Court Opinion

ID: 9366068
Source: CourtListenerOpinion
Date Created: 2023-01-25 20:03:17.97754+00
Date Added: 2024-06-11T17:15:49.549037
License: Public Domain

Filed 1/25/23 Scrapit v. Del Angel Recycling Corp. CA2/1
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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has not been certified for publication or ordered published for purposes of rule 8.1115.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 ONE

 SCRAPIT, LLC et al.,                                                 B313691

           Plaintiffs, Cross-defendants                               (Los Angeles County
           and Respondents,
                                                                      Super. Ct. No. LC102732)
           v.

 DEL ANGEL RECYCLING
 CORPORATION et al.,

           Defendants, Cross-
           complainants and Appellants.

      APPEAL from a judgment of the Superior Court of Los
Angeles County, Huey P. Cotton, Judge. Conditionally affirmed
as modified.
      Crawford Law Group, Roza Crawford and Daniel A.
Crawford for Defendants, Cross-complainants and Appellants.
      Marchetti Law and Frank E. Marchetti for Plaintiffs,
Cross-defendants and Respondents.
                  _________________________
                        INTRODUCTION
       Following a bench trial and a court-ordered forensic
accounting, respondents Scrapit, LLC (Scrapit), its owner Antoun
Chiha, and his wife Sandra Chiha were awarded $175,454.67 in
damages payable by appellants Ricardo Del Angel Bandala
(Bandala), Elfego Del Angel (Del Angel), Luis Suarez and
Makina, Inc. (Makina). Those damages arose from the
dissolution of the parties’ metal recycling business partnership.
       Appellants do not challenge any of the trial court’s liability
findings, including that they breached the partnership agreement
and their fiduciary duties to respondents, and fraudulently
induced respondents to invest in the partnership. Nor do
appellants challenge the trial court’s order dissolving the
partnership as of March 13, 2015, the court’s conclusion that
Scrapit held a one-third interest in the partnership, or the
findings of the court-appointed forensic accountant.
       Appellants contend only that the trial court erred in
measuring damages. Based on the forensic accounting report,
the trial court awarded respondents Scrapit’s one-third share of
the adjusted net profit of the partnership through the dissolution
date, plus a one-third share of the business’s inventory as of that
date. We agree with appellants that this was error, because
among other things (1) the adjusted net profits calculation
incorporated the value of the inventory, meaning the damages
award double-counted the value of the inventory, and (2) the
damages calculation included a partnership asset without
accounting for offsetting partnership liabilities.
       The parties dispute what the appropriate alternative or
corrected damages number should be. For the reasons explained
below, we find respondents’ arguments concerning the calculation

                                 2
of damages unpersuasive. Instead, we agree with appellants that
the proper measure of damages is Scrapit’s one-third interest in
the partnership’s net assets (total assets minus total liabilities as
of the dissolution date), a formula that comports with the
applicable Corporations Code1 provisions.
       Appellants, however, incorrectly contend that the
partnership’s net assets equal the partnership’s adjusted net
profit. Those are two very different things. Assets minus
liabilities is the partnership’s net assets; adjusted net profit is
the net income generated by the partnership during a specified
period. The undisputed forensic accountant report calculated
total partnership assets of $731,358.62 and total partnership
liabilities of $253,213.30 as of the dissolution date. Subtracting
the liabilities from the assets gives a net asset figure of
$478,145.32 (a figure the forensic accountant’s report explicitly
includes as the partnership’s total equity). Scrapit’s one-third
interest of this amount is $159,381.77.
       Accordingly, we conditionally affirm the judgment as
modified to award $159,381.77 in damages subject to
respondents’ consent to this modification pursuant to California
Rules of Court, rule 8.264(d). If respondents do not timely file a
consent in the Court of Appeal to this reduction, the damages
award is to be reversed and the matter remanded for a new trial
limited to determining the amount of damages, as liability has
been established. (See Cal. Rules of Court, rule 8.264(d).)

        1   Unspecified statutory references are to the Corporations
Code.

                                    3
      FACTUAL AND PROCEDURAL BACKGROUND
A.    The Parties Form a Partnership2
      In September 2012, Del Angel and Bandala started
operating a metal recycling business through a partnership with
Makina (which was owned by Suarez) and Eduardo Barajas
Hernandez. Bandala and Del Angel jointly held one partnership
unit.
      Shortly thereafter, Sandra and Antoun Chiha began
discussing with Bandala and Del Angel the possibility of joining
the partnership. Bandala informed Sandra Chiha that the
business either had, or was soon going to have, all of the
necessary permits and licenses. Bandala and Del Angel told the
Chihas that each of the three partners had invested $50,000 into
the business. They also told the Chihas that all of the business’s
equipment was owned free and clear and that the only debt of the
partnership was a $13,000 loan which they wanted the Chihas to
pay off as part of their investment.
      The Chihas joined the partnership through Scrapit, a
company owned by Antoun Chiha. The Chihas began working at
the business in early November and a partnership agreement
was signed on December 12, 2012. Under the partnership
agreement, there were four partners each holding a 25 percent
interest in the partnership: Bandala,3 Makina, Hernandez and

      2The factual summary is taken primarily from the
statement of decision issued by the court on May 4, 2021.
Appellants do not dispute any of the court’s factual findings.
      3Bandala held his interest in the partnership for himself
and Del Angel.

                                 4
Scrapit. Scrapit invested $50,000 in the business, as required by
the partnership agreement.
      Sandra Chiha, who had years of experience in the recycling
industry, initially managed the business’s operations. She
received $500 per week for her work, Bandala received $500 per
week, and Antoun Chiha and Del Angel each received $300 per
week. Suarez and Hernandez did not work at the business and
did not receive any regular payments.
B.    Disputes Arise Among the Parties and the Chihas
      Stop Participating in Business Operations
      Soon after the Chihas started working at the business they
learned that appellants had not applied for many required
licenses and permits, including a scrap metal dealer permit.
They also found out the business had debts that appellants had
not disclosed. Because it did not have a scrap metal dealer
permit, the business closed in late November 2012, and did not
reopen until mid-January 2013.
      The Chihas became suspicious that the other partners had
not invested $50,000 as had been represented, so they requested
each partner submit proof of their investment. Suarez presented
evidence that he had invested $50,000. Bandala and Del Angel
were not able to prove their full investment, but the partners
nonetheless voted to approve a full partnership share for them
because Del Angel had put labor into the business; the Chihas
agreed to this in part because they did not believe the business
could operate without Bandala and Del Angel. Hernandez was
unable to show proof that he had invested $50,000 and the
partners never voted to approve his investment. As a result,
Scrapit’s partnership share (as well as that of the other approved
partners) effectively increased from one-quarter to one-third.

                                5
      When the business resumed operations in mid-January
2013, Sandra Chiha again started receiving $500 per week and
Antoun Chiha again started receiving $300 per week. According
to Del Angel, at this time both he and Bandala began receiving
$800 per week. Antoun Chiha testified that he never approved
any salary increases and the issue was never discussed at any
partnership meeting.
      In late February 2013, the Chihas stopped working at the
business. Sandra Chiha testified that she did so because she was
concerned that the unethical work practices going on at the
business would damage her reputation in the industry. Antoun
Chiha testified that he saw the partnership engage in practices
he believed were illegal.
      In March 2013, Del Angel sent a letter questioning
Scrapit’s investment in the partnership. Sandra Chiha was
unable to provide a full accounting because Suarez had taken
records for the time period from November 2012 through January
2013. Suarez had taken a banker’s box of financial records and
the Chihas learned that he had given it to the partnership’s
accountant. The Chihas were subsequently refused access to the
documents; the daily cashier sheets for January 19 and 20, 2013,
which Sandra Chiha testified would have shown additional cash
contributed by the Chihas on behalf of Scrapit, were never
produced.
      On May 10, 2013, Antoun Chiha wrote to the partners to
demand repayment of Scrapit’s $50,000 investment and $10,000
owed on a $20,000 loan Scrapit made to the business. The other
partners refused to buy out Scrapit’s partnership interest. After
some brief and unproductive back and forth, any discussion

                                6
regarding the other partners buying out Scrapit’s partnership
interest ceased.
C.    The Parties Sue Each Other and the Matter Is Tried
       Respondents filed suit on March 13, 2015.4 On
February 22, 2016, they filed an amended complaint which
became the operative complaint for the lawsuit. Scrapit asserted
claims against appellants for breach of partnership agreement,
breach of fiduciary duty, dissolution of partnership, imposition of
constructive trust, and accounting. The Chihas asserted claims
against appellants for breach of employment agreement, common
count for labor provided, and Labor Code violations. Respondents
jointly asserted claims against appellants for intentional
misrepresentation and negligent misrepresentation.
       On September 16, 2016, appellants filed a cross-complaint
for breach of written contract, intentional breach of fiduciary
duty, fraud, negligent misrepresentation, and conversion.
      The matter was tried to the court in January 2018.5

      4After the litigation commenced, Bandala, Del Angel and
Suarez stopped using the name Del Angel Recycling and began
doing business through a newly formed entity called United
Scrap Force, Inc.
      5 The judgment and statement of decision both state that
the court heard evidence on January 11, 12, 16 and 17, 2018.
However, the transcript of the proceedings on those days does not
contain all of the testimony referenced in the statement of
decision, including the in-court testimony of Bandala and Abigail
Del Angel. Thus, it appears the court heard evidence on an
additional day. That additional day was apparently January 18,
2018; that is what appellants state in their opening brief.
However, appellants’ designation of the record on appeal only

                                7
      On March 20, 2018, the trial court announced its tentative
ruling in favor of respondents on most of their claims and against
appellants on all of their claims, ordered that the partnership
was dissolved as of March 13, 2015, and ordered the parties to
obtain an accounting of the partnership through that date, with
the cost of the accounting to be paid from partnership funds.
D.   The Court Orders a Forensic Accounting
     On November 1, 2018, the court issued an order appointing
accountant Tiffany Tso “to perform a forensic accounting of Del
Angel Recycling Corporation.”6 The order directed Tso to
“account for all money in and out of the company from
November 5, 2012[,] through March 13, 2015[,] and account for
all revenue or income from any source (cash or otherwise) and all
payments including payroll, capital improvements/replacements,
debts assumed by the business, payments on debts, ‘dividends’ or
payments to partners/investors, etc.” The order further directed
Tso to “determine a present day valuation of the business and its
assets.” The order directed appellants “to make all their books
and records available for access and review by Ms. Tso.”
       Tso submitted her report, along with an authenticating
declaration, in January 2021.7 Tso noted in her declaration that

requested the preparation of transcripts for January 11, 12, 16
and 17, 2018.
      6The court had, in June 2018, appointed a different
accountant but dismissed that accountant in October 2018
because he was not making enough progress.
      7 Tso finished her report well before January 2021, but
appellants did not pay her fees as ordered. On September 30,
2020, the court issued an order directing appellants to pay Tso

                                8
“the business changed corporate entities and has operated under
the new corporation United Scrap Force, Inc. since 2016.” As to
her efforts to determine a present-day valuation of the business,
Tso stated “[w]e have received literally none of the information
needed for a present-day valuation of the business and therefore
we are unable to prepare the valuation analysis. For example,
we do not have tax returns, financial statements, general ledgers,
bank statements, check copies, accounts receivable listings,
inventory listings, fixed asset listings, or any other records since
year 2015.”
      As to her accounting of the finances of the business from
November 5, 2012, through March 13, 2015 (accounting period),
Tso summarized that “the company generated estimated net
profits of $76,364 during the accounting period, and that it
invested in inventory of approximately $450,000 which remained
at the end of the accounting period prior to being transferred into
the successor corporate entity, United Scrap Force, Inc.” Tso
further stated that “because the [c]ompany’s business is largely
operated on a cash basis, with that cash never being deposited to
the bank, the veracity of historical transactions is subject to the
quality of the contemporaneous records which were kept
throughout the accounting period. In that regard we found there
were several missing records and that the historical general
ledgers which were kept in QuickBooks were incomplete.”
      Schedule 1 of the report summarized the inflows and
outflows of funds during the accounting period. According to that

$15,000 by a date certain and indicated that if the amount was
not paid by then it would appoint a receiver for the business.
Appellants subsequently paid Tso’s fees and she issued her
report.

                                 9
schedule, the partnership received $10,387,822.85 in income and
incurred $9,711,369.86 for “[c]ost of [g]oods [s]old” (primarily to
purchase the materials it sold), resulting in a gross profit of
$676,452.99. The partnership incurred $217,435.71 in other
expenses, resulting in net ordinary income of $459,017.28.
Finally, adding “[o]ther income” of $13,000.02,8 and subtracting
$539,461.96 in “[e]xpenses [p]aid [v]ia ‘[p]etty [c]ash’ ”9 and
$266,968.98 in “[p]ayroll [e]xpenses [p]aid [v]ia ‘[p]etty [c]ash’ ”10
yielded an adjusted net cash flow of negative $334,413.64.
      Schedule 1 of the report valued inventory on hand as of the
end of the accounting period at $450,000. In a note regarding
this valuation, the report explained that “[g]iven the total lack of
information regarding inventory levels at any date, we relied on
an industry ratio . . . to estimate inventory level at the end of
accounting period.” The report arrived at the $450,000 valuation
by dividing the cost of the goods purchased during 2014
($4,215,293) by an “[i]nventory [t]urnover [r]atio” (9.4 percent)
and rounding up by approximately $1,565.

      8 This amount was from 2012, and likely reflects the
payment of a $13,000 loan to the partnership, which payment
Scrapit made as part of its investment in the partnership; also
included was $0.02 in interest income.
      9 A breakdown of these cash payments was included on
schedule 1B of the report; the largest amounts were for facility
rent ($234,852.31), “[s]upplies” ($197,000.01), “[m]isc.”
($34,860.77), equipment rent ($32,140), and accounting fees
($23,150).
      10A breakdown of these cash payments was included on
schedule 1D of the report.

                                  10
      Schedule 1 also listed capital expenditures and equipment
purchases during the accounting period totaling $120,240,
adjusted for the value of equipment contributed by Bandala
($37,668.65), Makina/Suarez ($15,849) and Hernandez11
($27,500), for “[t]otal [c]apital [e]xpenditures/[e]quipment
[p]urchases” of $39,222.35.
       In schedule 1, the report combined the net negative cash
flow (-$334,413.64), with the value of the inventory on hand
($450,000) and then subtracted the capital
expenditures/equipment purchases ($39,222.35) to calculate an
“[a]djusted [n]et [p]rofit” of $76,364.01.
       The report also included, as schedule 2, a summary of the
assets and liabilities of the partnership as of March 13, 2015.
Based upon financial data prepared by the partnership, as
corrected by records reviewed by the forensic accountant and the
accountant’s estimate of inventory on hand in March 2015, the
report concluded the partnership’s total assets were $731,358.62
and its total liabilities were $253,213.30, resulting in “[t]otal
[e]quity” of $478,145.32.12

      11Hernandez is identified as “Eduardo Barajas” in the
accounting report.
      12  Schedule 2 also sets forth the partnership’s assets and
liabilities based solely on the financial data prepared by the
appellants; according to those records, the partnership’s total
assets were $257,075.46 and its total liabilities were $253,213.30,
yielding “[t]otal [e]quity” of $3,862.16. The biggest difference
between the accountant’s findings and the appellants’ data was
in the inventory category: the accountant determined that the
business had $450,000 in inventory while the appellants’ data
showed $0 worth of inventory.

                                11
E.     The Statement of Decision and Judgment
       On May 4, 2021, the court issued a detailed statement of
decision. The following day, it issued a lengthy judgment that
summarized the court proceedings and the accounting, and found
as follows: Bandala/Del Angel and Hernandez breached their
contractual obligations and fiduciary duties by failing to invest
$50,000 into the partnership; Bandala, Del Angel and
Makina/Suarez breached the partnership agreement and their
fiduciary obligations by failing to provide regular accountings of
the partnership’s business; Bandala and Del Angel breached the
partnership agreement and their fiduciary duties by unilaterally
increasing their salaries after February 2013; and appellants
negligently and intentionally misrepresented to respondents that
they had all the necessary permits and licenses for the metal
recycling business and that Hernandez and Bandala/Del Angel
had made their required financial contributions, and respondents
reasonably relied on these representations in contributing
$50,000 to the partnership.13
      The court found that Scrapit held a one-third share of the
partnership, and that dissolution of the partnership was
“appropriate and necessary under the terms of the [p]artnership
[a]greement as well as pursuant to Corporations Code [section]
16801.”14 While the judgment did not state a dissolution date,

      13 The court found against the Chihas on their causes of
action for breach of employment agreement, common count for
labor provided, and Labor Code violations.
      14Section 16801, subdivision (5) authorizes a court to order
a partnership to be dissolved on the application of a partner
when, among other grounds, “[a]nother partner has engaged in

                                12
the court in a previous order had set the dissolution date as
March 13, 2015.
       With respect to damages, the judgment indicated that the
court was basing its award on the forensic accounting and stated
as follows:
       “The [c]ourt finds that the assets of Del Angel Recycling,
Inc., aka United Scrap Force, Inc. are to be divided equally
between the three partners that actually invested in the business
and secured their partnership interests. Accordingly, Scrapit,
LLC is entitled to one-third of the assets of Del Angel Recycling,
Inc. The [c]ourt determines that [appellants] did not cooperate
with Ms. Tso and her efforts to obtain a current valuation of the
assets of the business, which business [appellants] were
operating in trust for the partnership until its dissolution.
Despite this, Ms. Tso was able to determine that Del Angel
Recycling, Inc. had profits of $76,364 and inventory of $450,000
in inventory, which totals $526,364.” The judgment awarded
Scrapit one third of this $526,364, which is $175,454.67.
       Following this award, no motions were filed with the trial
court regarding any alleged errors in the court’s damages
calculation.15 Appellants filed a timely notice of appeal on
June 28, 2021.

conduct relating to the partnership business that makes it not
reasonably practicable to carry on the business in partnership
with that partner.” (§ 16801, subd. (5)(B).)
      15The failure to timely move for a new trial ordinarily
precludes a party from complaining on appeal that a damages
award was excessive. (E.g., Greenwich S.F., LLC v. Wong (2010)
190 Cal.App.4th 739, 759.) Respondents understandably do not

                                13
                          DISCUSSION
A.     Standard of Review
       “An appellant’s challenge to damages, depending upon its
specific nature, may be subject to a substantial evidence, abuse of
discretion, or de novo standard of review. The question of
whether a plaintiff was, in fact, damaged by the defendant’s
breach of contract is reviewed for substantial evidence. (See
GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856,
873 [274 Cal.Rptr. 168] (GHK).) The question of whether ‘a
certain measure of damages is permissible given the legal right
the defendant has breached, is a matter of law, subject to de novo
review. [Citation.]’ (New West Charter Middle School v. Los
Angeles Unified School Dist. (2010) 187 Cal.App.4th 831, 843
[114 Cal.Rptr.3d 504] (New West); see also Hurtado v. Superior
Court (1974) 11 Cal.3d 574, 579 [114 Cal.Rptr. 106, 522 P.2d
666].) But where the measure of damages is legally permissible,
a trial court’s choice of that measure, among other legally
permissible measures of damages, is reviewed for abuse of
discretion. (New West, at p. 843, citing GHK, at p. 873.)” (JMR
Construction Corp. v. Environmental Assessment & Remediation
Management, Inc. (2015) 243 Cal.App.4th 571, 583.)
       “ ‘ “ ‘Where [a] statement of decision sets forth the factual
and legal basis for the decision, any conflict in the evidence or
reasonable inferences to be drawn from the facts will be resolved

argue that rule applies here, because the failure to move for a
new trial does not preclude a party from asserting an alleged
failure to apply the proper measure of damages. (Ibid.) The
damages issue here turns on the proper measure of damages, and
not the credibility of witnesses or conflicting evidence as the facts
are undisputed.

                                 14
in support of the determination of the trial court decision.’ ” ’
[Citation.]” (Gomez v. Smith (2020) 54 Cal.App.5th 1016, 1027.)
      “ ‘Where the fact of damages is certain, the amount of
damages need not be calculated with absolute certainty.
[Citations.] The law requires only that some reasonable basis of
computation of damages be used, and the damages may be
computed even if the result reached is an approximation.
[Citation.] This is especially true where . . . it is the wrongful
acts of the defendant that have created the difficulty in proving
the amount of loss of profits [citation] or where it is the wrongful
acts of the defendant that have caused the other party to not
realize a profit to which that party is entitled.’ ” (Sargon
Enterprises, Inc. v. University of Southern California (2012) 55
Cal.4th 747, 774-775, quoting GHK, supra, 224 Cal.App.3d at
pp. 873-874; see also Scheenstra v. California Dairies, Inc. (2013)
213 Cal.App.4th 370, 402 [“An award of damages computed on a
reasonable basis will be upheld even if it is only an
approximation”].)
B.      The Court’s Damage Calculation Was Erroneous
        Appellants argue the court erred in selecting and applying
the measure of damages. Scrapit’s causes of action in this matter
are subject to the Uniform Partnership Act of 1994 (UPA; § 16100
et seq.). Under the UPA, “A partner may maintain an action
against the partnership or another partner for legal or equitable
relief, with or without an accounting as to partnership business,
to do any of the following:
        “(1) Enforce the partner’s rights under the partnership
agreement.
        “(2) Enforce the partner’s rights under [the UPA] . . . [¶] . . .
[¶] . . . .

                                   15
       “(3) Enforce the rights and otherwise protect the interests
of the partner, including rights and interests arising
independently of the partnership relationship.” (§ 16405, subd.
(b).) Accordingly, damages awarded to Scrapit must be based on
its rights under the partnership agreement, the UPA or a
separate cause of action.
      1.    The Value of the Inventory Was Double Counted
       Appellants first point out that the adjusted net profit
calculation incorporates the value of the inventory. By adding
the value of the inventory to the adjusted net profit amount in
calculating damages, the $450,000 in inventory was double
counted (effectively as $900,000 instead of $450,000). We agree
the court’s damages calculation erroneously double-counted the
inventory.
       Respondents’ argument to the contrary is unpersuasive.
They contend that the net profits and inventory valuations
determined by the accountant were not “overlapping,” and they
cite to the declaration of the accountant which stated, in part,
“Our findings are that the company generated estimated net
profits of $76,364 during the accounting period, and that it
invested in inventory of approximately $450,000 which remained
at the end of the accounting period prior to being transferred into
the successor corporate entity, United Scrap Force, Inc.” The
mere fact that these two values are listed in the same sentence,
however, does not mean they are completely distinct and do not
overlap. A review of the schedules attached to the forensic
accountant’s declaration clearly shows the valuation of retained
inventory ($450,000) was incorporated in the calculation of
adjusted net profit. If the value of the inventory is not

                                16
considered, the business would have incurred a net loss of
$373,636, as opposed to a profit, as of the dissolution date.
      2.    The Value of the Inventory Was Not Offset By
            Partnership Liabilities
       Appellants further argue that including the $450,000
inventory amount itself was erroneous, because it effectively
awarded Scrapit a one-third share of the partnership’s assets
without reference to Scrapit’s concomitant share of the
partnership’s liabilities. Given the court’s dissolution of the
partnership, respondents were entitled to Scrapit’s one-third
share of the partnership’s equity on the dissolution date. Under
the code, that equity (what appellants term net assets) is
calculated by deducting the partnership’s liabilities from its
assets. Thus, an award of partnership assets without reference
to the related partnership liabilities was error.
       Pursuant to section 16801, when a partnership is dissolved
“its business shall be wound up.” Section 16807, subdivision (a)
provides that, “[i]n winding up a partnership’s business, the
assets of the partnership, including the contributions of the
partners required by this section, shall be applied to discharge its
obligations to creditors, including, to the extent permitted by law,
partners who are creditors. Any surplus shall be applied to pay
in cash the net amount distributable to partners in accordance
with their right to distributions under subdivision (b).”
Subdivision (b) of section 16807 provides, in relevant part, that
“[i]n settling accounts among the partners, the profits and losses
that result from the liquidation of the partnership assets shall be
credited and charged to the partners’ accounts. The partnership
shall make a distribution to a partner in an amount equal to any
excess of the credits over the charges in the partner’s account.”

                                 17
Thus, when a partnership is dissolved, each partner is entitled to
their share of the equity of the partnership, measured as the
value of the partnership’s assets less its outstanding liabilities.
       Section 16807, subdivision (b) assumes that there will be a
“liquidation of the partnership assets,” which did not occur in this
case. Instead of liquidating the partnership assets, appellants
continued to operate the metal recycling business under another
name.16 Respondents argue that, because there was no
liquidation, the trial court could award damages without
considering the partnership’s “alleged debts and liabilities.”
However, they provide no authority for that proposition nor any
cogent argument supporting it. Furthermore, such a result
would be contrary to the approach required where a partner
leaves a partnership and the remaining partners continue
business operations—in other words, what happened here. In
that situation the partner who “dissociates” from the partnership
is entitled to their share of the net equity of the partnership, as of

      16 Section 16803, subdivision (c) provides that “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.” Appellants do not contend that they continued
operating the business pursuant to section 16803, and there is no
dispute they continued the metal recycling business beyond “a
reasonable time” needed to facilitate an orderly winding-up
within the meaning of section 16803.

                                 18
the date of dissociation, which is the amount a liquidation of the
partnership on that date would have yielded.
       Under the code, a partner can effect a dissociation by
providing the partnership with “notice of the partner’s express
will to withdraw as a partner.” (§ 16601, subd. (1).) In such a
situation, “the partnership shall cause the dissociated partner’s
interest in the partnership to be purchased for a buyout price
determined pursuant to subdivision (b).” (§ 16701, subd. (a).)
That buyout price “is the amount that would have been
distributable to the dissociating partner under subdivision (b) of
Section 16807 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.”17 (§ 16701,
subd. (b).)
      In short, if a partner dissociates but the partnership is not
liquidated, the dissociating partner is entitled to recover what it
would have recovered had the partnership been liquidated or sold

      17 The partnership agreement is consistent with these
provisions. It provides that, upon the withdrawal of a partner,
“the remaining [p]artner . . . may continue the [p]artnership
business by purchasing the interest of the other [p]artner in the
assets and good will of the [p]artnership.” The agreement further
provides that the purchase price is “the net book value of the
interest as shown on the last regular accounting of the
[p]artnership preceding the dissolution together with the full
unwithdrawn portion of the deceased, withdrawing, or
terminated [p]artner’s distributive share of any net profits
earned by the [p]artnership between the date of the accounting
and the date of dissolution of the [p]artnership.”

                                19
as a going concern—namely, their share of the equity of the
partnership, measured as the value of the partnership’s assets
less its outstanding liabilities. Here, the court erroneously
measured damages by only implementing one part of the
foregoing method, namely the valuation of one partnership asset
(inventory),18 while not accounting for the departing partner’s
obligation to share in the partnership’s outstanding liabilities.
C.    The Parties’ Alternative Damages Theories Are
      Legally Unsupportable
      Given our finding that the court’s calculation was
erroneous, both parties urge we adopt alternative legal theories
of damages and apply them to the undisputed facts here. We
discuss these theories below.
      1.    Non-dissolution Claims
       Respondents argue that awarding them Scrapit’s share of
the partnership’s inventory and the adjusted net profit should be
affirmed because it was a proper measure of damages under their
causes of action for breach of contract, breach of fiduciary duty,
and negligent and intentional misrepresentation. Respondents,
however, fail to explain how any of these causes of action would
allow them to recover, as damages, Scrapit’s share of the
inventory without a deduction for its share of the partnership’s
liabilities.
       Turning first to the breach of contract claim, “[d]amages
awarded to an injured party for breach of contract ‘seek to
approximate the agreed-upon performance.’ [Citation.] The goal

      18We recognize that inventory was not the only asset held
by the partnership. For example, the partnership owned
equipment and held money in bank accounts and cash.

                                 20
is to put the plaintiff ‘in as good a position as he or she would
have occupied’ if the defendant had not breached the contract.
[Citation.] In other words, the plaintiff is entitled to damages
that are equivalent to the benefit of the plaintiff’s contractual
bargain. [Citations.]” (Lewis Jorge Construction Management,
Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 967-
968.) Here, the benefit of the bargain expressed in the
partnership agreement was that the partners would share in the
net profits of the business, as well as both the assets and the
liabilities of the partnership. Scrapit fails to explain how its
share of the partnership’s assets alone is a proper measure of
damages for appellants’ breach of the partnership contract.
       Similarly, respondents fail to articulate how Scrapit’s share
of the inventory would properly measure damages for breach of
fiduciary duty or negligent and intentional misrepresentation.
The court found appellants breached their fiduciary duties by
failing to make their promised investments into the partnership,
failing to provide regular accountings of the partnership’s
business, and increasing Bandala’s and Del Angel’s compensation
for working for the business. The court also found that
respondents relied on misrepresentations by appellants in
deciding to join the partnership and make their financial
contribution. Respondents make no argument how awarding
them Scrapit’s share of the partnership’s inventory through the
date of dissolution reasonably measures their losses under any of
these claims, and nothing in the court’s statement of decision or
the judgment indicates the court intended the inventory amount
as a measure of those damages for those breaches.
       Finally, respondents argue the court’s measure of damages
was proper in light of appellants’ failure to cooperate with the

                                21
accounting, which impacted the reliability of the accountant’s
findings. The court stated in the judgment that appellants “did
not cooperate with Ms. Tso and her efforts to obtain a current
valuation of the assets of the business, which business
[appellants] were operating in trust for the partnership until its
dissolution.”19 Appellants do not dispute this finding, and there
is substantial evidence to support it. However, there appears to
be no connection between the award of the inventory amount and
appellants’ lack of cooperation. The court did not explain (nor
appear to intend) any such connection in the judgment or its
lengthy statement of decision, nor do respondents explain it on
appeal.
      2.    Net Profits
       Appellants argue the court should have awarded Scrapit
solely a one-third interest in the adjusted net profit of $76,364,
namely $25,454.67, claiming this is the amount provided for upon
liquidation under section 16807, subdivision (b) and the
partnership agreement. This argument misreads section 16807,
subdivision (b) and the partnership agreement.
       In support of their contention, appellants point to a portion
of section 16807, subdivision (b) stating that “[i]n settling
accounts among the partners, the profits and losses that result
from the liquidation of the partnership assets shall be credited
and charged to the partners’ accounts.” (§ 16807, subd. (b).)
According to appellants, “profits” as used in that statutory
language means net adjusted income. But “the profits [or] losses

      19 The judgment also stated that Tso reported she was
unable to accurately calculate the current value of United Scrap
Force, Inc. because of the lack of financial information.

                                22
that result from the liquidation of the partnership assets” are not
positive or negative income generated while the partnership was
in operation. They are instead the positive or negative difference
remaining upon liquidation/windup—in other words, what is left
once the partnership’s assets are applied to discharge its
liabilities. (See, e.g., § 16807, subd. (a).)
       Appellants’ reliance on paragraph 7 of the partnership
agreement is equally misplaced. That paragraph provides that
“[a]ny net profits or losses that may accrue to the [p]artnership
shall be distributed to or by the [p]artners.” This provision
governs on-going operations, and not what occurs in a dissolution
and/or dissociation. A separate provision, paragraph 21,
addresses that circumstance and is in accord with section 16807,
subdivision (b). In particular, paragraph 21 provides that the
partnership is to be liquidated and then “the debts paid[ ] and the
surplus divided equally among the [p]artners.”
       Thus, we reject appellants’ contention that the adjusted net
profit calculation equates to the amount required by section
16807. In particular, this proposed measure errs by using figures
from an income statement (which shows the partnership’s
financial performance over a period of time) instead of the
appropriate figures from the balance sheet showing the assets
and liabilities necessary to calculate a distribution under section
16807.
D.    Reversal Is Appropriate Unless Respondents
      Consent to a Reduction in the Damage Award
      While we disagree with their reading of the statute,
appellants correctly point to section 16807, subdivision (b) as the
proper measure of damages here. Schedule 2 of the accountant’s
report shows the accountant already calculated the amount

                                23
required by section 16807. Specifically, the accountant
determined that, on the dissolution date, the partnership’s total
assets were $731,358.62 and its total liabilities were $253,213.30,
resulting in “[t]otal [e]quity” of $478,145.32. Thus, based on
section 16807, Scrapit’s one-third interest in the partnership on
the dissolution date was one-third of $478,145.32, namely
$159,381.77.
       Given this, we inquired of the parties pursuant to
Government Code section 68081 whether the forensic
accountant’s calculation of the partnership’s “[t]otal [e]quity” on
March 13, 2015, as $478,145.32 (total partnership assets minus
total partnership liabilities) set forth “the profits and losses that
result[ed] from the liquidation of the partnership assets” as
described in section 16807, subdivision (b).
       In their supplemental brief, appellants responded that the
accountant’s valuation of “[t]otal [e]quity” was not the amount
described in section 16807, subdivision (b) because “[t]he trial
court made a specific finding that the gross assets of the
partnership business were $526,364, based on figures shown in
Schedule 1 of the accounting report,” which they contend is a
factual finding which neither party has challenged on appeal. We
disagree that the court made a finding about the total assets of
the partnership. Schedule 1 is not a balance sheet but a cash
flow statement, and does not reflect total partnership assets. The
trial court did not find that the partnership’s assets were
$526,364, and it clearly referred to one of the two components,
$450,000, as “inventory” and to the other, $76,364, as “profits.”
The judgment cannot be read as equating the sum of these two
amounts as the assets of the partnership on the dissolution date,

                                 24
contrary to the express findings in the accounting report upon
which the trial court relied.
      Respondents contend in their supplemental brief that the
accountant’s valuation of “[t]otal [e]quity” was not the amount
described in section 16807, subdivision (b) “because the
partnership’s assets were never liquidated.”20 As discussed
above, when a partner dissociates from a partnership and the
remaining partners carry on with the business, the dissociating
partner is entitled to recover the amount that a liquidation would
have yielded. Thus, the lack of an actual liquidation in this
matter is immaterial.
      In sum, neither appellants nor respondents offer any
persuasive reason why the amount set forth in the accounting
report as the partnership’s “[t]otal [e]quity” on March 13, 2015,
does not measure the “profits and losses that result[ed] from the
liquidation of the partnership assets” as described in section
16807, subdivision (b). Because appellants correctly accept that a
proper measure of damages here is to apply section 16807,
subdivision (b), we conclude it is appropriate as a matter of
judicial economy to modify the judgment to reflect a damages
award of $159,381.77 and conditionally affirm the judgment as
modified, subject to respondents’ consent to that reduction. (See
Cal. Rules of Court, rule 8.264(d) [“If a Court of Appeal decision
conditions the affirmance of a money judgment on a party’s
consent to an increase or decrease in the amount, the judgment is

      20 Attached to respondents’ supplemental brief was a copy
of e-mail correspondence respondents’ counsel had with the
forensic accountant’s partner regarding our request for further
briefing. We will not consider this information as it is outside the
record.

                                25
reversed unless, before the decision is final under (b), the party
serves and files a copy of a consent in the Court of Appeal”].)
Should respondents not timely consent, the damages award is
reversed.
                          DISPOSITION
      The award of damages is reduced from $175,454.67 to
$159,381.77, and the judgment conditionally affirmed as modified
subject to respondents’ consent pursuant to California Rules of
Court, rule 8.264(d). If respondents timely file a consent, the
clerk shall send a file-endorsed copy of the consent to the superior
court along with the remittitur. If respondents do not timely file
a consent, the damages award is reversed and the matter
remanded for a new trial limited to determining the amount of
damages to be awarded to respondents, as liability has been
established.
      Each party is to bear its own costs on appeal.
      NOT TO BE PUBLISHED

                                           WEINGART, J.

We concur:

             CHANEY, J.

             BENDIX, Acting P. J.

                                 26