Opinion
B191282
5-10-2007
LARRY WELCH et al., Plaintiffs and Appellants, v. ST. GEORGE et al., Defendants and Respondents.
Law Offices of Tabone and Derek L. Tabone for Plaintiffs and Appellants. Hahn & Hahn and Rita M. Diaz for Defendants and Respondents.
NOT TO BE PUBLISHED
We affirm the judgment of dismissal. The trial court correctly sustained respondents demurrer because the current lawsuit is barred by the doctrine of collateral estoppel. Thirty years ago the court interpreted the parties partnership agreement in a manner that forecloses the current litigation.
FACTUAL AND PROCEDURAL BACKGROUND
"`"We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] " (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
Appellants Complaint
Larry and Judith Welch filed a complaint for dissolution of partnership, declaratory relief, and appointment of a receiver to oversee the dissolution. St. George, Harlan Bixby, Harlan K. Bixby Trust, Cranford Scott, Bradley Bixby, and Curtis Joinder were named as defendants.
The complaint alleges the Welchs and individual defendants are owners of an interest in St. George, a limited partnership established to purchase an apartment building. The Welchs own 43 of 160 units in St. George. Their interest was decreased in 1983 because of a failure to pay an assessment, but they continue to maintain just over 20 percent interest. The remaining units are owned as follows: Harlan K. Bixby Trust 100.6; Cranford Scott 6.5; Bradley Bixby 6.8; Curtis Joinder 3.1.
The Welchs attached the partnership agreement to the complaint. Paragraph 6 provides in part: "either General Partner may also be a Limited Partner, if and to the extent that he purchases a Limited Partnership Interest, and to such extent shall be treated in all respects as a Limited Partner."
Paragraph 7(f) of that agreement provides: "Termination of Partnership or Sale of Assets. Limited Partners owning in the aggregate sixty-seven (67%) percent of the total investment units of the Limited Partnership (exclusive of the investment units, if any, of the General Partners) may, upon sixty (60) days written notice to the General Partners, elect to dissolve the Partnership or direct the General Partners to sell the Partnership property. The General Partners shall, thereafter, proceed to dissolve and wind up the Partnership activities or to sell the Partnership property respectively."
On October 18, 2005, the Welchs sent a letter purporting to exercise their right to dissolve the partnership. The Welchs believe their ownership interest is greater than 67 percent because "[e]xclusive of the 100.6 units held by the general partner there are 59.4 units, of which [the Welchs] own 43, or 72.1%."
The Welchs sought a declaration regarding the meaning of paragraph 8(e)(2) of the agreement, which concerns the distribution of proceeds from the sale of the partnership property. The Welchs also sought the appointment of a receiver to commence liquidation and operate the partnership. They sought an injunction prohibiting the general partner from interfering with the receiver.
Respondents Demurrer
Respondents demurred to the complaint based on res judicata and collateral estoppel. They supported the demurrer with documents from prior litigation including a complaint from a 1977 lawsuit.
On July 26, 1977, Larry Welch and other plaintiffs sued Bixby as the general partner and other limited partners for declaratory relief, removal of the general partner, dissolution of the partnership, and appointment of a receiver. It was alleged that the plaintiffs demanded Bixby dissolve the partnership and the letter making such demand was incorporated into the complaint by reference. The demand letter provides in pertinent part: "Paragraph 7(f.) of the Partnership Agreement of St. George provides an opportunity for owners of 67% or more of Partnership shares (exclusive of the investment units of the General Partner) to elect to dissolve the Partnership or direct the General Partner to sell the Partnership property. [¶] You are hereby notified under the provisions of paragraph 7(f.) that the undersigned direct you to proceed to dissolve and wind up the Partnership activities and to sell the Partnership property." Among others, Larry Welch signed the letter.
Bixby responded as follows in a letter also attached to the complaint: "Section 7f grants this elective right to Limited Partners owning 67 percent of the total investment units of the Limited Partnership (exclusive of the investment units, if any, of the General Partners). By reference to other provisions of Section 7 of the Partnership Agreement, as well as Sections 5(a) (5), 6a, and 8e, it is clear that the exclusion referred to in Section 7f is the General Partners interest in profits and losses and not the General Partners interest acquired by purchase of a Limited Partnership Interest, on the same terms as all other Limited Partners. Accordingly, your interests in the Limited Partnership are not sufficient to permit you to make the election granted by Section 7f of the Partnership Agreement."
The trial courts statement of decision from the 1977 litigation indicates that "the direction of the limited partners who voted, instructing the general partner to dissolve the partnership and to sell the assets of the partnership was invalid and ineffective for lack of sufficient votes." Similarly, the judgment provides the instruction in the letter attached to the complaint directed Bixby "as general partner of the Partnership, to dissolve St. George and to sell the partnership assets was invalid and ineffective for lack of sufficient votes."
In its opinion, affirming and reversing in part, the Court of Appeal indicated that to dissolve the partnership the "agreement required a 67 percent vote. The dissenters represented but 53 percent." The court stated "[t]he attempted removal of Bixby was invalid, as was the noticed dissolution."
In their reply brief, the Welches state that the Court of Appeal was concerned with other litigation. Assuming this to be true, the Court of Appeal is still discussing prior litigation between the parties.
Trial Court Conclusions
The court sustained the demurrer without leave to amend concluding that the prior litigation precluded Welch from seeking the same relief. A judgment of dismissal ensued and the court awarded Bixby $25,800 in attorney fees, slightly less than the $26,362.50 requested by respondents. The Welchs appeal from the judgment of dismissal and the award of attorney fees.
DISCUSSION
I. Collateral Estoppel Bars Relitigation of The Meaning of the Partnership Agreement Provision 7f
If the facts necessary to show that the doctrine of res judicata or collateral estoppel applies are within the complaint or subject to judicial notice, the trial court may properly sustain a demurrer on that ground. (Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292, 1299.)
"The doctrine of res judicata precludes the relitigation of certain matters which have been resolved in a prior proceeding under certain circumstances. [Citation.] Its purpose is `to preserve the integrity of the judicial system, promote judicial economy, and protect litigants from harassment by vexatious litigation. [Citations.] [¶] The doctrine has two aspects. It applies to both a previously litigated cause of action, referred to as claim preclusion, and to an issue necessarily decided in a prior action, referred to as issue preclusion. [Citations.] The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. [Citations.]" (Brinton v. Bankers Pension Services Inc. (1999) 76 Cal.App.4th 550, 556.)
In this case, the sole disputed element is whether the issues raised in the present action are identical to those raised in the prior action. The issues are the same because both the prior litigation and the present litigation depend on the interpretation of section 7f of the partnership agreement. All of the Welchs causes of action are contingent on the dissolution of the partnership, which in turn requires them to own 67 percent of the units as calculated under section 7f.
In the prior litigation, the trial court and court of appeal necessarily concluded that the units owned by the general partner should be considered when applying paragraph 7f because both courts determined that the limited partners effort to dissolve the partnership was ineffective because a lack of sufficient votes to comprise the necessary 67 percent. The Welchs are bound by that determination in the current litigation.
Although ownership of some of the units have transferred since the prior litigation, the Welchs continue to own 43 of 160 units. If all of the units are included in the calculation, as required by the prior litigation, the Welchs interest is less than 27 percent without regard to any decrease as a result of their failure to pay the assessment. Although the Welchs allege that their interest should be calculated without considering the units owned by the general partner, that method of calculation was rejected in prior litigation.
Collateral estoppel precludes the relitigation of issues already decided. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) The purpose of collateral estoppel is to "obviate the need to relitigate issues already adjudicated in the first action." (Syufy Enterprises v. City of Oakland (2002) 104 Cal.App.4th 869, 878.) That purpose is served by the trial courts conclusion that the Welchs are barred from relitigating the meaning of section 7f. There are no facts alleged "sufficient to compel the dissolution of the partnership" as the Welchs argue and as required for each cause of action alleged in the complaint.
The Welchs argue that if the trial court decided the issue in the prior action it is "simply wrong " and it "would work a monstrous injustice to enforce a plainly erroneous interpretation that was never challenged on appeal." However, this argument ignores the appellate courts statement that there was not the 67 percent ownership necessary to invoke the provisions of paragraph 7(f). In addition, collateral estoppel applies even if the issue was incorrectly determined. Collateral estoppel may apply even where the issue was wrongly decided in the first action. "`"An erroneous judgment is as conclusive as a correct one."" (Roos v. Red (2005) 130 Cal.App.4th 870, 887.) Therefore, even assuming the court erred in its interpretation of section 7f, Welch is still bound by the decision.
We have not emphasized the fact that Judith Welch was not a party to the prior litigation. The Welches do not argue that the third prerequisite — the party against whom the doctrine of collateral estoppel is being asserted was a party or in privity with a party to the prior proceeding—does not apply. They specifically state "The dispute here is over the first element: were the issues previously decided identical to the ones presented here. . . ." Therefore, we need not further consider the issue.
II. Appellants Have Not Shown That They Could Amend The Complaint To Assert A Cause of Action
Appellants argue the transfer of Bixbys general partner and limited partner interests into a trust was invalid. This argument is contrary to the allegation in the complaint that the Harlan K. Bixby Trust owned 100.6 units in the St. George partnership. It is also contrary to the allegation in the complaint that "Defendant Harlan K Bixby Trust is the general partner of St. George."
Assuming appellants could amend their complaint to assert that the transfer by Bixby to his trust were invalid, they still have not shown that they own a sufficient number of units to compel dissolution of the partnership under section 7f of the partnership agreement. Either Bixby or his trust continues to own the units. Paragraph 12e provides: "Any sale or transfer, or purported sale or transfer, of any Partnership interest shall be null and void unless made in accordance with the provisions of Paragraphs 12a, 12b, 12c, and 12d hereof."
Bixby concedes that the transfer of his general partner interest was invalid but argues that the transfer of his limited partner interest was valid. We need not further consider these issues.
Nor have appellants shown that the transfer of the general partners interest, if invalid, compels dissolution of the partnership. They cite to Fisher v. Hampton (1975) 44 Cal.App.3d 741, which relies on former Corporations Code section 15031 to hold that a dissolution is required where a general partners commit acts which "rendered it impossible to carry out the business and purpose of the partnership. . . ." However, section 15031 was repealed in 1996, operative in 1999. Therefore, the Welchs have not met their burden of showing there is a reasonable possibility that the defect in pleading can be cured by an amendment. (See Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.)
III. The Trial Court Did Not Abuse Its Discretion In Calculating The Amount of Attorneys Fees
Paragraph 13d of the partnership agreement provides: "In the event any legal action or proceeding is commenced to enforce any of the provisions of this Agreement or for damage for breach of any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees and to costs of court."
Appellants do not challenge respondents entitlement to fees but, instead challenge the amount of the award. Our review of the amount of an attorney fee award is deferential. (Childrens Hospital & Medical Center. v. Bonta (2002) 97 Cal.App.4th 740, 777.) " `It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.] The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. [Citations.] The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. " (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096.)
Appellants argue that the amount of fees awarded by the trial court is not reasonable. Specifically, they challenge the courts award of fees for 34 hours to file a motion for an undertaking which appellants believe was the same as a motion filed in another case between the same parties. Appellants also challenge two hours billed for filing a notice of appeal in a different case.
Appellants provide no citation to the record indicating that the motion for an undertaking is the same as that filed in another case. The only page they cite is to their opposition for attorney fees, which shows that they made the identical argument to the trial court. This does not show the trial court abused its discretion in awarding fees for the motion.
With respect to the notice of appeal, respondents bills include a combined entry, that among other things, states that they reviewed a notice of appeal. As appellants point out, the date for the notice of appeal was prior to the notice of appeal filed in this case. The amount billed for the combined entry was for $262.50, less than the $562.50 subtracted by the trial court from the amount requested. Appellants have shown no abuse of discretion.
DISPOSITION
The judgment is affirmed. Respondents are entitled to costs.
We concur:
RUBIN, J.
BOLAND, J.