Plaintiffs also assert the parties
agreed to modify their agreement to provide that an LLC would be formed “as soon as
possible after escrow closed.” However, plaintiffs provide no record citation for their
assertion that Glenn requested the removal of the Stevensons’ names from the purchase,
and the citations they provide for their assertion that the parties agreed to form an LLC as
soon as possible do not so state. Dean testified that the parties discussed forming an LLC
as soon as they could. However, he did not say there was any agreement to that effect.
Further, plaintiffs ignore contrary testimony of the Doughertys that removal of the
Stevensons’ names from the title had been at Dean’s request because of tax liens, and
Glenn’s testimony that there had been no discussions as to timing in forming an LLC.
Further discrepancies regarding the evidence will be discussed in connection with
plaintiffs’ various contentions on appeal.
II
Removal of Stevensons from Purchase Documents
On their claim for breach of fiduciary duty by Judee and Coldwell Banker,
plaintiffs take issue with the following statement by the trial court in its amended
statement of decision: “The entire issue of title being taken solely by the Doughertys is
an issue of Dean’s own making. In fact, the manner of taking title was an
accommodation to him.”
7
Plaintiffs assert the foregoing passage is based on speculation by the court that
Dean was trying to evade paying taxes and “is not supported by, and is at complete odds
with, the uncontroverted facts.” (Bolding omitted.) According to plaintiffs, it is
undisputed Dean did not ask to have title placed in his son’s name, as he might have
done, since Nicholas was investing in the property as well. Plaintiffs assert this all could
have been avoided if an LLC had been formed. Plaintiffs further assert: “[T]he manner
of taking title was an accommodation to Coldwell Banker’s agents, not the clients. The
agents simply didn’t want Dean’s tax liens to attach to the property they were co-
buying . . . .”
Plaintiffs also take issue with the following related statement by the trial court:
Consistent with Dean’s desire not to be on the title to the property, “in 2001 Dean
arranged for his son Nicholas, who was then still a teenager, to take title to the family’s
home in Granite Bay, thus minimizing the chance that the property would be located to
satisfy tax liens against Dean.” Plaintiffs assert this statement too is based on speculation
and that there was nothing dishonest in Nicholas purchasing the family home.
Finally, plaintiffs contend that, even assuming they were trying to conceal their
ownership of the property to evade having it taken to pay taxes, defendants too were
complicit in this arrangement.
Regarding the purchase of the Stevensons’ family home by Nicholas, plaintiffs
argue there was nothing improper in this arrangement. Plaintiffs assert they had been
living in the home for several years as tenants when it became available for sale.
However, because of Dean’s tax liens, the Stevensons could not obtain financing to
purchase it. Therefore, Nicholas, who was working at Intel at the time, did so. Plaintiffs
assert this was a good investment for Nicholas.
As support for the foregoing, plaintiffs cite the testimony of Nicholas and Terina.
Nicholas testified he purchased the home in 2001, the family had lived in the home
before its purchase, and he was working full time at Intel at the time. Terina testified
8
Nicholas purchased the property because of the tax liens and because it was a good
investment for him. However, there is nothing in this evidence that the Stevensons had
been leasing the home before its purchase by Nicholas. Thus, the trial court could
reasonably infer Nicholas had purchased it from his parents. There is also nothing in the
foregoing evidence about Nicholas purchasing the home because the Stevensons could
not obtain financing. Terina was asked: “Okay. I want to go back to your family home.
The reason that the family home was in your son Nick’s name was because of your tax
liens; isn’t that right?” She answered, “Yes.” Although Terina went on to testify the
purchase was a good investment for Nicholas, she gave no further details. Under these
circumstances, the trial court could reasonably infer Nicholas purchased the property to
keep it out of the names of the Stevensons in order to avoid having it claimed for taxes.
At any rate, the issue here is not whether the Stevensons’ names were kept off the
title to their family home to avoid tax liens, but whether the Stevensons requested that
their names be kept off the title to the property at issue in this matter because of tax liens.
The trial court so found, and the issue on appeal is whether that factual finding is
supported by substantial evidence. That finding supports at least in part the court’s
ultimate conclusion that Judee and Coldwell Banker did not breach any fiduciary duty
owed to plaintiffs in facilitating this change in the purchase.
On a claim based on the sufficiency of the evidence, our review is limited to a
determination of whether the record contains evidence of “ponderable legal significance”
which, when coupled with all reasonable inferences therefrom, supports the judgment of
the trial court. (Beck Development Co. v. Southern Pacific Transportation Co. (1996) 44
Cal.App.4th 1160, 1203.)
The record here contains sufficient evidence to support the trial court’s finding.
Judee testified she prepared the addendum removing the Stevensons from the purchase
based on what she had been told by Glenn. Glenn in turn testified he requested Judee to
prepare the addendum on Dean’s instructions. According to Glenn, Dean called him and
9
said he needed to be taken off the title and to have Judee prepare the necessary
documentation. Glenn understood at the time that Dean’s request was based on the tax
liens. Dean himself acknowledged the tax liens were implicated in the decision to
remove the Stevensons from the purchase documents, although he denied it was his idea
to do so.
While there is certainly contrary evidence in the record, our job is not to weigh the
evidence and decide which is more convincing. That job was for the trial court. Where
the evidence shows the trial court could have gone either way on an issue, our job is
done. We accept the trial court’s findings on the evidence.
And this is not changed by the fact the Doughertys were fully aware and complicit
in the Stevensons’ scheme to try and avoid having their tax liens attach to the property.
The question here is not whether either party acted improperly or unethically. The
question is whether, given the fact the Stevensons requested that their names be removed
from the purchase documents, the real estate professionals owed them any duty of care to
explain the significance of such removal. We discuss that issue later.
Furthermore, the basic premise of plaintiffs’ argument on the trial court’s finding
is that the removal of the Stevensons’ names from the purchase documents adversely
impacted their rights in the property. However, as the trial court recognized, and we
agree, the names on the title documents were immaterial. The property was clearly
purchased by the partnership and remained partnership property throughout this matter.
Thus, regardless of why the Stevensons’ names were removed from the documents, their
partnership rights were not adversely affected.
III
Adequacy of the Dissolution Order
The trial court ruled for plaintiffs on their claims for dissolution of the partnership
and for an accounting. Plaintiffs contend the court nevertheless failed to provide for
10
proper disposition of the partnership assets and, therefore, the judgment must be
amended. They raise seven separate arguments in this regard, which we shall address in
turn.
The trial court found plaintiffs failed to request that they be dissociated from the
partnership within the meaning of Corporations Code section 16601. That section reads
in relevant part: “A partner is dissociated from a partnership upon the occurrence of any
of the following events. [¶] (1) The partnership’s having notice of the partner’s express
will to withdraw as a partner or on a later date specified by the partner.” According to
the court, there had been “no written statement--‘express will’--by Dean and Terina to
withdraw as partners . . . .” The court found instead that any dealings among the partners
after a dispute arose were attempts to settle their dispute as to the terms of the
partnership. According to the court: “Given the partners [sic] widely divergent views as
to terms of the partnership, and the value of partnership property, it was quite reasonable
for defendants to refuse the settlement demand and to allow the court to equitably
determine the respective rights of the parties under the oral partnership agreement.”
Plaintiffs contend the trial court “overlooked” the fact that this was a partnership
at will from which a partner could dissociate at any time. (See Corp. Code, § 16602,
subd. (a).) Not so. The court did not conclude the Stevensons could not dissociate from
the partnership; it concluded they had not in fact done so.
Plaintiffs next contend the court erred in concluding the Stevensons had not given
notice of an “express will” to dissociate because there was nothing in writing with
specific language to that effect. We agree the court appears to have believed an express
will to dissociate must be in writing. The court went on to analyze two pieces of
correspondence which, it concluded, did not amount to a statement of express will to
dissociate.
Plaintiffs assert the evidence as a whole shows the Stevensons expressed an intent
to dissociate. We disagree. Assuming the Stevensons gave notice at some point of a
11
desire to withdraw from the partnership, what followed thereafter were negotiations,
offers and counter-offers as to the terms of such withdrawal. While the Stevensons
certainly had an absolute right to withdraw from the partnership, they did not have a right
to dictate the terms of such withdrawal. The Stevensons did not simply withdraw from
the partnership and let the chips fall where they may as to the ultimate buyout. They
continued as partners while negotiating the terms of their withdrawal.
If, indeed, the Stevensons believed they had given notice of an intent to withdraw
and to receive their share of the partnership value, and the Doughertys refused to let them
do so, it would have been incumbent upon the Stevensons at that point to seek relief from
the court for such refusal. Instead, the Stevensons continued to negotiate with the
Doughertys over the terms of their withdrawal. It was only when those negotiations
broke down that plaintiffs filed this action. And even then, plaintiffs did not claim a
violation of Corporations Code section 16601 but instead sought a dissolution of the
partnership.
In their arguments on appeal, plaintiffs nevertheless appear to assert a right to be
awarded their share of the value of the partnership at the time of their request to
dissociate. They cite Corporations Code section 16701, which reads in relevant part:
“Except as provided in Section 16701.5 [relating to dissociations occurring within 90
days of a dissolution], all of the following shall apply: [¶] (a) If a partner is dissociated
from a partnership, the partnership shall cause the dissociated partner’s interest in the
partnership to be purchased for a buyout price determined pursuant to subdivision (b).
[¶] (b) The buyout price of a dissociated partner’s interest is the amount that would have
been distributed to the dissociated partner under subdivision (b) of Section 16807
[regarding winding up] if, on the date of dissociation, the assets of the partnership were
sold at a price equal to the greater of the liquidation value or the value based on a sale of
the entire business as a going concern without the dissociated partner and the partnership
was wound up as of that date. . . .”
12
As explained above, plaintiffs did not seek relief under the foregoing provision in
their complaint and, hence, their claim in that regard was not properly before the trial
court. Plaintiffs alleged defendants have engaged in conduct making it impracticable to
continue the partnership and it is no longer possible to carry on the business in
conformity with the partnership agreement. They sought “a judicial determination that
the partnership shall be deemed dissolved.” They further sought a winding up of the
partnership business, a sale of the partnership’s assets, and an accounting, with the
proceeds divided according to the terms of the partnership agreement. That is what the
trial court attempted to do.
Plaintiffs’ next contention regarding the terms of the dissolution is a jumble of
unrelated arguments concerning the Doughertys’ alleged breach of fiduciary duty and
fraudulent misrepresentations. For example, plaintiffs assert the evidence shows Glenn
tried to coerce them into agreeing to a change in the terms of the partnership and used a
bogus appraisal in an effort to buy them out at a discounted price. Plaintiffs argue the
trial court “ignored the obvious significance” of these acts and “absurdly concluded” they
were immaterial because plaintiffs were not harmed thereby. Plaintiffs also include a
general discussion of the law relating to breach of the covenant of good faith and fair
dealing and quote from Civil Code provisions on the tort of fraud.
To the extent plaintiffs’ arguments are intended to assert that the trial court erred
in rejecting their claims against the Doughertys for breach of the partnership agreement,
breach of fiduciary duty and fraud, they are not properly before us. Appellate briefs must
state each contention raised under a separate heading. (Cal. Rules of Court, rule
8.204(a)(1)(B).) Where an appellate brief fails to include proper headings for contentions
raised, those contentions need not be considered. (Heavenly Valley v. El Dorado County
Bd. of Equalization (2000) 84 Cal.App.4th 1323, 1346; Live Oak Pub. Co. v. Cohagen
(1991) 234 Cal.App.3d 1277, 1291.)
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Furthermore, plaintiffs’ purported assertions that there is evidence supporting their
various claims are not accompanied by a complete analysis of all the evidence on those
issues, both favorable and unfavorable, or an explanation of how the trial court erred in
rejecting those claims. It is not the obligation of this court to pick up the ball and run
with it for plaintiffs.
While we recognize that plaintiffs are pursuing this appeal in propria persona, and
therefore may not be familiar with the various rules and procedures applicable to this
matter, a pro per litigant is entitled to the same, but no greater, consideration than other
litigants and is held to the same rules of procedure. (Bianco v. California Highway
Patrol (1994) 24 Cal.App.4th 1113, 1125-1126; Bistawros v. Greenberg (1987) 189
Cal.App.3d 189, 192-193.)
To the extent plaintiffs’ contentions instead go to whether the Doughertys
improperly precluded them from withdrawing from the partnership, that was not the basis
of plaintiffs’ dissolution claim. Plaintiffs never claimed the Doughertys improperly
precluded them from withdrawing from the partnership and, hence, the Doughertys were
never put on notice of an obligation to defend such a claim. The trial court made no
findings in that regard.
“The rule is well settled that the theory upon which a case is tried must be adhered
to on appeal. A party is not permitted to change his position and adopt a new and
different theory on appeal. To permit him to do so would not only be unfair to the trial
court, but manifestly unjust to the opposing litigant. (2 Cal. Jur., sec. 68, p. 237.)” (Ernst
v. Searle (1933) 218 Cal. 233, 240-241.)
Plaintiffs next contend the trial court improperly placed the burden on them to
prove their various claims, when the burden should instead have been on the Doughertys
to disprove them, given the Doughertys’ greater access to the relevant evidence. They
argue: “Here, the Doughertys had almost exclusive availability and access to the
information and financial records of the property purchase, title, reasons for the title not
14
being assigned to the LLC, the reasons for the amendment dismissing the Stevensons, the
reasons for their attempt to restructure the partnership, their reasons for stopping the
project, [and] their reasons why their buy out [sic] offer was so much lower than their
partners were entitled to.”
Once again, plaintiffs’ arguments have no bearing on their dissolution or
accounting claims but instead concern whether the trial court erred in denying their other
claims. But because plaintiffs have not presented these arguments under appropriate
headings, they are not properly before us.
Plaintiffs next contend the trial court erred in failing to award them damages
pursuant to Corporations Code section 16701 in accordance with their purported earlier
dissociation from the partnership. However, as we have explained, there was no such
dissociation and, in any event, this was not the basis of plaintiffs’ complaint or the theory
on which this matter was tried. Hence, plaintiffs have forfeited any such claim.
Plaintiffs contend the trial court erroneously awarded interest on the amounts
contributed by the partners at a rate of 7 percent. They argue the proper rate should have
been 10 percent, as specified in Civil Code section 3289. Subdivision (b) of that section
reads: “If a contract entered into after January 1, 1986, does not stipulate a legal rate of
interest, the obligation shall bear interest at a rate of 10 percent per annum after a
breach.” Plaintiffs further argue that, because defendants attempted to charge 15 percent
interest on their contribution to the partnership, which is above the maximum allowed by
law, they are entitled to no interest whatsoever. They cite article XV, section 1 of the
state Constitution, which establishes a maximum rate that may be charged on a non-
consumer loan as the higher of 10 percent or 5 percent over the applicable Federal
Reserve Bank rate. Plaintiffs argue the maximum rate under this formula was 11.25
percent.
The Doughertys disagree with plaintiffs’ assertion that they are not entitled to any
interest because they charged a usurious rate of 15 percent. Plaintiffs cite nothing to
15
support their claim that Glenn demanded 15 percent interest on his investment in the
partnership. The Doughertys, for their part, cite Glenn’s testimony, where he indicated
he had been paying 15 percent to another investor and assumed this would be an
appropriate amount, but further indicated the parties had not agreed on an amount and he
assumed a reasonable amount would be used. But even assuming defendants had
proposed to use a 15 percent interest rate, this was merely a matter of negotiation
between the parties. Defendants had no power to dictate the interest rate. A mere
suggestion above the applicable usury rate does not bar any interest recovery whatsoever.
As for using 10 percent rather than the 7 percent used by the trial court, the
Dougherty’s have no objection to this, inasmuch as they contributed more than plaintiffs
and hence would benefit thereby. However, plaintiffs’ claim for a 10 percent interest rate
is premised on an assumption that the parties made loans to the partnership. Plaintiffs
cite Corporations Code section 16401, subdivision (e), which states: “A payment or
advance made by a partner that gives rise to a partnership obligation under subdivision
(c) or (d) constitutes a loan to the partnership that accrues interest from the date of the
payment or advance.” Subdivision (d) of that section reads: “A partnership shall
reimburse a partner for an advance to the partnership beyond the amount of capital the
partner agreed to contribute.” (Italics added.)
There is some question here whether the amounts the parties initially contributed
to the partnership for purchase of the property were capital contributions rather than
loans. At any rate, the parties expressly agreed interest would be paid. They simply
failed to specify the amount.
Civil Code section 3289, on which plaintiffs rely, applies where there has been a
breach of contract. Here, as the trial court found, there was no breach of the partnership
agreement. The question here is not the appropriate interest rate to apply upon a breach
but the appropriate interest rate under the terms of the partnership agreement. The parties
agreed to pay interest but failed to specify an amount. The trial court selected an amount
16
of 7 percent. The parties do not contend this was an unreasonable or unauthorized
amount under the circumstances.
As their final contention regarding the dissolution and accounting claims,
plaintiffs assert the trial court “failed to provide disposition of the property upon a sale
consistent with it’s [sic] own finding, except to speculate that a sale would not provide
for any profits to be divided.” In its order, the court stated: “The court will order that the
partnership be dissolved and that partnership property be sold. The parties will be given
an opportunity to meet and confer to see if they can agree on a plan for the dissolution
and windup of the partnership, including sale or disposition of the property. After
expenses have been reimbursed, proceeds of the sale shall provide for return of the
partners’ respective investments of $50,000 and $155,000. In the event the sale of the
property does not provide for full return of those investment amounts, the partners shall
be entitled to return of funds in the proportionate amount of their investments. Interest
shall be applied at 7%. The parties are entitled to be reimbursed for their time in the
project, subject to their being sufficient proceeds to allow for that, and subject to an
accounting of their time, below.”
Contrary to plaintiffs’ assertion, the trial court did not speculate that there would
be insufficient funds from sale of the property to reimburse the parties. It merely
provided for how the proceeds would be divided were this to occur. Nevertheless, we
agree the court could have been clearer as to how excess proceeds would be divided after
payment of all expenses and reimbursement for all time and money contributed.
However, in the context of the entire statement of decision, it is clear the court intended
that such excess funds, i.e., the profits from the venture, would be divided equally among
the partners. The court also did not specify a rate at which the partners’ contributions of
time would be reimbursed, apparently leaving that for the parties to work out. However,
inasmuch as the court reserved jurisdiction to resolve the matter if the parties are unable
to reach agreement on dissolution, the trial court will have an opportunity to clear this up
17
in further proceedings if necessary. Thus, we find no error in the court’s dissolution
order.
IV
Valuation of the Property
Plaintiffs contend the trial court erred when it stated “it was not clear that there
was ‘equity’ at all in ‘the project’ ” and then failed to determine the value of the property.
It is unclear exactly what plaintiffs hope to accomplish by this contention.
Apparently, they believe the court was required to award them damages based on the
value of the property at the time of their purported dissociation but failed to do so
because it could not determine such value. Plaintiffs again cite Corporations Code
section 16701, which requires the court to determine a buyout price of a dissociated
partner’s interest. However, as we have explained, there was no dissociation in this
matter, and plaintiffs’ dissolution and accounting claims were not based upon a
withdrawal from the partnership prior to filing suit. Plaintiffs sought a straightforward
dissolution, which the trial court granted.
Plaintiffs quote from California Lettuce Growers, Inc. v. Union Sugar Co. (1955)
45 Cal.2d 474, 486-487, where the California Supreme Court said: “ ‘[W]hen it clearly
appears that a party has suffered damage a liberal rule should be applied in allowing a
court or a jury to determine the amount, and that, given proof of damage, uncertainty as
to the exact amount is no reason for denying all recovery.’ ” However, the trial court
rejected plaintiffs’ breach of contract claim, and plaintiffs have presented no argument on
appeal that the court erred in this regard. The question here is not one of damages for
breach of contract but the appropriate dissolution of the partnership. The court was under
no obligation to determine the value of the property under such circumstances.
18
V
Attorney Fees
Plaintiffs contend they are entitled to an award of attorney fees under Corporations
Code section 16701 for defendants’ bad faith failure to dissociate them from the
partnership and pay them their share of the partnership value. However, as previously
explained, plaintiffs’ did not assert a claim based on a failed dissociation from the
partnership but instead sought dissolution, which the trial court granted. Plaintiffs
therefore are not entitled to relief under the indicated code section.
In her opening brief, Terina contends plaintiffs are entitled to attorney fees under
the “tort of another” exception to the American rule. The other plaintiffs join in Terina’s
arguments on appeal.
“Under the American rule, as a general proposition each party must pay his own
attorney fees. This concept is embodied in section 1021 of the Code of Civil Procedure,
which provides that each party is to bear his own attorney fees unless a statute or the
agreement of the parties provides otherwise.” (Gray v. Don Miller & Associates, Inc.
(1984) 35 Cal.3d 498, 504, fn. omitted.) One exception to this rule, however, is “the ‘tort
of another’ or ‘third party tort’ exception, [which] allows a plaintiff attorney fees if he is
required to employ counsel to prosecute or defend an action against a third party because
of a tort of the defendant.” (Id. at p. 505.)
Plaintiffs contend the tort of another exception applies here because the various
breaches of fiduciary duty by Judee and Coldwell Banker required plaintiffs to file suit
against the Doughertys. However, as we have explained, the trial court correctly
concluded plaintiffs failed to establish any claim against the real estate defendants.
Hence, their tort of another argument fails at its inception.
19
VI
Claims Against Real Estate Professionals
Plaintiffs contend the trial court erred in rejecting each of their claims against
Judee and Coldwell Banker. Those claims are for breach of fiduciary duty, intentional
and negligent misrepresentation and general negligence. The bulk of plaintiffs’
arguments regarding the real estate professionals concern their claim for breach of
fiduciary duty, which we shall address first.
Plaintiffs assert it is “[u]ncontested” that no partnership was formed until the close
of escrow on the property. They cite as support Judee’s testimony that, at the time she
represented the parties in the purchase of the property, there “wasn’t really a partnership”
and she was instead representing four individuals. They also cite Glenn’s testimony that
“technically” no partnership existed until the property was purchased. Thus, they argue,
Judee’s relationship with plaintiffs from the start was as their personal agent rather than
as an agent of the partnership.
The foregoing arguments ignore contrary evidence in the record that the
partnership was formed for the purpose of buying property, developing it and selling
homes at a profit. The parties entered into a partnership agreement and then went about
finding appropriate property to develop. The question of when the partnership was
formed is one of law based on the facts and not one based on the opinions of the parties.
At any rate, whether Judee represented the parties as individuals or as members of
a partnership is of no import. Either way, she owed the individual partners a duty of care.
Plaintiffs also argue the court erred in placing the burden on them to prove their
breach of fiduciary duty claim rather than on the real estate professionals to disprove it.
They argue: “Once a fiduciary breach has been established, a rebuttable presumption of
reasonable reliance is created subject to being overcome by substantial evidence.”
Plaintiffs further argue that, once a fiduciary gains an advantage over its principal, a
20
presumption of undue influence arises. According to plaintiffs, “Coldwell Banker’s
agents gained full advantage as they have full title to the property, which was jointly
purchased with the Stevensons.”
The foregoing argument presupposes that a breach of fiduciary duty has been
established, thereby shifting the burden to defendants to disprove reliance. However, the
trial court found to the contrary. The court also found the Doughertys obtained no
advantage over the Stevensons by having the latter’s names taken off the purchase
documents. Regardless of the names on the title, the property was owned by the
partnership.
Plaintiffs argue Coldwell Banker breached multiple fiduciary duties owed to the
Stevensons. For example, they argue that, during the purchase transaction, Judee
delegated virtually all of the transaction to Glenn, who is not a licensed real estate
professional. They further argue Coldwell Banker failed to provide the Stevensons with
any documentation memorializing their ownership interest in the property and failed to
form an LLC as promised. They also assert the Doughertys, acting as agents for
Coldwell Banker, breached their fiduciary duty by making unfounded assertions that the
Stevensons were not 50 percent partners in the enterprise and by withholding information
about the true percentage interests. They further claim a breach of fiduciary duty by
virtue of Judee’s failure to explain the significance of the addendum by which the
Stevensons’ names were removed from the purchase documents.
On this last point, plaintiffs contend the expert witness who testified for Coldwell
Banker, Patricia Gillette, opined that Judee’s failure to advise plaintiffs on the
ramifications of signing the addendum removing themselves from the purchase
documents was a breach of fiduciary duty. Plaintiffs misread the record. Gillette was
asked a hypothetical that assumed Judee had been informed the parties were aware of
Dean’s tax lien problem but had not yet decided what to do about it. Based on that
assumption, Gillette opined Judee had a fiduciary duty to consult with the parties on how
21
to proceed. However, Gillette explained this was contrary to her understanding of the
evidence. The evidence showed instead that the parties brought to Judee a fait accompli
that they had decided to remove plaintiffs’ names from the purchase documents because
of the tax liens. Hence, Judee was not presented with a problem to solve but a solution to
put into effect. Gillette opined that, under these circumstances, Judee had no obligation
to advise plaintiffs regarding the removal of their names from the documents.
Later, Gillette was asked to assume the parties agreed to form an LLC before the
close of escrow, and she opined that Judee would have had an obligation to advise them
to get it done. However, here again, the hypothetical was contrary to the evidence in the
record. As explained above, there was no agreement among the parties to form an LLC
before the close of escrow. Gillette opined Judee met the applicable standard of care
under the actual facts of the case.
At any rate, plaintiffs’ arguments regarding the alleged multiple breaches of
fiduciary duty are all premised on an assumption that Judee and Coldwell Banker
somehow failed to protect the Stevensons’ interests in the purchase of the property. But
the trial court found to the contrary. The Stevensons’ interests in the property were fully
protected despite their names being deleted from the purchase documents. If that were
not the case, the court would not have ordered that they share in the dissolution of the
partnership. Plaintiffs repeatedly assert the Stevensons’ rights were eliminated by the
conduct of their fiduciaries. However, the only thing that was eliminated was the
Stevensons’ names from the title documents. Their equitable interest, by virtue of their
participation in the partnership, remained.
Turning now to plaintiffs’ misrepresentation claims, the trial court found that,
assuming representations were made as alleged, “plaintiffs have not proved by a
preponderance of evidence that defendants made the alleged representations of fact
without reasonable ground for believing them to be true, or with any intent to induce
plaintiffs’ reliance on the facts allegedly misrepresented.”
22
Plaintiffs contend the record contains substantial evidence satisfying each of the
elements of their fraud claim. However, on the issue of whether, at the time defendants
made alleged misrepresentations, they believed them to be true, plaintiffs’ only citations
to the record are to passages whereby Glenn explained he understood the partnership to
be one whereby the parties would share profits equally but would share ownership of the
property based on their contributions to the purchase. Thus, Glenn believed profits
would be split 50/50 but ownership was 75/25.
The foregoing argument appears under the heading, “Stevensons Proved Coldwell
Banker had Caused Damage” (bolding omitted) and the subheading, “Stevensons
Suffered Damage from Coldwell Bankers’ Breaches.” However, the argument itself
concerns whether Glenn committed fraud in his dealings with his partners. That
argument is not properly presented under the indicated heading. (Cal. Rules of Court,
rule 8.204(a)(1)(B); Heavenly Valley v. El Dorado County Bd. of Equalization, supra, 84
Cal.App.4th at p. 1346.)
At any rate, assuming plaintiffs are correct that there is substantial evidence of
each element of their misrepresentation claims against the Doughertys, or Coldwell
Banker for that matter, that is not the appropriate standard for our review. This case
comes to us on appeal from a judgment entered by the trial court. In that judgment, the
court found plaintiffs failed to prove their misrepresentation claims. On appeal, the
burden on plaintiffs is not to show there is sufficient evidence to support their claim but
to show there is not sufficient evidence to support the opposite. In order to do that,
plaintiffs must present all the evidence on the issue, both favorable and unfavorable, and
show that the evidence against them is insufficient to support the trial court’s conclusion.
Plaintiffs have failed to make that showing.
The same goes for plaintiffs’ negligence claim. They have not even attempted to
show there is not sufficient evidence to support the trial court’s rejection of that claim.
23
Plaintiffs do take issue with the trial court’s determination that the Doughertys
held the property in trust for their benefit. They argue the evidence shows instead that
defendants did all they could to sabotage plaintiffs’ interest in the property.
Plaintiffs’ argument misconstrues the trial court’s finding. The court was not
making a factual determination regarding the quality of defendants’ actions and whether
they were beneficial to plaintiffs. The court’s finding was that, as a matter of law, the
property was being held in trust. In other words, as the holders of legal title to property
that was in fact equitably owned by others, defendants were placed in the role of trustees
for the benefit of the true owners.
Because the Stevensons’ partnership interests in the property was secured, as the
trial court found and plaintiffs do not dispute, plaintiffs have no claim against the real
estate professionals on their various causes of action. They do not claim any other loss
resulting from actions of the real estate professionals. Their dispute with the Doughertys
over the appropriate dissolution of the partnership is a matter of internal partnership
governance, of which the real estate professionals had no control.
VII
Exclusion of Evidence
During trial, plaintiffs attempted to introduce into evidence two documents,
exhibits 67 and 68-1. Exhibit 67 is a letter dated May 2, 2007, written by counsel for
Coldwell Banker, Victoria Naidorf, to counsel for plaintiffs, Karen Goodman. In it,
Naidorf denied any liability of her client. Exhibit 68-1 is a letter dated May 7, 2007,
from Howard Stagg, counsel for the Doughertys, to Goodman. In that letter, Stagg
asserted plaintiffs have no claim against the Doughertys because the Stevensons did not
take title to the property, the Stevensons failed to make financial contributions toward the
purchase as promised, and the Doughertys were not responsible for the parties’ failure to
form an LLC. Stagg also discussed his clients’ desire not to litigate this matter and to
24
instead work out some other type of resolution. Finally, Stagg demanded mediation of
the dispute.
The trial court excluded both documents based on Evidence Code section 1152.
Subdivision (a) of that section reads: “Evidence that a person has, in compromise or
from humanitarian motives, furnished or offered or promised to furnish money or any
other thing, act, or service to another who has sustained or will sustain or claims that he
or she has sustained or will sustain loss or damage, as well as any conduct or statements
made in negotiation thereof, is inadmissible to prove his or her liability for the loss or
damage or any part of it.”
Plaintiffs contend exhibits 67 and 68-1 do not qualify for exclusion under
Evidence Code section 1152, because they did not contain any offer or promise to
compromise plaintiffs’ claims. We agree as to exhibit 67, but not exhibit 68-1.
Evidence Code section 1152 is “based on the public policy in favor of the
settlement of disputes without litigation and [is] intended to promote candor in settlement
negotiations: ‘The rule prevents parties from being deterred from making offers of
settlement and facilitates the type of candid discussion that may lead to settlement.’ ”
(Zhou v. Unisource Worldwide (2007) 157 Cal.App.4th 1471, 1475.)
Although exhibit 67 was written by counsel for one party to counsel for the other
and expressly states it is a “CONFIDENTIAL SETTLEMENT COMMUNICATION,” it
is clear from the content the letter was in no way an acknowledgement of responsibility
or offer to compromise. After introducing herself as counsel for Coldwell Banker,
Naidorf stated: “I believe that there is no basis to claim that Coldwell Banker is in any
way responsible for the dispute that has arisen between your clients and Mr. and Mrs.
Dougherty. Hopefully the principals can work together through their respective attorneys
to reach a prompt and appropriate resolution of this matter. However, if such resolution
is not possible, I would urge that no further attempts be made to drag Coldwell Banker
into this non-brokerage, personal issue.”
25
There is nothing in the foregoing that could be construed as an acknowledgement
of responsibility on the part of Coldwell Banker or an offer to compromise plaintiff’s
claims. Hence, Evidence Code section 1152 would not appear to be applicable. It is not
the caption of the letter but its content that is controlling.
On the other hand, it is hard to see any relevance in the document. Plaintiffs
argue: “Exhibit 67 clearly shows that Coldwell Banker was dealing in bad faith, as they
fully denied all liability for their agent’s failures.” As we have explained, there is
substantial evidence in the record that both Coldwell Banker and its agent met their
applicable standard of care under the circumstances presented. It is hard to see how a
party is acting in bad faith merely by denying responsibility where no responsibility
exists. Thus, any error in excluding exhibit 67 under Evidence Code section 1152 was
harmless.
As for exhibit 68-1, that letter reads in part: “Finally, let me confirm that the
Doughertys’ [sic] have no interest in litigating this matter, and have made several
proposals to Mr. and Mrs. Stevenson, to return their money to them, or to provide them
with payment and a larger percentage of their investment, in an effort to settle and resolve
this matter. They obtained and provided your clients with an appraisal of the property,
and were prepared to make payment to your clients based on that appraisal value. We
understand, however, that your clients declined to accept the value determined by the
appraiser, and represented that he [sic] was going to engage an independent appraiser to
determine the value of the property. Perhaps it would be appropriate to allow the
appraisal process to be completed, and then further discussion of resolving these claims,
with an unwinding of whatever agreement may or may not have been reached among the
parties, with all to go their separate ways.”
It is clear from the foregoing that exhibit 68-1 contains settlement discussions. It
expresses the Doughertys’ willingness to allow the Stevensons some amount as
settlement of their claims under the partnership agreement. It further expresses the
26
Doughertys’ willingness to use appraisals to determine valuation for purposes of
plaintiffs’ dissolution claim. Evidence Code section 1152 is clearly applicable.
Plaintiffs nevertheless contend the letter also contains other things relevant to this
dispute, such as an acknowledgement that the Stevensons had attempted to dissociate
from the partnership and evidence that the Doughertys were misrepresenting the facts.
However, the fact the letter may have contained other matter does not detract from the
fact it also contained settlement negotiations. Plaintiffs made no offer to redact the
objectionable portions of the letter and present the remainder.
Plaintiffs contend they were entitled to present exhibit 68-1 as a response to an
earlier letter they sent to the Doughertys that was admitted into evidence. They cite
Evidence Code section 356, which reads: “Where part of an act, declaration,
conversation, or writing is given in evidence by one party, the whole on the same subject
may be inquired into by an adverse party; when a letter is read, the answer may be given;
and when a detached act, declaration, conversation, or writing is given in evidence, any
other act, declaration, conversation, or writing which is necessary to make it understood
may also be given in evidence.”
Plaintiffs did not argue below that exhibit 68-1 was admissible as a response to
their earlier letter and made no showing that exhibit 68-1 was necessary to make the
earlier letter understood. On the contrary, plaintiffs’ questioning regarding exhibits 67
and 68-1 sought to elicit testimony as to plaintiffs’ reaction to the exhibits, i.e., that the
letters caused them emotional distress. Hence, the trial court was not called upon to rule
on whether admission of exhibit 68-1 was necessary to make the earlier letter understood.
Plaintiffs have therefore forfeited any such claim.
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VIII
Emotional Distress Damages
Plaintiffs contend they are entitled to emotional distress damages on their various
tort and breach of contract claims. However, as we have explained, plaintiffs’ claims,
other than those for dissolution and an accounting, were properly rejected by the trial
court. Hence, their assertion of a right to emotional distress damages is a non-starter.
IX
Nicholas Stevenson
In his separate opening brief, Nicholas contends the trial court erred in denying
him any relief on the complaint. The other plaintiffs have joined in Nicholas’s arguments
on appeal.
Plaintiffs contend the trial court erred in concluding Nicholas was no more than an
investor in the partnership and not a partner. They argue this finding is inconsistent with
other findings by the court, ignores the fact that the Doughertys consented to Nicholas
becoming a partner in the venture, and is contrary to the law permitting assignment of
property interests and causes of action. As we shall explain, all of these arguments are
based on fundamental misunderstandings of the law and the findings of the trial court.
Plaintiffs contend the trial court’s finding that Nicholas was no more than an
investor is inconsistent with another finding that he was a “straw purchaser” for his
parents and also inconsistent with the ultimate determination that Nicholas did not prevail
on any cause of action. The court made no finding that Nicholas was a “straw
purchaser.” The portion of the court’s statement of decision cited for this assertion reads:
“Dean delivered checks totaling $48,500 to Coldwell Banker towards the close of escrow,
including checks from Nicholas. He provided another check for $1,500, bringing the
total amount paid by the Stevensons towards the purchase to $50,000. . . . The
Doughertys contributed $155,000 towards the $205,000 purchase price. The Doughertys’
28
funds, and the funds contributed on behalf of Dean and Terina, were placed in escrow
together and, as partnership funds, were used to consummate the purchase of the
Virginiatown property.”
The court found the Stevensons contributed $50,000 toward the purchase of the
property and a portion of those funds came from Nicholas. In effect, Nicholas
contributed money to his parents, either as a gift or a loan, and his parents used those
funds in the purchase of the property. This is not inconsistent with the court’s
determination that Nicholas was an investor and not a partner.
Plaintiffs next take issue with the court’s statement: “There is no evidence to
support that the Doughertys consented to Nicholas becoming a partner, either expressly
or impliedly.” Plaintiffs argue this is inconsistent with the provision of the purchase offer
that it could be assigned to others, which gave the parties the freedom to bring others into
the deal. According to plaintiffs, “the Doughertys, in fact, expressly consented to
Nicholas becoming a co-investor, even if not a partner.”
It is one thing for the Doughertys to expressly agree that others could be brought
into the deal and quite another for them to agree on a particular assignee. There is
nothing to suggest the provision permitting assignees was a blanket authorization for any
partner to bring in any other party of his or her choosing. Plaintiffs cite nothing to
suggest the partners, including the Doughertys, agreed to assign a portion of the property
purchase to Nicholas.
Plaintiffs nevertheless assert the trial court “completely blew it” in concluding
Nicholas was an investor rather than an equity purchaser. Plaintiffs cite that portion of
the escrow instruction, signed by Judee, which states the funds being deposited “are not
loan proceeds.” Plaintiffs assert this is contrary to the court’s finding that Nicholas had
made a loan rather than an investment.
Plaintiffs misconstrue the escrow instructions. The document in question begins:
“I, the undersigned depositor, hand you herewith checks in the amount of $48,500
29
payable to North American Title Company.” It then states: “These funds are not loan
proceeds and are to be deposited immediately in this escrow for the account of Glenn
Dougherty and Judee Dougherty, principal(s).” The document is signed by Dean as the
depositor.
Because the declaration was signed by Dean, it is his assertion that the funds are
not loan proceeds. In effect, Dean was assuring all interested parties that the funds
belonged to him and had not been obtained by way of a loan for which the lender might
be asserting a security interest in the property. Whether in fact Dean had obtained the
funds by way of a loan from Nicholas is of no moment. This is a matter between Dean
and Nicholas. For all that appears, the funds were given to Dean with no strings attached.
The trial court did not find that Nicholas made a loan directly to the partnership to
facilitate purchase of the property. There is nothing in the record to suggest the
Doughertys agreed to such a loan. Rather, the Stevensons were required to come up with
$50,000 toward the purchase and they arranged for Nicholas to provide them a portion of
that money. The Stevensons then took that money and contributed it to the partnership.
Thus, Nicholas was a lender to his parents, not the partnership. Hence, he has no claim
against the partnership.
Plaintiffs also contend the trial court ignored a fundamental right of property
ownership, the right to assign all or a portion of the property to another. They argue the
Stevensons had a right to assign their share of the property to others, with or without
consent from the other property owners, and they assigned a portion of their interest in
the property to Nicholas. In fact, plaintiffs argue, not only did the Stevensons have the
right to assign a portion of their interest in the property to Nicholas, they also had the
right to assign their causes of action to recover that interest.
Plaintiffs misconstrue the nature of the underlying transaction. The parties here
did not purchase the property as individuals but as a partnership. Thus, the individuals
did not each own a portion of the property, which could be freely assigned to others. The
30
property was owned by the partnership. As such, the individual partners had no right to
assign any portion of the property. Only the partnership as a whole could do so. And,
contrary to plaintiffs assertions, the fact the court found the Stevensons had no right to
transfer a portion of the property to Nicholas is not inconsistent with the further finding
that the Stevensons had not lost any rights by virtue of the manner in which title to the
property was taken. The Stevensons retained their partnership interest in the property.
That interest is no different than if their names had been included on the title.
Plaintiffs contend that, by virtue of Nicholas’s contribution of funds to the
purchase, he became an assignee of the Stevensons under the terms of the purchase offer
and, as such, Judee owed him a fiduciary duty. However, as explained above, Nicholas
did not contribute funds to the partnership but to the Stevensons and did not become an
assignee of a partnership interest. Furthermore, we conclude the trial court did not err in
rejecting plaintiffs’ breach of fiduciary duty claim. Hence, it does not matter whether
Judee owed Nicholas a fiduciary duty.
Plaintiffs nevertheless contend the proper burden of proof for a fiduciary is a
rebuttable presumption and, hence, the trial court should have concluded Nicholas
became a partner, because there is no evidence the Doughertys failed to consent to him
becoming a partner. This argument obviously puts the cart before the horse. Assuming a
rebuttable presumption arises against a fiduciary, the court must first find a fiduciary
relationship exists. Here, plaintiffs attempt to use the rebuttable presumption to prove a
fiduciary relationship existed, thereby giving rise to the rebuttable presumption.
As their final argument, plaintiffs again assert the trial court erred in finding that
Nicholas did not become a partner by virtue of his having contributed $42,000 to the
partnership for purchase of the property. However, as previously explained, the trial
court found Nicholas did not contribute to the partnership but to the Stevensons, who in
turn contributed those funds to the partnership for purchase of the property. Furthermore,
one does not become a partner in an enterprise merely by contributing money to it. There
31
must be an intent that the parties are entering into a partnership. The record supports the
trial court’s conclusion that no such intent existed here. Whatever the Stevensons may
have thought, there is no evidence that the parties ever discussed Nicholas becoming a
member of their partnership.
DISPOSITION
The judgment is affirmed. Defendants, both the Doughertys and Coldwell Banker,
are entitled to costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)
HULL , J.
We concur:
NICHOLSON , Acting P. J.
DUARTE , J.
32