Judge Theresa M. Traber, Case Number: 18STCV10316, Date: 2023-07-21 Tentative Ruling

Judge: Theresa M. Traber, Case: 18STCV10316, Date: 2023-07-21 Tentative Ruling

Case Number: 18STCV10316 Hearing Date: February 8, 2024 Dept: 47

SUNDERIPAL S. ARORA V. DALJEET SINGH, No. 18STCV10316

TENTATIVE RULINGS ON DEFENDANTS’ MOTIONS IN LIMINE

Defendants’ MIL # 1 – seeking an order to exclude evidence and argument about Defendants’ alleged creation of a duplicate lease on the Browning property.

TENTATIVE RULING: DENIED.

According to the parties’ representation of the facts they intend to prove, Defendants’ efforts to obtain a loan to facilitate their purchase of the Eider Run property occurred before, during and after the negotiations with Plaintiffs that culminated in an alleged agreement on July 6, 2018 to sell their partnership interest to Plaintiffs. Defendants’ parallel actions to secure a loan instead of performing on the sales agreement constitute evidence of their lack of intent to sell the partnership interest. Further, that Defendants allegedly forged a lease to give to Logix Credit Union and the timing of those events reinforce Plaintiffs’ argument Defendants’ true focus was on getting a loan at any cost, not on consummating a sale of their partnership interests.

Defendants’ MIL # 2 – seeking an order excluding any evidence of or reference to the 2007 oral agreement regarding the Leucadia property.

TENTATIVE RULING: DENIED.

Plaintiffs seek to prove that the parties entered into an oral partnership agreement in 2007 to own and manage the real property located at 41 Leucadia in Irvine and then in 2014 to expand the partnership to encompass the rental, maintenance, and management of both the Leucadia property and a second property located at 25831 Browning Place in Stevenson Ranch. Defendants contend that the parties’ oral partnership agreements in 2007 and 2014 could not have transferred any ownership interest to Plaintiff in Leucadia because such a transfer would run afoul of the statute of frauds.

Plaintiffs disagree relying on persuasive authority holding that partnership agreements to own and manage real property may be oral without violating the statute of frauds. (E.g., En Taik Ha v. Kang (1960) 187 Cal. App. 2d 84, 90–91.) In rejecting the argument that the statute of frauds bars any right in a real estate partnership, the Court in Kang explained:

A partnership may be formed by parol, even though its sole purpose is to deal in real estate. In Swarthout v. Gentry, 62 Cal.App.2d 68, 78–79, 144 P.2d 38, 43, it is stated:

‘If a partnership is formed and real property is dedicated to partnership use and is used by the partnership for its sole benefit, the fact that title was acquired by one or more of the partners with their private funds or was owned by them as tenants in common prior to the formation of the partnership will not necessarily defeat the claim of the partnership to ownership of the property in the absence of an express agreement that it should remain property of those in whose names title stood. Under such circumstances the owners of the legal title hold the property in trust for the partnership. Bastjan v. Bastjan, 215 Cal. 662, 12 P.2d 627. The rule is thus stated in Perelli-Minetti v. Lawson, 205 Cal. 642, 272 P. 573, 576:

“The partnership agreement was not in writing. ‘A partnership in lands may be formed by an agreement in parol. Such parol agreement is valid and may be enforced between the parties.’ Musick Consol. Oil Co. v. Chandler, 158 Cal. 7, 12, 109 P. 613, 614; Koyer v. Willmon, 150 Cal. 785, 787, 90 P. 135; Scott v. Jungquist, 179 Cal. 7, 9, 175 P. 412. The relations between the parties were confidential and each was a trustee for the other in all partnership transactions. Koyer v. Willmon, supra. ‘If property owned by one of the partners before the organization of the firm has been used for partnership purposes, it must be determined from the partnership agreement and the conduct of the parties whether it has become a part of the firm property or remains the property of the one partner. Thus a lease of premises occupied by the firm business, procured by one partner before formation of the partnership may become firm property without formal assignment, if it is so understood and the partners regard it as such.’ Rowley's Modern Law of Partnership, § 277. ‘It is not necessary to show that the partnership property was purchased with partnership funds. Land standing in the name of an individual partner may have been contributed by him as his portion to the firm assets. The true method of determining, as between the partners themselves, whether land standing in the name of the individuals is or is not to be treated as partnership property is to ascertain from their conduct and course of dealing the understanding and intention of the partners themselves, which, when ascertained, should unquestionably control.’ * * *

“‘In the language of the trial court: ‘Even though the ranch property in question may have originally come to the parties in the character of tenants in common, this character was destroyed by the parties having farmed and operated it upon joint account and as partnership property and by their acts thereby made it partnership assets'.” See, also, McNab v. Mills, 199 Cal. 231, 248 P. 657; Chapman v. Hughes, 104 Cal. 302, 303, 37 P. 1048, 38 P. 109.

‘Nor does the statute of frauds, Civ.Code, § 1624, prevent proof of the existence of a trust in favor of the partnership where title stands in the names of the partners or in that of a third person. In Bates v. Babcock, 95 Cal. 479, 30 P. 605, 16 L.R.A. 745, 29 Am.St.Rep. 133, it was held that under such circumstances the statute of frauds could not be invoked to commit a fraud on the partnership by depriving it of property belonging to it. Perelli-Minetti v. Lawson, supra, and Bastjan v. Bastjan, supra, are to the same effect.’

(En Taik Ha v. Kang, supra, at pp. 90-91.) Thus, it is well settled in California that a partnership may be formed by oral agreement even though its sole purpose is to deal in real estate. Where the evidence demonstrates that the real property is managed and operated as partnership property and it became a partnership asset. (Id.) Defendants offer no opposition to the force of these authorities.

The Court concludes, therefore, that if there is evidence of oral partnership agreements in 2007 and/or 2014 and of the partnership’s operation of the partnership property, the statute of frauds may not be invoked to challenge the transfer of the property to the partnership or the later alleged disposition of the partnership assets or a share thereof.

Defendants’ MIL # 3 – seeking an order excluding any evidence of or reference to a “purported partially oral, partially written agreement to sell” the Defendants’ interests in Leucadia and Browning to Plaintiffs.

TENTATIVE RULING: DENIED.

The Court concurs with Defendants that an agreement to transfer an ownership interest in partnership property from one partner to the other is generally subject to the statute of frauds. (Kaljian v. Menezes (1995) 36 Cal.App.4th 573, 586-587.) An exception to the statute of frauds must grounded on proof of two factors: first, that the parties were engaged in a partnership or joint venture; and second, that there is no substantial evidence that the agreement was to sell property as opposed to a mere interest in the partnership or joint venture. (Id., at p. 587.)

Here, there appears to be little disagreement that the parties were partners in real estate management, but there is a vigorous dispute about whether the transaction was a sale of Defendants’ partnership interest, that is, their rights to receive rents and profits from operating the partnership property, as Plaintiffs argue, or a sale of Defendants’ ownership interest in the Leucadia and Browning properties, as Defendants contend. Kaljian teaches that such a dispute must be resolved by the jury based on instructions that describe the standards for applying the statute of frauds and determining whether the statute has been satisfied. (Id., at p. 588.) Given this standard, the Court cannot find that evidence of the sales agreement must be excluded as irrelevant as Defendants’ motion would suggest. Instead, evidence of the parties’ agreement, if any, should be submitted to the jury for a determination of whether the agreement envisioned the sale of the real property (and, thus, is governed by the statute of frauds) or was intended to transfer partnership rights to receive rents and profits (such that it could be enforced as an entirely oral contract). The parties are ordered to meet and confer about appropriate jury instructions on these issues and to submit a joint proposal or competing versions by February 15, 2024.

Further, Defendants’ acknowledgment that the agreement is “partly written” discloses the need for bifurcation of the trial, with the first phase being a bench trial about whether the written evidence of the agreement satisfies the statute of frauds and the second phase a jury trial on the parties’ claims and defenses. As the Supreme Court has explained:

The statute of frauds does not require a written contract; a “note or memorandum ... subscribed by the party to be charged” is adequate. (Civ.Code, § 1624, subd. (a).) In Crowley v. Modern Faucet Mfg. Co. (1955) 44 Cal.2d 321, 282 P.2d 33, we observed that “[a] written memorandum is not identical with a written contract [citation]; it is merely evidence of it and usually does not contain all of the terms.” (Id. at p. 323, 282 P.2d 33; see also Kerner v. Hughes Tool Co. (1976) 56 Cal.App.3d 924, 934, 128 Cal.Rptr. 839; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 350, p. 397.) Indeed, in most instances it is not even necessary that the parties intended the memorandum to serve a contractual purpose. (Rest.2d Contracts, § 133; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 352, p. 398; see Moss v. Atkinson (1872) 44 Cal. 3, 16–17.)

A memorandum satisfies the statute of frauds if it identifies the subject of the parties' agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty. (Rest.2d Contracts, § 131; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 353, p. 399.) “Only the essential terms must be stated, ‘“details or particulars” need not [be]. What is essential depends on the agreement and its context and also on the subsequent conduct of the parties....' (Rest.2d Contracts, § 131, com. g, p. 338.)” (Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 762–763, . . . .)

This court recently observed that the writing requirement of the statute of frauds “‘serves only to prevent the contract from being unenforceable’ [citation]; it does not necessarily establish the terms of the parties' contract.” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 345, 9 Cal.Rptr.3d 97, 83 P.3d 497.) Unlike the parol evidence rule, which “determines the enforceable and incontrovertible terms of an integrated written agreement,” the statute of frauds “merely serve[s] an evidentiary purpose.” (Ibid.) As the drafters of the Second Restatement of Contracts explained: “The primary purpose of the Statute is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made. The contents of the writing must be such as to make successful fraud unlikely, but the possibility need not be excluded that some other subject matter or person than those intended will also fall within the words of the writing. Where only an evidentiary purpose is served, the requirement of a memorandum is read in the light of the dispute which arises and the admissions of the party to be charged; there is no need for evidence on points not in dispute.” . . .

Thus, when ambiguous terms in a memorandum are disputed, extrinsic evidence is admissible to resolve the uncertainty. . . . Extrinsic evidence can also support reformation of a memorandum to correct a mistake. . . . [¶] Because the memorandum itself must include the essential contractual terms, it is clear that extrinsic evidence cannot supply those required terms. . . . It can, however, be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others.

(Sterling v. Taylor (2007) 40 Cal. 4th 757, 765–67 [Citations omitted].) Whether a writing satisfies the status of frauds is a legal question for the Court. Accordingly, the Court bifurcates the trial, scheduling the bench trial to begin on February 20, 2024, at 10 a.m., to address the sufficiency of the writings reflecting the parties’ sales contract under the statute of frauds, with the jury trial to follow immediately thereafter.

Defendants’ MIL # 4 – seeking an order to exclude evidence and argument about Defendants’ alleged use of fraudulent gift letters in connection with seeking a loan from Logix Credit Union.

TENTATIVE RULING: DENIED.

According to the parties’ representation of the facts they intend to prove, Defendants’ efforts to obtain a loan to facilitate their purchase of the Eider Run property occurred before, during and after the negotiations with Plaintiffs that culminated in an alleged agreement on July 6, 2018 to sell their partnership interest to Plaintiffs. Defendants’ parallel actions to secure a loan instead of performing on the sales agreement constitute evidence of their lack of intent to sell the partnership interest. Further, the fact that Defendants allegedly forged a lease and offered gift letters to Logix Credit Union reinforces Plaintiffs’ argument their true focus was on getting a loan at any cost, not on consummating a sale of their partnership interests. That said, the Court is concerned about the potential prejudice that will be inflicted on Defendants if Plaintiffs can explore and emphasize the allegedly fraudulent nature of the gift letters and consume trial time in developing this collateral issue.

Exercising its discretion under Evidence Code § 352, the Court will allow limited evidence on the gift letters as they reflect Defendants’ behind-the-scenes efforts to secure a loan that would obviate the need for any sale to Plaintiffs while making contrary representations in the sale negotiations with Plaintiffs. This evidence would include the timing of and reasons for Defendants’ requests for gifts, their representations to Logix, and possibly the repayment of the gifts. The Court needs offers of proof from both sides to tailor an appropriate order.