Judge Theresa M. Traber, Case BC715362 2022-10-11 Tentative Ruling

VICHIT TILAKAMONKUL, et al. v. VICHAI TILAKAMONKUL, et al., Case No. BC715362

On July 25, 2018, Plaintiff Vichit Tilakamonkul (Vichit)[1] filed a verified complaint for damages and other relief against Defendants Vichai Tilakamonkul, Virut Tilakamonkul, Somsak Tilakamonkul, Marasri (Mary) Tilakamonkul, Narong Tilakamonkun, Sumeth Tilakamonkul,[2] and others claiming an interest in certain described real and personal property. In the initial complaint, Vichit asserted claims for breach of written contract, partnership accounting, dissolution of partnership and accounting, conversion, breach of fiduciary duty, constructive fraud, and partition and sale and accounting.

After several revised iterations of the complaint, the Second Amended Complaint was filed on August 21, 2019, which was the operative complaint at trial. In that pleading, Vichit Tilakamonkul joined with brother and former defendant, Somsak Tilakamonkul (jointly “Plaintiffs”) to assert twelve causes of action against their brothers, Defendants Vichai, Virut, Narlong, Sumeth, and Pramorte, as well as Siriratn Tilakamonkul and several entities owned by some or all of the seven Tilakamonkul brothers. These entity defendants included Royal Thai Cuisine II, Inc. (“RT II”), Royal Thai Cuisine IV, Inc. (“RT IV”), and T-Team Investments, LLC. (“T-Team”). The Second Amended Complaint asserts claims for quiet title, breach of oral contract, negligence, partnership accounting, partnership dissolution and accounting, partition and sale of partnership property, breach of fiduciary duty, and breach of the covenant of good faith and fair dealing.

Various defendants filed Cross-complaints in the action. By the time of trial, there were three at issue. In its Second Amended Cross-Complaint, filed on March 25, 2021, Defendant T-Team sues Plaintiffs Vichit and Somsak, as well as Sudatip Tilakamonkul, who is also known as Dawn Tilakamonkul, alleging causes of action for declaratory relief, quiet title, breach of contract, account stated, and goods and services rendered. T-Team’s cross-complaint focuses on the ownership of real property located at 4941 Mount Bigelow in San Diego (“Mt. Bigelow Property”) and at 4199 and 4201 Ransom Street in Long Beach (“Ransom Properties”), and the related issue of whether funds paid to Vichit in 2007 constituted a buyout of his interest or a loan still owed by Vichit to T-Team. RT II intervened in the action on or about March 12, 2019 to bring a claim for declaratory relief against Plaintiffs, seeking a judgment regarding the ownership of the Royal Thai Cuisine restaurant in Newport Beach. Further, Defendants Vichai, Virut, Narlong and Sumeth cross-complained against Plaintiffs for declaratory relief on June 30, 2018, requesting a declaration that Plaintiffs own no part of the restaurant businesses or real property they claim to own jointly with the five defendant brothers.

On October 1, 2020, the Court bifurcated trial in this matter and ordered that the following equitable causes of action in the Second Amended Complaint would be tried first to the Court: (1) quiet title, (8) partnership accounting, (9) partnership dissolution and accounting, (10) partition and sale of partnership property, and (11) breach of fiduciary duty. (10/1/20 Order, p. 10.) In addition, the Court ordered that the following equitable causes of action in the Second Amended Cross-Complaint would be tried in the first-phase bench trial: the first, third and sixth causes of action for declaratory relief and the second cause of action for quiet title. The Court ordered that all other causes of action would be tried in a second phase, with the legal claims being tried to a jury along with an intertwined equitable cause of action that would be tried to the Court.

At issue in the first phase of the trial is the ownership of a chain of family-operated Thai restaurants in Southern California that were owned at one time by all seven Tilakamonkul brothers. Although all the restaurants are now closed and their assets sold, each plaintiff contends he has a right to a 1/7^th share (14.28 percent) of the proceeds from the disposition of these businesses. Other matters to be resolved in the first phase of the trial are Plaintiffs’ claims to 1/7^th shares each in the ownership of several pieces of real property, including a house located at 24921 Georgia Sue Court in Laguna Hills (“Georgia Sue property”), two homes in Long Beach referred to as the Ransom Property, and a house in San Diego referred to as the Mt. Bigelow Property. Plaintiffs also argue that Defendants breached their fiduciary duties to Plaintiffs in the manner they have dealt with the family properties.

For their part, Defendants and Cross-Complainants assert that Plaintiffs possess no ownership interest in the restaurants or real property, arguing that any interests they once held were extinguished long ago in connection with a 2007 buyout of Vichit’s interests and a 2014 termination of Somsak’s ownership rights because of his wife Pankee’s embezzlement from the family business. Defendants also contend that Plaintiffs’ claims for fiduciary breach and related causes of action cannot succeed because Plaintiffs cannot demonstrate a partnership relationship and, in any event, the claims are barred by the statute of limitations. Defendants also urge the Court to deny any relief, even if a right to it is proven, based on Plaintiffs’ unclean hands and on Defendants’ affirmative defenses of laches and estoppel.

The Court held a bench trial in this case from December 13-21, 2021, and on January 3, 2022. After the parties rested, the Court set a schedule for the submission of the parties’ written closing arguments that was completed on January 25, 2022. On March 18, 2022, the Court ordered the parties to comply with the mid-trial order to submit a settled statement for the testimony and evidence offered on December 13-14, 2021, when there was no court reporter at trial. That settlement statement was submitted on April 4, 2022, and the Court took the matter under submission on April 6, 2022, and issued its tentative Statement of Decision on June 8, 2022. Having ruled on the parties’ objections, the Court issues this final Statement of Decision.

The Tilakamonkul brothers came from a family that owned and operated restaurants in their native Thailand. The second oldest brother, Pramorte, spearheaded an effort to replicate this business in California by establishing and running a series of Thai restaurants in Southern California first with his wife, father-in-law, and several brothers and later with all seven brothers. The first enterprise involving all seven Tilakamonkul brothers was a restaurant opened in Newport Beach in 1981.

While there are slight differences in the brothers’ stories, most of the origin story of the Newport Beach restaurant is undisputed. According to Virut, it was Pramorte’s idea that all seven brothers would own the Newport Beach restaurant, which was opened in the early 1980s. (Settled Statement [SS], p. 10.) Virut, Sumeth, and Pramorte’s wife, Marasri (or Mary), agreed. (Id., pp. 10, 12-14; Trial Transcript (“TT”) 12-16-21, pp. 49-50.) With Pramorte, they were among the original four owners of RT II. (SS, pp. 12-13.) The four agreed that they would open and operate a restaurant in Newport Beach. (Id., p. 14.) But before the restaurant was opened, the other brothers became part of RT II. (SS, p. 13.) There was no written agreement, just an oral understanding to open the Newport Beach restaurant. (SS, p. 16.)

Vichai testified that there was an oral agreement between Pramorte, Sumeth, Virut and himself that they would all contribute $35,000 and open a Newport Beach restaurant. (TT 12-20-21, pp. 99-102.) Vichai said he pitched in the $35,000 and an additional $81,000 for Vichit, Somsak, and Narlong, who were the brothers who did not have money to contribute. (Id., p. 121.) According to Vichai, the agreement was that the initial four would share equally in the restaurant and that, when the remaining brothers came to the United States, they too would have equal shares. (Id., pp. 103-105.)

Similarly, in a letter dated January 9, 2012, Sumeth stated that he talked with Pramorte “before opening the restaurant that it would belong to all 7 siblings,” that he promised Pramorte that he would do that, and that he had “accomplished that.” (Exh. 28.) Sumeth clarified that all the restaurants that were open as of that date belonged to all seven brothers at that time. (TT 12-15-21, pp. 109-115.) He also testified that there was an oral agreement that all seven brothers would own the Newport Beach restaurant opened in 1981 in equal shares. (Id.)

Vichit testified, however, that he was involved in discussions with Pramorte, Virut and Sumeth about opening the Newport Beach restaurant in about 1980. (TT 12-21-21, pp. 27, 29-30.) Pramorte said everyone had agreed that they would open a restaurant like their parents and would all be owners. (Id., pp. 27, 29.) They agreed that everyone would contribute money, and Vichit said he contributed $4,000 in cash and purchased items for the restaurant. (Id., p. 28.) Six of the brothers were in the Los Angeles area at that time; Somsak was not. (Id.) Vichit said that the brothers referred to themselves as co-owners, not partners. (Id., p. 31.)

Somsak reported that Pramorte visited him in Thailand in 1980 to ask him to move to the United States to open a family restaurant that would be owned by all seven brothers equally regardless of how much each could contribute. (TT 1-3-22, pp. 8-9.) Somsak agreed to the proposal but did not immigrate until 1984. (Id.)

RT II was incorporated on or about May 8, 1981. (TT 12-16-21, p. 122; Exh. 268.) RT II entered into a lease on May 22, 1981, for an initial lease term commencing June 10, 1981, for the Newport Beach restaurant. (Exh. 272; TT 12-16-21, pp. 129-130.) Stock was issued to each of the seven brothers on November 2, 1981. (Exh. 269.) The stock certificate to Somsak was canceled because he had not yet immigrated to the U.S., but a new certificate was issued in 1985. (Id.; TT 12-16-21, pp. 123-125.) RT II had bylaws, employed an attorney for many years, held board meetings, and kept minutes of those meetings. (Id., pp. 125-127.) Although the brothers’ financial and work contributions varied, it was clear that after incorporation, the business was jointly owned by all seven brothers. (SS, p. 16.) Vichit acknowledged that Pramorte said the corporations were set up to operate and manage the restaurants. (TT 12-21-21, p. 52.)

Virut testified that the Newport Beach restaurant opened before incorporation, but the records do not support this testimony. (SS, p. 16.) Vichai said he did construction on the Newport Beach restaurant in “early 1980,” before it opened, but this conflicts with the dates on the first lease, which was signed on May 22, 1981. (TT 12-20-21, p. 118; Exh. 272.)

In the beginning, Virut and Sumeth invested their savings in keeping the Newport Beach restaurant afloat when it first opened. (SS, p. 13.) According to Narlong, from the beginning, when the parties’ restaurant business eventually generated profits, they were not distributed but rather reinvested in the business. (SS, p. 7.) Vichit agreed this was the business plan that led to opening new restaurants. (TT 12-21-21, pp. 39-40.) Sumeth told Vichit that accumulated profits from the Newport Beach restaurant were used to open the Manhattan Beach and Laguna Beach restaurants, both of which opened in the mid-1980s. (TT 12-21-21, pp. 41-42; SS, p. 13.)

RT IV operated the Laguna Beach restaurant which was opened in 1985. The corporation was created in January, the lease signed in March, and the restaurant opened thereafter. (TT 12-16-21, pp. 147-149; Exh. 282-283.) The restaurant closed for good in 2017 after a series of problems with Health Department enforcement. (TT 12-16-21, p. 153.)

RT V was incorporated in 2005, opened the Hi Thai restaurant in San Diego around the same time, and housed restaurant employees at the Mt. Bigelow property. (TT 12-20-21, pp. 9-12; Exh 290.) The restaurant was open through 2017, when substantial renovations were required by the university landlord that RT V did not have funds to cover. (TT 12-20-21, pp. 13-14.) According to Sumeth, one of the reasons RT V was short on funds was Pankee’s alleged embezzlement. (Id.) Lacking sufficient money to continue operating, Sumeth said they walked away from the lease and left the equipment because it was not worth selling. (Id., p. 16.)

Sumeth provided unrebutted testimony that none of the brothers received any distributions or dividends or other compensation from the RT restaurants from 2012 through January 2019. (TT 12-16-21, pp. 105-106.) RT II closed its business in 2019. (Id., pp. 119-120.) Over the last few years, Vichai, Narlong, and Sumeth loaned money to RT II to pay for rent on the long-term lease and other expenses. (Id., pp. 134-16; Exh. 379-386.) RT II sold the liquor license from the Laguna Beach restaurant for $50,000 and put it in its corporate checking account. (TT 12-16-21, pp. 138-140.) RT II also negotiated an agreement to terminate and buy out the long-term lease. (Exh. 343.)

The Ransom Property was secured in connection with opening the Manhattan Beach restaurant to house its employees. (TT 12-15-21, pp. 36-37.) According to Somsak, the Ransom Property was purchased with profits from the Newport Beach restaurant. (TT 1-3-22, p. 14.) Virut testified that title to the Ransom property was taken in the names of Vichit, Somsak and Virut to facilitate a loan, but that his intent was that the property belonged to RT II. (SS, pp. 10, 17-18; Exh. 70-71; see also TT 12-20-21, pp. 109-110; TT 12-21-21, pp. 35-36.) This investment was meant to be shared by all seven brothers, even though title changed to allow for various loan arrangements. (SS, p. 18; TT 12-15-21, pp. 41-42.)

In 2000, the property was placed in trusts via documents that indicated the property being transferred to the trust was the separate property of all seven brothers and would remain their separate property, subject to the terms of the trusts. (Exh. 49-50.) Sumeth testified that the Ransom Property was owned by all seven brothers before title was transferred to T-Team, which was an LLC created to manage properties. (TT 12-16-21, p. 92; TT 12-20-21, p. 43; Exh 298; SS, p. 10.) T-Team was owned by all seven brothers. (Id., pp. 10, 19.) Virut testified in 2018 that T-Team was set up for tax purposes and that he was unaware of whether the Ransom property was ever transferred into its name. (Id., p. 19.) There was evidence at trial that T-Team managed the Ransom properties and signed leases with tenants. (TT 12-16-21, pp. 61-63. Exh. 300-301.)

Narlong testified at deposition that, from the “original contract,” all seven brothers owned the Ransom, Mt. Bigelow, and Georgia Sue properties. (SS, pp. 2-3.) He confirmed that – regardless of whether there was a partnership, corporation or joint venture – ownership remained in the seven brothers. (Id., p. 6.) He testified later, however, that he held no ownership interest in the Georgia Sue property. (Id., p. 7.) Narlong admitted that he had no involvement in the purchase of the family’s real estate or in business management. (Id., pp. 7-9.)

Workers from the Manhattan Beach restaurant lived at the Ransom property along with Virut and Vichit. (TT 12-20-21, p. 45; TT 12-21-21, p. 34.) Narlong said that he had heard that Royal Thai Cuisine employees rented out rooms in the Ransom Property, which he said was owned by the restaurant. (SS, p. 4.) Narlong stated in deposition that “the Royal Thai Cuisine” paid the mortgage on the Ransom properties. (Id., p. 3.)

When the Manhattan Beach restaurant closed, the Ransom property was vacant for a while, but was later rented to tenants. Eventually, the structures were demolished, and a two-unit condominium was erected and then leased to residential tenants. (TT 12-20-21, pp. 45-46.)

The Mt. Bigelow property was purchased in 2008 as an investment and to house RT V employees of the San Diego restaurant. (TT 12-21-21, p. 43; SS, p. 11.) According to Somsak, Sumeth provided money from the Newport Beach and Laguna Beach restaurants to make the down payment on the Mt. Bigelow property. (TT 1/3/22, p. 17-18.) In his deposition, Virut testified that he bought the property in 2008 or 2009 on behalf of RT II, for the benefit of all seven brothers. (SS, p. 20.) At trial, he stated that Vichit, however, was not an owner of Mt. Bigelow. (Id., p. 11.)

Virut also stated that the Mt. Bigelow property was put in Sumeth’s name at one point to facilitate refinancing. (Id., p. 20.) Sumeth confirmed that the Mt. Bigelow property was initially owned by all seven brothers, before title was transferred to T-Team. (TT 12-16-21, p. 93; TT 12-15-21, p. 43; see also TT 12-20-21, pp. 112-113.) T-Team received rental income from the property, paid by the RT IV restaurants in San Diego, and T-Team paid the mortgage and property taxes. (TT 12-16-21, pp. 64-66; TT 12-20-21, pp. 56-57.) According to Vichit, the property belonged to all seven brothers regardless of who held title. (TT 12-21-21, p. 46.)

Vichit and his family were permitted to live rent-free in the Mt. Bigelow property for a short time after he moved back from Merced where he had opened his own failed restaurant. (TT 12-15-21, p. 47.) Virut testified that, during that time, Vichit was no longer an owner of RT II or RT IV. (Id., p. 51.) Because Sumeth and Vichai would not allow Vichit to work in any of the RT restaurants, Virut gave him a job in a separate restaurant he owned with other investors, and his company paid utilities on the house while Vichit lived there. (TT 12-15-21, pp. 54. 56.)

Vichit admitted that he was not sure which corporation bought the Mt. Bigelow property, that he was not involved in purchasing it and contributed no money to its purchase. (TT 12-21/21, p. 97.) Nor did he know who paid the mortgage on the property or how much the restaurant workers paid in rent. (Id., p. 99.)

Virut testified that he found the Georgia Sue property, which he and Sumeth arranged to buy using a profit distribution from Royal Thai Cuisine I, a restaurant that was owned by the two of them with Pramorte and his father-in-law. (TT 12-15-21, pp. 5, 15.) None of the other brothers had any ownership interest in Royal Thai Cuisine I. (Id., pp. 5-6.) The total down payment on the property was $24,525, which included their profit sharing from Royal Thai Cuisine I and Virut’s own savings. (Id., p. 6; Exh. 203; TT 12-20-21, p. 26.) According to Virut and Sumeth, the property was purchased in their names for their personal investment purposes about a year or so after the Newport Beach restaurant was opened. (Exh. 204; TT 12-15-21, pp 12-13; TT 12-20-21, p. 26.) Neither RT II nor any other brothers paid the mortgage on the property owned by Virut and Sumeth. The mortgage was largely paid out of Sumeth’s bank account. (Id., pp. 16-18; TT 12-20-21, pp. 39-42.)

Mary Tilakamonkul, Pramorte’s former wife, testified that Virut and Sumeth met with Pramorte to ask permission to buy the Georgia Sue house for RT II employees to inhabit. (TT 12/16/21, pp. 8-9.) Pramorte told them to use RT II funds to purchase the house. (Id., p. 9.) Mary confirmed that the purchase was done with RT II funds, noting that the funds could not have come from RT I because she wrote the checks and controlled all the finances for that business. (Id., p. 10.) Contradicting this testimony, Sumeth stated that, when the house was purchased, there were no profits from the fledgling restaurant in Newport Beach. (TT 12-20-21, pp. 26-29; Exh. 400.)

Virut and Sumeth later used the equity in the Georgia Sue property to invest in Royal Thai Cuisine IV, which eventually operated businesses in the San Diego area. (TT 12-15-21, pp. 21-22; Exh. 100-101.) In December 2003, when Virut borrowed $243,000 against the Georgia Sue property to settle his marital dissolution action, he asked permission from Sumeth to do so, but not either plaintiff. (TT 12-15-21, p. 31; Exh. 106.) There were numerous transactions regarding the Georgia Sue property that involved Virut and/or Sumeth but none of the other brothers. (Exh. 109-116.)

Virut testified that he and Sumeth owned the Georgia Sue property, which was sold for approximately $600,000 in 2019. (SS, pp. 9-10; TT 12-15-21, p. 28.) Originally, Virut, Sumeth, their mother, two cousins and a cook lived in the Georgia Sue house. (SS, pp. 9-10.) Employees lived there to carpool to work. (Id.) RT II paid the rent for its employees living in the Georgia Sue house. (TT 12-15-21, p. pp.16-18.) Virut and Sumeth eventually married and moved out of the Georgia Sue house, which continued to be used as a rental property for RT II employees. Rent was paid by RT II to Virut and Sumeth. (TT 12-15-21, p. 26.) Sumeth was treated as a 50 percent owner of the Georgia Sue property on his tax returns. (TT 12-17-21, pp. 92-93; Exh. 205-207; TT 12-20-21, pp. 34-36.)

After he immigrated from Thailand in 1984, Somsak and his family lived in the Georgia Sue house with Virut, their mother, and four or five restaurant workers. (TT 12-15-21, p. 27; TT 1-3-22, pp. 9-11.) Somsak worked at the Newport Beach restaurant for 4-5 years and also worked in the restaurants in Manhattan Beach and Laguna Beach. (Id., pp. 11-12.) He managed the Laguna Beach restaurant for about 30 years, leaving in 2014. (Id., pp. 12-13.)

Vichit conceded that that he was not involved in buying the Georgia Sue property, contributed no money to the purchase, and did not make payments on the mortgage or for property tax. (TT 12-21-21, p. 101.)

Narlong testified in deposition that his youngest brother, Vichit, did “want to withdraw from the partnership,” but he did not know what happened about that. (SS, p. 6.) Virut stated that Vichit “sold his share in 2007” for $200,000. (SS, p. 11; TT 12-15-21, pp. 52-54.) According to Virut, he did not know the value of the entire enterprise or of Vichit’s share; $200,000 was the amount Vichit requested and the other brothers complied with his request. (Id., p. 86.) The parties refinanced the Ransom property to secure funds to pay Vichit his share. (Id., pp. 52-53.)

Sumeth also testified about Vichit’s request for funds to open his own restaurant, but said he had no conversations with Vichit about the matter. (TT 12-20-21, pp. 47, 86, 88.) He insisted, however, that Vichit said he wanted to be bought out of his interest in the family business in 2007 or 2008, and that Sumeth considered paying $200,000 to be a fair buyout of Vichit’s share of all the restaurants and properties owned at that time. (Id., pp. 48-50, 70.) Sumeth admitted, however, that no one made a detailed list of the valuations of the properties that Vichit was going to give up or requested a written agreement to reflect the deal. (Id., p. 88.)

In contrast to this testimony, Pramorte’s former wife, Mary, testified that Vichit approached her in her capacity as managing agent of T-Team Investments saying he wanted to borrow $200,000. She agreed and transferred title of the Ransom property from T-Team Investments to Somsak to allow him to take a loan out on the property and give the money as a loan to Vichit. (TT 12-16-21, pp. 10-13; Exh. 90.) Before the transaction, Mary sought approval from the other brothers, who all agreed. (TT 12-16-21, pp. 13-14.) When Mary sued in 2016 to recover distributions she claimed she was owed from the Tilakamonkul properties, she sued all the brothers except Vichit, whom she purportedly excluded because he was not named on the tax returns. (Id., pp. 28-32; Exh. 373-384.)

Before that, in a June 2015 judgment dissolving her marriage to Pramorte, Mary received 3.5 percent interest in RT II (which was one-half of Pramorte’s interest) and half of Pramorte’s interest in Royal Thai Real Estate Management, which made her the majority owner of the latter entity. (TT 12-16-21, pp. 33-35; Exh. 341.) Mary’s lawsuit against the brothers settled in July 2017, with Mary giving up all interest in the restaurants and the real estate at issue here, the Melrose property being sold and divided equally between all seven brothers, and the brothers transferring to Mary any interest in TC Investments. (TT 12-16-21, pp. 43-44; Exh. 336.)

Vichai admitted that RT II loaned money to many of the brothers, including about $240,000 provided to Vichai himself. (TT 12-21-21, pp. 18-20.)

Vichai testified that when the brothers were purchasing Vichit’s shares in 2007, the transaction did not include Royal Thai Real Estate Management, which owned the Melrose property. (TT 12-20-21, p. 25.)

Vichit said he regularly received K-1 forms from T-Team and Royal Thai Real Estate Management that listed income attributable to him but he never got actual distributions of profits. (TT 12-21-21, pp. 47-48; see also TT 12-20-21, pp. 82-85 [The amounts listed on the K-1 forms as income to each brother was not actually paid out to them].) If there is profit listed on a K-1 form, the partner must pay taxes on that amount regardless of whether there has been a distribution to the partner during that tax year. (TT 12-17-21, pp. 99-100.) Because of his dire financial situation, Vichit sent a letter to his brothers in September 2011 asking that no additional K-1s be sent to him because he lacked funds to pay the taxes. (TT 12-21-21, pp. 48-50; Exh. 333.) But he also admitted that he had not received any K-1s since 2007 or 2008. (TT 12-21-21, pp. 105-106; 110-111.)

Vichit signed a promissory note for $100,000 that was to be lent to him by Virut in July 2008, indicating that, if the amount was not repaid in 90 days, “Lender may transfer all stocks and shares of the following companies/corporations: Royal Thai Cuisine, Royal Thai Management, T-Team.” (Exh. 332.) But Vichit denied ever receiving the $100,000 loan referred to in the note. (TT 12-21-21, pp. 123, 125.)

Vichit denies that he resigned from any of the Tilakamonkul businesses or gave up any interest in them. (TT 12-21-21, p. 62.) Instead, he claims to have borrowed $200,000, which was paid to him in a check signed by Somsak. (Id., pp. 63-64.) Somsak also testified that the money was a loan from the company to Vichit. (TT 1-3-22, p. 55.) Vichit has not yet paid off the loan. (TT 12-21-21, p. 64.) On the other hand, Vichit testified in a deposition regarding a lawsuit in Merced County, that he once had an ownership interest in a house in Long Beach, but it is now in the trust of his siblings, because he “gave it all to them.” (TT 12-21-21, pp. 95-96.)

Virut also testified that Somsak “gave up his shares” in 2012, when he was confronted by his brothers with charges that Somsak’s wife was embezzling money from the business. (SS, p. 11.) According to Virut, Somsak “volunteered to give up his shares and sell his house to pay back the money” taken by his wife. (Id.) Sumeth said that Somsak promised that he would sell his house when he divorced his wife and reimburse his brothers for the embezzled funds out of his share of the sales proceeds, but the parties did not agree on a specific amount, just as much as Somsak could pay. (TT 12-20-21, pp. 59-61.) There was a meeting between Somsak, Virut, Sumeth and Vichai to negotiate a deal, but there is no written agreement regarding Somsak’s agreement to give up his share. (Id., pp. 61-62; SS, pp. 11; TT 12-15-21, p. 88.) Virut did not know the value of Somsak’s share at the time the deal was struck. (Id., pp. 87-88.) Later, when Somsak failed to sell his house or repay the money, he was fired from his job with RT II, and allegedly removed from the family business in August 2014. (Id.; Exh. 334; TT 12-20-21, pp. 64-69.) Sumeth testified that Somsak’s share of the business amounted to less than $1 million at that time. (Id., p. 70.) Later, when Somsak tried to collect rent on the Ransom property, T-Team sued him to stop his interference. (Id., pp. 71-72; Exh. 387.)

There was evidence introduced in support of the embezzlement claim, showing that Pankee diverted an estimated $1.4 million as part of her scheme. (TT 12-15-21, pp. 60-67; TT 12-16-21, pp. 72-77; Exh. 388, 389. 399.) When the brothers accused Pankee of embezzlement, she did not deny it. (TT 12-20-21, pp. 63-64.) Somsak testified that the accusation that Pankee embezzled more than $1 million was not credible. When he met with Sumeth about the issue, Somsak said if you believe Pankee embezzled money, then fire her. (TT 1-3-22, pp. 20-21.) At a later meeting, Sumeth told Somsak that Pankee’s employment had been terminated. (Id., pp. 21-22.) Sumeth opined that Somsak should be held responsible for any money taken by Pankee. (Id.) Somsak refused to accept that responsibility and did not agree to sell his house or pay back the million-plus dollars Sumeth claimed that Pankee took. (Id., pp. 22-23.) Sumeth told Somsak that he should leave the family business, but Somsak refused to do so. (Id.)

After this conflict in 2014, Somsak lost his job but it was his view that his financial status as an owner remained the same in that he did not receive distributions before Sumeth said Somsak should be ousted from the business or afterwards. (TT 1-3-22, p. 24-27.)

Per Sumeth, the brothers voted Somsak out of Royal Thai Real Estate Management and T-Team, but never pursued any court action to do so. (TT 12-20-21, p. 91, 93.) But Somsak still received K-1 forms for 2015-2017 from those entities. (Id., p. 95.)

In the first quarter of 2018, there was a board of directors meeting in which the brothers made a decision to sell all the properties and restaurants. Virut and Pramorte argued that Vichit and Somsak should receive one-seventh each of the sales proceeds of RT II. (SS, pp. 16-17. 21.) According to Virut, this discussion was prompted by an effort to settle the dispute that would become this lawsuit, but the effort was unsuccessful because Defendants would not include the Georgia Sue property as part of the deal as it was owned by Virut and Sumeth alone. (TT 12-15-21, p. 59.) On March 2, 2018, Sumeth’s wife, Chau LeTrihn, sent an email to a broker announcing the intent to sell all the real properties – Georgia Sue, Mt. Bigelow, Ransom, and Melrose properties -- along with the Newport Beach restaurant, all of which were described as owned by Vichai, Sumeth, Virut and Narlong. (Exh. 43.) The email was reviewed and approved by Sumeth before it was sent out, but LeTrihn claimed that Vichai and Narlong were listed as owners on the Georgia Sue property only to assist in showing the real estate. (TT 12-16-21, pp. 54-57.) At deposition, however, LeTrihn said she listed the names given to her from the business accountant’s K-1 forms. (Id., p. 58.) She also testified in deposition that she delayed in listing the properties for sale because all the brothers had not yet agreed to selling them. (Id., pp. 60-61.)

Virut sent the LeTrihn email to Vichit, then the two of them met to discuss the effort by the three brothers, Vichai, Sumeth and Narong, to sell all the family property and exclude Vichit, Somsak and Pramorte from sharing in the proceeds. (TT 12-21-21, pp. 67-68.) Virut said he wanted to stop the sale because it would be depriving the three excluded brothers of their shares. (Id., pp. 68-69.) So Virut wrote a check to Vichit’s lawyer to finance a lawsuit to stop the sale. (Id., p. 70-71.) Vichit did not understand why he had been excluded because during a family meeting in February 2018 before the email was written, his brothers had assured him that he continued to possess a share of the family holdings. (Id., pp. 71-72.) But this version of the February 2018 meeting is contradicted by Vichit’s July 25, 2018 verified complaint. (Exh. 337, p. 3.)

Anthony Pena, accountant for some of the parties’ businesses and for some individual parties, testified that Royal Thai Real Estate Management was treated as a general partnership for tax purposes, so he issued K-1 forms for each of the partners each tax year. (TT 12-17-21 pp. 84-85.) He was told by Sumeth that Vichit had sold out his share of the business so Pena prepared the 2010 K-1 to show that his interest was transferred to the remaining partners on January 1, 2010. (Id., pp. 85-86, 95-96; Exh. 292.) The same is true for the K-1 forms prepared in connection with the tax returns for T-Team Investment, LLC. (TT 12-17-21, pp. 88-91; Exh. 306.)

A. Ownership of the Royal Thai Cuisine Restaurants in Orange and San Diego Counties.

Several of the plaintiffs’ claims are grounded on their contentions that the seven Tilakamonkul brothers formed a partnership in 1981 to operate a family restaurant business in which each would share equal ownership before any corporation was created and that this pre-incorporation agreement survived the decision to incorporate the restaurant business as RT II in 1981. Plaintiffs make the same arguments in connection with the restaurants that were eventually operated through RT IV and RT V. As a counterpoint to these arguments, Defendants contest Plaintiffs’ ability to demonstrate a partnership relationship between the brothers, resting on the corporate form used to run all of the family’s restaurants. Before examining the evidence submitted by the parties on these issues, the Court will lay out the legal standards for evaluating Plaintiffs’ claims and Defendants’ rejoinder.

The Court of Appeal’s decision in Eng v. Brown (2018) 21 Cal. App. 5^th 675, 694, discusses the substantive law that governs the Court’s analysis of Plaintiffs’ contentions about partnership formation and the impact of subsequent incorporation. As to the initial question of partnership formation, the Eng court first relied on the statutory definition of a partnership, noting that generally, “the association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” (Ibid., citing Corp. Code, § 16202(a).). The appellate court explained:

The question of the existence of a partnership depends primarily upon the intention of the parties ascertained from the terms of the agreement and from the surrounding circumstances. . . . Ordinarily the existence of a partnership is evidenced by the right of the respective parties to participate in the profits and losses and in the management of the business. . . . In ascertaining the intention of the parties, where they have entered into a written agreement, such intention should be determined chiefly from the terms of the writing. . . . While the question of whether a partnership exists is to be determined from the nature of the relation agreed upon rather than the name which the parties have given to it, some weight must be given to the language of the parties themselves. . . . It is the intention as evidenced by the terms of the agreement, and not the subjective or undisclosed intention of the parties, that controls. . . .

However, “[a] partnership need not be evidenced by writing. . . . It is immaterial that the parties do not designate the relationship as a partnership or realize that they are partners, for the intent may be implied from their acts. . . .

(Id., at p. 694 [Citations and internal quotation marks omitted].) “An association organized as another entity (e.g., a corporation) is not a partnership.” (Id. citing Corp. Code §16202(b).) Plaintiffs here have the burden of proving the existence of a partnership between the parties. (Eng v. Brown, supra, at p. 694.)

If the formation of a partnership is demonstrated, it is presumed to endure until the contrary is demonstrated. (Id., at p. 695.) In general, a business that is incorporated does not continue as a partnership. (Id., at p. 694 [Citations omitted].) “[T]he party seeking to rebut the partnership relationship has the burden of showing subsequent incorporation or other reorganization. . . . If that party establishes that the partnership incorporated or reorganized into another type of entity, it has met its burden of proof to show that the partnership ended and the partnership relationship was terminated.” (Id., at p. 695.) In addition to contesting the initial formation of a partnership, Defendants here argue that the creation of RT II, RT IV and RT V extinguished any previously existing partnership and, thus, they bear the burden of showing incorporation or reorganization into a non-partnership format that supersedes the prior partnership.

To avoid this result, Plaintiffs must offer evidence to show the partners intended to retain their partnership notwithstanding the change in form. (Id., at pp. 695-696.) “Partners may, by agreement, continue their relations as copartners in conjunction with their relationship as stockholders of a corporation, and ‘the law would take cognizance of such dual relationship and deal with “the parties in the light of their agreement[s between themselves], independently of their incorporation”....’” (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1158.) “[C]ourts will enforce preincorporation agreements among partners or joint venturers who have incorporated in order to carry out the agreement between or among the partners or joint venturers.” (Id., at p. 1159; see also Elsbach v. Mulligan (1943) 58 Cal.App.2d 354, 369-370 [“If a corporation or a formal partnership is a mere agency for the purpose of convenience in carrying out a joint venture agreement, and independent and innocent third parties, such as creditors or stockholders, are not injured thereby . . . , justice would seem to demand that in determining the rights of the parties they be placed in the position each occupied under the original agreement.”].) To rebut proof of incorporation or another change in organizational form, Plaintiff must shoulder the burden of proving “that the parties entered into a preincorporation agreement or otherwise intended for their partnership to survive incorporation.” (Eng v. Brown, supra, at p. 696.) In deciding whether a partnership has been extinguished, courts have considered facts showing an agreement to preserve partnership rights, evidence that the corporate form was disregarded, and equitable considerations as to the former partners and third parties which have dealt with the corporation. (Id., at pp. 696-697 [discussing Persson v. Smart Inventions, Inc., supra, and other cases].)

The Court first resolves the question of whether Plaintiffs have demonstrated the formation of a partnership to operate one or more Thai restaurants. The evidence in this case reveals that four of the brothers residing in California -- Pramorte, Sumeth, Virut, and Vichai – decided to open a family restaurant in Newport Beach that would be jointly owned by all seven brothers. Vichit and Somsak testified that they too were involved in such discussions in 1980. The Court finds that there was general agreement between all seven brothers that a Newport Beach restaurant would be owned by all seven even though only some would participate in its operation or invest in its formation. It is also clear from the evidence presented that Pramorte led the initiative to open the jointly owned restaurant and decided that it would be run under the auspices of a corporation, just like the Los Angeles restaurant he already owned with two brothers, his wife and her father.

Before the restaurant opened, Pramorte incorporated Royal Thai Cuisine II (RT II) on May 6, 1981, by executing the Articles of Incorporation, which were filed with the Secretary of State on May 8, 1981. (Exh. 268.) RT II entered into a lease on May 22, 1981, for an initial lease term commencing June 10, 1981 for the Newport Beach restaurant. (Exh. 272; TT 12-16-21, pp. 129-130.) Referenced as an attachment to the lease, but not actually appended to Exhibit 272, is Exhibit “B” which is described as “plans and specifications of the alterations, improvements additions and utility installations, and the estimated cost thereof, which Lessee proposes to make in, on and to the Premises.” (Exh. 272, p. 4.) The Lessor expressly consented to the improvements but required that RT II give “not less than ten (10) days’ notice prior to the commencement of any work in the Premises.” (Id.) Stock was issued to each of the seven brothers, and their mother, Laor Tilakamonkul, on November 2, 1981. (Exh. 269.)

The stock certificate to Somsak was canceled by handwritten notation on the face of the certificate because he had not yet immigrated to the U.S., but a new certificate was issued in 1985. (Id., p. D1060; TT 12-16-21, pp. 123-125.) The cancellation of Somsak’s stock was authorized during a November 6, 1981 Board of Directors meeting, which was attended by all seven brothers and their mother, all of whom are identified in the minutes as directors of RT II. (Exh. 270.) According to the minutes, the directors voted unanimously on two seconded motions that the issuance of stock to Somsak be rescinded and that Somsak’s resignation from his position as a director be accepted. (Id.) A new stock certificate was issued to Somsak in 1985, and the mother’s certificate was cancelled in the same year, leaving the seven brothers as the only shareholders all with equal shares in RT II. (Exh. 269.)

While the record does not include many minutes of the board of directors and reflects no corporate bylaws for RT II until 1985, there is evidence that corporation generally observed corporate formalities by issuing bylaws, employing an attorney and regular accountant, filing corporate tax returns, holding board meetings, and maintaining corporate bank accounts. The same is true for RT IV. (TT 12-16-21, pp. 125-127; TT 12-17-21, pp. 78, 82.)

Plaintiffs argue that RT II originated as a partnership based on an oral agreement between the brothers but was later incorporated. The Court concludes, however, that Pramorte’s plan in creating a joint family business for the benefit of all brothers was not to fashion a partnership but rather to form a corporation to run the family restaurant after securing his brothers’ agreement to do so. All parties agree that Pramorte was the driving force behind the genesis of the Newport Beach restaurant and that it was his impetus that prompted its incorporation before the doors to the restaurant opened. (TT 12-21-21, p. 52.) There is little question based on the record before the Court that incorporation of RT II preceded the execution of the lease, the build-out of improvements and modifications to accommodate the restaurant, and the launch of the food venue. The Court concludes that this timeline was by Pramorte’s design, as he had already started and operated a Los Angeles restaurant using a similar plan, with shares being allocated to himself, his wife and her father, and his two brothers not as a partnership but under the auspices of a corporation. In initiating the opening of the Newport Beach restaurant, Pramorte followed the same organizational model used in Los Angeles by first getting approval from his brothers and then forming a corporate structure before opening the restaurant’s doors.

Plaintiffs’ contrary argument is grounded largely on testimony about discussions between the brothers to open a Newport Beach restaurant that would be co-owned by all seven brothers and the improvident use of the word “partners,” rather than “co-owners” or “shareholders.” But conversations about an intent to operate a jointly owned business are a necessary predicate for any such business, regardless of the corporate form ultimately chosen. Nothing in the discussions about starting a business together dictated that the restaurant would be run as a partnership. Instead, the primary organizing principal was joint ownership, not a particular corporate form. Once the idea was conceived and agreed to by the brothers, however, the concrete business plan was initiated through incorporation as the first step. The Newport Beach restaurant never functioned as a partnership, but rather was opened on the foundation of RT II’s incorporation and its leasing and buildout of space.

The Court finds, therefore, that from the outset of its formation, RT II was a duly organized corporation with joint ownership reflected by the shares issued to all seven brothers. The parties’ intent, as implemented by Pramorte, is clear from the actions taken after the brothers’ talks about launching a business, including incorporation, execution of a lease in the company’s name, and subsequent opening of the restaurant. (Eng v. Brown, supra, at p. 694 [the contracting parties’ “intent may be implied from their acts”.].) These actions telegraph Pramorte’s intention to form a corporation to run the restaurants followed by actual corporate operation of the business. Pramorte tracked the same pattern in opening the other Orange and San Diego County restaurants, that is, after deciding to expand the restaurant chain, he first incorporated RT IV and RT V and then opened and operated the restaurants under the new corporate forms. Paraphrasing the holding about the corporation formed by three alleged joint venturers in Mindenberg v. Carmel Film Productions (1955) 132 Cal. App. 2d 598, “[t]he evidence shows without conflict that the original plan was formation of a corporation and the conduct of business by it, each of the [seven brothers] to own one-[seventh] of the stock; that the corporation . . . was promptly formed; that it conducted the business throughout, observing the customary corporate forms, electing officers and directors, conducting directors' meetings, acting through its elected officers, etc.; [1500] shares of stock were issued to or for the benefit of each of the [seven] participants. . . .” (Id., at p. 601.)

The Court concludes, therefore, that there was no partnership that preceded the formation of the corporations, RT II, RT IV and RT V, and that their restaurants in Orange and San Diego County were continuously operated by those corporations, although jointly owned by all seven brothers as equal shareholders. There is no basis for a finding under Eng v. Brown or Persson v. Smart Inventions, Inc, that there was any pre-incorporation agreement that a partnership of brothers would survive incorporation or that the corporate form was disregarded. Accordingly, the Court finds that RT II, RT IV and RT V were corporations at the time they closed their restaurants and should be considered corporations as they face dissolution.

Plaintiffs contend that the Ransom, Mt. Bigelow and Georgia Sue properties were purchased with funds from the jointly owned restaurant businesses and, thus, are equally owned by all seven brothers, regardless of the name on title which was changed and manipulated many times for refinancing or other financial goals. Defendants object to this approach and argue that to contest legal title to property as reflected in deeds, Plaintiffs must meet the standard under Evidence Code § 662, which provides: “The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”

The Court finds that Plaintiffs have met their burden of showing by clear and convincing proof that they secured a one-seventh share of the Ransom and Mt. Bigelow properties. The clear weight of the evidence is that these properties were purchased with profits from the jointly owned RT II and/or RT IV, that they were secured to house restaurant workers in Royal Thai eateries, that title and deeds of trust were held in the names of various brothers for the purpose of financing, and that both were eventually transferred to T-Team so it could manage the properties for the benefit of all seven brothers, as joint owners of T-Team. Further, Defendants Virut and Sumeth testified that these properties were owned by all seven siblings before they were transferred to T-Team. (SS, pp. 10, 17-18, 20; TT 12-16-21, p. 93; TT 12-15-21, pp. 41-43; TT 12-20-21, pp. 109-110, 112-113; TT 12-21-21, pp. 35-36.)

Based on the evidence in the record, the Court concludes that all seven brothers share a beneficial interest in the Mt. Bigelow and Ransom properties and that they are each entitled to a one-seventh share of these properties.

As to the Mt. Bigelow property, it was purchased in 2008 as an investment and to house RT V employees of the San Diego restaurant. (TT 12-21-21, p. 43; SS, p. 11.) According to Somsak, Sumeth provided money from the Newport Beach and Laguna Beach restaurants to make the down payment on the Mt. Bigelow property. (TT 1/3/22, p. 17-18.) In his deposition, Virut testified that he bought the property in 2008 or 2009 on behalf of RT II, for the benefit of all seven brothers. (SS, p. 20.) Sumeth confirmed that the Mt. Bigelow property was initially owned by all seven brothers. (TT 12-16-21, p. 93; TT 12-15-21, p. 43; see also TT 12-20-21, pp. 112-113.)

Title was transferred several times during the brothers’ ownership of the Mt. Bigelow property. In 2006, title was taken in Virut’s name and, in 2015, in the names of Virut, Sumeth and one of their wives. (Exh. 95-96.) Virut stated that the Mt. Bigelow property was put in Sumeth’s name at one point to facilitate refinancing. (SS, p. 20.)

While T-Team claims ownership of the Mt. Bigelow property, there is no documentary evidence that title was held in T-Team’s name but rather that it managed the investment, receiving rental income from the property that was paid by the RT IV restaurants in San Diego and using that income to pay the mortgage and property taxes. (TT 12-16-21, pp. 64-66; TT 12-20-21, pp. 56-57.) According to Vichit, the property belonged to all seven brothers regardless of who held title. (TT 12-21-21, p. 46.)

Turning to the Ransom property, the houses were purchased in connection with the brothers’ jointly owned Manhattan Beach restaurant to provide a residence for its employees. (TT 12-15-21, pp. 36-37.) Virut testified that title to the Ransom property was taken in the names of Vichit, Somsak and Virut to facilitate a loan, but that his intent was that the property belonged to RT II. (SS, pp. 10, 17-18; Exh. 70-71; see also TT 12-20-21, pp. 109-110; TT 12-21-21, pp. 35-36.) This investment was meant to be shared by all seven brothers, even though title changed to allow for various loan arrangements. (SS, p. 18; TT 12-15-21, pp. 41-42.)

Based on the evidence at trial, title to the Ransom property was held in various names. The property was initially held by Virut, Vichit and Somsak. (Exh. 30.) In 2000, the property was placed in trusts via documents that indicated that the property being transferred to the trust was the separate property of all seven brothers and would remain their separate property, subject to the terms of the trusts. (Exh. 49-50.) The trust instruments state that the Trustors, who are all seven brothers, “contributed all of the money as payments on the property and have always been considered the owners of the property” and confirm that that the trust document is intended to “accurately reflect the title to the property as was intended from the beginning.” (Id.) Then in 2002, the Ransom property was transferred to T-Team. (Exh. 84-85.) In May 2007, however, T-Team transferred title to Somsak in connection with a loan transaction. (Exh. 90-91.) Then, in November 2016, title to 4201 E. Ransom was transferred to Sumeth and Virut. (Exh.92.) Thus, as with the title to Mt. Bigelow, the record does not show that T-Team ultimately acquired title to the Ransom properties or that it held title when the property was sold. Further, the title history for both the Ransom and Mt. Bigelow properties shows that the name on title was not about ownership but convenience, generally for refinancing or otherwise securing credit.

In the first quarter of 2018, there was a board of directors meeting in which the brothers decided to sell all the restaurants and real estate, including the Mt. Bigelow and Ransom properties. Virut and Pramorte argued that Vichit and Somsak should receive one-seventh each of the sales proceeds of the brothers’ holdings. (SS, pp. 16-17. 21.) According to Virut, this discussion was prompted by an effort to settle the dispute that would become this lawsuit, but the effort was unsuccessful because Defendants would not include the Georgia Sue property as part of the deal as it was owned by Virut and Sumeth alone. (TT 12-15-21, p. 59.)

On March 2, 2018, Sumeth’s wife, Chau LeTrihn, sent an email to a broker announcing the intent to sell all the real properties – Georgia Sue, Mt. Bigelow, Ransom, and Melrose properties -- along with the Newport Beach restaurant, all of which were described as owned by Vichai, Sumeth, Virut and Narlong. (Exh. 43.) The email was reviewed and approved by Sumeth before it was sent out. (TT 12-16-21, pp. 54-57.) This is strong evidence that, as of 2018, all defendants viewed the Mt. Bigelow and Ransom properties as being owned by some or all of the brothers themselves and not by the management company, T-Team. It also provides great force to Plaintiffs’ contention that they own one-seventh of both properties, since the brothers’ disagreement about ownership at the board meeting showed that four of the seven brothers, including Virut, Pramorte, and both Plaintiffs, considered the properties to be owned directly by the seven brothers, rather than by T-Team.

For all these reasons, the Court concludes that Plaintiffs have rebutted T-Team’s claim of ownership by clear and convincing evidence showing that each Tilakamonkul brother, including each Plaintiff, owns a one-seventh beneficial interest in the Mt. Bigelow and Ransom properties and that T-Team is a jointly organized entity charged with property management and financial oversight of the parties’ real property concerns.

The situation is different for the Georgia Sue property in that, with only two exceptions, it was always treated as the separate property of Sumeth and Virut, rather than the joint investment of all seven brothers. These two brothers were always the owners of record of the Georgia Sue property, and the record shows that they refinanced it, and paid the mortgage out of Sumeth’s personal account. (Exh. 99-102, 105-107, 109-110, 112-113, 115-116, 201-267, 342, 343, and 366.) While it may be that the property was used in part to house restaurant workers working in the Orange County restaurants, this does not amount to evidence of RT II’s ownership interest. Instead, the record demonstrates that RT II paid rent for its employees, and this income was reported on the personal tax returns of Sumeth and Virut. (Id.; TT 12-15-21, p. 26; TT 12-17-21, pp. 92-93; TT 12-20-21, pp. 34-36.)

The only evidence that rebuts this consistent showing of Sumeth and Virut’s joint ownership is Mary’s testimony that the down payment for the Georgia Sue did not come from the two brothers’ profits from the Los Angeles restaurant and an email purportedly showing that the two of them tried to sell the Georgia Sue house in 2018 as a property jointly owned with Vichai and Narlong. The Court does not find Mary’s testimony to be persuasive evidence that the down payment came from profits from the Newport Beach restaurant that was owned by all seven siblings, rather than from other sources. The Georgia Sue property was purchased in April 1982 – less than one year after RT II opened the Newport Beach restaurant. (Exh. 99.) The Court credits Defendants’ testimony that the new restaurant did not yield substantial profits in its first months of operation and was unlikely to invest in real property so soon. (See also Exh. 400 [RT II sustained loss of $62,325 from November 1981 to March 1982].) Further, Mary’s testimony did not foreclose the possibility that Sumeth and Virut secured profit distributions from the Los Angeles restaurant that she did not know were destined for investment in the Georgia Sue property.

Turning to the March 2018 email about selling a list of jointly owned properties, the Court does not read the email as convincing evidence that Sumeth and Virut were conceding that all brothers listed on the email held ownership interests in the Georgia Sue property. (Exh. 43.) It is more likely that the email is imprecise in its disclosure, providing a catalogue of properties to be sold, including the Georgia Sue house, and a list of property owners, without stating whether all the properties were jointly owned by all the listed owners or whether a different ownership matrix applied.

Taking all the evidence together, the Court concludes that Plaintiffs have not shown by clear and convincing evidence that they have any ownership interest in the Georgia Sue house.

C. Termination of Plaintiffs’ Ownership Interests in the Restaurants and Real Estate

Defendants seek declaratory judgments establishing that Vichit’s interest in the family business was bought out in 2007 and that Somsak’s ownership rights were terminated in 2014 because of his wife Pankee’s alleged misappropriation of corporate funds. The parties hotly dispute the significance of various events, with Vichit describing the $200,000 he received as a loan just like the distributions made to other brothers over the years and Somsak vehemently denying both any involvement in his wife’s alleged embezzlement and any concrete action by Defendants to negate his ownership shares in the brothers’ restaurants and real estate. There is conflicting evidence about what was said and done by the brothers involved in these matters and hot disputes about the significance of key documents.

To resolve the controversy, the Court first delves into whether there is any evidence in the record that Defendants complied with the contractual and/or legal requirements for termination of a director and/or shareholder of a corporation and then examines the evidence regarding the transactions at issue.

1. Whether Defendants Complied with Legal Standards for Terminating Plaintiffs’ Interests

Regardless of the conduct of the parties or their intent in pursuing certain transactions, the question arises whether there was a legally valid termination of either Plaintiff’s ownership interests and/or transfer of their interests to the remaining owners. Although Plaintiffs offered evidence that Defendants did not secure a Court order ending their ownership interests, no one has briefed the standards for terminating or effecting an involuntary transfer of a shareholder’s interest. Plaintiffs simply assert, as to Vichit’s alleged buyout, that there was “no documentary evidence (no written buyout agreement, and no valuation, no estimated price, etc., per the Code,” but fail to provide any legal authority or even citations to a Code section to support the standards for evaluating Defendants’ conduct. (Plaintiffs’ Final Argument, p. 17 [emphasis added].) As to Somsak, Plaintiffs argue “[n]o court action was taken against Somsak, as required by the Corporations Code, to remove a partner from a partnership,” but again offer no legal authority for the proposition nor even a citation to a statute. (Id., p. 19 [emphasis added].) Defendants’ legal support for the purported terminations is even more paltry in that they do not even acknowledge that there might be required procedures to conduct a valid termination of the ownership interests and rights of a shareholder or partner. (Defendants’ Closing Brief, pp. 11-15.)

Before addressing the factual disputes over the business arrangements between the parties, the Court examines the legal indicia of a transaction cancelling a shareholder’s ownership interest or effecting a buyout of his or her shares to determine whether the evidence shows that Defendants followed any of the procedures typically used to effectuate these kinds of transactions.

“The relation between a corporation and its stockholders is one of contract in which the charter, articles of incorporation, bylaws, provisions of the stock certificate, and pertinent statutes are embodied. The rights, interests, and obligations of the stockholders arise out of this contract and are defined and established by the corporate charter or articles of incorporation and applicable laws.” (18A Am. Jur. 2d (May 2022 Update) Corporations § 615.) “A stockholder's rights are not to be determined conclusively or exclusively by the provisions of his or her certificate of stock, but, in connection with such provisions, other evidence in writing may properly be considered, such as provisions of the articles of incorporation, of the bylaws, of agreements as the result of which the stock has been issued, or resolutions voted prior to the issue of the certificate.” (Id.)

“[T]he ownership of a share of stock carries with it certain incidents, primary among which are a right to share in the management of the corporation (right to vote), a right to share in corporate earnings, and a right to a share of the assets of the corporation upon dissolution.” (Id.) A shareholder “may not be deprived of the property value of his or her stock or the rights inherent in its ownership, except by consent or lawful process.” (Id., § 616.) Further, “[u]ntil a stockholder is validly divested of his or her stock certificates, he or she remains a stockholder, despite any announcement of resignation or abandonment of that status by him or her, and despite any collateral attacks upon that status.” (Id., § 764; see also Oberly v. Kirby (Del. 1991) 592 A.2d 445, 458 [a corporation is owned by its shareholders and “they cannot be forced out of the corporation except in special circumstances, and then they must be fully compensated for their interest.”].)

Plaintiffs’ rights as shareholders in RT II are governed by the Capital Stock Certificates issued to them, the Articles of Incorporation, the corporate Bylaws, and the California Corporations Code. (Exh. 268, 269, 271.) The Articles of Incorporation establish that RT II is authorized to issue only one class of shares of stock with a total of 75,000 shares. (Exh. 268.) The stock certificates issued to each Plaintiff provide that the 1500 shares issued are “transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed or assigned.” (Exh. 269, p. D1056, D1059.) On Vichit’s certificate, there is a stamp imposing an additional but largely illegible restriction on transfer of the shares. (Id., p. D1056.)

In addition, the Minutes of the Board of Directors, dated November 6, 1981, identify all shareholders as directors of RT II. (Exh. 270.) The same is reflected in the August 8, 1982, board minutes, in which all shareholders are identified as directors with some, like Vichit, listed as present and others as absent. (Exh. 400.) While the Court has no Board minutes for meetings held after 1985, when RT II reissued shares to Somsak, the Court deduces from the minutes provided that all shareholders, including both Plaintiffs, were entitled to act as directors for the corporation.

The RT II Bylaws set specific procedures for removing directors from office. They allow the Board to announce the vacancy of a director’s seat where he or she “has been declared of unsound mind by an order of the court, or who has been convicted of a felony.” (Exh. 271, p. D1023.) Directors may be removed without such cause “if such removal is approved by a majority of the outstanding shares entitled to vote, subject to Section 303 of the California Corporations Code.” (Id., p. D1024.) Alternatively, shareholders holding at least 10 percent of the outstanding shares may seek an order from the Superior Court to “remove from office any Director in case of fraudulent or dishonest acts or gross abuse of authority of discretion” and bar service as a director for a period determined by the Court. (Id.; see Corporations Code § 304.) In addition, a director may voluntarily resign by giving written notice to the Board or its directors or officers. (Exh. 271, p. D1023.)

The Bylaws do not provide for the expulsion of shareholders or the cancellation of their shares. Section 2 states, however, that a transfer of shares must be accomplished by the surrender to the Secretary or transfer agent of the corporation of the certificate for share “duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer,” which will prompt the issuance of a new certificate to the person entitled thereto, cancellation of the old certificate, and recording of the transaction on the corporation’s share register. (Exh. 271, p. D1034.) Under Corporations Code § 422, “[w]hen the articles are amended in any way affecting the statements contained in the certificates for outstanding shares, or it becomes desirable for any reason, in the discretion of the board, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the board may order any holders of outstanding certificates for shares to surrender and exchange them for new certificates within a reasonable time to be fixed by the board.” (Corp. Code §422(a).) Although it is not clear if this statute applies to a corporation’s complete termination of a shareholder’s ownership interest and transfer of that interest to another, the statute clearly permits a corporate board to compel the exchange of one type of stock for another based on a proper order to the affected shareholders. (Heller Inv. Co. v. Southern Title & Trust Co. (1936) 17 Cal.App.2d 202, 213.)

Applying these principles to the circumstances here, the Court concludes that Defendants failed to follow any of the prescribed procedures for the alleged termination of Somsak’s ownership rights or the purported buyout of Vichit’s interest in the family business. There is no evidence, for example, that either Vichit or Somsak surrendered their stock certificates in person or through their attorney as is mandated on the face of the certificates. (Exh. 269.) Nor is there any note of cancellation written across Plaintiffs’ certificates as there was with the cancelled shares of Somsak when he temporarily gave up his shares in 1981 and when the brothers’ mother lost her shares in 1985. (Exh. 269, pp. D1060, D1062.) Similarly, in contrast to evidence of a Board meeting where Somsak’s stock was cancelled in 1981 (Exh. 270), Defendants offered no Board minutes reflecting Board decisions to extinguish the interests of Vichit or Somsak.

Further, since all the brothers were directors as well as shareholders, Defendants were required to follow the procedures in the Bylaws for removing them from office, but no evidence demonstrates that any such measures were pursued. There were no court orders declaring Somsak or Vichit to be of unsound mind or proving that either of them had been convicted of a crime. Nor was there any showing that Defendants pursued lawsuits in 2007 or 2014 to oust Somsak and Vichit from their offices as directors. Further, Defendants have offered no written notices received by RT II from Somak or Vichit announcing their voluntary resignations from the board. (See Exh. 271, p. D1023.)

The record is also devoid of any evidence that Plaintiffs were removed by a vote of the majority of shares of the outstanding shares entitled to a vote. Indeed, the evidence showed that only three of the seven brothers endorsed the notion that Somsak and Vichit had been ejected from the corporation. At the first quarter Board of Directors meeting in 2018, Virut and Pramorte argued that Vichit and Somsak should each receive their one-seventh shares of any proceeds secured from the sale of the family restaurants and real estate. (SS, pp. 16-17, 21.) When Sumeth’s wife, LeTrihn, sent out an email in March 2018 initiating the sale of all the properties without listing either plaintiff or Pramorte as owners, Virut forwarded it to Vichit and spearheaded opposition to efforts by Vichai, Sumeth and Narong to sell all the family property and exclude Vichit, Somsak and Pramorte from sharing in the proceeds. (Exh. 43; TT 12-21-21, pp. 67-68.) Virut reached out to Vichit to stop the proposed sale because it would have deprived the three excluded brothers of their rightful shares. (Id., pp. 68-69.) He even wrote a check to finance Vichit’s lawsuit opposing the three brothers’ quest to exclude Plaintiffs from sharing in the proceeds of the Thai restaurants and properties. This lawsuit is the action that was filed on July 25, 2018 at Virut’s suggestion. Tallying the votes based on the 2018 business discussions, only three of the brothers -- Vichai, Sumeth and Narong – maintained that Plaintiffs no longer held their partnership shares, whereas four of them – Pramorte, Virut and the two Plaintiffs – recognized their continued ownership interests.

Finally, there is no evidence that RT II’s board ordered either Somsak or Vichit to surrender their shares to the corporation or its board, consistent with Corporations Code § 422. Indeed, the record includes virtually no direct documentary evidence of a buyout of Vichit’s shares or a termination of Somsak’s interest.

The only documents reflecting a potential change in Plaintiffs’ ownership status are the tax documents produced by the real estate entities. It is telling, though, that the modified tax treatment of Vichit shown in those documents first emerged in the K-1 forms issued by T-Team and Royal Thai Real Estate Management in 2010 and by TC Investment LLC in 2011 – 3-4 years after the purported buyout in 2007 and around the time that Vichit’s restaurant in Merced closed making it unlikely that he could repay any loan to the other brothers. (TT 12-21-21, p. 118.) Similarly, because Vichit continued to be included in the tax returns for the family businesses, and thus feared he would have to pay taxes on reported income that was never distributed to the shareholders, he wrote to his older brother on September 27, 2011, asking that he be taken off the tax returns because he lacked funds to pay taxes on the phantom income. (TT 12-21-21, pp. 47-50; Exh. 333.) There are notations on the 2010 tax returns for T-Team and Royal Thai Real Estate Management that Vichit sold his interest which was redistributed to the other brothers (Exh. 292, 306), but no evidence that Vichit ever saw or approved these notations. Given this record, the Court cannot conclude from the tax returns alone that Vichit sold his share in 2007, as it appears from the letter he sent in September 2011 that this change was prompted by Vichit’s 2011 request for tax relief and not the effectuation of a prior buyout deal.

The same mixed bag arises from a review of Somsak’s tax treatment. Although Somsak’s alleged ouster occurred in 2014, he is listed as an officer of RT II along with Sumeth and Virut, each with 14.3 percent of stock owned, in the company’s 2014-2017 tax returns. (Exh. 277-280.) Thus, while the tax documents provide some support for Defendants’ contention, their weight is not sufficient to establish that Plaintiffs’ ownership interests were terminated by buyout or ouster before this lawsuit was filed. Moreover, they provide no evidence that Defendants pursued any corporate procedures to extinguish Plaintiffs’ ownership interests, only that they were eventually excluded from the tax documents.

2. Testimony About Defendants’ Alleged Buyout of Vichit’s Ownership Interests

The Court now focuses on evidence about the character of the contested transaction in 2007 when Vichit received $200,000 from the family business assets and the parties’ intentions in arranging this payment. Plaintiffs contend the $200,000 payment was a loan, while Defendants argue it was a buyout of Vichit’s interest in all family restaurants and property.

Evidence regarding the question of whether Vichit secured a $200,000 loan from his brothers or negotiated a buyout of all his business interests is decidedly mixed with each side offering prior sworn testimony that conflicts with the positions the testifying parties advanced at trial and no clear evidence about the nature of the decision made in connection with the $200,000.

Defendants’ own testimony does not offer solid support for the nature of the transaction. Narlong said it was his understanding that Vichit wanted to withdraw, but he did not know if that was “really the case or not.” (SS, p. 6.) Virut testified that Vichit wanted to be bought out, but that this was just mentioned in a phone call with some of the brothers and there was no “real meeting or any official.” (TT 12-15-21, pp. 52-53.) The payment to Vichit was financed by taking out a loan on the Ransom property, but Virut was not involved in the transaction. (Id.) Sumeth was aware of Vichit’s request for funds to open his own restaurant, but he did not talk to Vichit directly about the matter. (TT 12-20-21, pp. 47, 86, 88.) Vichai testified that there was no discussion among the brothers about whether to purchase Vichit’s shares. (TT 12-20-21, p. 122.) Instead, Vichit simply asked for $200,000 and the brothers figured out a way to get the money for him. (Id.) Vichai also claimed that the buyout of Vichit’s interest did not include his share of Royal Thai Real Estate Management. (Id., p. 125.) This view of the scope of Vichit’s buyout was apparently not shared by the other brothers, but it may have been offered by Vichai as a justification for why Vichit later received a distribution when Royal Thai Real Estate Management’s assets were sold.

From a procedural aspect, all parties agreed that there was no contract or other document memorializing a buyout agreement. Further, both Virut and Vichai stated there was no official meeting among the brothers to authorize a buyout, but rather a simple call or series of calls about giving Vichit the money he was requesting. (TT 12-15-21, pp. 52-53; TT 12-20-21, p. 122.) Narlong’s testimony was even less compelling, amounting to an inkling that Vichit wanted to withdraw but not knowing whether it ever occurred. (SS, p. 6.) Of particular significance to the Court is the fact that there was no attempt by any of the brothers to calculate the actual value of Vichit’s share in connection with the purported buyout of his ownership interest. Instead, Vichit asked for a specific amount, which was provided to him. This smacks of a loan transaction, not a payment reflecting a shareholder’s one-seventh percentage share of a list of restaurants and properties. Further, such loans to individual brothers were not unusual. Vichai admitted that RT II loaned money to many of the brothers, including about $240,000 provided to Vichai himself. (TT 12-21-21, pp. 18-20.)

Defendants contend in their post-trial briefing that, regardless of the process, all of them “considered the payment to be a buyout of Vichit’s interests, which buyout was not completed until 2010.” (Defendants’ Objections to Tentative Statement of Decision, p. 2.) This is not an accurate description of the evidence at trial. To the contrary, Defendants offered testimony at trial and in their depositions that directly contradicted the claim that Vichit sold all his interests in 2007. In response to questioning from the Court during trial, Sumeth testified that, when he sent a letter to his siblings about business issues in January 2012, all the restaurants that were open for business at that time belonged to all seven brothers. (Exh. 28; TT 12-15-21, pp. 109-115.) Similarly, Narlong confirmed in his December 5, 2018 deposition that both Vichit and Somsak remained owners of the family restaurants on the day he testified. (SS, pp. 3-5.) The evidence also showed, as noted above, that when Vichai, Sumeth and Narong tried to sell the family assets in 2018 and exclude Vichit, Somsak and Pramorte from sharing in the proceeds, Virut alerted Vichit to the plan and funded this lawsuit to challenge the effort because he believed such a sale would have deprived the three excluded brothers of their rightful shares. (TT 12-21-21, pp. 67-71; Exh. 44.) Thus, while Defendants’ contentions at trial may have been uniform on the buyout issue, their testimony and evidence were not. Indeed, because all these statements attest to Vichit’s continued ownership interest well after the alleged buyout in 2007, they are contrary to the position Defendants took at trial and consistent with Vichit’s trial contention that he simply obtained a loan not a buyout.

Both Plaintiffs took the position at trial that the $200,000 was a loan that Vichit needed to open his own restaurant and that he never requested or negotiated a sale of his ownership interests. Unlike any of the defendant brothers, both Plaintiffs were involved in the real estate transaction that yielded the $200,000 that was extracted from the Ransom property and given to Vichit. In her capacity as the managing agent of T-Team Investments, Mary Tilakamonkul facilitated the loan that was taken out on the Ransom property in 2007. It was her testimony that Vichit asked for a loan and that she obtained the other brothers’ approval to give him a loan out of the equity of the property. (TT 12-16-21, pp. 10-14; Exh. 90.)

Defendants sought to impeach Mary’s testimony about the 2007 loan transaction by reference to actions she took about one decade later. Years after the 2007 transaction, in 2016, Mary sued for distributions she was owed on her interest in Tilakamonkul properties, naming all brothers except Vichit. (Id., pp. 28-32; Exh. 373-384.) Defendants point to this evidence to impeach Mary’s testimony about the loan sought in 2007 but given the temporal gap between the two events – a period of about nine years -- and her explanation that she simply relied on the tax returns to identify the owners at the time she sued, this effort to impeach Mary’s testimony about what happened in 2007 has little force. From Mary’s point of view, it was plainly possible that some action taken after 2007 but before 2016 could have resulted in the change she noticed in the tax returns. The same must be said about Defendants’ reliance on the 2017 agreement settling Mary’s lawsuit, which again did not include Vichit as a signatory. (Exh. 336.)

Of greater significance is Mary’s 2017 deposition testimony in her prior lawsuit that she did not remember why she signed the 2007 grant deed transferring the Ransom property to Somsak. (TT 12-16-21, p. 20.) This is the same deed Mary identified in her trial testimony as the one she signed to allow Somsak to obtain a mortgage on the property to fund a loan to Vichit. (Exh. 90.) Although the 2017 testimony does not contradict her statements at trial in this case, Defendants argue it calls into question her ability in 2021 to remember a 2007 transaction better than she did in 2017. Defendants’ point is well-taken as far as it goes. On the other hand, Defendants do not offer any testimony from Mary’s 2017 deposition on the key question she addressed at trial regarding whether Vichit asked for a loan and the other brothers approved it. Nor do they explain the significance of Mary’s testimony about the 2007 grant deed in her 2016 lawsuit versus its importance in this case. Thus, while comparing the two sworn statements raises questions about Mary’s ability to remember, the Court recognizes that memories vary based on the context and does not discount Mary’s testimony merely because of her faulty memory in 2017 on one aspect of her testimony here.

Defendants also emphasize Mary’s conviction for the felony of falsifying documents and urge the Court to disbelieve her testimony in its entirety. (Defendants’ Objections to Tentative Statement of Decision, p. 6.) This conviction is clearly admissible to attack Mary’s veracity. That said, Defendants provide no reason why Mary would lie to support Vichit against his brothers, particularly since the lawsuit she brought against the Tilakamonkul brothers was settled in July 2017 – nearly 4 ½ years before Mary’s 2021 trial testimony. (Exh. 336.) In addition, the lawsuit was not a long and bitter battle that would give rise to hard feelings or grudges but rather a dispute that was settled about 18 months after the case was filed. (Id.)

Defendants showcase a promissory note Vichit signed in July 2008 seeking a $100,000 loan from Virut and its language stating that, if the loan amount was not repaid in 90 days, “Lender may transfer all stocks and shares of the following companies/corporations: Royal Thai Cuisine, Royal Thai Management, T-Team.” (Exh. 332.) This does not advance Defendants’ position, however, because even though the $100,000 loan never materialized, the signed note discloses that Vichit – and apparently Virut -- believed in July 2008 that Vichit retained ownership interests in all these Tilakamonkul businesses more than one year after he secured the $200,000 paid to him in May 2007. (TT 12-21-21, pp. 123, 125; Exh. 80.) That Vichit signed such a note in July 2008 supports his contention that he retained ownership interests that could be used as collateral for a loan more than a year after the $200,000 payment.

Defendants claim that Vichit admitted in his March 30, 2017 deposition in a different lawsuit that he relinquished all his interests in the family restaurants and real property. The Court does not read Vichit’s testimony as conceding such a position, but as with some of Defendants’ contradictory testimony discussed above, it does undermine the force of his claims at trial.

The first inquiry from Vichit’s March 2017 deposition focused on the Ransom property and specifically a question about when he sold it. (TT 12-20-21, pp. 95-96.) In response, Vichit said that he had not sold it “but now its in the trust of [his] siblings, in my siblings’ trust,” and “belongs to the trust now.” While he said he had no interest in the property because he “gave it all to them,” the significance of these statements is far from clear. The Ransom property was placed in trust in 2000 with the proviso that it would remain the separate property of the seven brothers. (Exh. 49-50.) There is no evidence that those trusts were revoked or modified, but there is also nothing showing a deed conveying the properties into the trusts. In 2002, Vichit transferred title to one of the Ransom properties to T-Team, apparently as a gift and for no consideration, but T-Team was never established as a trust. (Exh. 84.) Instead, it is an LLC organized for real estate investment. (Exh. 298.) Given the documents available to track the transactions regarding the Ransom property and Vichit’s reference to having given it to “them” such that the property “belongs to the trust,” the Court does not construe Vichit’s testimony as an admission to any sort of buyout of his interests. Indeed, it is not at all clear what he meant in providing this testimony, so its probative value is limited.

The second deposition passage offered by Defendants begins with a question about how much money Vichit received from family members in 2010. He responds that his income from them was about the same as in 2008 and 2009, because “by that time, [he] didn’t have much left in the family,” that he “almost sold everything” and “didn’t have anything left.” (TT 12-21-21, p. 120.) Vichit also testified that he “was getting [his] investment back,” “like [he] took away [his] share.” (Id.) This testimony is strong evidence that Vichit’s ownership interests in “the family” were much diminished if not extinguished by the time of his March 2017 deposition. His testimony could be read to mean he took out a loan that amounted to extracting most of his investment share -- that he did not have “much” left and “almost” sold everything, that he was “getting” his investment back – or that there was a complete buyout of his interests – that he “didn’t have anything left” and he had taken “away [his] share.” In redirect at trial, Vichit said that this testimony reflected the fact that Defendants took him off the tax returns in response to his 2011 letter, but he testified that, despite these modified tax documents, his brothers continued to assure him that he maintained his ownership interest. (TT 12-21-21, pp. 126-127.) This explanation does not dispel the impression from Vichit’s 2017 statements that he gave up some or all of his ownership interests. Like the conflict between Defendants’ recent statements about Vichit’s ownership interests and their contentions at trial, Vichit’s testimony from his 2017 deposition contradicts the position he took at trial.

Taking into account all the evidence regarding what happened in 2007, the Court concludes that it is more likely that Vichit received a $200,000 loan from his brothers rather than a payment that bought out his share of the family restaurants and real property. Thus, Defendants have failed to shoulder their burden of proving that his interests were bought out and extinguished. Although the Court has considered all the evidence discussed above, this conclusion is grounded primarily on the following factors.

First, Defendants failed to follow any legal or corporate procedures to effectuate the termination of Vichit’s ownership interests or to memorialize the 2007 buyout of Vichit’s share at the time of the alleged transaction. There was no contract, no letter confirming the sale of shares, no cancellation of his stock certificate, no action taken under the corporate bylaws, and no board minutes, nor even an unrecorded meeting of all the corporate directors or LLC members. In the absence of such a definitive action divesting Vichit of his stock certificate, he “remains a stockholder, despite any announcement of resignation or abandonment of that status . . . , and despite any collateral attacks upon that status.” (18A Am. Jur. 2d (May 2022 Update) Corporations, § 76.) In the absence of any clear divestment of his ownership shares, Vichit’s vague comments in 2017 that he “almost sold everything” or “didn’t have much left” should be seen at worst as an ineffectual “resignation or abandonment” of his ownership status. Similarly, without a clear termination of his shares, Defendants’ unilateral insertion of buyout language in 2010 tax returns should be seen as an unsuccessful “collateral attack” on Vichit’s ownership status, rather than a definitive reflection of what occurred four years before.

Second, there is no evidence that all directors of the family corporations or members of the LLCs made a decision to terminate Vichit’s interest through a buyout. The record is clear that there was no meeting where the brothers discussed and decided the issue and, given the positions they took in 2018 just before this lawsuit was filed, it is unclear whether such a meeting would have resulted in requiring Vichit to give up his entire ownership interest to get a $200,000 payment to open his own restaurant. The principle of joint ownership in the family business was so important to these seven brothers that it seems very unlikely that they would excise one of their number without a serious discussion at a formal meeting. Further, and of great significance to the Court, there was never any calculation of the value of Vichit’s one-seventh share, nor any assessment about whether it was greater or less than the $200,000 payment he requested. Thus, the details of the transaction do not paint a picture of a buyout, but rather are more akin to a loan transaction where one side asks for an amount and the other pays it.

Third, the record at trial is replete with conflicting testimony by nearly every witness, vague and confusing explanations by the brothers about their knowledge of business entities and practices, and faded memories of what was said by who about the specific decisions at issue. Several defendants who attested to Vichit’s buyout of his ownership interest in 2007 also gave sworn testimony that he retained his one-seventh share years later. Vichit testified in a 2017 deposition that he took away most of his share in the family business but claims that because he continued to receive K-1 forms attributing income to him, he wrote a letter in 2011 asking to be taken off the tax return because he had no money to pay taxes on his share. Although Mary’s testimony was subject to impeachment, she testified clearly that Vichit asked for a loan which was approved by the brothers, and she made it happen. This testimony lent support to Vichit’s position but did not foreclose an opposite conclusion.

On balance, the Court finds that the trial testimony about the parties’ motivations with respect to the 2007 transaction is not very illuminating. If this were the only evidence to be considered, the Court would find in Plaintiffs’ favor on the ground that Defendants have not met their burden of proof. But taking into account the absence of any effort by Defendants to memorialize the alleged buyout or use legal means to cancel Vichit’s share in 2007, the fact that there was no meeting or other significant procedure to terminate this brother’s interest in the family business, and the evidence that no one even attempted to make a calculation of the value of the alleged buyout, the Court is persuaded that the transaction in 2007 did not effectuate a buyout and termination of Vichit’s interest and that he retains his ownership share but is indebted to the other brothers for the loan he secured in 2007.

Defendants seek a declaration that they terminated Somsak’s ownership interests on August 26, 2014, because he failed to sell his house to repay the allegedly embezzled funds taken by his wife, Pankee. There was ample evidence offered to substantiate Defendants’ contention that Pankee embezzled substantial funds from RT IV and that Defendants were irate about the financial improprieties they uncovered. Virut testified that Defendants confronted Somsak with the accusations and he volunteered to give up his shares and return the money with proceeds from the sale of his house. (TT 12-20-21, pp. 59-61.) Three of the brothers met with Somsak to negotiate this deal but it was never put into writing, nor was a repayment amount ever mentioned. (Id., pp. 59-62; SS, p. 11; TT 12-15-21, p. 88.) Defendants assert that, later, when Somsak failed to sell his house or repay the money, he was fired from his job with RT II and removed from the family business in August 2014. (Id.; Exh. 334; TT 12-20-21, pp. 64-69.)

Somsak claims he resisted Defendants’ efforts to require him to sell his house to pay their claimed but unproven losses from Pankee’s alleged misconduct and expressed skepticism about the inflated amount Defendants claimed had been taken. (TT 1-3-22, pp. 20-23.) He contends that there was no agreement that he would sell his home or make payments on the alleged embezzlement claims and argues that Defendants’ behavior amounted to threats to oust him from his ownership rights but no actual actions to do so until they attempted to sell the Tilakamonkul assets in 2018, which is the action that prompted this lawsuit.

Defendants argue that Somsak “does not dispute his interest in the family businesses was terminated in 2014,” but the cited testimony does not support that conclusion. (Defendants’ Closing Brief, p. 15.) The questions posed to Somsak address whether he was “kicked out of the family business,” but do not make clear if this referred to his firing as an employee or the termination of his ownership interests. (TT 12-21-21, pp. 46, 70-72.) In his testimony, Somsak said he received a letter about the termination. The only letter in the record relating to this matter is Exhibit 334, which conveys that Somsak’s “employment with Royal Thai Cuisine, Inc. is hereby terminated,” but makes no mention of his ownership interests in the family business. (Exh. 334.) While Somsak said there was another letter, it is not in the record and his description of it is that it stated that four of his brothers “agree to fire [him].” (TT 12-21-21, p. 46.) Similarly, in response to defense counsel’s questioning about Somsak being “kicked out of the business” after he refused to sell his house and repay the allegedly embezzled money, Somsak says, “That is the important reason why they fire me.” (TT 12-21-21, p. 70.) Although defense counsel tried to get Somsak to admit that his ownership interests were terminated in 2014, the plaintiff never adopted that language in his testimony.

Defendants point to an August 26, 2014 letter as the fulcrum for their termination action. (Exh. 334.) While that letter plainly discharged Somsak from his employment with Royal Thai Cuisine, Inc., it says nothing about his ownership interests in RT II, RT IV, or any real property owned jointly with the other Tilakamonkul brothers. It cannot be read as evidence of a termination of his ownership interests or cancellation of his shares, and frankly, given the decision to issue a formal written termination of Somsak’s employment, the fact that the letter fails to mention Somsak’s alleged ouster from joint ownership of the family businesses undermines Defendants’ argument that they moved forward with their threats to terminate Somsak’s ownership shares.

It is also urged that the Court consider T-Team’s quiet title action against Somsak in 2016 as evidence that his ownership rights were eviscerated in 2014. This chapter of the parties’ conflicts yields mixed results at best on the question of whether Somsak’s ownership rights ended in 2014. The fact that Somsak “claimed sole ownership” of the Ransom property in 2015, as alleged in T-Team’s complaint, belies Defendants’ contention that Somsak voluntarily gave up all his ownership rights in 2014. (Exh. 387, ¶ 12.) The allegation by T-Team that a “dispute arose between Somsak Tilakamonkul and the other members” of T-Team in 2015, with no mention of a termination of Somsak’s ownership rights, tends to negate Defendants’ argument here that Somsak lost all his ownership interest in August 2014. (Id., ¶ 11.) It is true that Somsak relented in settling the case by deeding the real estate to T-Team, but while relinquishing his assertion of sole ownership, the settlement agreement preserves his arguments of joint ownership asserted in this case. (Exh. 335.)

Based on these evidentiary facts, the Court cannot conclude that Defendants have demonstrated that they are entitled to declaratory relief establishing that they terminated Somsak’s ownership interests in RT II, RT IV, or any of the Tilakamonkul real estate. This conclusion is based not only on the facts regarding the interactions and intentions of the parties, but also on the absence of any evidence that Defendants employed legal or corporate procedures to terminate Somsak’s ownership interests. As with Vichit’s alleged buyout, the purported termination of Somsak’s share is unsupported by any documentary evidence showing that his stock certificate was cancelled or that he was removed via action of the Board or through a lawsuit, nor even a contract to repay the allegedly stolen funds or a confirming letter or email about any terms of the alleged arrangement between Somsak and Defendants.

For these reasons, the Court finds that Defendants have failed to demonstrate entitlement to a declaratory judgment that Plaintiffs gave up or otherwise lost their ownership rights in the family businesses.

Defendants assert an affirmative defense that Plaintiffs’ claims are barred by the applicable statutes of limitations because they were not brought until years after they knew their ownership interests had been terminated. Having rejected Defendants’ contentions that Vichit sold his ownership shares in 2007 and that Somsak lost his interests in 2014, the Court concludes that Defendants’ limitations arguments are grounded on factual scenarios that have been disproven by Plaintiffs. Instead, the Court finds that Plaintiffs’ causes of action accrued on April 5, 2018, when Virut sent Vichit the email disclosing Defendants’ plan to sell all the family restaurants and real property based on the supposition that they were jointly owned solely by Vichai, Sumeth, Narong, and Virut, with no ownership interests possessed by Vichit, Somsak and Pramorte. (Exh. 44.) Because Vichit commenced this action on July 25, 2018, and Somsak joined as a plaintiff on August 21, 2019, all causes of action in this lawsuit were timely asserted following Plaintiffs’ discovery of the alleged misconduct of Defendants. The Court, thus, rejects Defendant’s affirmative defenses based on the statute of limitations, laches and estoppel.

Defendants also argue that Vichit’s claims should be barred by the doctrine of unclean hands allegedly because he sought exclusion from the RT II tax returns so he could collect public assistance or alternatively so he would not have to pay taxes on the phantom income attributed to him but not received. (Defendants’ Closing Brief, p. 12.) Defendants view Vichit’s approach as a fraud on state welfare agencies or the taxing authorities and, thus, argue that he comes to the Court with unclean hands. This argument is based on a misconception of the unclean hands defense.

“The doctrine of unclean hands rests on the maxim that he who comes into equity must come with clean hands. . . . It ... closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant.” (Farahani v. San Diego Cmty. Coll. Dist. (2009) 175 Cal. App. 4th 1486, 1495 [citations and internal quotations omitted].) “Not all wrongful conduct constitutes unclean hands. Only if the misconduct is directly related to the cause at issue can a defendant invoke the doctrine.” (Aguayo v. Amaro (2013) 213 Cal. App. 4th 1102, 1110 [citation omitted].)

The alleged misconduct must have a close connection to the claims at issue in the case and a direct impact on the party asserting the unclean hands defense. Thus, “[t]he misconduct must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants. [Citation] [T]here must be a direct relationship between the misconduct and the claimed injuries ... so that it would be inequitable to grant [the requested] relief. [Citation] The issue is not that the plaintiff’s hands are dirty, but rather that the manner of dirtying renders inequitable the assertion of such rights against the defendant. [Citation] The misconduct must prejudicially affect the rights of the person against whom the relief is sought so that it would be inequitable to grant such relief. [Citation]” (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal. App. 4th 970, 979, as modified on denial of reh'g (Jan. 3, 2000) [Citations and internal quotation marks omitted].)

Here, Vichit’s alleged misconduct is not related to the transaction at the core of this case for several reasons. First, there is a temporal disconnect between the transaction at issue in this case – the alleged buyout of Vichit’s interests in 2007 – and Vichit’s alleged misconduct in connection with his request to be excluded from the tax returns in 2010. Vichit’s rationale for seeking exclusion from the tax returns in 2010 has nothing to do with the question of whether there was a buyout in 2007.

Similarly, the evidentiary issue here is whether Vichit was excluded from RT II’s tax returns because his interests were bought out by Defendants in 2007 or because he asked to be excluded from the burden of paying taxes on undistributed profits many years later. But while Vichit’s motivation for asking for exclusion serves to explain his request, it has no impact at all on Defendants. Defendants argue that they were damaged by Vichit’s misconduct because they had to shoulder a greater tax burden after he was removed from the tax returns. But his removal from the tax returns is not the misconduct at the heart of Defendants’ unclean hands defense, which instead centers on Vichit’s motivation for removal rather than the removal itself. Even if Defendants could prove that Vichit was trying to defraud governmental agencies by asking to be taken off RT II’s tax return, this is not the kind of misconduct that would support an unclean hands defense because the alleged wrongdoing did not “affect the equitable relations between the litigants” in this case. (Kendall-Jackson Winery, supra, at p. 979.) There has been no showing by Defendants that any alleged tax fraud had any impact on Defendants; there was no “direct relationship between the misconduct and Defendants’ claimed injuries.” (Ibid.)

For all the reasons explained above, the Court finds that Plaintiffs have not established that RT II, RT IV, or RT V are partnerships, but rather that the evidence shows they are and have been properly functioning corporations, duly organized under the laws of the state. Because the Court has not found the existence of a partnership operating the RT restaurants, it does not address Plaintiffs’ contention that they suffered damages because of their partners’ alleged breaches of fiduciary duty.

The Court also concludes that Plaintiffs have demonstrated by clear and convincing evidence that the Ransom and Mt. Bigelow properties were jointly owned by all seven brothers and that each of them retain a one-seventh beneficial interest, contrary to the ownership claim of Defendant T-Team, which the Court finds to be an entity created by the owners to perform property management and financial oversight for their real estate. In contrast, Plaintiffs have not proven that they possess any ownership share in the Georgia Sue property, which has been continuously owned by Sumeth and Virut alone.

With respect to Defendants’ contentions that the ownership interests were terminated, the Court finds in Plaintiffs’ favor, thus denying the request for declaratory relief stating that Vichit’s interest in the family business was bought out in 2007 and that Somsak’s ownership rights were terminated in 2014 because of his wife Pankee’s alleged misappropriation of corporate funds.

Finally, the Court rejects Defendants’ affirmative defenses based on statute of limitations, laches, estoppel, and unclean hands, finding that the facts in the record do not support the application of these defenses in this case.

In their objections to the tentative Statement of Decision, Plaintiffs urged the Court to issue specific findings about the monetary and other relief they seek. While there is some evidence in the record that might allow for damage calculations, the parties’ closing briefs do not address the nature or amount of the monetary or other relief that should be granted in this first phase of the trial. To remedy this situation, the Court will make further orders to address not only the proper remedy, if any, to be granted during this first phase of trial but also the impact of the Court’s rulings on any remaining claims or defenses being asserted by the parties in this action.

Dated: October 11, 2022 ______________________________________ The Honorable Theresa M. Traber Superior Court Judge

[1] Most of the parties are brothers with the same or nearly identical last names. For clarity, the Court refers to each brother by his first name but means no disrespect to the parties in doing so.

[2] Where a party’s name has been misspelled in an original pleading, the Court has simply corrected the spelling without restating the original misspelling to denote the name under which the party was erroneously sued.

RESPONDING PARTY(S): Defendants Vichai
Tilakamonkul, Virut Tilakamonkul, Narlong Tilakamonkun, and T-Team Investment,
LLC.

This is a dispute among seven Tilakamonkul brothers in which Plaintiffs
sought to quiet title, dissolve a partnership, and partition and sell the restaurants
and real property alleged to be jointly owned by the brothers, among other
causes of action. Plaintiffs alleged that the defendant siblings denied that
Plaintiffs had any interest in the properties at issue. In a cross-complaint,
T-Team investment also sought quiet title and declaratory relief with respect
certain real properties.

The parties have, at the Court’s
request, briefed the issue of what equitable remedies, if any, are appropriate
in light of the Court’s September 1, 2022 Amended Statement of Decision.

The Court finds that imposition of
a resulting trust on the proceeds from the sale of the Ransom and Mt. Bigelow
properties and allocation of one-seventh of the proceeds to each Plaintiff is
the appropriate remedy.

Plaintiffs
request that the Court employ its inherent equitable powers to fashion a remedy
to impose a resulting or constructive trust on the proceeds from the sale of
the Ransom and Mt. Bigelow properties and allocate one-seventh of the proceeds
to each individual Plaintiff.

Plaintiffs
request that the Court take judicial notice of (1) the Court’s June 30, 2022
statement of decision; (2) the Court’s September 1, 2022 Amendment to Statement
of Decision; and (3) the ex parte application of T-Team filed on or about
August 2, 2022. Plaintiff’s Requests Nos. 1 and 2 are GRANTED pursuant to
Evidence Code section 452(d) (court records). Plaintiff’s Request No. 3 is
DENIED as irrelevant to the Court’s ruling. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 (“[J]udicial notice .
. . is always confined to those matters which are relevant to the issue at
hand.”].)

On July 25, 2018, Plaintiff Vichit
Tilakamonkul (Vichit)[1]
filed a verified complaint for damages and other relief against Defendants
Vichai Tilakamonkul, Virut Tilakamonkul, Somsak Tilakamonkul, Marasri (Mary)
Tilakamonkul, Narong Tilakamonkun, Sumeth Tilakamonkul,[2]
and others claiming an interest in certain described real and personal
property. In the initial complaint, Vichit asserted claims for breach of
written contract, partnership accounting, dissolution of partnership and
accounting, conversion, breach of fiduciary duty, constructive fraud, and
partition and sale and accounting.

After several revised iterations of
the complaint, the Second Amended Complaint was filed on August 21, 2019, which
was the operative complaint at trial. In that pleading, Vichit Tilakamonkul
joined with brother and former defendant, Somsak Tilakamonkul (jointly
"Plaintiffs") to assert twelve causes of action against their
brothers, Defendants Vichai, Virut, Narlong, Sumeth, and Pramorte, as well as
Siriratn Tilakamonkul and several entities owned by some or all of the seven
Tilakamonkul brothers. These entity defendants included Royal Thai Cuisine II,
Inc. ("RT II"), Royal Thai Cuisine IV, Inc. ("RT IV"), and
T-Team Investments, LLC. ("T-Team"). The Second Amended Complaint
asserted claims for quiet title, breach of oral contract, negligence,
partnership accounting, partnership dissolution and accounting, partition and
sale of partnership property, breach of fiduciary duty, and breach of the
covenant of good faith and fair dealing.

Various defendants filed
Cross-complaints in the action. By the time of trial. there were three at
issue. In its Second Amended Cross-Complaint, filed on March 25, 2021,
Defendant T-Team sues Plaintiffs Vichit and Somsak, as well as Sudatip
Tilakamonkul, who is also known as Dawn Tilakamonkul, alleging causes of action
for declaratory relief, quiet title, breach of contract, account stated, and
goods and services rendered. T-Team's cross-complaint focuses on the ownership
of real property located at 4941 Mount Bigelow in San Diego ("Mt. Bigelow
Property") and at 4199 and 4201 Ransom Street in Long Beach ("Ransom
Properties"), and the related issue of whether funds paid to Vichit in
2007 constituted a buyout of his interest or a loan still owed by Vichit to
T-Team. RT II intervened in the action on or about March 12, 2019 to bring a
claim for declaratory relief against Plaintiffs, seeking a judgment regarding
the ownership of the Royal Thai Cuisine restaurant in Newport Beach. Further,
Defendants Vichai, Virut, Narlong and Sumeth cross-complained against Plaintiffs
for declaratory relief on June 30, 2018, requesting a declaration that
Plaintiffs own no part of the restaurant businesses or real property they claim
to own jointly with the five defendant brothers.

On October
1, 2020, the Court bifurcated trial in this matter and ordered that the
following equitable causes of action in the Second Amended Complaint would be
tried first to the Court: (1) quiet title, (8) partnership accounting, (9)
partnership dissolution and accounting, (10) partition and sale of partnership
property, and (11) breach of fiduciary duty. (10/1/20 Order, p. 10.) In
addition, the Court ordered that the following equitable causes of action in
the Second Amended Cross-Complaint would be tried in the first-phase bench
trial: the first, third and sixth causes of action for declaratory relief and
the second cause of action for quiet title. The Court ordered that all other
causes of action would be tried in a second phase, with the legal claims being
tried to a jury along with an intertwined equitable cause of action that would
be tried to the Court.

At the close of the first phase of
trial, the Court issued its statement of decision, finding that Plaintiffs did
not establish that RT II, RT IV, or RT V are partnerships, but rather that the
evidence shows they are and have been properly functioning corporations, duly
organized under the laws of the state. (June 30, 2022 Final Statement of
Decision.) The Court therefore declined to address Plaintiffs’ contentions that
they suffered damages as a result of their partners’ alleged breaches of
fiduciary duty. (Id.)

The Court also concluded that
Plaintiffs demonstrated by clear and convincing evidence that the Ransom and
Mt. Bigelow properties were “jointly owned by all seven brothers until their
transfer to T-Team, which has been jointly owned by all seven brothers,” but
not that they possessed any ownership share in the Georgia Sue property, which
has been continuously owned by Sumeth and Virut alone. (Id.) The Court
modified its statement of decision in this respect on September 1, 2022 to
clarify that each of the seven brothers owns a beneficial interest in the
Ransom and Mt. Bigelow properties and that they are each entitled to a
one-seventh share of these properties. (September 1, 2022 Ruling Modifying
Statement of Decision; see RJN Exh. B.)

The Court denied Defendants’
request for declaratory relief stating that Vichit’s interest in the family
business was bought out in 2007 and that Somsak’s ownership rights were
terminated in 2014 because of his wife Pankee’s alleged misappropriation of
corporate funds. (June 30, 2022 Final Statement of Decision.) The Court also
rejected Defendants’ affirmative defenses based on statute of limitations,
laches, estoppel, and unclean hands, finding that the facts did not support the
application of these defenses. (Id.) Following issuance of the Statement
of Decision and its subsequent modification, the Court ordered supplemental
briefing by the parties as to what remedies, if any, to which the parties may
be entitled based on these rulings. The parties having done so, the Court now
rules on this issue.

Plaintiffs
propose two remedies which they contend the Court should apply to carry out the
effect of its finding of beneficial ownership in the Ransom and Mt. Bigelow
Properties: (1) imposition of a resulting trust, or (2) imposition of a
constructive trust.

Plaintiffs argue that the
appropriate remedy to give effect to the Court’s ruling is to order the
imposition of a resulting trust on the proceeds from the sale of the
properties.

A resulting trust arises “when the
legal estate is transferred or conveyed under such circumstances that the
intent appears, or is inferred, that the beneficial interest should not be
enjoyed with the legal title.” (Fulton v. Jansen (1893) 99 Cal. 587,
590.) A resulting trust carries out the intent of the parties as implied from
the facts of the case. (Laing v. Laubach (1965) 233 Cal.App.2d 514,
515.)

Plaintiffs contend that imposition
of a resulting trust is proper because the Court found that the seven brothers
are and had always been intended as the beneficial owners of the property, and
that T-Team does not own the Ransom and Mt. Bigelow properties and had never
paid consideration for the purchase of these properties. Plaintiffs therefore
argue that the proper remedy is an imposition of a resulting trust and
distribution of the proceeds from the sale of the property to each brother
equally.

In opposition, Defendants’ only
argument besides those addressed separately below is that Plaintiffs do not
cite any portion of the Court’s Statement of Decision when claiming that the
Court’s findings establish the existence of a resulting trust. A cursory review
of the briefing shows that this assertion is not true. Even if Defendants were
correct, the Court is perfectly capable of recalling the findings published in
the Court’s own statement of decision, especially where, as here, Plaintiffs
have requested judicial notice of that statement. (See RJN Exhs. 1, 2.)

The Court agrees with Plaintiffs
that the imposition of a resulting trust is the proper remedy in this instance.
As the Court found in its Amended Statement of Decision, the evidence showed
that the brothers purchased the properties themselves with profits from the
jointly owned RT II and RT IV, and that the brothers intended for both the
Ransom and Mt. Bigelow properties to be jointly owned by all seven brothers,
regardless of who held title. (RJN Exh. 1, p. 15, Exh. 2. p.1.) The Court also
found that T-Team ultimately never acquired title to the Ransom and Mt. Bigelow
properties or held title to all these properties when they were sold. (Id.
pp. 1-2.) As the Court has found that the brothers were and always were
intended to be the beneficial owners of the property, and that each Plaintiff
owns a one-seventh beneficial interest in these properties, the Court therefore
finds that the appropriate remedy is the imposition of a resulting trust
allocating a one-seventh share to each Plaintiff of the proceeds from the sale
of the property.

Plaintiffs, in the alternative, argue that the appropriate
remedy to give effect to the Court’s ruling is the imposition of a constructive
trust on the properties.

A constructive trust is an equitable remedy imposed to
prevent unjust enrichment and is appropriate when there has been some wrongful
act or inequitable conduct that results in such enrichment. (Haskel
Engineering & Supply Co. v. Hartford Acc. & Indemnity (1978) 78
Cal.App.3d 371, 375.)

Plaintiffs argue that T-Team committed a series of wrongful
acts in making various claims in this litigation. Plaintiffs first argue that,
as the Court has found that T-Team was a property manager for the benefit of
the seven brothers, it was their agent and owes each of them a fiduciary duty,
which Plaintiffs argue T-Team has breached by claiming in this action that it
holds full legal and beneficial title to these properties. Second, Plaintiffs
argue that T-Team has filed a “false pleading” by alleging facts that it
purportedly knew were false at the time of filing. Finally, Plaintiffs argue
that T-Team breached its fiduciary duty by filing fraudulent K-1 tax forms
listing distributions that were never paid out. Plaintiffs also claim that
T-Team committed other unspecified inequitable acts to enrich itself.

In opposition, Defendants argue, correctly, that allegations
in pleadings are protected by the litigation privilege, codified in Civil Code
section 47, which creates an absolute privilege for all communications related
to litigation. (Civ. Code § 47; see Flatley v. Mauro (2006) 39 Cal.4th
299, 322.) The litigation privilege applies to any communications (1) made in
judicial or quasi-judicial proceedings; (2) by litigants or other participants
authorized by law; (3) to achieve the objects of the litigation; and (4) that
have some connection or logical relation to the action. (Silberg v.
Anderson (1990) 50 Cal.3d 205, 212.)

Plaintiffs maintain their contention in the reply that T-Team
committed wrongful acts by filing statements in the pleadings which Plaintiffs
contend were knowingly false and contend that the litigation privilege is not
absolute because it does not protect a party making false statements from
adverse consequences such as a motion for summary judgment. The Court is
unmoved by this argument. The allegations made in the pleadings are
communications made by a party in a judicial proceeding to achieve the object
of the litigation and are facially connected to the action. They are therefore
protected by the litigation privilege and cannot be a basis for imposition of a
constructive trust. As to Plaintiffs’ arguments regarding the K-1 forms, the
question of whether those forms was fraudulent was never presented to the
Court, and the Court did not reach that issue in its statement of decision.
Plaintiffs are therefore not entitled to imposition of a constructive trust.

Defendants object to the motion in
its entirety on the basis that it is a motion for leave to amend the Second
Amended Complaint that is not in compliance with the Rules of Court regarding
such a motion. For Defendants to make this argument when the Court specifically
requested briefing on this issue following its Statement of Decision is
puzzling, to say the least. Although Plaintiffs improperly cite Code of Civil
Procedure section 580, which concerns an award of remedies following a failure
by a defendant to answer, Plaintiffs’ briefing is a proper appeal to this
Court’s inherent equitable power to fashion an appropriate remedy. (See Zarrahy
v. Zarrahy (1988) 205 Cal.App.3d 1, 4.) The Court did not invite nor do
Plaintiffs seek amendment to the pleadings at this juncture. Instead,
Plaintiffs have briefed, as requested, the issue of what remedy would be
appropriate for the court to fashion using its inherent equitable powers.
Failure to adhere to inapplicable procedural rules for a different type of
motion is not a basis for denial of the relief requested.

Defendants request that, if Plaintiffs are permitted to amend
the pleadings to assert claims for a constructive or resulting trust,
Defendants should be permitted to assert appropriate defenses and cross-claims
arising from the imposition of any trust. As Plaintiffs are not seeking to
amend the pleadings, this request is improper. Further, Defendants cite no law
entitling a party to reimbursement of trustee’s fees and advances as the result
of an imposition of a resulting trust as an equitable remedy in a case like
this one. The request is therefore denied.

Accordingly, The Court finds that imposition
of a resulting trust on the proceeds from the sale of the Ransom and Mt.
Bigelow properties and allocation of one-seventh of the proceeds to each
Plaintiff is the appropriate remedy.

Any party may submit on the
tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day
before the hearing. All interested parties must be copied on the email. It
should be noted that if you submit on a tentative ruling the court will still
conduct a hearing if any party appears. By submitting on the tentative you
have, in essence, waived your right to be present at the hearing, and you
should be aware that the court may not adopt the tentative, and may issue an
order which modifies the tentative ruling in whole or in part.

[1] Most of
the parties are brothers with the same or nearly identical last names. for
clarity, the Court refers to each brother by his first name but means no
disrespect to the parties in doing so.

[2] Where a
party's name has been misspelled in an original pleading, the Court has simply
corrected the spelling without restating the original misspelling to denote the
name under which the party was erroneously sued.