Judge Mitchell L. Beckloff, Case 21STCP00295 2023-01-06 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 21STCP00295, Date: 2023-01-06 Tentative Ruling

[The court reminds the parties the court’s First Amended General Order filed May 3, 2019 requires a printed courtesy copy of pleadings and motions that include points and authorities including attachments and exhibits.]

This action arises from a partnership dispute related to real property located at 350 S. Los Angeles Street in downtown Los Angeles (the Property) currently managed by Defendants, Saeed Farkhondehpour, Downtown Acquisition Group (DAG) and Investment Consultants LLC (IC). The complaint alleges claims for breach of contract, breach of fiduciary duty, fraud, improper disposition of property, specific performance and accounting. A jury trial for this action is scheduled to commence on March 20, 2023.

Through this motion, Plaintiffs, Siry Investments L.P., Mohammed Siry, and Siry Brothers Partnership, seek an order appointing a receiver to manage Defendant, 350 South Los Angeles St. Partnership, L.P. (the Partnership) and take possession of the Property.

Defendants Saeed Farkhondehpour, individually and as trustee of the 1993 Farkhondehpour Family Trust, the Partnership, DAG, and IC, oppose the motion.

Despite the problematic format of Defendants’ evidentiary objections, the court rules on them as follows:

Objections to the Declaration of Gregory D. Hagen: The following objections are overruled (in large part based on their lack of specificity) – 3, 4, 5 and 6. Objection 1 is overruled except as to the first sentence of paragraph 2 which is sustained. Objection 2 is overruled except as to the second sentence of paragraph 16 which is sustained.

Objections of the Declaration of Brian Neman: All objections are overruled except objection 3 which is sustained as to paragraphs 5, 6 and 7 only.

Objections to the Declaration of Morad Ben Neman: Objection 1 is overruled except as to paragraph 5 and paragraph 7 except as to the last sentence which is sustained. Objection 2 is sustained. Objection 3 is overruled.

Objections to the Declaration of Moe Siry: Objections 3, 4, 5 and 6 are overruled. (The court notes objection 3 appears to contain a typographical error.) Objection 1 is overruled as to paragraph 7 (based on the grounds stated). Objection 1 is sustained as to all except the last sentence of paragraph 5 and the first sentence of paragraph 9. Objection 2 is sustained as to the fifth sentence only.

Objections to Gregory D. Hagen Reply Declaration: Objections 1 and 4 are overruled. Objections 2 and 3 are sustained as to paragraphs 2, 3 and 7 and overruled as to paragraph 9.

Defendants’ wholesale objection to the amended submission of exhibits is overruled.

Appointment of a receiver is an extreme provisional remedy. A court may appoint a receiver only when facts are presented by admissible evidence clearly demonstrating a receiver is necessary to protect the property and maintain the status quo. (Barclay Bank of California v. Superior Court (1977) 69 Cal.App.3d 593, 597.)

A receiver may not be appointed except in the classes of cases expressly set forth in the statutes. (Turner v. Superior Court (1977) 72 Cal.App.3d 804, 811.) “Code of Civil Procedure section 564 contains a principal source of authority for trial courts to appoint receivers.” (Ibid.) “The requirements of Code of Civil Procedure section 564 are jurisdictional, and without a showing bringing the receiver within one of the subdivisions of that section the court's order appointing a receiver is void.” (Ibid.)

Plaintiffs seek the appointment of a receiver to take over management of the Partnership from Defendants.[1] Plaintiffs’ motion is based on four general allegations of misconduct.

First, Plaintiffs argue that Plaintiffs and (Cross-Defendants) Morad Ben Neman, Simon Neman, and Brain Neman[2]—as owners of more than two-thirds of the Partnership—voted to remove DAG as General Partner.[3] (Memo 2:20.)

“A General Partner may be removed from the Partnership only upon a vote of Limited Partner[s] holding sixty-six percent (66%) of the outstanding interest[s] in the Partnership held by persons other than the General Partner. Notice of the removal shall be served on the General Partner either by certified or registered mail, return receipt requested, or by personal service. The notice shall set forth the effective date of the removal. This Section may not be amended without the written consent of the General Partner." (Ex. A, p. 14.)

Relying on the removal provision, Plaintiffs contend on or about August 3, 2020, “Plaintiffs and Neman” gave written notice of their vote to replace Defendant DAG as General Partner and IC as manager of the Partnership. (Plaintiff Ex. B; B. Neman Decl., ¶¶ 2-3.)

Defendants dispute that a vote in accordance with the partnership agreement occurred. (Bolson Decl., ¶ 4., Ex. S.) Specifically, Defendants argue Defendant Farkhondehpour (presumably on behalf of Defendant DAG as well as on his own behalf) did not receive the required (1) formal notice of meeting, (2) a written notice of a vote of the limited partners, or (3) proper notice of removal of the general partner under the terms of the partnership agreement. (Opposition 7:3-7; Farkhondehpour Decl., ¶ 13)

Defendants also argue Plaintiffs have not established they have an ownership interest in the Partnership and are entitled to vote.[4] The court agrees. The court also notes—as argued by Defendants—Brian Neman’s authority to act on behalf of The Neman Family Irrevocable Trust and Yedidia Investments, Inc. is unclear at best.[5]

Plaintiffs fail to respond in any meaningful way to Defendants’ claims surrounding the legitimacy of the vote taken. Instead of explaining how Plaintiffs have the authority of vote on Partnership matters or how Brian Neman is authorized to act, Plaintiffs deflect: “Equally unpersuasive is Mr. Farkhondehpour’s obscure cobweb of an argument that he was not voted out.” (Reply 9:16-17.) Plaintiffs merely assert “a super-majority of the limited partners voted him out . . . .” (Reply 9:18-19.)

Even assuming the court found Defendant DAG had been properly removed as General Partner pursuant to Section 12.1 of the partnership agreement, such fact standing alone would not cause this court to exercise its discretion in favor of the appointment of a receiver. General wrongdoing by Defendants or Plaintiffs’ superior rights to the Property is insufficient—there must be some threat of harm or harm suffered by the Partnership to justify the drastic remedy of a receiver. Simply showing Defendant DAG continues to act as General Partner while IC continues to act as manager does not alone show the Partnership has suffered or may suffer injury.

Code of Civil Procedure section 564 provides a receiver may be appointed, “by the court in which an action or proceeding is pending, . . . in the following cases: . . . (9) In all other cases where necessary to preserve the property or rights of any party.” Further, a motion for a receiver can be brought “in an action between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of any party whose right to or interest in the property or fund . . . is probable, and where it is shown that the property or fund is in danger of being lost, removed, or materially injured.” (Code Civ. Proc., § 564, subds. (b)(1) and (b)(9).)

In any event, on the evidence presented, the court cannot find the Partnership removed Defendant DAG as General Partner pursuant to Section 12.1 of the partnership agreement.[6]

Second, Plaintiffs contend Defendant Farkhondehpour failed to refinance a loan on the Property in spite of its status as “fully due and payable.”[7] (Hagen Decl., ¶ 21, Ex. H.) Plaintiffs further assert “Farkhondehpour has failed to look after the finances of the Partnership and ensure that the loan payments are made in a timely fashion.” (Memo 5:5-6 [citing M. Neman Decl., ¶ 6, Ex. M; Siry Decl., ¶ 5; B. Neman Decl, ¶¶ 5-7, Ex. J-K].)

There is no dispute the loan on the Property is in default. Defendants concede as much. Nonetheless, Defendants contend the default is not based on their failure to make required payments. Defendants explain the loan reached its maturity only because Plaintiffs obstructed Defendants’ efforts to obtain an extension of the loan.[8] (Farkhondehpour Decl., ¶¶ 15-18, 20, Ex. F.) Defendants also contend Hamni Bank would not further extend the loan “due to Mr. [Morad] Ben Neman’s involvement” as, according to Plaintiff, he had been indicted for money laundering. (Farkhondehpour Decl., ¶¶ 6, 15.)

Unable to refinance the loan, Defendant Farkhondehpour issued a request for capital contributions to address the loan default. Plaintiffs failed to respond to the capital call; under the partnership agreement, they had no obligation to make additional capital contributions. (Farkhondehpour Decl., ¶ 21.)

Thereafter, Rahim Golbari (or an affilitated entity, Black Gem) purchased the Partnership’s debt obligation from Hanmi Bank. Golbari purportedly did so “as a favor to the partners, to assist them in providing time to obtain financing or pay off the loan.” (Farkhondehpour Decl., ¶¶ 21, 25.) Golbari, however, has now indicated his intent to commence a “legal/foreclosure action . . . if the full balance payable for both loans is not received . . . by December 31, 2022.” (Hagen Reply Dec., Ex. X.)

Defendants have not had an opportunity to respond to the evidence concerning Golbari’s apparent unwillingness to further forebear as Plaintiffs presented the evidence in reply. (The court notes Golbari’s representative emailed the notice to interested parties on December 9, 2022 at 4:10 p.m. Plaintiffs filed their moving papers on December 9, 2022 at 5:58 p.m. Curiously, Defendants elected not to address the issue in their opposition papers.)

Plaintiffs’ evidence fails to expressly identify Defendants’ mismanagement of the Partnership based on the loan default.[9] Plaintiffs assert Defendants failed to obtain refinancing in 2020 through Universal Bank when available to the Partnership. (Reply 4:13-16. B. Neman Decl., Ex. Y.) Without explanation, Defendant Farkhondehpour reports “the Nemans attempted” to obtain the loan from Universal Bank but were unsuccessful. (Farkhondepour Decl., ¶ 17.) According to Plaintiffs, however, Defendants “refused” to accept Universal Bank’s “loan offer.” (B. Neman Decl., ¶ 3.)[10] The evidence of Defendants’ alleged mismanagement as it relates to the failure to refinance the Property is murky at best. Moreover, under the circumstances nothing suggests a receiver would be any more successful at refinancing the loan than Defendants—how does a receiver protect the Property where limited partners have failed to respond to capital calls or requests for information from lenders?

Plaintiffs speculate the Property is not receiving “full rental income from tenants” because Defendants have not made repairs after a fire at the Property. (M. Neman Decl., ¶ 6.) Defendants submit evidence to the contrary supporting their claim the City of Los Angeles has signed off on the fire repair work by a licensed contractor. (Farkhondehpour Decl., ¶ 29, Ex. L [final inspection].)[11] It appears the required repair work has been undertaken, completed and approved by the city.

Finally, Plaintiffs request a receiver be appointed based on Defendant Farkhondehpour’s “long history of mismanaging and stealing from partnership(s) that he manages.” (Motion 7:7.) Plaintiffs cite to a prior lawsuit involving Defendant Farkhondehpour wherein the courts found Defendant Farkhondehpour engaged in misconduct.

These prior acts of misconduct (occurring sometime prior to June 2007), however, are inadequate to affirmatively demonstrate misconduct with the Partnership. Moreover, as noted by Defendants, the past misconduct arises from a single case (BC372362) where a jury found against Defendant Farkhondehpour in part in 2009.[12] (Motion. Exs. Q-T.) In turn, Defendants argue Plaintiffs have been bad actors in the past and in the current litigation. Defendant Farkhondepour’s prior bad acts (substantially pre-dating this motion) do not inform on the need for a receiver for this Partnership. Similarly, Plaintiffs’ alleged bad acts are unhelpful to deciding whether the extraordinary remedy of a receiver is warranted today.

The court finds that the evidence submitted by Plaintiffs is inadequate to support the appointment of a receiver. There is no evidence demonstrating a receiver is required to preserve the Property, or what services a receiver could perform differently than Defendants. Plaintiffs’ evidence does not support a finding Defendants have engaged in misconduct putting the Partnership and the Property in jeopardy. In fact, Plaintiffs essentially concede as much. To wit, in reply, Plaintiffs contend the court should appoint a receiver for the following reasons:

“Obtain an independent assessment of the status of construction and any safety concerns;

Obtain an independent assessment of what work has been approved by the City and whether additional permits/inspections should be undertaken;

Obtain documentation from the insurance adjustor and company to determine what has been paid, and if more should be paid;

Apply, in conjunction with the lender, any insurance payouts to those performing work at the Property;

If the current lender is unwilling to enter into a payment schedule, then determine whether the loans that Neman or others have attempted to obtain are feasible;

If no alternative financing can be obtained, then oversee a capital call sufficient to pay off the loan.” (Reply 8:10-22.)

Plaintiffs’ rationale for a receiver suggests Plaintiffs distrust Defendants. Plaintiffs’ distrust, however, is insufficient to justify the appointment of a receiver. Plaintiffs have not demonstrated Defendants are actively mismanaging the Partnership or hiding or misusing assets.[13] Finally, Plaintiffs have not provided any evidence to support their claim Defendants have failed to make required distributions.

[1] The partnership agreement designates Defendant DAG as General Partner. According to Plaintiffs, Defendant Farkhondehpour controls both DAG and IC. Plaintiffs state: “Although Plaintiffs reference just [Defendant] Farkhondehpour, since he controls the other entities that manage the property, this Motion is directed at the defendant group, controlled by him.” (Motion, p. 2, fn. 1.)

[2] Plaintiffs’ language is generalized and imprecise. It is unclear from the memorandum of points and authorities who voted to remove DAG. Plaintiffs specify “Plaintiffs and the Neman cross-defendants [] hold almost 70% of the partnership interests.” (Memo 2:20-22.) Plaintiffs later specify “Siry and Neman” gave written notice. (Memo 3:13.) It appears from the partnership agreement Morad Ben Neman has no individual ownership interest in the Partnership. Instead, he holds interests as the trustee of two different trusts, The Neman Family Irrevocable Trust and Yedidia Investments, Inc. (Plaintiffs’ Ex. A.) There is evidence, however, Brian Neman is now acting as trustee of the trusts. (Whether Yedidia Investments, Inc. and the Yedidia Investment Trust are the same entity is unexplained. See B. Neman Decl., ¶ 1.) Plaintiffs’ interest in the Partnership is unclear.

[3] The motion generally alleges “Neman” owns 39.6 percent of the Partnership while “Siry” owns 29.7 percent of the Partnership.

[4] Under the law, a transfer of an “interest” in a partnership does not make the transferee a limited partner with voting rights. (Corp. Code, §§ 15907.01, 15907.02, subd. (h).) Without any evidence, Plaintiffs argue they have a 29.7 percent interest in the Partnership. (Memo 2:8-15.)

[5] Indeed, whether 16.5 percent of the Partnership is owned by a corporation (Yedidia Investments, Inc.) [Plaintiff’s Ex. A], the Yedidia Defined Benefit Trust (Opposition 3:8-9) or the Yedidia Investment Trust (B. Neman Decl., ¶ 1) is unexplained by the parties.

[6] Defendants contend the court previously found the Partnership had not conducted a valid vote to removed Defendant DAG as General Partner. The court could not locate any such finding in its order denying a preliminary injunction. (See Order filed July 12, 2021.)

[7] Defendant Farkhondehpour appears to have been acting on behalf of his alleged affiliates Defendants DAG and IC.

[8] Defendants allege a refinancing source, Woori Bank, required a copy of Plaintiff Mohammed Siry’s family partnership agreement. Plaintiff Mohammed Siry never provided the agreement despite requests. Plaintiff Mohammed Siry requested the bank contact his counsel directly so that he could evaluate the bank’s request. (Farkhondehpour Decl., Ex. F.) Defendant Farkhondehpour advised Plaintiff Mohammed Siry’s counsel “[u]nfortunately thats [sic] not the way it works when trying to obtain financing. Please forward [the] partnership agreement or call the loan officer to discuss whatever !!” (Farkhondehpour Decl., Ex. F.)

[9] Under the circumstances, the evidence is insufficient to conclude Defendants are responsible for the imposition of default interest. (See Reply 4:1-3.)

[10] Plaintiffs represent a loan was “available” to the Partnership in 2020. (Reply 4:13.) There is no evidence Universal Bank offered to loan money to the Partnership. The only evidence on the issue is letter of intent and an offer to “consider an application . . . subject to further analysis and due diligence.” (B. Neman Reply Decl., ¶ 2, Ex. Y.) Moreover, Universal Bank indicated it would consider the Partnership’s loan application only if Yedida Investment Trust served as manager. (Ibid.)

[11] Photographs submitted by Plaintiffs (M. Neman Decl., Ex. P) suggest construction at the Property. Based on the evidence, the licensed contractor hired by Defendants are not involved in that construction. It appears tenants of the Property are engaged in a build out of space without necessary permits. Whether and to what extent, if at all, Defendants were aware of the non-authorized tenant construction is unclear. Defendants have represented they will investigate whether the tenants have breached their lease. (Opposition 14:24-27; (Farkhondehpour Decl., ¶ 30.) In any event, the court struck the evidence submitted to support the claim construction at the Property is ongoing.

[12] Plaintiffs’ counsel’s declaration suggests the matter “originally went to trial in or about November of 2011.” (Hagen Decl., ¶ 24.) The Court of Appeal opinion in Siry Investment, L.P. v. Farkhondehpour, Court of Appeal Case No. B277750 indicates the “matter proceeded to a jury trial in October 2009.” (Opinion filed March 3, 2020 p. 5.) Siry Investment, L.P. filed the action in June 2007 alleging misconduct by Defendant Farkhondehpour. (Id. at p. 4.) The reporter’s transcript cited by Plaintiffs’ counsel indicates the court heard a motion for a new trial in February 2010. (Hagen Decl., ¶ 26, Ex. R.)

[13] Plaintiffs’ argument that “for roughly a decade, [Defendant] Farkhondehpour opaquely withheld any partnership distributions” is unclear. (Memo 5:10 [emphasis added].) Despite this action having been initiated nearly two years ago and being scheduled for trial in just three months, Plaintiffs provide no evidence distributions Defendants were required to make distributions and failed to do so. Similarly, Plaintiffs’ conclusions about rent rolls—without evidence—is unpersuasive. (See Siry Decl., ¶ 6. [“For example, [Defendant] Farkhondehpour had not properly accounted for security deposits from the tenants, and the tenant payments did not appear to coincide with the leases, which also appeared to be out of date.”])