Judge: Elaine W. Mandel, Case: 22SMCV00951, Date: 2023-09-06 Tentative Ruling

Case Number: 22SMCV00951    Hearing Date: March 13, 2024    Dept: P

Tentative Ruling

United Brands Worldwide, LLC v. D&K Worldwide, LLC et al., Case No. 22SMCV00951

Hearing Date March 13, 2024

D&K Worldwide, LLC and Danny Suleminian’s Motion for Summary Judgment

Plaintiff United Brands Worldwide (UB) entered into a written agreement in 2013 with defendant D&K Worldwide, under which UB agreed to upgrade property owned by D&K in exchange for 20% of the net profit after the property was sold. UB alleges the written agreement was orally modified in 2015, with UB to receive a monthly $300 fee. UB alleges 20% of net profits from the property’s rental income would be calculated at the end of each year, with UB receiving the difference between that percentage and the $3,600 received in monthly payments.

Defendants dispute the terms of the 2015 agreement, arguing UB is entitled only to a monthly $300 fee, not 20% of each year’s net rent profits. UB alleges D&K failed to provide the net profits payment due under the 2015 oral agreement, never intended to honor the agreement and repudiated the entire partnership. D&K and its principal Suleminian move for summary judgment on the breach of contract, fraud, breach of fiduciary duty and accounting claims.

UB Evidentiary Objections:

Objection to Fact 1 OVERRULED, 2 OVERRULED, 4 SUSTAINED (irrelevant and prejudicial), 5 SUSTAINED (speculation, opinion), 6 – 11 OVERRULED.

Breach of Contract

An action for breach of an oral contract is subject to a two-year statute of limitations. Cal. Code of Civ. Proc. §339(1). An action for breach of a contract “founded upon an instrument in writing” is subject to a four-year statute of limitations. Cal. Code of Civ. Proc. §337.

Under the continuous accrual doctrine, when a contract calls for a series of payments, the statute of limitations begins to run for each payment when it becomes due and payable. White v. Moriarty (1993) 15 Cal.App.4th 1290, 1299. In other words, “where performance of contractual obligations is severed into intervals, as in installment contracts, the courts have found that an action attacking the performance for any particular interval must be brought within the period of limitations after the particular performance was due.” Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1388-89.

A cause of action accrues “upon the occurrence of the last element essential to the cause of action.” Howard Jarvis Taxpayers Ass’n. v. City of La Habra (2001) 25 Cal.4th 809, 815. The statute of limitations for contract claims is subject to the discovery rule, under which the statute of limitations does not begin to run until plaintiff discovers or should have discovered with reasonable diligence, all facts essential to the cause of action. Prudential Home Mortgage Co., Inc. v. Superior Court (1998) 66 Cal.App.4th 1236, 1246.

Defendants argue that under the continuous accrual doctrine, the statute of limitations has already passed for all breaches alleged. They also argue UB’s cause of action for breach of contract is based on an oral agreement, subject to a two-year statute of limitations.

UB argues the breach of contract claim arises out of a 2015 oral modification of the 2013 written contract, not a new, separate oral contract. Therefore, they argue the four-year statute of limitations for a written contract, not the two-year statute of limitations for an oral contract, applies. This misstates the law.

“[A] claim is founded upon a writing only when it ‘relies upon the language within a written instrument or contract.’” JPMorgan Chase Bank, N.A. v. Ward (2019) 33 Cal.App.5th 678, 686. UB does not argue the 20% yearly net profits obligation arose out of the written language of the parties’ 2013 agreement. Regardless of whether the 2015 modification was a new agreement or a modification of an earlier agreement, it did not “rely upon the language within” the written 2013 agreement. A claim founded upon the alleged 2015 oral agreement is subject to a two-year statute of limitations.

UB argues there is a triable issue of fact as to whether the contract is divisible, arguing it may wait until the entire contract is breached before filing its claim, rather than being held to a series of limitations periods accruing with each individual default. UB admits, however, that its claim for breach is based on an installment contract. UB’s Response to Defendants’ Separate Statement no. 11, FAC ¶15. Therefore, the 2015 oral modification created a contract where “performance of contractual obligations is severed into intervals[,]” in this case, monthly and yearly intervals. This is the definition of a divisible contract -- one under which performance is due at specified intervals. There is no triable issue of fact as to divisibility—UB clearly alleged a divisible contract founded on installment payments.

Since the contract UB alleges is divisible, the two-year statute of limitations has already run for claims based on payments due in 2015, 2016, 2017, 2018 and 2019. The action was filed June 2022, and payments alleged to be due in those years would fall outside the two-year statute of limitations for breach of oral agreement.

UB does not present evidence creating a triable issue of fact as to delayed discovery of any of the breaches of contract. In January 2017 UB and Suleminian exchanged emails regarding UB’s alleged entitlement to 20% of net rental profits. Suleminian decl., exh. C. In the initial email, UB requested “a copy of the books and records” for the property “to view the true profits and to determine what is the actual 20% due to United Brands.” Suleminian repudiated UB’s interpretation of the 2015 agreement, stating he was entitled to “$300 a month between me an [SIC] you,” and “20% of the profit when we sell it,” not 20% of the total rental profits from the property. Id.

Via this exchange, UB was placed on notice that Suleminian and D&K would not adhere to the terms of the 2015 agreement as UB allegedly understood it. UB’s argument that it was not on notice of the breaches until 2020 is insufficient to create a triable issue of fact as to delayed discovery, given that it does not dispute receiving the January 2017 emails, which are unequivocal in their repudiation.

UB provides evidence via the Abramov declaration that Suleminian never repudiated – and in fact affirmed – UB’s right to 20% profits from the property’s eventual sale in emails and other communications after January 25, 2017. UB Separate Statement of Additional Material Facts 23-24. This would be sufficient to show a triable issue of fact as to delayed discovery but for the fact that neither party presents evidence that the building has been sold yet. A claim for a failure to remit 20% of the profits after sale is unripe. GRANTED

Breach of Fiduciary Duty/Fraud/Accounting

The statute of limitations for a cause of action for breach of fiduciary duty is based on the “gravamen” of the claim – the nature of the right sued upon and/or the principal purpose of the action. E.g., Davies v. Krasna (1975) 14 Cal.3d 502, 515. Fraud is subject to a three-year statute of limitations. Cal. Code of Civ. Proc. §338(d). An action or an accounting is subject to a two-year statute of limitations if the contract was oral and a four-year statute of limitations. E.g., Jefferson v. J.E. French Co. (1960) 54 Cal.2d 717.

As stated, UB was on notice by January 21, 2017 that Suleminian and D&K rejected UB’s contention that it was entitled to 20% of the property’s yearly rental profits. Suleminian decl. exhibit C. Failure to pay the balance of profits each year is the gravamen of the claim for fraud. FAC ¶50-51. The fraud cause of action is time-barred, given that UB discovered it by January 2017 at the latest. As with the breach of contract claims, the fraud claim is unripe to the extent it is based on defendants’ alleged repudiation of their agreement to pay 20% of the sale profits, since the property has not yet been sold.

UB’s of action for breach of fiduciary duty and accounting, however, are based not just on failure to pay 20% of rental profits under the 2015 agreement, but also on the refusal to provide partnership documents and to recognize existence of a partnership. FAC ¶¶46, 66. UB provided evidence indicating it did not discover those alleged breaches until 2020. UB Separate Statement nos. 23-24. That creates a triable issue of fact, allowing the breach of fiduciary duty and accounting causes of action to proceed.

GRANTED as to fraud; DENIED as to breach of fiduciary duty and accounting.