Court Opinion

ID: 9926030
Source: CourtListenerOpinion
Date Created: 2024-01-23 18:03:12.331056+00
Date Added: 2024-06-11T09:21:58.742958
License: Public Domain

Filed 1/23/24 Archer v. Johnson CA2/6
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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

                         SECOND APPELLATE DISTRICT

                                         DIVISION SIX

 JOHN S. ARCHER, et al.,                                          2d Civil No. B322083
                                                                (Super. Ct. No. 56-2019-
      Plaintiffs and Appellants,                                00533922-CU-NP-VTA)
                                                                   (Ventura County)
 v.

 AARON LEMAR JOHNSON, et
 al.,

      Defendants and Respondents.

       John S. Archer and Richard Ongania (appellants) appeal
from the judgment following a court trial. Appellants and
respondent entered into an oral partnership agreement to create
a computer software system used in home inspections.
Appellants filed a complaint against respondent and his limited
liability company, AaceSystems LLC, alleging, inter alia, causes
of action for breach of an oral partnership agreement, declaratory
relief, and for an accounting.1 They allege respondent sold the
software to users without sharing profits with them.
       The trial court found in favor of appellants on the breach of
oral agreement cause of action, awarded nominal damages, and
ordered that partnership law would apply from that point
forward. It denied appellants’ cause of action for an accounting.
Appellants contend the trial court erred in ruling that
partnership law only applied to the partnership “‘moving
forward’” and refusing to order an accounting. We affirm.
                Factual and Procedural Background
       Appellants are certified home inspectors. Prior to 2010,
they used an inspection software called “System 2000.” The
system allowed users to collect and manage data, including
narratives from home inspectors such as appellants. Those
narratives, otherwise referred to in the industry as “comments,”
were then used to generate inspection reports.
       The software was outdated, cumbersome, and not user-
friendly. In 2010, appellants hired respondent to modernize
System 2000, including adding new features and incorporating
the vast library of comments appellants had created over the
years into System 2000’s existing library of comments. The
modernized version of System 2000 was named, “Spectacular.”
       By March 2011, an operable version of Spectacular was
ready for use. Appellants believed Spectacular was so good that
they could sell the software to fellow home inspectors.
       Although appellants possessed industry-specific experience,
they lacked the technical capability to modify and further develop
the software. Appellants contacted respondent and offered him a

      1 AaceSystems LLC defaulted in the underlying case and is
not a party to this appeal.

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three-way partnership for ownership and operation of
Spectacular. Respondent agreed and the parties consummated
their agreement with a handshake.
      Pursuant to their partnership agreement, appellants were
responsible for instructing respondent on the layout and form of
the software to improve usability. They were also responsible for
providing the comments, conducting field testing, and for
marketing Spectacular to fellow home inspectors at conferences.
Respondent was responsible for developing the software as the
code writer.
      Appellants and respondent met with a legal consultant who
advised them to create a limited liability company to hold
ownership of the software and the business. The parties agreed
to use respondent’s previously formed company, AaceSystems
LLC.
      Throughout 2011 and 2012, appellants and respondent
worked together to improve the functionality of the software.
When Spectacular was ready for sale to home inspectors,
appellants and respondent marketed the software at home
inspector meetings and conventions.
      Appellants and respondent held themselves out as
“partners” and routinely used collective language such as “we”
and “us” in their internal communications, particularly when
referring to Spectacular business and future profits. Appellants
also exercised control over the day to day business operations,
including setting the price for Spectacular’s licenses and
determining user content.
      In August 2018, respondent gave a presentation at a home
inspector meeting where appellants were also present. When an
audience member inquired about the number of Spectacular

                                3
sales, respondent stated that he had sold 1500 units. Appellants
were shocked because respondent had indicated to them that
business was slow and things were not selling that well.
       In October 2018, the parties met at a local café. Mr. Archer
informed respondent that he wanted to fund his trust with his
one-third ownership interest in Spectacular and asked
respondent to give him a copy of the LLC agreement with his
name on it to include in the trust. Respondent denied that
appellants had any ownership in Spectacular and subsequently
terminated their access to Spectacular.
       In September 2019, appellants filed a complaint against
respondent and AaceSystems LLC, alleging among other claims,
breach of an oral agreement. Appellants requested declaratory
relief and an accounting.
       No evidence was produced at trial as to how many units of
Spectacular were sold. Following a court trial, the trial court
issued an oral tentative decision. The trial court found in favor of
appellants on their claim for breach of oral agreement, finding
“the evidence is very strong that there was some sort of informal
formal agreement . . . that they would be partners in this
business.”
       The trial court found the evidence of damages to be “very
spartan” and awarded only nominal damages of $100. As the
trial court explained, “I certainly don’t have evidence that 1500
units were sold at $599 per unit, and it would really be
speculation as to what the appropriate damages would be.”
       The trial court denied appellant’s cause of action for an
accounting. As the trial court explained:
       “There isn’t sufficient evidence to rely on to order an
       accounting of - - I mean, I don’t know what has been done

                                 4
       in the past, and we really didn’t establish the damages
       other than, as I said, nominal damages. So I am not going
       to order an accounting to be done. So what we are left with
       is the declaratory relief request, which I’m granting, and
       that is that a partnership does exist. It’s a third, a third, a
       third partnership. Partnership law will apply from this
       point forward.”
                              Discussion2
       Appellants contend the trial court should have ordered that
the partnership was created in 2011 or 2012 when the parties
made their handshake agreement. Appellants also contend the
trial court should have sustained the cause of action for an
accounting and ordered respondent to account for the profits and
losses he derived from Spectacular from the time of the
partnership’s formation. As we shall explain, appellants’
contentions are without merit.
       “A judgment or order of a lower court is presumed to be
correct on appeal, and all intendments and presumptions are
indulged in favor of its correctness. [Citations.]” (In re Marriage
of Arceneaux (1990) 51 Cal.3d 1130, 1133 (Arceneaux).)
       We review the trial court’s findings of fact for substantial
evidence and its denial of an accounting for abuse of discretion.
(People v. Cromer (2001) 24 Cal.4th 889, 893-894; Heller v.
Pillsbury Madison & Sutro (1996) 50 Cal.App.4th 1367, 1392
(Heller).)

      2 No respondent’s brief was filed. Accordingly, the appeal
is submitted on appellants’ opening brief, the record, and any oral
argument by appellants. (Cal. Rules of Court, rule 8.220(a)(2).)

                                  5
  Trial Court’s Order Partnership Law Governs Moving Forward
       Appellants do not challenge the trial court’s finding of a
three-way partnership for the ownership and sale of Spectacular.
However, they contend the trial court erred when it found that
the partnership only began to exist for profit division purposes as
of the time of trial. Appellants contend this finding was
“unsupported by evidence and defies common sense” where “[a]ll
of the acts, words and conduct that the trial court relied on as
evidencing an agreement occurred years prior, culminating in a
handshake between the parties in 2011 or 2012.”
       Here, the trial court issued its oral tentative decision
pursuant to California Rules of Court, rule 3.1590(c). The
tentative decision expressly stated, “[p]artnership law will apply
from this point forward.” The trial court instructed the parties
that the tentative decision would become the statement of
decision unless, within 10 days, a party specifies those principal
controverted issues as to which the party is requesting a
statement of decision or makes proposals not included in the
tentative decision. (Id., subd, (c)(4).)
       Appellants did not file any response or object to the trial
court’s tentative decision. Consequently, they have forfeited their
right to raise the issue now. (See Arceneaux, supra, 51 Cal.3d at
pp. 1133-1134.)
       The forfeiture rule applies with special force when the
appealing party received the judge’s tentative ruling and raised
no objection to it. “It is axiomatic that a party may not complain
on appeal of rulings to which it acquiesced in the lower court. . . .
It is unfair to the trial judge and the adverse party to attempt to
take advantage of an alleged error or omission on appeal when
the error or omission could have been, but was not, brought to the

                                 6
attention of the trial court in the first instance. [Citation.] . . . .
[¶] It follows that when a trial court announces a tentative
decision, a party who failed to bring any deficiencies or omissions
therein to the trial court’s attention forfeits the right to raise
such defects or omissions on appeal.” (Porterville Citizens for
Responsible Hillside Development v. City of Porterville (2007) 157
Cal.App.4th 885, 912, citing Arceneaux, supra, 51 Cal.3d at p.
1134.)
       Even if we were to reach the merits on this issue,
appellants fail to show that the alleged error resulted in a
miscarriage of justice. (See Lundy v. Ford Motor Co. (2001) 87
Cal.App.4th 472, 479; Cal. Const., art. VI, § 13.)
       Here, there is no evidence that appellants are entitled to
two-thirds of the profits going back to 2011 or 2012. Rather, the
evidence shows that appellants intended for respondent to keep
at least some of the profits as compensation for his work on
Spectacular. As Mr. Archer explained during his testimony, “We
never asked for a cut . . . Richard and I, considered us three-way
partners from the onset. And we never asked for money because
[respondent was] developing the product as it progressed. So . . .
any profits that were made, we just figured we would let
[respondent] keep because of [his] work.” When respondent quit
his job to focus on Spectacular full time, appellants continued to
allow him to keep the profits of Spectacular sales to “compensate
him for the amount of income that he was foregoing by giving up
his job.”
       We conclude reversal is not warranted on this issue.
                      Action for an Accounting
       As we have indicated, we review the trial court’s denial of
an accounting for an abuse of discretion. (Heller, supra, 50

                                   7
Cal.App.4th at p. 1392.) “‘“The term [judicial discretion] implies
the absence of arbitrary determination, capricious disposition or
whimsical thinking. It imports the exercise of discriminating
judgment within the bounds of reason. . . .”’” (Estate of Gilkison
(1998) 65 Cal.App.4th 1443, 1448-1449.) A “‘showing on appeal is
wholly insufficient if it presents a state of facts, a consideration of
which, for the purpose of judicial action, merely affords an
opportunity for a difference of opinion. An appellate tribunal is
neither authorized nor warranted in substituting its judgment for
the judgment of the trial judge. . . .’” (Ibid.)
       “A cause of action for an accounting requires a showing
that a relationship exists between the plaintiff and defendant
that requires an accounting, and that some balance is due the
plaintiff that can only be ascertained by an accounting.
[Citations.]” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156,
179; Sass v. Cohen (2020) 10 Cal.5th 861, 869 (Sass).) It is a
“‘species of disclosure predicated upon the plaintiff’s legal
inability to determine how much money, if any, is due.’” (Teselle,
at p. 180, italics added.)
       Here, the trial court expressly found there was insufficient
evidence to rely on to order an accounting. As the trial court
explained in its tentative decision, “I don’t know what has been
done in the past, and we really didn’t establish the damages
other than . . . nominal damages.”
       Appellants contend the trial court applied the wrong legal
standard because “[n]either knowledge of what was ‘done in the
past’ nor prospective establishment of damages, are recognized as
necessary elements to establish appellants’ entitlement to an
accounting.” Instead, they contend all they had to show was (1) a
relationship between the parties requiring an accounting, and (2)

                                  8
some balance is due to them that “‘can only be ascertained by an
accounting.’” (Citing Sass, supra, 10 Cal.5th at p. 869 and Corp.
Code, § 16405, subd. (b).)
       But appellants have not sufficiently demonstrated that any
balance was due or that it could only be ascertained by an
accounting and not through some other ordinary means of
discovery. To be sure, appellants had the opportunity to conduct
discovery to develop the evidence of damages or “some balance
due.” The record reflects that appellants filed a motion to compel
discovery and requested sanctions, however, it is unclear how the
trial court resolved the matter and on what basis. Appellants’
appendix does not include the motion to compel discovery, the
opposition filed by respondent, or the trial court’s ruling.
       “The burden of demonstrating error rests on the appellant.
[Citation.]” (Winograd v. American Broadcasting Co. (1998) 68
Cal.App.4th 624, 632.) To meet this burden, the appellant must
provide an adequate appellate record to assess error. “Failure to
provide an adequate record on an issue requires that the issue be
resolved against” the appellant. (Hernandez v. California
Hospital Medical Center (2000) 78 Cal.App.4th 498, 502.)
       Notwithstanding any discovery dispute, appellants had the
opportunity to examine respondent under oath. They presented
evidence that at least some units of Spectacular were sold. But,
Spectacular can be bought for a day, a single use, a month, the
entire year, or as a renewal at a discounted price.
       Like the trial court, we have no evidence as to how many
units of Spectacular were sold, or in what form, and at what
price. Appellants are not now entitled to an accounting based on
their own failure to carry their burden of proof in the first
instance. (See Evid. Code, §500 [a party has burden of proof as to

                                9
facts essential to his or her claim for relief]; 1 Witkin, Cal.
Evidence (6th ed. 2023) Burden of Proof and Presumptions, § 10,
p. 166 [same].)
       The trial court considered all of the evidence presented,
found it “very spartan” and insufficient to show that any “past
damages” occurred. It was not an abuse of discretion for the trial
court to then conclude that appellants’ failure to prove past
damages necessarily precluded them from demonstrating some
balance was due.
                              Disposition
       The judgment is affirmed.
       NOT TO BE PUBLISHED.

                                     YEGAN, Acting P. J.

We concur:

             BALTODANO, J.

             CODY, J.

                                10
                  Benjamin F. Coats, Judge
              Superior Court County of Ventura
               ______________________________

     Ferguson Case Orr Paterson and Joshua S. Hopstone,
Morgan T. Lynch, for Plaintiffs and Appellants.

     No appearance for Respondents.