Filed 8/26/15 Dillon v. Super. Ct. CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
TERESA DILLON, D067321
Petitioner,
(San Diego County Super. Ct. No. 37-
v. 2010-0087010-CU-OR-CTL)
THE SUPERIOR COURT OF SAN
DIEGO COUNTY,
Respondent;
JASMINE RAMOS et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. Randa Trapp, Judge. Petition granted.
Wicks Law and Rory Richard Wicks for Petitioner.
No appearance for Respondent.
Sharif | Faust Lawyers and Matthew J. Faust for Real Parties in Interest.
On a prior appeal, we reversed a judgment awarding damages to real parties in
interest Jasmine Ramos and David Ramos1 and against petitioner Teresa Dillon. The
damages award grew out of a partnership between the Ramoses and Dillon.
On remand, Dillon filed a peremptory challenge to the trial judge under Code of
Civil Procedure section 170.6. The trial judge denied the challenge, and Dillon filed a
petition for a writ of mandate. We stayed proceedings in the trial court and issued an
order to show cause.
We now grant Dillon relief on her petition. As we explain more fully below, an
accounting of each partner's interest in the partnership was prepared during the course of
the prior trial court proceedings. However, the trial court declined to make an award
based on the accounting but instead awarded the Ramoses damages based on their
contribution to the partnership; the trial court's judgment also purported to preserve the
Ramoses' interest in the partnership. We reversed the prior judgment because we found
the trial court erred in awarding damages without first complying with the accounting and
distribution process required under Corporations Code section 16807, when, as ordered
by the trial court, a partnership is dissolved. We directed that on remand the trial court
comply with Corporations Code section 16807. Because on remand the trial court will be
required to reexamine the previously litigated accounting issue, on remand the parties
have the right to file a challenge under section Code of Civil Procedure section 170.6.2
1 When appropriate for the purposes of clarity, we will refer to each of the Ramoses
by their first names.
2 All further statutory references are to the Code of Civil Procedure.
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FACTUAL AND PROCEDURAL BACKGROUND
We fully set forth the factual and procedural background of the parties' dispute in
our opinion in Ramos v. Dillon (Oct. 31, 2014, D065489, nonpub. opn.), and we
summarize the pertinent portions of that background here.
1. Property Acquisition
Dillon is a real estate broker who owns a real estate company. Jasmine is a
licensed real estate agent who worked for Dillon's company. Jasmine's husband, David,
is also a licensed real estate agent with 25 years of experience in the construction
industry, but he is not a licensed contractor.
In April 2004, the Ramoses and Dillon entered into an oral partnership for the
purposes of purchasing an apartment building located in San Diego, California (the
property). Dillon and the Ramoses each contributed $250,000 toward purchasing the
property. In addition to their contributions, in order to purchase the property, in
November 2004 the parties obtained a "Hard Money Loan" in the amount of $300,000.
The parties did not qualify for traditional long-term financing and were aware that the
Hard Money Loan required a balloon payment of $302,312.50 in October 2007. The
parties also agreed that they would share equally in the costs of repairing the property.
When the Hard Money Loan became due in 2007, the parties agreed to pursue a
bank loan for as much as they could borrow to pay off the Hard Money Loan and
renovate the property. Dillon represented that because she had a higher credit score she
could get a better interest rate on a bank loan. The parties agreed that Jasmine would
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quitclaim her interest in the property to Dillon for the purpose of getting a better interest
rate and that the Ramoses would be added back on title to the property within 30 days. In
June 2007, Dillon obtained a loan from Wells Fargo (the Wells Fargo Loan) in the
amount of $520,000 in her own name in connection with the property. The Wells Fargo
Loan required a monthly payment of $4,731.97 and bore interest at 6.375 percent per
annum.
The parties agreed that although the Ramoses were not on the loan or on title to
the property, they would be equally responsible for repaying the loan and maintaining
their interest in the property. The parties substantially completed work on the property in
April or May 2009, and the first tenant moved in shortly thereafter.
Because of the Ramoses' financial difficulties and their inability to meet their
obligations with respect to the property, Dillon suggested memorializing those
obligations. In July 2009, Dillon prepared a promissory note, which, by its terms, was
secured by the Ramoses' interest in the property. The Ramoses executed the note.
By January 2010, the relationship between the parties had deteriorated and Dillon
was demanding payment from the Ramoses under the terms of the note.
2. Trial Court Proceedings
The Ramoses filed a complaint against Dillon in which they alleged various
contract and tort claims against her, and Dillon filed a cross-complaint against them. The
trial court initially determined that, in obtaining the note, Dillon had breached her
fiduciary duty to the Ramoses and that (1) the note must be reformed to be unsecured and
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(2) the Ramoses be placed on title to the property and on a partnership bank account. In
lieu of reforming the note, the court gave Dillon the option of purchasing the Ramoses'
interest in the property.
In an effort to carry out the trial court's initial determination, the parties selected
an appraiser and an accountant. The appraiser estimated the "as is" value of the property
was $898,000 as of July 11, 2012. At a hearing held in April 2013, the accountant
testified that after more than eight years, the partnership was "pretty close to breaking
even." Thereafter, the accountant issued a final report that incorporated changes
requested by the court. The accountant's final report concluded that Dillon would need to
pay the Ramoses $121,639.68 to purchase their interest in the property.
The Ramoses filed a posttrial brief electing a damages award based upon Dillon's
breach of fiduciary duty. Specifically, they sought return of their "contributions to the
partnership" totaling $478,153, consisting of their down payment of $250,000, the value
of David's labor at $10,000 per month for 16 months, and the return of a $68,153 cash
payment. Dillon opposed the request. In their reply, the Ramoses admitted they were
seeking return of their partnership contributions, not future lost profits.
The court issued a final judgment finding that the accounting led to an inequitable
result, as the Ramoses would recover little and Dillon would be unjustly enriched at their
expense. Given the continuing disputes between the parties, the court concluded it would
not be practical for them to continue the partnership. Based on Dillon's breach of
fiduciary duty, the court found the Ramoses properly elected damages and dissolution of
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the partnership. The trial court found the note was unenforceable and awarded judgment
against Dillon in the amount of $478,153 plus prejudgment interest that had not yet been
calculated.
3. Appeal
On appeal, we reversed. As we indicated, we found that under Corporations Code
section 16807, upon dissolution of a partnership, the trial court was required to conduct
an accounting of the partnership's assets and liabilities and distribute the partnership
assets as required under the statute. We stated: "When a partnership is dissolved and its
business wound up, the assets go first to pay the creditors, including partners who are
creditors, and any surplus assets are generally liquidated and distributed to its members.
(§ 16807, subds. (a), (b).) Generally, 'until the affairs of a partnership are wound up, the
claim of a partner is equitable and can only be enforced in an accounting action, and that
no personal judgment can be entered in such an action until all partnership assets have
been converted into money, the debts paid and a final balance ascertained.' [Citation.]
As one legal treatise explained, 'the claims of partners for reimbursement of contributions
to capital, or disbursements on behalf of the partnership, or repayment of debts of the
partnership to them are primarily against the partnership assets, and a personal judgment
against individual partners should not be rendered unless the partnership assets are
insufficient to make repayment.' [Citation.]
"Here, the trial court ordered dissolution of the partnership without complying
with section 16807. This is error. Accordingly, the judgment must be reversed and the
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matter remanded for the court to fashion an appropriate remedy based on its finding that
Dillon breached her fiduciary duty to the Ramoses. As an aside, we note that where, as
here, the partnership was not making a profit, dissolution may result in a seemingly
unjust result for all parties." (Ramos v. Dillon, supra, D065489.)
4. Proceedings on Remand
Upon our remand, the case was reassigned to the original trial judge, and Dillon
filed a challenge to the trial judge under section 170.6; as we indicated at the outset, the
trial judge denied the challenge, and Dillon filed a petition for a writ of mandate.
DISCUSSION
Section 170.6, subdivision (a)(2) provides in pertinent part: "A motion under this
paragraph may be made following reversal on appeal of a trial court's decision, or
following reversal on appeal of a trial court's final judgment, if the trial judge in the prior
proceeding is assigned to conduct a new trial on the matter. Notwithstanding paragraph
(4), the party who filed the appeal that resulted in the reversal of a final judgment of a
trial court may make a motion under this section regardless of whether that party or side
has previously done so. The motion shall be made within 60 days after the party or the
party's attorney has been notified of the assignment."
"Section 170.6 permits a peremptory challenge to be made when the same trial
judge is assigned for a new trial after reversal on appeal in order to avoid potential bias
on the part of a judge who had been reversed on appeal. [Citations.] Section 170.6
applies only where the matter is to be retried, not where it is remanded with instructions
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that require the trial court to complete a judicial task not performed in the prior
proceeding. In the context of this statute, a retrial is a 'reexamination' of a factual or legal
issue that was in controversy in the prior proceeding. [Citations.]" (Geddes v. Superior
Court (2005) 126 Cal.App.4th 417, 423-424 (Geddes), fns. omitted.) In Geddes, a
judgment entered on an order granting summary judgment was reversed because the trial
court had failed to state the reasons for, and cite the evidence supporting, its decision in
favor of the defendant. On remand, the plaintiff filed a section 170.6 challenge, which
was granted. The defendant filed a petition for a writ of mandate, which the Court of
Appeal granted. The court found that the remand did not require any retrial of the merits
of the motion for summary judgment, but only the performance of the procedure required
by section 437c, subdivision (g). (Geddes, supra, 126 Cal.App.4th at p. 424.) The court
found that the procedural error that gave rise to the remand did not require a new trial
within the meaning of section 170.6, subdivision (a)(2) and that, accordingly, the trial
court erred in granting it. (Id. at pp. 424-425.)
In contrast, in First Federal Bank of California v. Superior Court (2006) 143
Cal.App.4th 310, a section 170.6 challenge was proper on remand. In First Federal, the
prevailing party in a contract case successfully appealed from an order denying its
request for attorney fees. On remand, that party filed a challenge under section 170.6,
which was denied. The Court of Appeal issued a writ requiring that the challenge be
granted. "Here, it is clear that there was a trial, even limiting the examination to the
attorney's fees motion. The trial court made a determination on the merits that First
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Federal was not entitled to recover its attorney's fees. Reversing that order, we remanded
for a hearing on the amount to be awarded, a hearing that will require the presentation of
evidence and factual and legal determinations as to the nature and amount of the fees
sought. Such a reexamination of an issue previously in controversy is a retrial. The trial
court erred in rejecting the motion." (Id. at p. 315.)
The record here shows that at the first trial, the propriety of a disposition and
award based on an accounting of the partnership's assets was litigated and rejected by the
trial court; our reversal and remand for failure to make such a disposition plainly requires
a reexamination of the merits of an issue previously in controversy and is a retrial within
the meaning of section 170.6, subdivision (a)(2). Thus, in denying Dillon's challenge, the
trial court abused its discretion.
DISPOSITION
Let a writ of mandate issue directing the superior court to vacate its January 12,
2015 order denying Dillon's challenge under section 170.6 and enter an order granting
Dillon's disqualification motion. The stay issued by this court on January 22, 2015 is
vacated. Costs are awarded to Dillon.
BENKE, Acting P. J.
WE CONCUR:
HUFFMAN, J.
HALLER, J.
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