Groth v. GiladGroth v. Gilad
These consolidated appeals are the second and third appeals filed by Ami Gilad and Roy Gilad in a long-running dispute about a loan William Grоth made to fund a cigar club business that subsequently failed. When the loan was not repaid in full, Groth and Groth Holdings & Consulting, Inc. (collectively, plaintiffs) sued Ami, Roy, Legacy Cigar Club, Inc., 65 Oak Court, LLC, and K.A.D. Alliance, Inc. (collectively, defendants),1 alleging (among other causes of action) breach of a written promissory note. In a prior appeal (Groth et al. v. Gilad et al. (Nov. 18, 2019, A151497/A150493) [nonpub. opn.] (Groth I)),2 this court
On remand, the trial court held bifurcated bench trials, found that both the cigar club partnership and a subsequently formed corporation were liable on the note, and entered judgment in favor of the plaintiffs and against the Gilads on the breach of contract cause of action and other claims. (See
The Gilads now appeal from that judgment and a post-judgment award of attorney fees to Groth. The Gilads assert the trial court erred by declining to retry causes of action not affected by our prior opinion, by failing to conclude, as a matter of law, that the Gilads bore no personal liability under the note because the partnership did not exist at the time of the note‘s execution, and that the fees order must also be reversed if plaintiffs are no longer the prevailing party. We disagree and affirm.
BACKGROUND
A.
In June 2008, Groth, Roy, Ami, and Frank Carozza signed a “Partnership Engagement Letter,” which states that an unnamed partnership, to which they would “contribute capital equally,” “shall generally engage in the business of a [cigаr
The partners decided to buy a building to house the cigar club and entered escrow on a property in Danville. A limited liability company (65 Oak Court, LLC) was later formed to purchase the property. Based on the terms of the real estate contract, the partnership would forfeit a $100,000 deposit if the sale did not go through.
After Roy‘s numerous efforts to secure financing (from both banks and “hard money lenders“) appeared to have failed to secure enough financing, Ami contacted Groth and asked for financial assistance to “bridge the gap” before a loan came through. Ami instructed Groth that funds needed to be deposited into the partnership account but that they would be moved to the LLC account before closing.
On September 17, 2008, Groth deposited $735,000 in Ami‘s business account (the partnership account), according to Ami‘s instructions. Ami in turn openеd an account for the newly formed LLC and moved the funds to the LLC account. Groth testified that he viewed a portion (roughly $610,000) as a “short-term loan.” He was particularly concerned that he be repaid quickly because he had withdrawn a large portion of the funds from a retirement account, and he understood that he would incur substantial penalties and tax liability if the funds were not returned to his retirement account within a short period of time.
At the last minute, better financing was obtained and not all оf Groth‘s funds were needed to close the transaction. $610,000 of Groth‘s money was paid into the escrow but was refunded when no longer needed at closing. Because Roy closed
On October 9, 2008, Groth spoke with Ami, in a parking lot, and they agreed that $125,000 of Groth‘s contribution would be сonsidered a capital contribution. Roy and Ami each made equal capital contributions. This left approximately $610,000 as Groth‘s loan. Groth explained that, if the latter amount was not needed for the closing, he needed the money back to replenish his retirement account. Ami told him that the business needed more operating capital. Groth told Ami that if his funds were to be used as operating capital, “you and Roy have to go on the hook . . . with me.” Ami agreed, saying, “[d]on‘t worry about it. We‘ll do that.”
Legacy Cigar Club, Inc. was incorporated about a week later, on October 15, 2008.
Ami prepared a promissory note using a form he found on the internet. The first draft of the note, sent to Groth by Ami via email on January 28, 2009, was in the amount of $610,001 and was signed by Ami on behalf of “Legacy Cigar Club, a California Corporation.” Groth asked for changes—specifically he asked to change the principal amount to $600,000 to reflect a $10,001 payment by the LLC to Groth, to add the corporation as an obligоr by changing Ami‘s signature block to read “Ami M. Gilad, CFO, Legacy Cigar Club,” and to have Roy sign the note as a representative of the partnership.
Ami changed the note as requested. Thus, the signed and revised promissory note provides “the undersigned hereby jointly and [s]everally promise to pay” Groth $600,000 plus five percent interest per year. (Italics added.) It was backdated to October 9, 2008. At the end of the text, there are three signature blocks. The term “[w]itnessed:” appears before the signature blocks and
The note has not been repaid. Both Roy and Ami denied personal liability on the note, claiming that only the corporation is obligated. Groth testified that it was his understanding that there was more than one obligor and that the three partners, in addition tо the corporation, were liable on the promissory note.
B.
Plaintiffs sued the Gilads, Legacy Cigar Club, Inc., the LLC, and K.A.D. Alliance, Inc., in September 2010. The operative complaint alleged numerous causes of action, including, among others, breach of contract (promissory note), negligence, breach of fiduciary duty, negligent misrepresentation, intentional infliction of emotional distress, and negligent infliction of emotional distress.
In particular, Groth alleged he loaned over $600,000 to the рartnership in 2008, with the understanding that Roy and Ami would be personally obligated on the loan. Groth also alleged he and the Gilads signed a written promissory note documenting the loan agreement that provided Ami, Roy, and “Legacy Cigar Club” would repay the principal and interest at five percent per year. Groth then alleged he performed under “the loan agreement,” that “the note” became due in 2010, and that the defendants “breached said loan agreement by . . . refusing to pay back the lоan principal and interest.”
In 2015, Groth filed a motion for summary adjudication with respect to his breach of contract cause of action. The Honorable Steven K. Austin (Ret.) granted Groth‘s motion and
At a court trial on plaintiffs’ remaining causes of action and the Gilads’ cross-complaint, the trial court (the Honorable Judith S. Craddick (Ret.)) relied on the summary adjudication ruling to exclude certain evidence proffered by the Gilads with respect to existence of either the partnership or a loan to the partnership. Judge Craddick issued a statement of decision finding, among other things, that a partnership existed, that the parties were jointly and severally liable on the note, that Ami was negligent in providing tax advice to Groth, and that the Gilads were liable for numerous breaches of fiduciary duty. On the plaintiffs’ breach of contract cause of action, judgment was entered against the Gilads for $400,000 plus interest.
The Gilads appealed from that judgment and, in the prior Groth I opinion, this Division reversed the judgment because a triable issue of material fact precluded summary adjudication. (Groth I, supra, A151497/A150493.) Groth I explained that—on the question of whether the parties agreed the partnership (as opposed to solely the corporation) was obligated on the note—the evidence supported competing inferences, which meant summary
Groth I explained: “The[] signatures [on the note] reasonably suggest only the corporation is obligated. Yet, in conflict with that understanding, both versions also provide for joint and several liability on the ‘undersigned.’ . . . [¶] To resolve the ambiguity, the fact finder will need to consider the conflicting extrinsic evidence presented by the parties. . . . [¶] In short, we agree with the Gilads that there are competing reasonable inferences regarding their personal liability on the note. A triable issue of material fact precludes summary adjudication. Our conclusion moots the defendants’ appeal (A151497) from the post-judgment fees order and the parties’ remaining arguments [regarding Judge Craddick‘s damage calculations that would be moot if there was no partnership or the partnership was not liable on the note].” (Groth I, supra, A151497/A150493.)
On remand, a bifurcated court trial was held (before the Honorable Edward G. Weil) to determine the intended obligors on the note. The trial court, in its statement of decision, wrote: “As the Court of Appeal held, the four corners of the agreement are ambiguous, because the apparent indication that that signatories signed on behalf of Legacy Cigar Club, a corporation, is not consistent with the statement that the signatories ‘jointly and severally promise’ to pay, a concept which would not apply where there is only a single obligor. . . . [¶] Going back to the time before the note was negotiated and signed, it is clear that from the time that the $735,000 contribution was determined to be a capital contribution of $125,000 and a loan of $610,000, that the loan was a loan to the partnership. On September 17, 2008, [when Groth deposited $735,000 in the partnership account], the Corporation did not exist. The loan bore no interest rate and did not have a specified repayment date. The history of the dealings
The trial court stated that the parties had different understandings on the key issue—“whether the subsequent note executed in January of 2009 relieved the partnership of its obligation and replaced it with the corporation.” The court explained: “Groth believed that Roy and Ami remained personally liable on the note (in addition to the Corporatiоn). At the same time, Roy and Ami believed that only the corporation was liable.” The court continued: ”
C.
Thereafter, the sеcond phase of bifurcated trial commenced, before the Honorable Charles S. Treat (Ret.). Judge Treat concluded that Groth I decided the summary adjudication ruling was erroneous and only required retrial of the intertwined
On the plaintiffs’ breach of written contract cause of action, judgment was entered in their favor—for $400,000 plus interest. The Gilads were also ordered to pay Groth $50,000 in general damages and $84,299.33 for breach of fiduciary duty. Ami was further ordered to pay plaintiffs a total of $449,419.71 (inclusive of interest) on the tax negligence claim. On Ami‘s cross-complaint against the plaintiffs, Ami obtained judgment in the amount of $10,350 and otherwise took nothing. In reliance on an attorney fees clause in the note, the trial court also ordered the Gilads to pay attorney fees to the plaintiffs based on their status as the prevailing party.
DISCUSSION
A.
The Gilads contend Judge Treat erred by refusing to retry unspecified “prior legal rulings” that were purportedly reversed by Groth I. Having reviewed the issue de novo (Ducoing Management, Inc. v. Superior Court (2015) 234 Cal.App.4th 306, 313 [standard of review]), we disagree.
The Gilads rely on this Division‘s purported unqualified reversal in Groth I. True, the disposition of the prior appeal reads: “The judgment and the post-judgment fees order are reversed.” (Groth I, supra, A151497/A150493.) Ordinarily, such an unqualified reversal—i.e., a reversal without directions to the trial court—remands the cause for a new trial on all issues presented by the pleadings. (Hall v. Superior Court (1955) 45 Cal.2d 377, 381; Weightman v. Hadley (1956) 138 Cal.App.2d 831, 836.) On remand, the parties are in the same position as if the
However, several limitations exist with respect to the general unqualified reversal rule. First, the general rule does not govern—the case will not be set for retrial—if the appellate opinion as a whole establishes a contrary intent. (Stromer v. Browning (1968) 268 Cal.App.2d 513, 518-519.) ” ‘Judgment reversed’ at the end of an opinion is, of course, strong indication” that retrial is mandatory. (Id. at p. 518.) But “[i]t is the substance of the opinion that controls, not the form of the order.” (In re Anna S. (2010) 180 Cal.App.4th 1489, 1500, italics added; accord, Snapp v. State Farm Fire & Casualty Co. (1964) 60 Cal.2d 816, 821.)
Second, retrial is not required—despite an unqualified reversal—where no issues of fact remain to be tried. (Bank of America v. Superior Court (1990) 220 Cal.App.3d 613, 621; Moore v. City of Orange (1985) 174 Cal.App.3d 31, 34-35.) “[W]hen it is said an unqualified reversal ‘remands the case for a new trial,’ it means a new trial as defined by section 656 of the Code of Civil Procedure, i.e., ‘a re-examination of an issue of fact.’ ” (Weightman v. Hadley, supra, 138 Cal.App.2d at p. 838.) “Where the facts of a case are undisputed, there is no reason for such a reexamination.” (Bank of America, at p. 621.)
The Gilads attempt to elevate form over substance. The Groth I opinion—read as a whole—establishes this Division‘s intent that the trial court retry (or try for the first time) the factual issues we identified with respect to plaintiffs’ breach of written contract cause of action as well as any factual issues that needed to be redetermined because the promissory note and partnership claims were intertwined. (Groth I, supra, A151497/A150493.)
Furthermore, when Judge Treat asked the parties what issues had not already been resolved (by Judge Craddick and Judge Weil) that required witness testimony on remand, the Gilads conceded there were no remaining factual issues that necessitated witness testimony. The Gilads’ counsel stated explicitly that they only had exhibits, which were largely undisputed, and that “[t]he core of our case is a legal case.” Any error was invited by this concession. (See Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202, 212 [“[u]nder the doctrine of invited error, when a party by its own conduct induce[d] the commission of error, it may not claim on appeal that the judgment should be reversed because of that error“]; Bank of America v. Superior Court, supra, 220 Cal.App.3d at p. 621; Moore v. City of Orange, supra, 174 Cal.App.3d at pp. 34-35.)
B.
The Gilads also insist they have no personal liability on the note because “the partnership was no longer in existence at the time the promissory note was exеcuted.” To the extent the
1.
The Gilads forfeit their substantial evidence argument by failing adequately to provide citations to the record and an adequate summary of the relevant facts. In numerous instances in their appellate briefs, the Gilads make factual statements with no record citation. They also fail to fairly summarize (much less cite the record tо support) the plaintiffs’ evidence. It is not our role to search the record for evidence that supports the parties’ contentions. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)
In any event, ample evidence supports the challenged finding—that the Gilads were aware of Groth‘s belief the promissory note would obligate both the partners and the corporation. Groth testified about a conversation he had with Ami in a parking lot, on October 9, 2008, where Groth expressed his desire that the Gilads be personally responsiblе on the loan and to have the loan memorialized in writing. Ami agreed, saying, “[d]on‘t worry about it. We‘ll do that.” Groth said that, in that same time period, Roy made similarly reassuring comments to him. Groth also testified, “I told Ami specifically that Roy had to sign on behalf of the partnership.”
Ami may have denied that he ever agreed to be personally liable during any conversation in a parking lot, but the trial court explicitly credited Groth‘s testimony on this point. It is not our role to reweigh the evidence or second guess thе trial court‘s credibility determinations. (See Conservatorship of O.B. (2020) 9 Cal.5th 989, 1008.)
The Gilads also contend that, by October 2008, the partnership was terminated “by operation of law.” Their argument relies on the legally unsupported premise that the partnership was dissolved or converted no later than the date of incorporation.
Generally, relations among partners and between the partners and the partnership are governed by the partnership agreement and the
The engagement letter itself does not demonstrate that the partnership was dissolved by October 2008. (See
Other provisions of the
The Gilads’ argument is premised on wholly eliminating the statutory requirement that a converting partnership have a plan of conversion. The Gilads do not point us to any plan of conversion. And we cannot construe closure of the partnership bank account or the incorporation as ipso facto accomplishing conversion. (See
On October 24, 2008, the parties did execute a mutual release that released Carozza from any liability, relinquished his interest in the business, and reimbursed his capital contribution. But, again, this document cannot be construed as an approved plan of convеrsion or be understood to have dissolved the partnership. The release does not mention the partnership, much less its dissolution, conversion, or the details required by
Finally, the Gilads are wrong to insist that any claim for breach of the promissory note is barred by the statute of limitations.
The Gilads’ debt arises from a written promissory note, not an oral contract, which means a four-year statute of limitations applies. (See
C.
In their appeal of the post-judgment fees order (A174191), the Gilads only argue that the attorney feе award must fall if the judgment is reversed. Because we affirm the judgment, we affirm the order awarding attorney fees without further discussion.
DISPOSITION
The judgment and post judgment attorney fees order are affirmed. Plaintiffs are entitled to their costs on appeal.
BURNS, J.
WE CONCUR:
JACKSON, P. J.
SIMONS, J.
Groth et al. v. Gilad et al. (A169301/A174191)