Filed 6/28/21 Chmait v. Heritage Asset Management CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication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

FOURTH APPELLATE DISTRICT

DIVISION THREE

OMAR CHMAIT,

 Plaintiff and Appellant,

v.

HERITAGE ASSET MANAGEMENT, 

INC., et al.,

 Defendants and Respondents.

 G057374

 (Super. Ct. No. 30-2014-00745712)

 O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Martha 

K. Gooding, Judge. Reversed and remanded with instructions.

Cedar Adams and Adam K. Obeid for Plaintiff and Appellant.

Estes Law Group and Polly J. Estes for Defendants and Respondents.

INTRODUCTION
2

Today we hold that the wind up of a general partnership actually requires 

winding up the partnership business. A wind-up cannot be completed by way of a selfdealing conversion of partnership assets by some of the partners, to the detriment and 

without the consent of the other partner or partners. Where such a conversion occurs, the 

partnership remains in existence, and the other partner is owed commensurate damages

and a proper accounting. Because the trial court reached a contrary conclusion after a 

bench trial, we reverse and remand for further proceedings.

FACTS1

In 2013, Rima Radwan was working in the student loan consolidation 

business for a company called Student Loan Managers.2 Student Loan Managers’ 

business consisted of approaching student loan debtors and helping them to consolidate 

their loans in order to lower their monthly payments. If the company could convince a 

borrower to consolidate, it would collect certain fees for servicing and managing the loan 

over its decades-long life. 

Over time, Rima and her colleagues recognized the highly lucrative 

business opportunity in student debt consolidation.3 She and her brother, Mazen 

Radwan, and a family friend, appellant Omar Chmait, decided to start a competing 

student loan consolidation business. At Omar’s request, Rima and Mazen agreed to bring 

in Omar’s long-time best friend, Dean Robbins, as a partner. In August 2013, the four of 

1 Neither side disputes the trial court’s factual findings so we glean this section mainly from the trial 

court’s corrected final statement of decision and the parties’ joint list of stipulated facts. As the judgment is largely 

based on the trial court’s conclusions of law, we are governed by the de novo standard of review rather than 

substantial evidence. (See Enea v. Superior Court (2005) 132 Cal.App.4th 1559, 1563 (Enea).) Thus, we need not 

consider respondents’ contention that appellant waived any substantial evidence objection to the factual findings 

under County of Solano v. Vallejo Redevelopment Agency (1999) 75 Cal.App.4th 1262, 1273. 

2 We shall adopt the nomenclature of the trial court in referring to the individual parties in the case 

by their first names – not out of informality, but, in the trial court’s words, for purposes of “convenience and clarity, 

as two of the parties share a common last name.” 

3 According to appellant’s expert, student loan debt has grown considerably in the past decade or so,

and a significant percentage of these borrowers are delinquent on their loans. This creates a demand for student loan 

consolidation services like those provided by the business entities in this case. 
3

them formed a general partnership by oral agreement and decided to use the name 

Student Loan Service Managers (SLS Managers).4 

The Partnership

The partnership’s business was to run a telemarketing/call center doing the 

same thing as Rima’s former employer – convincing student loan debtors to consolidate 

multiple student loans and lower their monthly payments using federal government 

programs. Once the loans were consolidated, each borrower would have only one loan 

with one lower monthly payment over a 20- or 30-year period. SLS Managers would 

process the customer’s payments and in return, the customer would pay the partnership

an initial sign-up fee plus a residual monthly fee for the life of the consolidated loan. The 

partnership’s profit-generating potential thus lay in its customer agreements. 

The four partners decided they would each take an equal stake in the 

business, 25 percent, and would share in its profits and losses. They would also share 

equally the ownership of partnership assets and partnership business opportunities. 

Decisions of the partnership were to be made by majority vote and each partner was to 

bring something to the table in exchange for their 25 percent interest. 

Rima, having taken forms and other documents from her former employer, 

was to bring her industry knowledge to bear to help do the back-office work for the 

business, processing the consolidations and other administrative tasks. Mazen was to 

provide starting capital to get the business off the ground. Dean had computer skills, so 

he was in charge of creating the partnership’s customer relationship management (CRM) 

software – ultimately named Lazarus – to help manage the customer data and accounts. 

He would provide ongoing technical support as well. 

Omar was a fledgling restaurateur, having opened a Mediterranean 

restaurant in San Juan Capistrano earlier that year. He also had experience managing a 

4 The similarity to Rima’s former employer’s name is not lost on us.
4

telephone call center, so they agreed he would manage the call center floor and do the 

“front office” work. He agreed to work at SLS Managers during the day and then go to 

work at his restaurant in the evenings. As part of his contribution to the business, Omar 

was to lease office space, obtain a list of leads, contract with a payment processor (which 

turned out to be Payment Automation Network (PAN)), hire and manage the call center 

employees, maintain the partnership’s financial records, and help with revising forms 

Rima had taken from Student Loan Managers.

5

 Omar did most of these things, but 

sometimes not in a satisfactory manner.6 

The business opened its doors in August 2013. By early 2014, however, 

Rima, Mazen, and Dean were growing more and more concerned about Omar’s 

performance. They felt he was not adequately contributing to the business. At a January 

2014 meeting, Omar admitted he had not been performing up to par, and they decided to 

make some changes to try to help him improve. They moved his office and cut down his 

responsibilities. 

These changes did not work, so on February 5, 2014, Rima, Mazen, and 

Dean sat Omar down and told him he could choose one of two options. First, he could 

walk away from the partnership completely and take a 5 percent share of partnership 

profits in perpetuity. Or he could remain a partner, but with a reduced 10 percent stake. 

If he improved his performance and earned the right to 25 percent, they would restore his 

equal share to him. Omar refused both options, because he did not think they had the 

5 While the trial court characterized Rima as “bring[ing]” forms from Student Loan Managers, it is 

difficult for us to see how this “bringing” did not constitute out-and-out misappropriation of her former employer’s 

proprietary information. We have no evidence in the record that Rima had Student Loan Managers’ permission to 

take these documents, let alone use them as forms for a competing business. Indeed, the evidence is to the contrary. 

6 One area of focus at trial, and in the statement of decision, was Omar’s nonfeasance or 

malfeasance as a partner – that he failed to timely hire a payment processor, failed to change the company name in 

Rima’s forms, failed to obtain workers’ compensation insurance, poorly managed the books and employees, and 

frequently showed up late to work, amongst other transgressions. We need not get into the details of these episodes 

because they are largely irrelevant to the question before us. For purposes of appeal, Omar himself does not seem to 

dispute they occurred. 
5

right to unilaterally reduce his partnership stake. Instead, he ignored the conversation 

and kept working at SLS Managers as if it had not occurred. 

Formation of D.O.R.M., Inc.

From the beginning, the partners’ intention was to eventually conduct 

business under the auspices of a limited liability entity, but the necessity became more 

acute in late 2013. Student Loan Managers, Rima’s former employer, learned she had 

used its forms to solicit customers for SLS Managers. It had its attorney send the 

partners a cease and desist letter in late October 2013. Faced with an actual threat of 

litigation, the partners formed an S-corporation called D.O.R.M. Group Inc. (DORM) in 

early 2014.7 Aside from setting up a bank account for DORM and filing its articles of 

incorporation, however, no other corporate formalities were observed until June 2014, 

and DORM was – for lack of a better term – relatively dormant until then.8 

Omar is Expelled from the Partnership

On March 7, 2014, about a month after they had told Omar his stake in the 

partnership was reduced, Rima, Mazen, and Dean were very perturbed to discover Omar 

had just printed two copies of the partnership’s customer list. Believing he was stealing 

the data in order to start a competing business, they locked him out of the company 

computers and told him he was terminated from the partnership.9 They took away his 

management duties and purported to take away his ownership stake. They agreed to have 

a meeting at a later date to discuss the terms of his exit. 

That meeting occurred on April 4, 2014 in a restaurant. The parties were 

unable to reach any consensus on a fair buyout price for Omar’s share of the partnership 

7 The acronym D.O.R.M. stands for the four partners’ first names: Dean, Omar, Rima, and Mazen. 

The trial court found D.O.R.M. was formed with Omar’s knowledge and there was no “ulterior motive or nefarious 

purpose in forming” it because it was intended to shield the partners from personal liability after they received the 

cease and desist letter. 

8 Omar had earlier formed a separate LLC for the partnership’s business, but the LLC was never 

operational. 

9 Again, for our purposes, we need not review whether Omar printed the lists for legitimate 

purposes. Our resolution of the case is the same even if his action was wrongful and his termination was warranted.
6

because Omar insisted he was still a 25 percent partner and Rima, Mazen, and Dean 

insisted he was not. Omar told the three he would “see them in court” and abruptly left. 

Immediately upon his departure from the restaurant, Rima, Mazen, and Dean voted to 

dissolve the partnership. 

Winding Up the Partnership?

Rima, Mazen, and Dean did not seek professional advice in approaching 

the dissolution or wind up of the partnership. Instead, Mazen took it upon himself to 

decide what was required, and Dean and Rima went along with it. They prepared no

formal list of creditors or assets, and there was no formal accounting done to find out the 

true scope of the partnership’s assets, liabilities, profits, and losses.10 Instead, Mazen 

identified the partnership’s creditors on his own and entered into agreements with them to 

settle the partnership’s debts. The trial court stated there was no evidence as to the 

amount of said debts and how much it cost the partnership to settle them. 

There was no plan to convert the partnership to a corporation. But in April

2014, Rima, Mazen, and Dean instructed PAN to deposit incoming funds into DORM’s 

bank account, over which Omar had no signatory authority.11 This meant incoming 

payments from customer agreements were going into DORM’s account as of that time, 

instead of the partnership’s account. They transferred all of the partnership’s assets –

including client lists, office furniture, computer equipment, and CRM software – to 

DORM. Significantly, DORM paid nothing for these assets. Partnership employees 

were terminated and offered employment at DORM; new contracts with those who 

wished to accept the offer were executed. DORM also purchased some new equipment 

10 The trial court concluded this was because “there were so few” creditors and assets and the 

creditors were well-known to the partners. 

11 Leaving Omar off the list of signatories does not appear to have been nefarious, as he himself did 

not want to be associated with the account. Because of a prior dispute, he wished to maintain a low profile at the 

bank at which the account was opened. However, Omar’s absence from the account was certainly beneficial for 

Dean, Rima, and Mazen.
7

and systems, contracted with a new data source for leads, and terminated the 

partnership’s lease and leased new office space in DORM’s name. 

Then, in June 2014, Rima, Mazen, and Dean issued themselves shares in 

DORM, leaving out Omar. They named themselves corporate officers and directors and 

operated the same student loan consolidation business under the DORM entity’s name. 

However, after a few months, they decided to divide the business into two parts –

customer generation and customer servicing. They formed two new corporations, 

respondent Heritage Asset Management, Inc. (Heritage) and Tribune Management, Inc. 

(Tribune) for this purpose. 

The Lawsuit

Omar was locked out with no compensation for his share of the partnership, 

and negotiations with his former partners had gone nowhere. So Omar filed a complaint

against Rima, Mazen, Dean, and DORM on September 17, 2014, alleging 11 causes of 

action: breach of the partnership agreement, conversion of partnership assets, actual 

fraud, constructive fraud, conspiracy to convert the partnership assets, accounting, breach 

of fiduciary duty, breach of corporate opportunity doctrine, interference with economic 

relations, unfair competition, and declaratory relief. Heritage and Tribune were later 

added as defendants. 

The case was originally scheduled for jury trial, but trial was bifurcated so 

that a stipulated list of equitable issues could be tried to the court first. These equitable 

issues included Omar’s causes of action for accounting, declaratory relief, and unfair 

competition, three affirmative defenses, and equitable remedies including imposition of 

constructive trust and statutory remedies regarding wind-up and forced judicial sale of 

corporate entities. In addition to the stipulated equitable issues for the court to resolve, 

the parties submitted a helpful list of 52 stipulated facts. 

A bench trial was conducted in late 2016 and early 2017 on the equitable 

issues, and a statement of decision was ultimately issued regarding them. The trial court 
8

concluded Rima, Mazen, and Dean had expelled Omar and dissolved the partnership in 

good faith. However, it concluded they did not have the legal right to unilaterally reduce 

his ownership stake, and at the time of the dissolution, he was entitled to 25 percent of 

whatever remained after wind-up.12 Furthermore, it found the three dissolving partners

breached their fiduciary duties by transferring the partnership’s assets to DORM for no 

consideration, but this transfer was still a liquidation and, coupled with Mazen’s 

settlement of partnership debts, it effectuated the termination of the partnership. 

On the basis of these conclusions, the trial court ordered an accounting as to 

five things: (1) the amount of cash owned by the partnership, regardless of whether the 

cash was held in the partnership’s name or not, (2) the amount of payments received by 

the partnership from its existing customer accounts during the wind-up period, (3) the 

costs incurred and paid by the partnership in connection with servicing those accounts 

during the wind-up, (4) the amounts owed to the partnership’s creditors and how much 

was paid to the creditors by Mazen, and (5) the amounts generated by any sale of 

partnership assets. It also viewed it as “necessary” to determine how many customer 

accounts were active as of April 4, 2014, the amount of fees generated by them each 

month, the time period over which the fees would be payable, and the extent to which any 

of the accounts became inactive. 

The parties stipulated to the appointment of referee M. Daniel Close to 

determine the fair market value of the partnership business as of April 4, 2014 and 

conduct an accounting regarding the five issues identified by the trial court. His decision 

was to stand as the decision of the court regarding the amounts owed Omar, and the 

parties stipulated Close’s opinion would resolve the remaining issues in the case. 

12 Even though it found Omar had been dissociated for cause from the partnership in March 2014 

under Corporations Code section 16601, the trial court correctly observed the dissolution had occurred within a 90-

day period after the dissociation, thus reassociating Omar into the partnership for purposes of the wind-up. (Corp. 

Code, § 16701.5, subd. (b)(1).)
9

Close issued his statement of decision on September 6, 2018, finding the 

business was worth $236,000 as of April 4, 2014. The court entered judgment on January 

7, 2019, awarding Omar all of $59,000, or 25 percent of the Close valuation. 

DISCUSSION

Omar’s primary argument on appeal is that the trial court erroneously 

determined the dissolution and wind up of the partnership was valid. He argues the trial 

court drew from this incorrect antecedent the erroneous legal consequent that he was only 

entitled to 25 percent of the value of the partnership as of the dissolution. We agree.

I. Dissolution and Wind-Up

We must first question whether the partnership was dissolved in good faith

on April 4, 2014. The trial court found the vote to dissolve was valid under 

“Corporations Code [s]ection 16801(a), because at least half of the partners. . . expressed 

their will to dissolve the Partnership and wind up its business.” We presume the trial 

court was referring to subdivision (1) of Corporations Code section 1680113, which 

allows dissolution “[i]n a partnership at will, by the express will to dissolve and wind up 

the partnership business of at least half of the partners[.]” (Italics added.)

The trial court’s analysis of the issue fails to take into account the second 

part of that sentence. While there may have been an express will to dissolve here, we can 

find no indication there was an express will to wind up the partnership business. Dean 

testified he, Mazen, and Rima voted to dissolve the partnership immediately after Omar 

abruptly left the April 2014 meeting, and the abrupt departure was due to Omar’s refusal 

to accept his expulsion and the diminution of his 25 percent stake. This timing indicates 

the dissolution was not because Dean, Rima, and Mazen wished to terminate the 

partnership’s business. On the contrary, they wanted to continue operating, just without 

Omar. They dissolved because they couldn’t get him to agree to walk away.

13 All statutory references are to the Corporations Code.
10

Such use of the dissolution mechanism was a breach of the respondents’

fiduciary duty. “‘Partnership is a fiduciary relationship, and partners are held to the 

standards and duties of a trustee in their dealings with each other. “‘“[I]n all proceedings 

connected with the conduct of the partnership every partner is bound to act in the highest 

good faith to his copartner and may not obtain any advantage over him in the partnership 

affairs by the slightest misrepresentation, concealment, threat or adverse pressure of any 

kind.” [Citations.]’”’ (BT–I v. Equitable Life Assurance Society (1999) 75 Cal.App.4th 

1406, 1410–1411, quoting Leff v. Gunter (1983) 33 Cal.3d 508, 514 (Leff).) Or, to put 

the point more succinctly, ‘Partnership is a fiduciary relationship, and partners may not 

take advantages for themselves at the expense of the partnership.’ (Jones v. Wells Fargo 

Bank (2003) 112 Cal.App.4th 1527, 1540; see Jones v. H.F. Ahmanson & Co. (1969) 1 

Cal.3d 93, 108, 111.)” (Enea, supra, 132 Cal.App.4th at p. 1564.) 

Such advantages include usurpation of partnership opportunities. “. . .[T]he 

continuing fiduciary duty which survives dissolution of the partnership is breached if the 

ex-partner attempts to divert partnership opportunities for his personal benefit to the 

detriment of his former partners (Leff [supra,] 33 Cal.3d [at p.] 514) or when the 

remaining partners exclude the ex-partner from the benefits of an existing partnership 

opportunity (Rosenfeld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 218, 

disapproved on other grounds in Applied Equipment Corp. v. Litton Saudi Arabia Ltd.

(1994) 7 Cal.4th 503, 521, fn. 10; Page v. Page (1961) 55 Cal.2d 192, 197–198).” 

(Crouse v. Brobeck, Phleger & Harrison (1998) 67 Cal.App.4th 1509, 1551.) 

In Leff, the defendant partners withdrew from their joint venture with 

plaintiff Leff in order to make a clandestine bid on a federal building contract without 

him. Our Supreme Court found a partner’s duty not to compete with the partnership on 

an opportunity being pursued “survives his withdrawal therefrom,” stating: “It is no less a 

violation of the trust imposed between partners to permit the personal exploitation of that

partnership information and opportunity to the prejudice of one’s former associates by the 
11

simple expedient of withdrawal from the partnership.” (Leff, supra, 33 Cal.3d at p. 514.) 

Essentially, the Leff court found the defendants’ withdrawal from the joint venture to be 

in bad faith because it was a mechanism being used to exclude Leff from a partnership 

opportunity.

We cannot see how Dean, Rima, and Mazen’s dissolution of the partnership 

here is all that different from the withdrawal in Leff. The partnership was a going 

concern with an active business, albeit not as active as the partners would have liked at 

that point. Every new customer brought into the business was a partnership 

opportunity.14 They dissolved in order to get rid of Omar and exclude him from 

participating in the business’ increasing success. Indeed, Omar made this argument to 

the trial court, but the trial court rejected it, stating: “the Court finds that Rima, Mazen 

and Dean did not breach their fiduciary duties by dissolving the Partnership. Their 

decision to dissolve the Partnership and thereafter move forward with their business via 

the DORM corporate entity they had created earlier was in good faith and not for an 

improper purpose.”15 This is problematic.

Granted, all four of the partners on any number of occasions may have 

expressed the mutual desire to change the entity under which they were doing business. 

But that is different from an intention to wind up the business as a whole. If they simply 

wished to go on with the business without Omar (which the facts indicate they were 

justified in doing), their proper legal recourse was to seek to judicially dissociate Omar 

from the partnership pursuant to section 16601, subdivision (5) and follow the buyout 

procedure under section 16701. After doing so, they could proceed to convert to a 

14 Respondents’ counsel argued at trial that the partnership opportunity doctrine was inapplicable 

because it only applies to new and distinct opportunities, such as a new contract. We reject such an argument. 

Because respondents intended to continue operating the business, each new customer represented an opportunity for 

the partnership to generate a new stream of future income. 

15 The trial court does not elaborate much on this conclusion, except to say it was not in bad faith for 

Dean, Mazen, and Rima to use the DORM entity because it had, until then, been “just an empty corporate entity.” 

We presume the trial court simply meant that DORM was not created as a tool to exclude Omar. This may well be 

the case, but its subsequent use appears less benign.
12

corporation or undertake any other activity necessary to form a limited liability entity for 

the business. Instead, from what we can see, the respondents used dissolution to squeeze 

Omar out.

But let’s leave that aside for the moment. Let’s assume the dissolution was 

valid pursuant to section 16801. This fact nonetheless remains: the partnership’s 

business was never wound up. “Winding up is ‘the process of completing all of the 

partnership’s uncompleted transactions, of reducing all assets to cash, and of distributing 

the proceeds, if any, to the partners.’ (Gregory, The Law of Agency and Partnership (3d 

ed. 2001) § 227, p. 368.) Under [the Revised Uniform Partnership Act] RUPA, ‘[a] 

person winding up a partnership’s business may preserve the partnership business or 

property as a going concern for a reasonable time, prosecute and defend actions and 

proceedings, whether civil, criminal, or administrative, settle and close the partnership’s 

business, dispose of and transfer the partnership’s property, discharge the partnership’s 

liabilities, distribute the assets of the partnership pursuant to Section 16807, settle 

disputes by mediation or arbitration, and perform other necessary acts.’ (Corp. Code, § 

16803, subd. (c).)” (Heller Ehrman LLP v. Davis Wright Tremaine LLP (2018) 4 Cal.5th 

467, 481.)

What was done here looks nothing like the activities outlined above.

16 The 

only thing Mazen did consonant with a wind-up was to settle the partnership debts with 

creditors. But even for that position, we have no formal record of the creditors and the 

amounts due or amounts paid. Respondents did not “complete” the partnership’s 

uncompleted transactions. They transferred the partnership’s uncompleted transactions to 

their new entity. And by their own account, they continued to initiate new business 

16 This is partly because, as Mazen admitted at trial, the dissolving partners never engaged an 

attorney to help them navigate the process. Instead, his only research into the process involved contacting an 

attorney cousin for advice. When pressed as to why he never sought a formal legal opinion on how to handle the 

dissolution, he answered unenlighteningly: “Because I did not.” 
13

during the purported “wind up” period – an act inconsistent with winding-up.17 (See 

King v. Stoddard (1972) 28 Cal.App.3d 708, 712.) Respondents did not reduce the 

partnership’s assets to cash.18 They transferred the only assets of any material value –

the customer agreements – to a corporation they controlled without paying the 

partnership a dime for them. 

As Omar’s expert, James Walters, testified, there was no final tax return or 

articles of dissolution filed by the partnership with the state, and there was no evidence 

the partnership’s up-to-date taxes were paid.

19 In fact, there was no accounting at all for 

assets and liabilities. There were no charges and credits to the partners’ accounts because 

Mazen did not formally account for the settlement of partnership debts. (See § 16807, 

subd. (b).) Was there a deficit once Mazen paid the creditors? Or a surplus? In the 

former situation, each partner would have to put up an amount to cover said deficit.20

(Ibid.) In the latter, each partner would be owed a distribution of the proceeds. (Ibid.) 

Yet it seems no partner either shelled out a penny or took one in. We can 

see no evidence of a distribution of any proceeds from the wind-up amongst Dean, Rima, 

or Mazen, let alone to Omar. Are we to assume respondents broke exactly even in the 

17 Dean prepared a spreadsheet of customer accounts created between August 2013 and September 

2015. The spreadsheet does not distinguish between accounts generated by the partnership, DORM, Heritage, and 

Tribune. However, respondents have always maintained DORM did not become operational until June 2014. If this 

was indeed the case, the spreadsheet reflects that, between April 4, 2014 (the date of dissolution) and June 18, 2014 

(the purported completion date of wind-up), the partnership signed an additional 1500 customers. Doesn’t sound 

like winding-up to us.

18 We cannot agree with the trial court’s conclusion the assets were liquidated “after a fashion” 

because they were transferred to DORM for no consideration. The relevant definitions of the word “liquidate” are:

“to determine the liabilities and apportion assets toward discharging the indebtedness of (as a firm that is going out 

of business)” or “to convert (assets) into cash.” (Webster’s 3d New Internat. Dict. (1981) p. 1319.) As to the 

former, there was no accounting. And the latter definition entails converting illiquid assets to cash or a cash 

equivalent, presumably through a sale on the open market. The respondents admit they never offered the customer 

accounts for sale. Mazen claimed sale of the customer accounts “was really not an option” because there was no 

accurate way to value them. But in an age replete with debt-based securities, we are confident he could have found 

an investment banker or broker willing to give it a try.

19 According to Mr. Walters, this could leave the partnership and partners open to any remaining tax 

liability the partnership had incurred and not yet paid. 

20 In the proceedings below, respondents contended the customer agreements were a liability rather 

than an asset – a proposition the trial court found dubious. As do we.
14

wind-up? And in the absence of any contemporaneous records, are we just to take 

respondents’ word for it?

We cannot. From our review of the record, the partnership was neither 

wound up nor converted.21 It was quite simply plundered and its business usurped in 

favor of the new respondent entities and their owners – their number now reduced to 

three. 

The trial court stated it did “not accept the argument that a flawed wind up 

is the equivalent of no wind up.” That statement is not inaccurate – very little of what 

this judge does is inaccurate. But we question its application to these facts. We would 

not call this “a flawed wind up” or even “the equivalent of no wind up.” We simply do 

not believe the phrase “wind-up” has any place in the description of these facts. Calling 

this a wind-up sanitizes what occurred. From the record before us, it appears Mazen, 

Rima, and Dean orchestrated a misappropriation of the partnership’s assets in order to 

achieve their desired result of expelling Omar.

Their decision to do so has a weighty legal consequence. Because a windup was never effectuated, the partnership never legally terminated. (See § 16802, subd. 

(a).) Which means it remains in existence today. It is entitled to compensation for the 

conversion of its assets and opportunities.

22 And Omar is entitled to his share of the 

same.

21 Omar argues the partnership was never properly converted to a corporation, if indeed that is what 

respondents wished to do. We find the issue moot. Respondents freely admitted and agreed there was no 

conversion of the partnership under the Code. Which makes what they did seem even more brazen, in our view. 

22 The partnership was not just the sum of the four partners’ interests. It was itself a separate legal 

entity to which respondents (and Omar, for that matter) owed fiduciary duties. (See §§ 16201, 16404.) 
15

II. Remedy and Damages

Given our conclusions above, the $59,000 awarded Omar in the judgment 

is patently inadequate, especially for a business valued only a year or so after the fact at 

$4.1 million by respondents’ own expert. Moreover, the valuation done by the appointed 

referee, Mr. Close, incorporated some faulty legal assumptions. Mr. Close did not make 

an explicit appraisal of the value of the customer accounts. As the primary asset of the 

partnership, such an appraisal must be included in any valuation of it – or, for that matter, 

of any of the businesses involved here. Mr. Close also incorrectly valued the partnership 

as of the date of dissolution – April 4, 2014. Had the partnership been properly dissolved 

and wound up, Omar would have been due his 25 percent share of the proceeds on the 

date of the wind-up, not the date of the dissolution. Since a partner in charge of wind-up 

can “preserve the partnership business or property as a going concern for a reasonable 

time” as necessary to finish the business of the partnership, the valuation should have 

included cash flows occurring during the wind-up period. (See § 16803, subd. (c).) Nor 

did Mr. Close does fully incorporate the finances of DORM, Heritage, and Tribune in his 

assessment.

Thus, our next question is: how is Omar to be made whole? We conclude 

this issue must be remanded to the trial court for resolution, potentially by forensic 

accounting and/or jury trial as the trial court, in consultation with the parties, may deem 

appropriate. But since the trial court is to take the laboring oar, we provide here some 

guidance in how the issue should be approached.

We begin with a stark truth. While Rima, Mazen, and Dean dissolved the 

partnership in bad faith, and it has remained in existence for lack of a wind-up, its 

existence must unquestionably be terminated now. Had any of the parties applied for 

judicial dissolution under section 16801, subdivision (5), there would be ample grounds 

to grant the request. With what has transpired between the four partners, it is no longer 
16

reasonably practicable for the partnership to continue.23 (§ 16801, subds. (5)(B) & (C).) 

So what must occur next is a wind-up pursuant to Article 8 of the RUPA, and Omar must 

receive his rightful share of these proceeds.

Winding-up requires an evaluation of the value of assets (mostly customer 

agreements, from what we can gather) and opportunities rightfully belonging to the 

partnership, existing as of the time the partnership was supposed to have been wound up. 

The amount of liabilities owed by the partnership at the time of dissolution and amounts 

paid by Mazen to settle them must be ascertained. Once this accounting of assets and 

liabilities is completed, the partners’ accounts must be settled according to section 16807.

Because the partnership assets and opportunities were converted by the 

respondents during the wind-up period, Omar is also entitled to his share of damages 

stemming from this conversion. Where a fiduciary converts a corporate or partnership

opportunity for its own benefit, the wronged entity is entitled to claim for itself the 

benefits obtained by the converting fiduciary. (See Industrial Indem. Co. v. Golden State 

Co. (1953) 117 Cal.App.2d 519, 533.) This means Omar is entitled to a share of the 

present value of the partnership’s converted opportunities. As such, an accounting of the 

partnership assets for purposes of wind-up must necessarily (1) trace the converted assets 

and opportunities, (2) ascertain who currently controls them, and (3) assess their present 

value. To do this, the books and records of DORM, Tribune, and Heritage must be fully 

opened to examination. Once a valuation of the partnership’s misappropriated assets and 

opportunities is completed, said value may be included in the accounting of partnership 

assets and liabilities, and folded into the settlement of partner accounts.

There must also be an accounting for distributions taken by Rima, Mazen, 

and Dean from DORM, Tribune, or Heritage to the extent these distributions included 

monies derived from the partnership’s converted assets and usurped opportunities. (See § 

23 We therefore disagree with Omar’s contention that he is entitled to a 25 percent stake in DORM. 
17

16404, subd. (b)(1).) It may be most practical to incorporate these distributions into the 

settlement of partner accounts as well.

All four partners are entitled to have their accounts settled in accordance 

with their 25 percent stake. We agree with the trial court’s conclusion that Dean, Rima, 

and Mazen did not have authority to unilaterally reduce Omar’s partnership stake based 

on his performance. There is no evidence of any such term in the parties’ oral agreement, 

and allowing such a reduction would effectuate an unfair forfeiture. (See O’Flaherty v. 

Belgum (2004) 115 Cal.App.4th 1044, 1057.) 

In sum, the partnership must be wound up and Omar is entitled to damages 

according to his 25 percent stake, taking into account any monies already received by 

way of the judgment and any asserted affirmative defenses deemed applicable as an 

offset. Adequate compensation for Omar can be achieved through a comprehensive 

settlement of partner accounts as described above. Expert evidence will likely be 

valuable in arriving at an accurate number.

DISPOSITION

The judgment is reversed and remanded to the trial court for proceedings to 

determine an appropriate amount of damages due to appellant consistent with the 

conclusions reached herein. Appellant is to recover his costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

MOORE, J.

THOMPSON, J.