Judge Lisa K. Sepe-Wiesenfeld, Case Number: 23SMCP00362, Date: 2025-01-03 Tentative Ruling

Judge: Lisa K. Sepe-Wiesenfeld, Case: 23SMCP00362, Date: 2025-01-03 Tentative Ruling

Plaintiff/Cross-Defendant Robert J. Sherman, as Trustee of the Sherman Administrative Trust created under the Sherman Family Trust, u/t/a dated October 14, 1987 (“Plaintiff”) moves the Court for an order appointing a receiver to marshal and take possession of the assets of Sherbro Music Company (“Sherbro”), receive the “writer’s share” of certain publishing royalties, compound for the same, and provide the Court with a recommendation on the winding up of the affairs of Sherbro and distribution of its assets, including in-kind distributions, as well as limiting the amount of an undertaking to the lesser of $2,500 or the amount held in Sherbro’s bank account. Defendant/Cross-Complainant Gregory V. Sherman, as personal representative and Executor of the Estate of Richard M. Sherman, now deceased (“Defendant”) opposes the motion on the ground the motion lacks competent evidence to support such a remedy, and there is no evidence that any property will be lost or that a receiver is necessary to preserve Plaintiff’s property or rights.

Two brothers, Robert B. Sherman and Richard M. Sherman, also known as the Sherman Brothers, and the fathers of Plaintiff and Defendant, created a general partnership in the 1970s under the fictitious business name Sherbro Music Company. (First Am. Compl. (“FAC”) ¶ 1.) Sherbro holds the Sherman Brothers’ copyright ownership interests in approximately 100 co-authored songs and collects certain royalties, primarily the writer’s share of certain publishing royalties, and owns other intellectual property. (Ibid.) The Sherman Brothers’ most significant works were “works-for-hire,” principally for Disney, and are not Sherbro assets. (Mot., Robert J. Sherman Decl. ¶ 4.) The annual income from the Sherbro asserts from 2017 to 2021 ranged from a higher of $24,309.61 in 2019 to a low of $4,288.97 in 2020, and averaged $12,319.32 per year for that five-year period. (Ibid.) Many years ago, Robert B. Sherman transferred his partnership interest in Sherbro to the Sherman Family Trust, which was admitted a substitute general partner and has served in the capacity of a full 50% general partner of Sherbro ever since. (Mot., Robert J. Sherman Decl. ¶ 6.) After Robert B. Sherman died on March 6, 2021, his son, Plaintiff, became the sole trustee of the trust, and when Richard M. Sherman died in May 2024, the trust was sole general partner. (Mot., Robert J. Sherman Decl. ¶ 7.)

Plaintiff alleges that in 2022, Richard M. Sherman engaged in conduct that unreasonably frustrated the economic purpose of the partnership and made it impracticable to continue the partnership, and while he acknowledged that Sherbro is a dissolved partnership, he refused to take any steps to wind up Sherbro’s affairs or cooperate with Plaintiff in doing so. (Mot., Robert J. Sherman Decl. ¶ 10.) Plaintiff then filed this action to seek court involvement in winding up the affairs of Sherbro and dividing Sherbro asserts. (Mot., Robert J. Sherman Decl. ¶ 14.) Plaintiff contends that Sherbro assets are now in danger of being lost of removed, and because Richard M. Sherman recently died, it remains unclear who is collecting royalties and whether the royalties are being collected and accounted for as property of the partnership and not being used personally by Defendant. (Mot., Robert J. Sherman Decl. ¶ 16.) Plaintiff contends that he has not received any distribution of royalties from Sherbro since 2016. (Mot., Robert J. Sherman Decl. ¶ 12.)

Code of Civil Procedure section 564, subdivision (b)(1), provides that a receiver may be appointed by the Court “[i]n an action by . . . partners or others jointly owning or interested in any property” and “[i]n all other cases where necessary to preserve the property or rights of any party.” Notably, “[t]he appointment of a receiver is a drastic remedy” such that the Court must “carefully weigh the propriety of such appointment in exercising [its] discretion to appoint a receiver particularly if there is an alternative remedy.” (Barclays Bank of California v. Superior Court (1977) 69 Cal.App.3d 593, 597, quotation marks omitted.) Again, the drastic nature of appointment of a receiver is such that “courts are strongly discouraged—although not strictly prohibited—from appointing a receiver unless the more intrusive oversight of a receiver is a necessity because other, less intrusive remedies are either inadequate or unavailable.” (Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal.App.5th 622, 628, quotation marks omitted.)

It is undisputed that Sherbro is a dissolved partnership; the parties simply dispute the date of dissolution, with Defendant claiming the partnership was dissolved in March 2012, when Robert B. Sherman died, while Plaintiff claims it was dissolved in October 2022, but Defendant has refused any attempt to wind up the partnership’s affairs. The evidence shows that the trust was recognized as a full general partner of Sherbro when Richard M. Sherman and the trust jointly entered into agreement with third parties on behalf of Sherbro, with Plaintiff and Richard M. Sherman identified as the general partners of Sherbro. (Mot., Robert J. Sherman Decl. ¶ 6.) When Plaintiff sought to dissolve and wind up the partnership, Richard M. Sherman conditioned the winding up on Plaintiff entering into a license agreement for a copyrighted asset authored by the Sherman Brothers and owned by Sherbro for Defendant’s benefit. (Mot., Robert J. Sherman Decl. ¶ 9.) When negotiations broke down, Richard M. Sherman changed his position by refused to recognize Plaintiff’s election to dissolve and wind up the affairs of the partnership. (Mot., Robert J. Sherman Decl. ¶ 10.)

The evidence also shows that while royalties were previously distributed equally, since 2016, no distributions have been made to Plaintiff. (Mot., Robert J. Sherman Decl. ¶ 12.) Defendant has also failed to provide an accounting to Plaintiff, which has made Plaintiff unable to verify whether all receipts are being deposited in the Sherbro bank account. (Mot., Robert J. Sherman Decl. ¶ 17.) Plaintiff also provides evidence that Defendant has created an LLC which may be used to transfer Sherbro assets from Sherbro to the new LLC. (Mot., Robert J. Sherman Decl. ¶ 20.) In the reply, Plaintiff provides evidence that Defendant has attempted to move money out of the Sherbro bank account, which was unsuccessful, but Plaintiff contends there is a danger that partnership assets could be lost. (Reply, Kanesaks Decl. ¶ 26.) Insofar as Defendant contends there is no evidence to show that any property is in danger of being lost, this is belied by the evidence showing that Defendant has attempted to move money from the Sherbro account to a different account. The Court finds there is a sufficient basis to appoint a receiver here, as the receiver can take possession of Sherbro’s assets, compound the royalties, and provide the Court with information that will inform its decision as to the winding up of the affairs of Sherbro and distribution of its assets. Without the appointment of a receiver, certain property may be lost and Plaintiff’s rights compromised, and the Court is unaware of an alternative remedy that would accomplish this same goal. Accordingly, Plaintiff/Cross-Defendant Robert J. Sherman, as Trustee of the Sherman Administrative Trust created under the Sherman Family Trust, u/t/a dated October 14, 1987’s Motion for Order Appointing Receiver is GRANTED.

Under Code of Civil Procedure section 529, “[o]n granting an injunction, the court or judge must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined any damages, not exceeding an amount to be specified, the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction.” The Court sets the bond in the amount of $2,500.