Court Opinion

ID: 2830941
Source: CourtListenerOpinion
Date Created: 2015-08-26 17:04:07.68566+00
Date Added: 2024-06-11T11:31:40.775815
License: Public Domain

Filed 8/26/15 Dillon v. Super. Ct. CA4/1
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

                    COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                  DIVISION ONE

                                           STATE OF CALIFORNIA

TERESA DILLON,                                                    D067321

         Petitioner,
                                                                  (San Diego County Super. Ct. No. 37-
         v.                                                       2010-0087010-CU-OR-CTL)

THE SUPERIOR COURT OF SAN
DIEGO COUNTY,

         Respondent;

JASMINE RAMOS et al.,

         Real Parties in Interest.

         ORIGINAL PROCEEDINGS in mandate. Randa Trapp, Judge. Petition granted.

         Wicks Law and Rory Richard Wicks for Petitioner.

         No appearance for Respondent.

         Sharif | Faust Lawyers and Matthew J. Faust for Real Parties in Interest.

         On a prior appeal, we reversed a judgment awarding damages to real parties in
interest Jasmine Ramos and David Ramos1 and against petitioner Teresa Dillon. The

damages award grew out of a partnership between the Ramoses and Dillon.

       On remand, Dillon filed a peremptory challenge to the trial judge under Code of

Civil Procedure section 170.6. The trial judge denied the challenge, and Dillon filed a

petition for a writ of mandate. We stayed proceedings in the trial court and issued an

order to show cause.

       We now grant Dillon relief on her petition. As we explain more fully below, an

accounting of each partner's interest in the partnership was prepared during the course of

the prior trial court proceedings. However, the trial court declined to make an award

based on the accounting but instead awarded the Ramoses damages based on their

contribution to the partnership; the trial court's judgment also purported to preserve the

Ramoses' interest in the partnership. We reversed the prior judgment because we found

the trial court erred in awarding damages without first complying with the accounting and

distribution process required under Corporations Code section 16807, when, as ordered

by the trial court, a partnership is dissolved. We directed that on remand the trial court

comply with Corporations Code section 16807. Because on remand the trial court will be

required to reexamine the previously litigated accounting issue, on remand the parties

have the right to file a challenge under section Code of Civil Procedure section 170.6.2

1      When appropriate for the purposes of clarity, we will refer to each of the Ramoses
by their first names.

2      All further statutory references are to the Code of Civil Procedure.
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                   FACTUAL AND PROCEDURAL BACKGROUND

       We fully set forth the factual and procedural background of the parties' dispute in

our opinion in Ramos v. Dillon (Oct. 31, 2014, D065489, nonpub. opn.), and we

summarize the pertinent portions of that background here.

       1. Property Acquisition

       Dillon is a real estate broker who owns a real estate company. Jasmine is a

licensed real estate agent who worked for Dillon's company. Jasmine's husband, David,

is also a licensed real estate agent with 25 years of experience in the construction

industry, but he is not a licensed contractor.

       In April 2004, the Ramoses and Dillon entered into an oral partnership for the

purposes of purchasing an apartment building located in San Diego, California (the

property). Dillon and the Ramoses each contributed $250,000 toward purchasing the

property. In addition to their contributions, in order to purchase the property, in

November 2004 the parties obtained a "Hard Money Loan" in the amount of $300,000.

The parties did not qualify for traditional long-term financing and were aware that the

Hard Money Loan required a balloon payment of $302,312.50 in October 2007. The

parties also agreed that they would share equally in the costs of repairing the property.

       When the Hard Money Loan became due in 2007, the parties agreed to pursue a

bank loan for as much as they could borrow to pay off the Hard Money Loan and

renovate the property. Dillon represented that because she had a higher credit score she

could get a better interest rate on a bank loan. The parties agreed that Jasmine would

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quitclaim her interest in the property to Dillon for the purpose of getting a better interest

rate and that the Ramoses would be added back on title to the property within 30 days. In

June 2007, Dillon obtained a loan from Wells Fargo (the Wells Fargo Loan) in the

amount of $520,000 in her own name in connection with the property. The Wells Fargo

Loan required a monthly payment of $4,731.97 and bore interest at 6.375 percent per

annum.

       The parties agreed that although the Ramoses were not on the loan or on title to

the property, they would be equally responsible for repaying the loan and maintaining

their interest in the property. The parties substantially completed work on the property in

April or May 2009, and the first tenant moved in shortly thereafter.

       Because of the Ramoses' financial difficulties and their inability to meet their

obligations with respect to the property, Dillon suggested memorializing those

obligations. In July 2009, Dillon prepared a promissory note, which, by its terms, was

secured by the Ramoses' interest in the property. The Ramoses executed the note.

       By January 2010, the relationship between the parties had deteriorated and Dillon

was demanding payment from the Ramoses under the terms of the note.

       2. Trial Court Proceedings

       The Ramoses filed a complaint against Dillon in which they alleged various

contract and tort claims against her, and Dillon filed a cross-complaint against them. The

trial court initially determined that, in obtaining the note, Dillon had breached her

fiduciary duty to the Ramoses and that (1) the note must be reformed to be unsecured and

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(2) the Ramoses be placed on title to the property and on a partnership bank account. In

lieu of reforming the note, the court gave Dillon the option of purchasing the Ramoses'

interest in the property.

       In an effort to carry out the trial court's initial determination, the parties selected

an appraiser and an accountant. The appraiser estimated the "as is" value of the property

was $898,000 as of July 11, 2012. At a hearing held in April 2013, the accountant

testified that after more than eight years, the partnership was "pretty close to breaking

even." Thereafter, the accountant issued a final report that incorporated changes

requested by the court. The accountant's final report concluded that Dillon would need to

pay the Ramoses $121,639.68 to purchase their interest in the property.

       The Ramoses filed a posttrial brief electing a damages award based upon Dillon's

breach of fiduciary duty. Specifically, they sought return of their "contributions to the

partnership" totaling $478,153, consisting of their down payment of $250,000, the value

of David's labor at $10,000 per month for 16 months, and the return of a $68,153 cash

payment. Dillon opposed the request. In their reply, the Ramoses admitted they were

seeking return of their partnership contributions, not future lost profits.

       The court issued a final judgment finding that the accounting led to an inequitable

result, as the Ramoses would recover little and Dillon would be unjustly enriched at their

expense. Given the continuing disputes between the parties, the court concluded it would

not be practical for them to continue the partnership. Based on Dillon's breach of

fiduciary duty, the court found the Ramoses properly elected damages and dissolution of

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the partnership. The trial court found the note was unenforceable and awarded judgment

against Dillon in the amount of $478,153 plus prejudgment interest that had not yet been

calculated.

       3. Appeal

       On appeal, we reversed. As we indicated, we found that under Corporations Code

section 16807, upon dissolution of a partnership, the trial court was required to conduct

an accounting of the partnership's assets and liabilities and distribute the partnership

assets as required under the statute. We stated: "When a partnership is dissolved and its

business wound up, the assets go first to pay the creditors, including partners who are

creditors, and any surplus assets are generally liquidated and distributed to its members.

(§ 16807, subds. (a), (b).) Generally, 'until the affairs of a partnership are wound up, the

claim of a partner is equitable and can only be enforced in an accounting action, and that

no personal judgment can be entered in such an action until all partnership assets have

been converted into money, the debts paid and a final balance ascertained.' [Citation.]

As one legal treatise explained, 'the claims of partners for reimbursement of contributions

to capital, or disbursements on behalf of the partnership, or repayment of debts of the

partnership to them are primarily against the partnership assets, and a personal judgment

against individual partners should not be rendered unless the partnership assets are

insufficient to make repayment.' [Citation.]

       "Here, the trial court ordered dissolution of the partnership without complying

with section 16807. This is error. Accordingly, the judgment must be reversed and the

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matter remanded for the court to fashion an appropriate remedy based on its finding that

Dillon breached her fiduciary duty to the Ramoses. As an aside, we note that where, as

here, the partnership was not making a profit, dissolution may result in a seemingly

unjust result for all parties." (Ramos v. Dillon, supra, D065489.)

       4. Proceedings on Remand

       Upon our remand, the case was reassigned to the original trial judge, and Dillon

filed a challenge to the trial judge under section 170.6; as we indicated at the outset, the

trial judge denied the challenge, and Dillon filed a petition for a writ of mandate.

                                        DISCUSSION

       Section 170.6, subdivision (a)(2) provides in pertinent part: "A motion under this

paragraph may be made following reversal on appeal of a trial court's decision, or

following reversal on appeal of a trial court's final judgment, if the trial judge in the prior

proceeding is assigned to conduct a new trial on the matter. Notwithstanding paragraph

(4), the party who filed the appeal that resulted in the reversal of a final judgment of a

trial court may make a motion under this section regardless of whether that party or side

has previously done so. The motion shall be made within 60 days after the party or the

party's attorney has been notified of the assignment."

       "Section 170.6 permits a peremptory challenge to be made when the same trial

judge is assigned for a new trial after reversal on appeal in order to avoid potential bias

on the part of a judge who had been reversed on appeal. [Citations.] Section 170.6

applies only where the matter is to be retried, not where it is remanded with instructions

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that require the trial court to complete a judicial task not performed in the prior

proceeding. In the context of this statute, a retrial is a 'reexamination' of a factual or legal

issue that was in controversy in the prior proceeding. [Citations.]" (Geddes v. Superior

Court (2005) 126 Cal. App. 4th 417, 423-424 (Geddes), fns. omitted.) In Geddes, a

judgment entered on an order granting summary judgment was reversed because the trial

court had failed to state the reasons for, and cite the evidence supporting, its decision in

favor of the defendant. On remand, the plaintiff filed a section 170.6 challenge, which

was granted. The defendant filed a petition for a writ of mandate, which the Court of

Appeal granted. The court found that the remand did not require any retrial of the merits

of the motion for summary judgment, but only the performance of the procedure required

by section 437c, subdivision (g). (Geddes, supra, 126 Cal.App.4th at p. 424.) The court

found that the procedural error that gave rise to the remand did not require a new trial

within the meaning of section 170.6, subdivision (a)(2) and that, accordingly, the trial

court erred in granting it. (Id. at pp. 424-425.)

       In contrast, in First Federal Bank of California v. Superior Court (2006) 143
Cal. App. 4th 310, a section 170.6 challenge was proper on remand. In First Federal, the

prevailing party in a contract case successfully appealed from an order denying its

request for attorney fees. On remand, that party filed a challenge under section 170.6,

which was denied. The Court of Appeal issued a writ requiring that the challenge be

granted. "Here, it is clear that there was a trial, even limiting the examination to the

attorney's fees motion. The trial court made a determination on the merits that First

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Federal was not entitled to recover its attorney's fees. Reversing that order, we remanded

for a hearing on the amount to be awarded, a hearing that will require the presentation of

evidence and factual and legal determinations as to the nature and amount of the fees

sought. Such a reexamination of an issue previously in controversy is a retrial. The trial

court erred in rejecting the motion." (Id. at p. 315.)

       The record here shows that at the first trial, the propriety of a disposition and

award based on an accounting of the partnership's assets was litigated and rejected by the

trial court; our reversal and remand for failure to make such a disposition plainly requires

a reexamination of the merits of an issue previously in controversy and is a retrial within

the meaning of section 170.6, subdivision (a)(2). Thus, in denying Dillon's challenge, the

trial court abused its discretion.

                                       DISPOSITION

       Let a writ of mandate issue directing the superior court to vacate its January 12,

2015 order denying Dillon's challenge under section 170.6 and enter an order granting

Dillon's disqualification motion. The stay issued by this court on January 22, 2015 is

vacated. Costs are awarded to Dillon.
                                                                        BENKE, Acting P. J.
WE CONCUR:

HUFFMAN, J.

HALLER, J.

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