Judge: Curtis A. Kin, Case: 21STCV13633, Date: 2022-10-04 Tentative Ruling
Case Number: 21STCV13633 Hearing Date: October 4, 2022 Dept: 72
MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE,
SUMMARY ADJUDICATION
Date: 10/4/22 (9:30 AM)
Case: Susan Gradman et al. v.
Parkview Limited Investors, LP (21STCV13633)
TENTATIVE RULING:
Plaintiffs Susan Gradman and Wayne Gradman’s Motion for
Summary Judgment, or in the Alternative, Summary Adjudication is GRANTED IN
PART.
Plaintiffs Susan Gradman and Wayne Gradman’s requests for
judicial notice are DENIED as “unnecessary to the resolution” of the issues
before the Court. (Martinez v. San Diego County Credit Union (2020) 50
Cal.App.5th 1048, 1075.)
Plaintiffs’ evidentiary objections are OVERRULED.
ISSUE NO. 1: Plaintiffs are entitled to summary
judgment, or in the alternative summary
adjudication, that the Parkview Limited Partnership has been
terminated and must be dissolved on at least three (3) separate and independent
grounds (any single one of which supports summary judgment in favor of
Plaintiffs):
1.a: The Parkview Limited Partnership has been
terminated and must be dissolved,
because the term of the Partnership expired as of December
27, 2012.
1.b: The Parkview
Limited Partnership has been terminated and must be dissolved due to
the legal incapacity of
the General Partner; and/or
1.c: The Parkview
Limited Partnership has been terminated and must be dissolved due to
the dissociation of the General Partner.
With respect to Issue No. 1.a, in arguing for the
dissolution of the partnership, plaintiffs refer to the 1972 Partnership
Agreement, which states that the term of the Parkview Limited Partnership
expired no later than December 31, 2012. (UMF 2, 3, citing Pl. Ex A [Art. V
& XXX(A)(2)].) Specifically, Article V of the 1972 Partnership Agreement
states: “The Partnership shall commence as of the date first above written
(sometimes hereinafter called “the effective date”) [i.e., December 27, 1972],
although said Partnership need not be recorded before December 31, 1972, and
shall continue for a period of forty (40) years thereafter the effective date
as herein elsewhere provided.” Article XXX(A)(2) of the 1972 Partnership
Agreement states, “The Partnership shall terminate on the occurrence of any of
the following events . . . 2. The expiration of the term hereof . . . .”
The term of a partnership is governed by the partnership
agreement. (See Corp. Code § 15901.10(a) [“[T]he partnership
agreement governs relations among the partners and between the partners and the
partnership”].) “It is the general rule that, when a contract specifies the
period of its duration, it terminates on the expiration of such period.” (Beatty
Safway Scaffold, Inc. v. Skrable (1960) 180 Cal.App.2d 650, 654.) Based on
plaintiffs’ citation to Articles V and XXX(A)(2) of the 1972 Partnership Agreement,
because December 31, 2012 has passed, plaintiffs meet their initial burden on
summary adjudication in demonstrating that the Parkview Limited Partnership
must be dissolved.
Defendant Parkview Limited Partnership maintains that the
term of the partnership was extended to December 31, 2060 in a 2015 Amendment
to the partnership agreement. (Resp. to UMF 4, 7, 8.) However, the effective
date of the 2015 Amendment was April 9, 2015, after the partnership had expired
pursuant to the terms of the 1972 Partnership Agreement. “A terminated contract
cannot be extended or modified; both extension and modification as those terms
are commonly understood presuppose the existence of a valid contract to extend
or modify.” (Citizens for Amending Proposition L v. City of Pomona
(2018) 28 Cal.App.5th 1159, 1189.) Because the 1972 Partnership Agreement
provides for the expiration of the partnership by December 31, 2012, the 2015
Amendment executed afterward was not effective. Defendant does not present any
other amendment indicating that the term of the partnership was extended before
the expiration of the 1972 Partnership Agreement.
Defendant also cites Corporations Code § 16406(a) and (b),
as well as the federal district court case Homme v. Kyuss Lives, Inc.
(C.D. Cal. 2012) 2012 WL 13012719, for the proposition that the business of the
partnership continued after the term set forth in the 1972 Partnership
Agreement. Defendant maintains that after the termination date reflected in the
1972 Partnership Agreement, plaintiffs received Schedule K-1 reflecting their
share of the distributions from the partnership. (Resp. to UMF 4, 7, 8, citing
Pl. Exs. M-O.) Defendant also argues that plaintiffs were in communication with
the partnership’s General Partner after 2012. (Resp. to UMF 4, 7, 8, citing Pl.
Exs. G-L.)
However, Corporations Code § 16406, as well as Homme which
relied on this statute, applies to general partnerships, not limited
partnerships, such as defendant Parkview Limited. The dissolution of limited
partnerships is governed by Corporations Code § 15908.01, which provides that
“a limited partnership is dissolved, and its activities must be wound up, only
upon the occurrence of any of the following: (a) the happening of an event
specified in the partnership agreement . . . .” Here, the expiration of the
term set forth in the partnership agreement requires the dissolution and
winding down of the Parkview Limited Partnership.
For the foregoing reasons, defendant fails to demonstrate
any triable issue with respect to whether the partnership agreement of the
Parkview Limited Partnership has terminated. Accordingly, the Court does not
reach Issue Nos. 1.b or 1.c.
The motion as to Issue No. 1 is GRANTED.
ISSUE NO. 2: Plaintiffs
are entitled to summary judgment, or in the alternative summary
adjudication, that
Plaintiffs are Limited Partners of the Parkview Limited Partnership with legal
standing to sue and are
entitled to all of the rights and remedies afforded under the Partnership
Agreement, the
California Uniform Limited Partnership Act, the California Probate Code and
other applicable
authorities. (Alternatively, Plaintiffs have legal standing as Assignees and
Legal
Representatives of Dr. Fiske’s Estate.)
Plaintiffs maintain that David Fiske, one of the original
limited partners of the Parkview Limited Partnership, transferred his interest
in the partnership to the Fiske Living Trust, on whose behalf plaintiffs are
suing as trustees. (UMF 42, 43, 61.) However, this transfer did not necessarily
make plaintiffs substitute limited partners with legal standing to use and
entitlement to exercise all rights and remedies as limited partners.
Corporations Code § 15901.02(al) defines “transferee” as “a
person to which all or part of a transferable interest has been transferred,
whether or not the transferor is a partner.” Corporations Code § 15907.02(a)(3)
states: “A transfer, in whole or in part, of a partner’s transferable interest
. . . does not, as against the other partners or the limited partnership,
entitle the transferee to participate in the management or conduct of the
limited partnership’s activities, to require access to information concerning
the limited partnership’s transactions except as otherwise provided in
subdivision (c), or to inspect or copy the required information or the limited
partnership’s other records or to exercise any other rights or powers of a
partner.”
Accordingly, while David Fiske was entitled to transfer his
interest in the partnership to the Fiske Living Trust, Corporations Code §§
15901.02(al) and 15907.02(a)(3) set forth a distinction between a transferee,
who does not have rights to an accounting or to management of the partnership’s
activities, and a limited partner.
Moreover, even though Article XV.E allows limited partners
to “gift, devise, or bequest” their interest in Parkview to “members of the
family” (UMF 50), by its explicit terms, that provision only serves to exempt
the limited partner from complying with “this Paragraph,” which requires the
selling limited partner to first offer the other limited partners the right to
purchase the interest.
Corporations Code § 15903.01 states: “A person becomes a
limited partner: [¶] (a) as provided in the partnership agreement . . . .”
Article XVI.A of the Partnership Agreement states: “No
assignee . . . shall have the right to become a substituted Limited Partner in
place of his assignor unless . . . 2. The written consent of the General
Partner to such substitution shall first be obtained . . . .” (Pl. Ex. A [Art.
XVI.A].)
Plaintiffs maintain that they obtained the written consent
of Donald Hollingshead, the General Partner of the partnership. As evidence,
plaintiffs cite letters received from Hollingshead offering to purchase
plaintiffs’ interest in the partnership (UMF 53, 54, 56), the purported 2015
Amendment identifying the percentage interest that the Fiske Living Trust had
in the partnership (UMF 55), Schedule K-1s that the partnership issued to the
Fiske Living Trust (UMF 57), letters that the partnership’s accountant sent to
the Fiske Living Trust identifying its share of the partnership (UMF 58, 59),
and a declaration from defense counsel purportedly authenticating a chart
confirming the Fiske Living Trust’s percentage interest in the partnership (UMF
64). None of these documents conclusively demonstrate that Hollingshead
consented to the Fiske Living Trust’s substitution as limited partner. Rather,
Hollingshead’s recognition of the Fiske Living Trust’s percentage interest in
the partnership is consistent with the trust’s status as a transferee without
management rights in the partnership.
Further, the documents do not make any distinctions between
limited partners and transferees. Indeed, in the 2015 Amendment, while Exhibit
A thereto sets forth a 9.644% interest that the Fiske Living Trust had, the
footnote to that exhibit states, “The schedule of Limited Partners is set forth
without regard to whether the person listed on the schedule is a Limited
Partner or a Transferee under the California Uniform Limited Partnership Act.
No inference should be taken that being listed on the aforementioned schedule
such person is a Limited Partner.” (Resp. to UMF 55.)
Based on the foregoing, defendant demonstrates a triable
fact concerning whether the Fiske Living Trust is a transferee or a limited
partnership.
Plaintiffs also cite to a 1998 Amendment of the partnership
agreement, where Edward W. Carter Family Trust signed the amendment on behalf
of limited partner Edward W. Carter without compliance with Articles XV or XVI
of the partnership agreement. (UMF 51.) However, Edward W. Carter was the
majority limited partner in the 1972 Partnership Agreement. (Pl. Ex. A at
GRA000099-103 [Carter contributed total of $199,716 out of $391,600 in total
contributions, or 51%].) Under Article XXI of the 1972 Partnership Agreement, a
majority in interest could vote to amend the agreement. (Resp. to UMF 51,
citing Pl. Ex. A [Art. XXI].) Under paragraphs 3(F) and 4(E) of the 1998
Amendment, Carter was allowed to transfer the majority partnership interest to
a trust without complying with Articles XV or XVI. (Resp.to UMF 51, citing Pl.
Ex. B.) Defendant therefore demonstrates that, as the majority limited partner,
Edward W. Carter may have been able to transfer the partnership rights and
remedies to a trust, a privilege which David Fiske did not have.
Alternatively, plaintiffs argue that they have rights as
limited partners under Article XVII.A of the 1972 Partnership Agreement, which
states: “On the death of a Limited Partner, his executor or administrator shall
have all rights of a Limited Partner for the purpose of settling the estate,
and such power as the deceased had to constitute his assignee a substituted
Limited Partner . . . .” (Pl. Ex. A [Art. XVII.A].) However, defendant
persuasively point out that David Fiske died in 2013, almost a decade ago. (UMF
52.) The Fiske Living Trust is listed as a transferee in Schedule K-1s issued
by the partnership as early as the 2013 tax year. (UMF 57.) Accordingly,
defendant demonstrate that the estate of David Fiske may have settled, thereby
indicating that plaintiffs have no need to exercise rights of limited partners
to settle the estate.
For the foregoing reasons, defendant demonstrates that the
Fiske Living Trust may be a transferee, as opposed to a limited partner.
The motion as to Issue No. 2 is DENIED.