Opinion
A146553
03-27-2018
JIM KEHOE et al., Plaintiffs and Appellants, JIM KEHOE, Cross-defendant and Respondent, v. MICHAEL O'BRIEN, Defendant, Cross-complainant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City and County Super. Ct. No. CGC12520986)
Plaintiffs Jim Kehoe, John Kehoe, and Mary Petrin filed an action against defendants Michael O'Brien and Joe O'Brien, seeking a partnership dissolution and other remedies. The trial court determined plaintiffs had failed to establish a partnership had been formed in three trucking companies operated by the Kehoes and Michael O'Brien. Jim Kehoe appeals judgment in favor of defendants on plaintiffs' complaint. Defendant Michael O'Brien appeals from the trial court's refusal to award him interest on his cross-action against Jim Kehoe for conversion of 12 trailers.
For ease of reference, unless otherwise indicated, a singular reference to Kehoe is to Jim Kehoe and to O'Brien is to Michael O'Brien. The evidence presented at trial is well known to the parties and will not be restated here at length.
We shall affirm the judgment.
I. Kehoe's Appeal of the Finding There Was No Partnership
After a bench trial, the court found that plaintiffs had failed to prove there was a partnership with O'Brien. Kehoe contends the court erred in focusing on the parties' intentions rather than the surrounding circumstances of the parties' relationship. Although Kehoe acknowledges the substantial evidence standard of review, he contends, nevertheless, that the factual findings made by the court compel a finding that a partnership existed. We disagree.
"[T]he 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." (Corp. Code, § 16202, subd. (a).) The existence of a partnership is an issue of fact to be determined from the parties' agreement, conduct, and the surrounding circumstances. (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1157; Holmes v. Lerner (1999) 74 Cal.App.4th 442, 454.) The party alleging a partnership relationship has the burden of proof. (Cochran v. Board of Supervisors (1978) 85 Cal.App.3d 75, 81.) The determination whether a partnership was formed is reviewed for substantial evidence—evidence that is relevant and adequate to support that determination. (Ibid.; Bank of California v. Connolly (1973) 36 Cal.App.3d 350, 364; see Young v. Gannon (2002) 97 Cal.App.4th 209, 225.) Appellate review is thus limited to determining whether substantial evidence supports the trial court's findings and conclusions. (See Cochran, at p. 81.)
"The 'substantial evidence' rule is often misunderstood. It is not a question of whether there is 'substantial conflict' in the evidence but, rather, whether the record as a whole demonstrates substantial evidence in support of the appealed judgment or order. [See, e.g., Bowers v. Bernards (1984) 150 CA3d 870, 872-873, 197 CR 925, 926-927— 'As we have found not at all uncommon in the many appeals taken to this court, both of the parties completely misapprehend the law']." (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2017) ¶ 8:39.)
"When a trial court's factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination . . . ." (Bowers v. Bernards, supra, 150 Cal.App.3d at pp. 873-874; see generally, Eisenberg et al., California Practice Guide: Civil Appeals and Writs, supra, ¶ 8.39.) "So long as there is 'substantial evidence,' the appellate court must affirm . . . even if the reviewing justices personally would have ruled differently had they presided over the proceedings below, and even if other substantial evidence would have supported a different result. Stated another way, when there is substantial evidence in support of the trial court's decision, the reviewing court has no power to substitute its deductions." (Ibid., citing among others, Bowers, at p. 874.)
The record below contains substantial evidence supporting the court's finding that there was no partnership. As the trial court found, the parties maintained separate bank accounts, although the principals and office staff had authority to and did deposit money into and take money out of each account without regard to whose name was on it. Transfers were intended to gain the benefit of a float to ensure that no account was overdrawn. Conflicting evidence was presented as to whether the principals agreed the transfers were to be reconciled or "made good." O'Brien testified he gave only limited authority to Kehoe to lend him money and borrow from his as needed and that Kehoe said the transfers or loans would be made good. Each company was responsible for paying its sub-haulers. Job records maintained in log books were segregated by company and there was a clear distinction between O'Brien's customers (equipment moving) and Kehoe's (dirt hauling). Income was deposited into the billing company's separate account. They did not reconcile the accounts to determine who owed what to whom. In addition, the parties' tax accountant testified that both O'Brien and Kehoe consistently filed "Schedule C's" to reflect each owned a sole proprietorship. The receptionist, who answered telephones at the shared office, testified Kehoe told her to simply say "hello" when answering because there were "three separate companies" operating out of the same office space.
The trial court concluded that "[d]espite the pooling of money among the three accounts and the very loose arrangement with respect to draws and expenses, the acts of the three sole proprietors reflect an intent to remain separate."
Kehoe challenges the court's ruling, contending the court erred by focusing on whether O'Brien intended to be a partner because intent is irrelevant to the determination. "The ultimate test of the existence of a partnership is the intention of the parties to carry on a definite business as coowners. Such intention may be determined from the terms of the parties' agreement or from the surrounding circumstances. [Citations.] A partnership need not be evidenced by writing. [Citation.] 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." (Greene v. Brooks (1965) 235 Cal.App.2d 161, 165-166.) This does not mean that intent is irrelevant. It is at the heart of the analysis. (See ibid.) Where there is no written agreement, that intent is determined by implication from the acts of the parties. Based upon the conflicting evidence presented, the trial court spoke of "intent" as manifested by the "acts of the three sole proprietors." We find no error in the court's ruling.
II. O'Brien's Appeal of the Court's Denial of Interest on Converted Trailers
The trial court ruled that Kehoe had converted 12 trailers that belonged to O'Brien and concealed them for 12 to 13 months. O'Brien contends the trial court erred by failing to award him interest on the value of the trailers for the period of time they were wrongfully in Kehoe's possession and he seeks interest awarded at the statutory rate of 7 percent per annum for a total of $36,855. O'Brien testified he spent time and effort searching in California and Nevada for the trailers. However, he does not dispute the court's finding that he did not introduce evidence as to the amount or value of his time or of expenses he incurred in searching for the trailers. The court awarded him $12,000 as "fair compensation" for the time and money he spent in searching for the trailers, citing Civil Code section 3336.
The court recognized that O'Brien had offered credible expert testimony as to the monthly rental value of the trailers and found that monthly rental value would have been between $422,500 and $526,500. However, the court also found (and O'Brien does not appear to dispute) that O'Brien had offered no evidence to support his claims of lost business opportunity, lost income, or that he leased replacement trailers. The court pointed to evidence that O'Brien borrowed trailers when he needed them and missed no income. The court refused to award damages based on the rental value of the trailers because "any award for damages for loss of use would be speculative and not supported by evidence."
Civil Code section 3336 governs the damages awarded for conversion of property. It provides: "The detriment caused by the wrongful conversion of personal property is presumed to be:
"First—The value of the property at the time of the conversion, with the interest from that time, or, an amount sufficient to indemnify the party injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of and which a proper degree of prudence on his part would not have averted; and
"Second—A fair compensation for the time and money properly expended in pursuit of the property." (Civ. Code, § 3336, italics added.)
" 'Whether a plaintiff "is entitled to a particular measure of damages is a question of law subject to de novo review. [Citations.] The amount of damages, on the other hand, is a fact question . . . [and] an award of damages will not be disturbed if it is supported by substantial evidence." ' (Rony v. Costa (2012) 210 Cal.App.4th 746, 753.)" (Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311, 1324.) "[O]ur duty is to uphold the findings if it is possible to do so upon any sound theory." (Crystal Pier Amusement Co. v. Cannan (1933) 219 Cal. 184, 192.)
O'Brien is entitled to a measure of damages under section 3336, as the trial court recognized. However, the statute itself speaks in terms of raising a "presumption" as to the detriment suffered by the person whose property is wrongfully converted. A presumption may be refuted by sufficient contrary evidence in the circumstances. (Dakota Gardens Apartment Investors B v. Pudwill (1977) 75 Cal.App.3d 346, 351-352 ["Civil Code section 3336 sets out the presumptive measure of damages in conversion, which is rebuttable, save and except when section 3337 applies"].)
"Under Civil Code section 3337, a defendant cannot rebut the presumption by claiming that he applied the converted property to plaintiff's benefit when he took unlawful possession of the property from the beginning. Consequently, the effect of section 3337 is to prevent mitigation when property is stolen from the plaintiff and subsequently applied to his benefit." (Dakota Gardens Apartment Investors B v. Pudwill, supra, 75 Cal.App.3d at p. 352, fn. 2.) This exception does not apply in this case.
The presumption was refuted here by the evidence O'Brien borrowed trailers and suffered no monetary loss from the conversion other than the time and expense he spent looking for them. In addition, the first measure is alternative, allowing interest based on the value of the property "or, an amount sufficient to indemnify the party injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of . . . ." (Civ. Code, § 3336, italics added.) The alternative measure does not mention an interest award.
In the circumstances presented, substantial evidence supported the court's findings that the only loss suffered by O'Brien was the time and effort, plus possible expenses he spent in looking for the trailers. Consequently, an award of interest on the value of the trailers was not required and the trial court did not err in refusing it.
DISPOSITION
The judgment is affirmed. The parties shall bear their own costs on appeal.
/s/_________
Kline, P.J. We concur: /s/_________
Stewart, J. /s/_________
Miller, J.