Corrales v. Corrales
198 Cal. App. 4th 221
| Cal. Ct. App. | 2011Background
- RCE formed in 1989 by Rudy and Richard as a two-person partnership to repair and sell computer tape drives under an indefinite term.
- Rudy’s wife Pamela and their two daughters joined as bookkeeper/office staff; they formed PK Electronics (PKE) in 2004 to compete without Richard.
- Richard withdrew via a Notice of Dissociation dated April 12, 2005; lawsuits followed in 2006 for multiple claims.
- Trial court relied on a valuation under Corporations Code section 16701 (buyout) rather than dissolution procedures; judgment awarded buyout to Rudy.
- Court found Rudy concealed PKE from Richard but held no damages from concealment; experts based valuation on wrong theory and lacked substantial evidence.
- This appeal challenges the valuation method and damages, leading to remand for proper dissolution under sections 16801 and 16807.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the buyout remedy applies in a two-person partnership | Richard contends 16701 governs buyout | Rudy argues dissolution not buyout in two-person partnership | Buyout remedy does not apply; dissolution procedures govern |
| Damages for breach of fiduciary duty when forming PKE | Richard seeks damages for competing with RCE | No damages proven or appropriate absent dissolution | Damages may be addressed in dissolution accounting; no independent damages found |
| Proper dissolution procedure after dissociation | Judge should apply buyout framework | Dissolution/16801-16807 is correct pathway | Remand for judicial dissolution under 16801 and 16807; include improper funds in winding up |
Key Cases Cited
- Belair v. Riverside County Flood Control Dist., 47 Cal.3d 550 (Cal. 1988) (judgment affirmed if correct on any legal theory)
- Cagnolatti v. Guinn, 140 Cal.App.3d 42 (Cal. App. 3d 1983) (dissolution context prior to RUPA)
- Gherman v. Colburn, 72 Cal.App.3d 544 (Cal. App. 3d 1977) (total repudiation vs. lesser breach)
- Malott v. Seymour, 101 Cal.App.2d 245 (Cal. App. 2d 1950) (availability of action for dissolution and accounting)
- Mosher v. Helfend, 7 Cal.App.2d 48 (Cal. App. 2d 1935) (exception to damages rule for partnership remoteness)
- Security Pacific Nat. Bank v. Lyons, 25 Cal.App.4th 706 (Cal. App. 4th 1994) (damages under partnership breach exceptions)
- Barlow v. Collins, 166 Cal.App.2d 274 (Cal. App. 2d 1958) (damages when partner converts partnership assets)
- Prince v. Harting, 177 Cal.App.2d 720 (Cal. App. 2d 1960) (damages for breach by partner)
- Ellis v. Navarro, 61 Cal.App.2d 755 (Cal. App. 2d 1943) (possession/damages in partnership context)