Judge Lon F. Hurwitz, Case 20-01143063 2022-11-21 Tentative Ruling

Judge: Lon F. Hurwitz, Case: 20-01143063, Date: 2022-11-21 Tentative Ruling

Status Conference

Motion for Judgment on the Pleadings

RULING:

Motion for Judgment on the Pleadings

Plaintiffs Dan W. Baer and Southern California Sunbelt Developers, Inc.’s Motion for Judgment on the Pleadings is granted, in part, and denied in part.

A plaintiff may make a motion for judgment on the pleadings only on the grounds that the complaint states facts sufficient to constitute a cause of action against the defendant, and the answer does not state facts sufficient to constitute a defense to the complaint. (CCP §438(c)(1)(A).)

“A plaintiff's motion for judgment on the pleadings is analogous to a plaintiff's demurrer to an answer and is evaluated by the same standards. [Citations.] The motion should be denied if the defendant's pleadings raise a material issue or set up affirmative matter constituting a defense; for purposes of ruling on the motion, the trial court must treat all of the defendant's allegations as being true. [Citation.]” (People ex rel. Becerra v. Superior Ct. (2018) 29 Cal.App.5th 486, 499 (citing Allstate Ins. Co. v. Kim W. (1984) 160 Cal.App.3d 326, 330-331)).

Where a defendant has filed a general denial and thus denied all of the plaintiff’s allegations, the trial court has to accept the denials as true. See id; see also Reese v. Gross (1934) 2 Cal.App.2d 384, 385–86 (emphasis added) (“In view of the general allegations of ownership by plaintiffs and the general denial thereof by defendants, it may be said that a motion by plaintiffs for judgment on the pleadings is improper as such a motion is in the nature of a demurrer to the answer and where the answer raises a material issue, no such motion can be allowed to prevail.”).

A trial judge deciding a motion for judgment on the pleadings may also consider, in addition to facts pleaded, any matters subject to judicial notice. (Barker v. Hull (1987) 191 Cal.App.3d 221, 224.) Further, “a court may take judicial notice of a party's admissions or concessions, but only in cases where the admission ‘can not reasonably be controverted,’ such as in answers to interrogatories or requests for admission, or in affidavits and declarations filed on the party's behalf.” Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 485.

The Complaint in this action asserts a single claim for “General Partner Liability” against defendants Donald B. Grammer (“Grammer”), Apple Management Services, LLC (“Apple Management”) and Apple Orchard Limited Partnership (“Apple Orchard”). Grammer and Apple Management have asserted a general denial and affirmative defenses in response to the Complaint. (ROA 19; Exh. 2 to Pltfs. RJN). Apple Orchard did not respond to the Complaint and is in default. (ROA 14; Exh. 3 to Pltfs. RJN).

Plaintiffs seek judgment on the pleadings as to their single claim “for general partner liability” against defendants Donald B. Grammer, Apple Orchard Limited Partnership, and Apple Management Services LLC. (Defendants Grammer and Apple Management shall be referred to jointly as “Defendants” and Apple Orchard Limited Partnership will be referred to as “Apple Orchard”). By way of this motion, Plaintiffs seek to hold Apple Orchard liable as general partner for the monetary cost awards against Banyan Limited Partnership (“Banyan”) reflected in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc entered in Van Dan Limited et al. v. Dan W. Baer et al., Orange County Superior Court Case No. 764271. They seek to hold Grammer liable as general partner of Apple Orchard for Apple Orchard’s obligations as general partner of Banyan. They also seek to hold Grammer liable as general partner of Pear Tree Limited Partnership (“Pear Tree”) and Orange Blossom Limited Partnership (“Orange Blossom”), for the monetary cost awards against Pear Tree and Orange Blossom reflected in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc. Finally, Plaintiffs seek to hold Apple Management liable as general partner, for the monetary cost awards against Banyan, Pear Tree and Orange Blossom reflected in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc.

After holding an initial hearing on this matter on April 1, 2022, the court requested supplemental briefing from the parties. Having now considered the supplemental briefing in addition to the initial briefing and oral argument by both sides, the court rules as follows:

As a preliminary matter, Apple Orchard did not respond to the Complaint and is in default. (ROA 14; Ex. 3 to Pltfs. RJN). A default “‘is said to “confess” the material facts alleged by the plaintiff, i.e., the defendant’s failure to answer has the same effect as an express admission of the matters well pleaded in the complaint.’” (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 281).

Banyan, Apple Orchard, Pear Tree and Orange Blossom are all Nevada limited partnerships. (RJN, Ex. 1 (Complaint) at ¶¶ 4, 23; Ex. 4 at nos. 13, 15, 17, 19; Ex. 6 at nos. 8, 10, 12.) Per California Corporations Code §15909.01(a), "[t]he laws of the state or other jurisdiction under which a foreign limited partnership is organized govern relations among the partners of the foreign limited partnership and between the partners and the foreign limited partnership and the liability of partners as partners for an obligation of the foreign limited partnership[.]" Thus, Nevada law governs "the liability of partners as partners for an obligation of the foreign limited partnership[s. In their opposition, Defendants do not dispute that Nevada law applies.

The Nevada Revised Statutes include two distinct chapters governing limited partnerships, Chapter 87A and Chapter 88, with the applicable chapter depending upon the date a given limited partnership was formed and whether it has affirmatively elected to be governed by Chapter 87A. (Nev. Rev. Stat., §§ 87A.145, 88.317). Plaintiffs contend that judgment imposing general partner liability on Defendants is appropriate under either chapter. The court also notes that the California Corporations Code mirrors the Nevada Revised Statutes.

The elements of general partner liability under Chapter 88 are: (1) the existence of a debt or obligation of the limited partnership; (2) the status of the defendant as general partner of the debtor limited partnership at the time the debt or obligation was incurred. (Nev. Rev. Stat., §§ 88.455(2); 87.150(1)(b); see also Cal. Corp. Code §15904.04).

The elements of general partner liability under Chapter 87A are: (1) the existence of a judgment based on a claim against the limited partnership; (2) the status of the defendant as general partner of the debtor limited partnership at the time the judgment was incurred as an obligation of the partnership; (3) the limited partnership assets subject to execution are clearly insufficient to satisfy the judgment, or exhaustion of limited partnership assets is excessively burdensome, or the grant of permission to levy execution against the assets of a general partner is an appropriate exercise of the court’s equitable powers. (Nev. Rev. Stat., §§87A.365; 87A.370; see also Cal. Corp. Code §15904.05(c).).

Plaintiffs have submitted judicially noticeable facts and admissions sufficient to support all required elements under either Chapter, which Defendants do not dispute.

Existence of a Judgment

The existence of a judgment, and the obligations imposed thereby, against each of Banyan, Pear Tree and Orange Blossom is established by both Grammer's and Apple Management's admissions that "the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc in the VAN DAN ACTION is a final, unappealable judgment." (RJN, Exs. 4, 6 at no. 1; Ex. 37)

Defendants’ Status as General Partners When the Obligations Were Incurred

As specified in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc, the obligation to pay the pre-judgment costs incorporated into that judgment were incurred by the judgment debtors as of May 31, 2011 (the date of the initial final judgment) and the post-judgment costs ($1,933.93 and $9,306.77), claimed by Plaintiffs in their 2017 memoranda of costs, were incurred as of January 15, 2019.

Defendants’ status as general partners regarding each of the relevant entities is established by the following admissions:

Banyan

• "APPLE ORCHARD was general partner of BANYAN on May 31, 2011." (RJN, Ex. 4 at no. 31, see also nos. 32-35.)

• "[Grammer was] general partner of APPLE ORCHARD on May 31, 2011." (RJN, Ex. 4 at no. 36, see also nos. 37-40.)

• "[Apple Management was] general partner of BANYAN on January 15, 2019." (RJN, Ex. 6 at no. 14, see also nos. 20- 22.)

Pear Tree

• "[Grammer was] general partner of PEAR TREE on May 31, 2011." (RJN, Ex. 4 at no. 21, see also nos. 22-25.)

• "[Apple Management was] general partner of PEAR TREE on January 15, 2019." (RJN, Ex. 4 at no. 15; see also Ex. 6 at nos. 23-25.)

Orange Blossom

• "[Grammer was] general partner of ORANGE BLOSSOM on May 31, 2011." (RJN, Ex. 4 at no. 26, see also nos. 27-30.)

• "[Apple Management was] general partner of ORANGE BLOSSOM on January 15, 2019." (RJN, Ex. 6 at no. 16, see also nos. 26-28.)

The Judgment Remains Unsatisfied

Defendants’ admissions establish that:

• Apple Orchard made no payments to Baer (RJN, Ex. 4 at no. 57) or to SCSD (Id. at no. 58) in satisfaction of the January 15, 2019 Further Corrected Judgment Nunc Pro Tunc.

• Banyan made no payments to Baer (Id. at no. 79; RJN, Ex. 6 at no. 41) or to SCSD (Ex. 4 at no. 80; Ex. 6 at no. 42) in satisfaction of the January 15, 2019 Further Corrected Judgment Nunc Pro Tunc.

• Pear Tree made no payments to Baer (RJN, Ex. 4 at no. 81; Ex. 6 at no. 43) or to SCSD (Ex. 4 at no. 82; Ex. 6 at no. 44) in satisfaction of the January 15, 2019 Further Corrected Judgment Nunc Pro Tunc.

• Orange Blossom made no payments to Baer (RJN, Ex. 4 at no. 83; Ex. 6 at no. 45) or to SCSD (Ex. 4 at no. 84; Ex. 6 at no. 46) in satisfaction of the January 15, 2019 Further Corrected Judgment Nunc Pro Tunc.

• Neither Grammer nor Apple Management have ever entered into any agreement with Baer or SCSD to limit their individual liability. (RJN, Ex. 4 at nos. 85-86; Ex. 6 at nos. 47-48.)

The Limited Partnerships Have Insufficient Assets to Satisfy the Judgment

Defendants judicially admit that Banyan, Pear Tree and Orange Blossom were "insolvent in the equitable sense of inability to pay debts as due at all times from 1996 to the present," and further, that they have been insolvent "in the balance sheet sense"—i.e., their assets did not exceed their liabilities—since December 20, 2016. (Supp. RJN, Ex. 1 at nos. 42, 43, 45, 46, 48, 49; Supp. RJN Ex. 2 at nos. 30-32, 34-36, 38-40).

Defendants also admit that Banyan, Pear Tree and Orange Blossom filed bankruptcy petitions (RJN, Ex. 4 at nos. 41, 44, 47), that Baer and SCSD filed proofs of claim in their bankruptcy proceedings (Id. at nos. 60, 63, 66, 69, 72, 75), which claims were not discharged (Id. at nos. 61, 64, 67, 70, 73, 76), and that Baer and SCSD received no distribution or dividend from the bankruptcy estates in said proceedings. (Id. at nos. 62, 65, 68, 71, 74, 77).

This is sufficient to demonstrate that the assets of Banyan, Pear Tree and Orange Blossom are “clearly insufficient” to satisfy the judgment against them.

Defendants’ contention that “Plaintiffs cannot establish an essential element of their claim—lack of partnership assets” is unavailing. (Opp. at 5:21-23). Specifically, Defendants contend that “[t]he very same Judgment awarding costs to Plaintiffs also, on other causes of action, awards judgment for millions of dollars to Defendants and against Baer-owned alter egos IBT International, Inc. and Southern California Sunbelt Developers, Inc. (“SCSD”). As of the May 31, 2011 judgment, those assets were fully available to Plaintiffs for execution, or equitable offset.” (Oppn at 2:9-13).

The statute is phrased in the present tense, and refers to “a finding that limited partnership assets subject to execution are clearly insufficient to satisfy the judgment.” (Nev. Rev. Statute § 87A.370(3)(d); see also Cal. Corp. Code §15904.05(c)(4)). This is the only interpretation that makes sense. Nonetheless, the judicial admissions submitted by Plaintiffs, which indicate that Defendants had an “inability to pay debts due at all times from 1996 to the present” would be sufficient to meet that element if the court were to interpret the statute in the manner proposed by Defendants.

Statute of Limitations

Defendants contend that the claim is barred by the statute of limitations. Per Defendants, “the Complaint pleads an accrual date of ‘May 31, 2011’ and that admission date fixes the date on this Motion.” (Oppn at 4:1-3). Grammer and Apple Management further contend that “[a]s to the awards of appellate costs, Plaintiffs had been adjudged prevailing parties and paid all reimbursable costs, as of the date of the appellate remittiturs — October 15, 2013. (Comp. ¶10); and October 19, 2016 (Comp. ¶ 12).” (Oppn at 4:12-14).

Defendants contend that Plaintiffs’ claims are barred by the three year statute of limitations in CCP §338(a). Section 338(a) applies to “an action upon a liability created by statute, other than a penalty or forfeiture.” As set forth in Winick Corp. v. Gen. Ins. Co. (1986) 187 Cal.App.3d 142, 145):

“California Code of Civil Procedure section 338, subdivision 1, provides that an action upon a liability created by statute must be brought within three years from the date on which the cause of action accrues. An obligation is created by statute if the liability would not exist but for the statute, and the obligation is created by law in the absence of an agreement. [citations] The action must be of a type which did not exist at common law.”

Both Nevada and California courts recognize that the Uniform Partnership Act is based on common law. (See Watson v. G.C. Associates Ltd. Partnership (1984) 100 Nev. 586, 588-89 (“As the drafter of the act explained at the time of its proposal, this language was intended to make clear that the act was based upon a common law or aggregate theory of partnership . . .”); see also Hobgood v. Glass (1958) 161 Cal.App.2d 208, 211–12). Therefore, CCP §338 does not apply.

Although Defendants contend that the liability of a general partner of a limited partnership differs markedly from common law, and is therefore a liability created by statute, Defendants cite nothing in support of that proposition. Further, the liability of general partners to a partnership was certainly part of the common law principles of partnership, even if limited partnerships did not exist at the time.

Thus, CCP §338(a) does not apply to the claims at issue here.

Rather, the claims are governed by the ten year statute of limitations set forth in CCP §337.5(b) for “an action upon a judgment.” (See Ahart, Cal. Practice Guide: Enforcing Judgments and Debts (The Rutter Group 2021) ¶ 6:59.5 (citing CCP §337.5; Kertesz v. Ostrovsky (2004) 115 Cal.App.4th 369, 373 (“An independent action may be filed on a judgment up until 10 years after the judgment becomes final.”) Even if the statute began to run on 5/31/11 (as Defendants contend), this action is timely as it was filed on 5/26/20. (ROA 1).

Liability of Grammer for Banyan’s Debts vis a vie Apple Orchard

Apple Orchard was cancelled on August 31, 2011. (Ex. 4 at no. 40; Ex. 45). Grammer was only a general partner of Apple Orchard until it was cancelled. (Id. at 39). As Grammer was apparently never a general partner of Banyan, Plaintiffs ask the court to find that the judgment against Apple Orchard that is sought by way of this motion is sufficient for the court to impose a judgment on Grammer for Apple Orchard’s liability to Banyan. The court cannot do so because if Apple Orchard has been cancelled, then Grammer is not currently its general partner. If Grammer is not a general partner of Apple Orchard at the time the judgment is entered, then Plaintiffs have not satisfied all elements required to impose a liability on Grammer for the judgment against Apple Orchard.

Plaintiffs’ policy based argument to the contrary, in the absence of any authority is unavailing.

The court therefore grants the motion, in part, and denies the motion, in part, as follows:

A. Apple Orchard is liable, as general partner, for the monetary cost awards against Banyan Limited Partnership (“Banyan”) reflected in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc entered in Van Dan Limited et al. v. Dan W. Baer et al., Orange County Superior Court Case No. 764271 (“Van Dan”), which were incurred May 31, 2011, when Apple Orchard was general partner of Banyan.

B. Grammer is individually liable, as general partner of Pear Tree Limited Partnership (“Pear Tree”) and Orange Blossom Limited Partnership (“Orange Blossom”), for the monetary cost awards against Pear Tree and Orange Blossom reflected in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc entered in Van Dan, which were incurred May 31, 2011, when Grammer was general partner of those entities.

C. Apple Management is liable, as general partner, for the monetary cost awards against Banyan, Pear Tree and Orange Blossom reflected in the January 15, 2019 Further Corrected Final Judgment Nunc Pro Tunc entered in Van Dan, which were incurred May 31, 2011, when Apple Management was general partner of those entities.

D. The court DENIES the request to find that Grammer is individually liable, as general partner of Apple Orchard, for Apple Orchard’s obligations as general partner of Banyan.

While Defendants request leave to amend their Answer, they do not offer any explanation as to how the Answer could be amended to cure any of the defects. Thus, the court does not grant leave to amend.

The court grants Plaintiffs’ request for judicial notice as to Exhibits 1- 4, 6, 37 and 45 and its supplemental request for judicial notice of supplemental Exhibits 1 and 2.

Plaintiff to give Notice of the Court’s Ruling.