Opinion
A143041
08-02-2017
SERIES GROUP, LLC, Plaintiff and Appellant, v. UNIQUE MANAGEMENT ASSOCIATES, INC., et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. CGC-12-518186)
Series Group, LLC (plaintiff) appeals following a court trial in which the trial court found against it and in favor of Unique Management Associates, Inc. (UMAI) and Naresh Dhadhal (collectively defendants) in plaintiff's action for breach of contract and other related causes of action. On appeal, plaintiff contends (1) the trial court erred in failing to provide for an accounting; (2) the court erred in finding plaintiff materially breached the parties' partnership agreement; (3) the court erred in failing to find a waiver of plaintiff's purported breach of the partnership agreement; (4) the court erred in denying quantum meruit recovery to plaintiff; (5) the court's analysis as to plaintiff's cause of action for breach of fiduciary duty was insufficient; and (6) the court erred in finding plaintiff failed to meet its burden as to damages. We shall affirm the judgment.
BACKGROUND
This case arises out of a written partnership agreement entered into on June 14, 2010, between plaintiff and defendants. Under that agreement, the parties were to redevelop and operate a new business entity at existing premises then called Temple Bar, located on Polk Street in San Francisco. Dhadhal was president of UMAI, which owned Temple Bar. Plaintiff was a company experienced in the operation and management of bars and nightclubs; its principal officer was Derek Bonner.
Pursuant to the partnership agreement, which was to run for a five-year period starting July 1, 2010, plaintiff became managing partner of the venture, making all day-to-day decisions regarding management, operations, and the future direction of the business. UMAI was responsible only for payment of certain preexisting, ongoing expenses, including rent, insurance, and other reasonable costs. Profits were to be split equally after plaintiff recouped its costs for refurbishing the premises.
With respect to plaintiff's reporting duties to UMAI, the partnership agreement provided that plaintiff "will keep maintain [sic] adequate records and take responsibility for the proper accounting of the business in accordance with GAAP [generally accepted accounting principles] and will use fair business practices in its financial reporting to UMAI. . . ." The agreement further provided, "UMAI will receive monthly reporting of the business financials of Temple Bar. [Plaintiff] will prepare P&L [profit and loss] statements and provide UMAI with any records or receipts it may need for accounting purposes. . . ."
In light of this language in the partnership agreement, the court found "[t]he maintenance of proper financial records and the monthly distribution of them is clearly a material term of the Partnership Agreement." The court further found that, "[f]rom the outset, plaintiff failed to perform its financial record keeping and reporting required under the Partnership Agreement."
The court explained the basis of this finding as follows: "The Partnership Agreement provides that the partners are entitled to receive quarterly distributions of the business profits, which obviously cannot be calculated without appropriate records of financial operation. Further, the testimony of Mr. Dhadhal confirmed the obvious: that no one would turn over a business to someone else to run without a means of staying informed as to at least how [sic] the financial aspects of how things are going, especially when profits are calculated upon fiscal management. Further, accurate financial record keeping and reporting was necessary for the plaintiff to recoup its costs of construction before profits were to be divided."
In its statement of decision, the court set forth the following evidence in support of its finding that plaintiff had failed to perform its agreed upon financial record keeping and reporting duties. Temple Bar closed on June 30, 2010, at which time plaintiff took over the business. It caused the premises to be remodeled and implemented a marketing plan. Daniel Baron, to whom Bonner offered an equity position in the project in exchange for his assistance, testified that he was frequently on the jobsite during construction and saw that plaintiff did not appear to be keeping records of construction work expenditures. On several occasions, he asked Bonner about keeping such records, but was rebuffed. He also observed that Bonner sold salvage materials from Temple Bar, including television sets, to buyers solicited through craigslist. After the new business opened, he observed Bonner paying some employees in cash at the end of their shifts. Zalaman, Daniel's father, testified that he wanted the best for his son, and therefore supplied materials and performed construction services on the project over three months, without being paid. After observing Bonner paying cash for various project related matters, Zalaman told Bonner in October 2010, he should use checks to pay for project related expenses, warned him that the cash transactions were improper, and threatened to tell Dhadhal if they did not stop. Eventually, in December, Zalaman reported his concerns to Dhadhal.
To avoid confusion, we will refer to Daniel and Zalaman Baron by their first names in this opinion.
On October 4, 2010, the new nightclub commenced operation under the name "Noble." As the court stated, the evidence showed that after the business reopened, the amounts of money collected from sales to customers, vendor promotions, and other sources were "not properly reconciled with deposits in the partnership's bank accounts." The court offered the example of a promotional cash payment of $5,000 from the vendor Red Bull, which the evidence showed Bonner received and deposited into a Series Group bank account from which most of the money was withdrawn with no showing of "where the money went or for what specific purpose." Another example of lack of cash management discussed by the trial court involved ATM cash withdrawals from the partnership's operating account. Although bank statements confirmed the withdrawals, Bonner could not recall what the cash was used for; nor were records presented at trial to refresh Bonner's recollection. Similarly, there was a failure of explanation regarding $30,000 in undeposited revenue, which apparently came from cash receipts from the sale of food and beverages. No record of a bank deposit or other use of this money was presented at trial, and Bonner testified he lacked a recollection regarding the revenue. The court stated that "Mr. Bonner's testimony was replete with similar instances where he could not recall facts to explain where money came from or where it went. While it is true that it would be difficult for a witness to have a detailed level of specific recollection of the an [sic] operating business' cash flow, an important reason for having accurate accounting records is to obviate the need to rely on memory. Mr. Bonner was regularly unable to refer to such records when cross-examined regarding particular transactions."
The court observed that Bonner "repeatedly explained that he kept receipts and perhaps other items in a box and that those records could be reviewed to answer specific questions." The court further noted that a box sat on a chair near plaintiff's counsel's table during the final day of trial, and counsel made passing reference to it in argument. However, "[t]he court did not look at what was in the box as it was neither presented to the court to be marked as an exhibit nor admitted into evidence." In any case, the court found that whether any documentation existed as to cash flow was irrelevant since the question was whether plaintiff adequately performed its obligation under the partnership agreement as managing partner to keep sufficient records and report to UMAI, which it did not.
The court also noted that plaintiff's failure to generate and provide defendants with proper financial records led to defendants filing a police claim accusing Bonner of embezzling money from the business. This claim was the subject of the cause of action for abuse of process in plaintiff's complaint, which was dismissed before the conclusion of trial.
In finding that plaintiff had not presented evidence that it kept adequate records, the court also cited the testimony of Bruce Friedman, plaintiff's accounting expert who testified as to plaintiff's damages. His testimony "established that there were a number of problems in what he was given to review," such as the "point of sale" system plaintiff used, which did not generate reports sufficient to reconcile cash receipts, and records from SF Bay Financial—a bookkeeping company that plaintiff hired in December 2010—which "had accuracy and completeness problems." Friedman also established that cash receipts and disbursements, as well as all banking transactions, should be recorded in appropriate ledgers, to track cash flow. As the court stated, since it was not shown at trial that plaintiff maintained such records, Friedman's testimony supported the court's conclusion that plaintiff "did not fulfill its financial record keeping and reporting obligations under the Partnership Agreement."
The court found "worthless" Friedman's opinion that Bonner had not embezzled any money from the business for two reasons. First, he had been qualified as an expert in accounting matters and his opinion on the embezzlement issue was based on an analytical construct for evaluating whether someone would steal money, the source of and legitimacy of which was not established, and which was based on sociological and psychological concepts, areas in which Friedman was not qualified as an expert. Second, Friedman's opinion on embezzlement "made no sense." Friedman had concluded from an interview with Bonner that he "did not appear to be a man of extravagant needs, thus he did not [need] a lot of money to meet such needs, thus he would have no reason to embezzle, thus he did not do so." The court found this "litany" "ridiculous" and further observed that the issues presented did not require it to determine whether Bonner had embezzled money.
In its statement of decision, the court recounted Dhadhal's testimony that he entered into partnership agreement with the understanding that plaintiff had the experience and expertise to turn the Temple Bar operation into a highly profitable nightclub business, whereas defendants did not. Dhadhal intended that plaintiff have authority to run the business, but that "financial reporting would be regular, frequent and proper, utilizing Generally Accepted Accounting Principles." After plaintiff took over the business under the partnership agreement in June 2010, through the opening of Noble on October 4, 2010, UMAI did not receive financial reports regarding the progress of the construction or other operational matters. Shortly after the opening, Dhadhal started to become concerned and, by the second week in October, Daniel and Zalaman reported their concerns about plaintiff's lack of financial records and cash controls.
On November 12, 2010, Dhadhal received a copy of an urgent email from Daniel to a Robert DiNapoli, which stated that it was necessary to prepare an accounting of the business's payroll to date for Dhadhal " 'today if possible.' " An email response from Bonner asked Daniel to "step back from everything involving operations" and "to take a silent role from now on until we can figure out a solution to our problem." The email further stated that any issues would be taken up by plaintiff, which would be "accountable to Naresh [Dhadhal] from this point on."
In December 2010, UMAI disavowed any further existence of a partnership between it and plaintiff.
On November 9, 2012, plaintiff filed a first amended complaint (complaint) for (1) breach of contract, (2) intentional misrepresentation, (3) negligent misrepresentation, (4) breach of fiduciary duty, and (5) abuse of process. In its prayer, plaintiff requested compensatory damages, interest, costs, exemplary and punitive damages, attorney fees, and a constructive trust on defendants' assets and profits.
As noted, the cause of action for abuse of process was subsequently dismissed.
A court trial commenced on June 28, 2013, and took place on approximately seven days over the course of almost eight months.
On April 23, 2014, the court issued a tentative statement of decision, in which it found "Plaintiff has failed to meet its burden of proof as to one or more elements of each of its causes of action against each defendant. Therefore, each defendant is entitled to judgment against plaintiff."
On May 8, 2014, plaintiff filed objections to alleged inaccuracies, omissions, and ambiguities in the tentative statement of decision.
On May 15, 2014, the court issued a final statement of decision, which was nearly identical to its tentative statement of decision.
On July 14, 2014, the court entered judgment in favor of defendants and against plaintiff on all causes of action.
On September 12, 2014, plaintiff filed a notice of appeal.
DISCUSSION
I. Standard of Review and Related Procedural Questions
A. Competing Rules of Court
Some of plaintiff's contentions on appeal involve the sufficiency of the evidence to support the court's findings. However, in the statement of facts in its opening brief, plaintiff has recited only those facts that are favorable to its position. As a panel of this Division stated in In re Davenport (2011) 194 Cal.App.4th 1507, 1531, "[s]uch conduct is not to be condoned." That is because California Rules of Court, rule 8.204(a)(2)(C) provides that an appellant's brief must "[p]rovide a summary of the significant facts limited to matters in the record." (See In re Marriage of Fink (1979) 25 Cal.3d 877, 887 [" 'It is incumbent upon appellants to state fully, with transcript references, the evidence which is claimed to be insufficient to support the findings' "]; see also, Hjelm v. Prometheus Real Estate Group, Inc. (2016) 3 Cal.App.5th 1155, 1165-1166 [a panel of this Division deemed party's sufficiency of the evidence argument waived due to its failure to follow rule 8.204(a)(2)(C)'s requirement regarding summary of significant facts to be provided in opening brief on appeal]; Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 737 [where a party on appeal has failed to set forth a summary of material evidence on an issue regarding which it has claimed evidence is insufficient, " 'the error assigned is deemed to be waived' "].)
All further rule references are to the California Rules of Court.
Normally, in light of the inadequate summary of relevant facts in its opening brief, we would find plaintiff's claims challenging the sufficiency of the evidence waived. (See Hjelm v. Prometheus Real Estate Group, Inc., supra, 3 Cal.App.5th at p. 1155; Schmidlin v. City of Palo Alto, supra, 157 Cal.App.4th at pp. 737-738.) In this case, however, there is a competing rule under which, if the respondent fails to file a respondent's brief, "the court may decide the appeal on the record, the opening brief, and any oral argument by the appellant." (Rule 8.220(a)(2).) This rule also applies here because defendants did not file a respondent's brief on appeal. Therefore, in light of defendants' failure to file a respondent's brief, we decline to deem waived plaintiff's sufficiency of the evidence claims under rule 8.204(a)(2)(C), but will instead address those claims under the applicable rules on appeal. (See Smith v. Smith (2012) 208 Cal.App.4th 1074, 1078 [under rule 8.220(a)(2), a reviewing court may decide appeal on record and opening brief, and plaintiff "still bears 'the affirmative burden to show error whether or not the respondent's brief has been filed"].)
B. Standard of Review on Appeal and Presumptions Arising
from the Trial Court's Statement of Decision
"In reviewing a judgment based upon a statement of decision following a bench trial, we review questions of law de novo. [Citation.] We apply a substantial evidence standard of review to the trial court's findings of fact. [Citation.] Under this deferential standard of review, findings of fact are liberally construed to support the judgment and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings. [Citation.] [¶] A single witness's testimony may constitute substantial evidence to support a finding. [Citation.] It is not our role as a reviewing court to reweigh the evidence or to assess witness credibility. [Citation.] 'A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness.' [Citation.] Specifically, '[u]nder the doctrine of implied findings, the reviewing court must infer, following a bench trial, that the trial court impliedly made every factual finding necessary to support its decision.' [Citation.]" (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981 (Thompson).)
However, when a party has made a proper request for a statement of decision, "the scope of appellate review may be affected. [Citation.]" (Thompson, supra, 6 Cal.App.5th at p. 981.) Code of Civil Procedure sections 632 and 634, as implemented by rule 3.1590(d)-(g), "establish a two-step procedure for requesting a statement of decision and preserving objections for pursuit on appeal." (Thompson, at p. 982.) "For the doctrine of implied findings to be disabled on appeal, both steps of the two-step procedure under section 632 and 634 must be followed." (Thompson, at p. 983.) Where a party fails to follow these procedural requirements, the reviewing court will imply findings against him or her and determine whether substantial evidence supports those findings. (Ibid.)
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Under section 632, "[t]he court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial. The request must be made within 10 days after the court announces a tentative decision . . . . The request for a statement of decision shall specify those controverted issues as to which the party is requesting a statement of decision. . . ."
Under section 634, "[w]hen a statement of decision does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court . . . prior to entry of judgment . . . it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue."
Here, at the conclusion of trial, the court took the matter under submission and informed the parties that it would prepare a statement of decision. It then issued a tentative statement of decision, to which plaintiff filed objections, in which it stated that it was requesting a statement of decision "on the principal controverted issues as specified below," as well as that it was submitting "objections to inaccuracies, omissions, and ambiguities" in the tentative statement of decision. The court subsequently issued a statement of decision that was virtually unchanged from its tentative statement of decision. We have some doubt regarding whether the objections filed by plaintiff comply with the requirements of section 632 but, giving plaintiff the benefit of the doubt, we will not deem its objections waived on appeal. (Compare Thompson, supra, 6 Cal.App.5th at pp. 984-985 [defendant "filed a laundry list of objections under section 634, but that was not enough to avoid the doctrine of implied findings" where he had "filed nothing under section 632 specifying as 'controverted' or otherwise proposing as 'content' " any issues he later claimed had not been addressed].)
Specifically, in the objections it filed, plaintiff did state at the outset that it "hereby requests a statement of decision on principal converted [sic] issues as specified below, as well as those other controverted issues included in the court's tentative decision, and submits the following objections to inaccuracies, omissions, and ambiguities in the courts tentative statement of decision served on April 23, 2014." However, this statement was followed by the Heading, "Objections to Inaccuracies, Omissions, and Ambiguities in Tentative Statement of Decision," after which plaintiff listed 35 purportedly unresolved issues and other objections to the tentative statement of decision.
We also note that "[e]ven where proper procedure under sections 632 and 634 has been followed punctiliously, '[t]he trial court is not required to respond point by point to the issues posed in a request for statement of decision. The court's statement of decision is sufficient if it fairly discloses the court's determination as to the ultimate facts and material issues in the case. [Citations.]" (Thompson, supra, 6 Cal.App.5th at p. 983.)
Finally, where, as here, " 'the issue[s] on appeal turn[] on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant's evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding." ' [Citation.]" (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466 (Sonic Manufacturing Technologies, Inc.).)
II. Trial Court's Failure to Provide for an Accounting
Plaintiff contends the trial court erred in failing to provide for an accounting. According to plaintiff, even assuming there was a material breach of contract (see pt. II., post), it was "statutorily entitled to an accounting, including a return on its capital contributions and a settlement of its partnership account." (See Corp. Code, § 16405, subd. (b) ["[a] partner may maintain an action against the partnership or another partner for legal or equitable relief, with or without an accounting as to partnership business"].)
Plaintiff objected that the court's tentative statement of decision did not adequately resolve whether plaintiff was entitled to equitable relief, including, inter alia, "an accounting of the Partnership's assets."
Plaintiff, however, did not request an accounting in its complaint, nor did it seek leave to amend the complaint to add such a claim. Instead, plaintiff asked that the court award it damages based on defendants' alleged misdeeds, and also requested imposition of a constructive trust. Citing Vaughan v. Caldwell (1927) 200 Cal. 572, 575, plaintiff asserts that to state a cause of action for an accounting from copartners, a pleading must only allege the existence of a partnership relationship and the existence of unsettled accounts, and that its complaint satisfied those pleading requirements. However, Vaughan does not stand for the proposition that a party can state a cause of action for an accounting even though it includes no such request in its pleadings. (See Vaughan, at p. 574 ["The prayer was that an account be taken of all the partnership dealings and transactions from the time of the commencement thereof to the date of the action"].)
Indeed, as the appellate court explained in Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413: "A cause of action for accounting requires a showing of a relationship between the plaintiff and the defendant . . . that requires an accounting or a showing that the accounts are so complicated they cannot be determined through an ordinary action at law. [Citations.] 'An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation. [Citation.]' [Citation.]" (See also 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, §§ 819-820, p. 236 [to state a cause of action for an accounting, which is equitable in nature, plaintiff must allege, inter alia, "[a] balance due from the defendant to the plaintiff that can only be ascertained by an accounting," rather than by "a sum certain or a sum that can be made certain by calculation"].)
Here, because plaintiff both failed to request an accounting in its complaint and alleged its right to recover damages, i.e., a sum certain or a sum that could be made certain by calculation, the trial court did not err in failing to provide for an accounting. (See Fleet v. Bank of American N.A., supra, 229 Cal.App.4th at p. 1413.)
We also note that plaintiff's failure to properly keep records and account to UMAI, as required by the partnership agreement, would likely make it extremely difficult to provide for an accounting in this case, even had an accounting been requested. (See pt. II., post.)
III. Trial Court's Finding that Plaintiff Materially
Breached the Partnership Agreement
Plaintiff contends the court erred in finding it materially breached the parties' partnership agreement, which excused defendants from further performance under the agreement. Specifically, plaintiff asserts (1) the court "failed to consider a significant amount of evidence relating to substantial performance," and (2) its ultimate findings that plaintiff materially breached the partnership agreement by failing to keep adequate financial records lacked an adequate evidentiary basis.
"It is elementary a plaintiff suing for breach of contract must prove it has performed all conditions on its part or that it was excused from performance." (Consolidated World Investments, Inc. v. Lido Preferred, Ltd. (1992) 9 Cal.App.4th 373, 380; accord, Plotnik v. Meihaus (2012) 208 Cal.App.4th 1590, 1602.) "When a party's failure to perform a contractual obligation constitutes a material breach of the contract, the other party may be discharged from its duty to perform under the contract. [Citations.] Normally the question of whether a breach of an obligation is a material breach, so as to excuse performance by the other party, is a question of fact. [Citations.] Whether a partial breach of a contract is material depends on 'the importance or seriousness thereof and the probability of the injured party getting substantial performance.' [Citations.] 'A material breach of one aspect of a contract generally constitutes a material breach of the whole contract.' [Citation.]" (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277-278 (Brown).)
Here, the partnership agreement required plaintiff to "maintain adequate records[,] take responsibility for the proper accounting of the business in accordance with GAAP and . . . use fair business practices in its financial reporting to UMAI." The agreement further provided that UMAI would receive monthly reporting of the business financials and that plaintiff would prepare profit and loss statements and provide UMAI with any records or receipts it might need for accounting purposes. In finding that plaintiff did not make a prima facie showing of breach of contract on the part of UMAI, the court explained: "In this case, the claimed breach is the termination of the Partnership Agreement by UMAI. The evidence established that the parties entered into the agreement in order to redesign the Temple Bar so as to maximize their profits from the business. Since the plaintiff was experienced in such an operation and UMA[I] was not, the control of business operations, including finances, was granted to the plaintiff. The Partnership Agreement expressly requires that the plaintiff keep proper accounting records and regularly submit them [to] UMAI, both because that is what is necessary to calculate partnership profits which were to be distributed quarterly and because such is common and prudent business practice.
"The evidence established that plaintiff failed to perform its obligation to maintain proper accounting records of the business and to regularly submit them to UMAI and that the failure to do so constituted a material breach of the Partnership Agreement, excusing any further performance by UMAI thereunder. Thus, the plaintiff failed to meet its burden of proof under its breach of contract action."
The court set forth the evidence on which it based its finding that plaintiff materially breached the partnership agreement by failing to maintain proper accounting records and submit such records to UMAI. This included the testimony of Daniel and Zalaman regarding plaintiff's failure to keep records, its cash payments of workers, and its sale of Temple Bar materials. The court also cited evidence, including that regarding the Red Bull promotional fee, the unaccounted for ATM withdrawals, and the $30,000 undeposited revenue issues, all of which showed that, after the business reopened, money collected from sales to customers, vendor promotions, and other sources were "not properly reconciled with deposits in the partnership's bank accounts."
Based on this evidence, the court reasonably found plaintiff had materially breached the partnership agreement and, therefore, there was no substantial performance of the terms of the agreement by plaintiff. (See Brown, supra, 192 Cal.App.4th at pp. 277-278.)
In addition, we find plaintiff's specific challenge to the court's finding that plaintiff failed to rebut Daniel's trial testimony to be without merit. Plaintiff asserts that it "presented substantial evidence controverting Daniel's testimony, thus rendering it unreliable and inadequate." First, plaintiff would have us alter the standard of review. The question is not whether plaintiff presented substantial evidence controverting the challenged testimony, but whether substantial evidence supports the court's finding, which was based in part on Daniel's testimony. (See Thompson, supra, 6 Cal.App.5th at p. 981; see also Sonic Manufacturing Technologies, Inc., supra, 196 Cal.App.4th at p. 466.) Nor is it our role to reweigh the evidence or assess witness credibility. (Ibid.)
The court cited Daniel's testimony that plaintiff did not appear to be keeping records of expenditures for the construction work being performed; that he asked Bonner about keeping such records, but Bonner rebuffed him; that he had observed that Bonner sold salvage materials from Temple Bar to buyers solicited on the website craigslist; and that after Noble opened, he observed Bonner paying some employees in cash at the end of their shifts. Plaintiff refers to Daniel's "acknowledged bias" based on his "having a financial interest in the outcome of the matter." In support of this statement, plaintiff cites to a passage in the reporter's transcript to which the court sustained an objection and struck the testimony from the record. Plaintiff also tries to counter Daniel's testimony by pointing to Bonner's testimony that he kept " 'construction notes' " and that he provided UMAI with a spreadsheet of ongoing construction costs from approximately September through November 2010. Again, for the reasons already discussed, none of the cited evidence that purportedly rebuts Daniel's testimony changes our conclusion that the court's finding of material breach was supported by substantial evidence. (See Thompson, supra, 6 Cal.App.5th at p. 981; Sonic Manufacturing Technologies, Inc., supra, 196 Cal.App.4th at p. 466.)
Plaintiff also mentions the testimony of Daniel's father, Zalaman, stating merely that he "was not a party to the Partnership Agreement, was not entitled to receive any of the accounting records provided by [plaintiff] to UMAI, and thus lacked foundation and personal knowledge as to [plaintiff's] accounting performance. As with Daniel's testimony, these assertions regarding Zalaman do not undermine the totality of the evidence on which the court relied in finding that plaintiff materially breached the partnership agreement.
IV. Trial Court's Failure to Find that Defendants Waived
Plaintiff's Breach of the Partnership Agreement
Plaintiff contends the court erred in failing to find a waiver of plaintiff's purported breach of the partnership agreement, and further contends this error prejudicially affected the court's findings on all causes of action.
"Case law is clear that ' "[w]aiver is the intentional relinquishment of a known right after knowledge of the facts." [Citations.] The burden . . . is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and 'doubtful cases will be decided against a waiver" [citation].' [Citations.] The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right. [Citation.]" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31 (Waller); see also, e.g. Whitney Investment Co. v. Westview Development Co. (1969) 273 Cal.App.2d 594, 603 ["When the injured party with knowledge of the breach continues to accept performance from the guilty party, such conduct may constitute a waiver of the breach"].)
Plaintiff maintains that we should not infer all findings necessary to support the judgment because it included in its objections to the tentative statement of decision an objection to the court's failure to address the waiver issue. First, plaintiff does not point to any argument in its briefing in the trial court regarding defendants' purported waiver of any breach of contract on plaintiff's part.
Second, even were we to address the issue, the evidence cited by plaintiff in support of its assertion that defendants continued to treat plaintiff as a partner despite knowledge of its alleged breach—including, for example, Dhadhal's purported assurance in December 2010, that plaintiff would continue to be treated as a shareholder and partner; Dhadhal and Bonner's attendance as partners at a December 14 hearing about an entertainment permit for Noble and the eventual joint grant of the permit to the partnership; and Dhadhal's supposed statement in February 2011, that he had no concerns after receiving a financial report from plaintiff's bookkeeper—would require us to speculate as to defendants' awareness of the full extent of plaintiff's breach and its intent as to the continuation of the partnership in the period before it repudiated the partnership agreement. (See Waller, supra, 11 Cal.4th at p. 31; see also Sonic Manufacturing Technologies, Inc., supra, 196 Cal.App.4th at p. 466.) In fact, when it addressed plaintiff's misrepresentation causes of action, the court stated that "the evidence established that plaintiff's failures to run the business in a fiscal[ly] responsible way and the unexplained questionable business practices discussed above reasonably instilled skepticism in the defendants, which justified their accusations of wrongdoing against the plaintiff, their steps to determine what was going on regarding the business' cash flow, and their ultimate exclusion of the plaintiff and Mr. Bonner from the business."
Hence, even were the issue properly raised in the trial court, the court reasonably could have found plaintiff did not satisfy its burden of proving defendants' intent to waive plaintiff's breach of the partnership agreement, given the court's finding that defendants acted reasonably in initially questioning plaintiff's performance before eventually terminating the partnership agreement, once it had full knowledge of the facts. (See Waller, supra, 11 Cal.4th at p. 31.; compare Whitney Investment Co. v. Westview Development Co., supra, 273 Cal.App.2d at p. 603.)
V. The Trial Court's Failure to Allow Quantum Meruit Recovery by Plaintiff
Plaintiff contends the court erred in failing to find plaintiff was entitled to recovery under the theory of quantum meruit, to compensate it for the services it rendered under the partnership agreement.
" 'The measure of recovery in quantum meruit is the reasonable value of the services rendered provided they were of direct benefit to the defendant.' [Citations.] [¶] The underlying idea behind quantum meruit is the law's distaste for unjust enrichment. If one has received a benefit which one may not justly retain, one should 'restore the aggrieved party to his [or her] former position by return of the thing or its equivalent in money.' [Citation.]" (Maglica v. Maglica (1998) 66 Cal.App.4th 442, 449-450.)
Here, plaintiff included in its objections the claim that the court did not adequately resolve in its tentative statement of decision whether plaintiff was entitled to equitable relief, including quantum meruit relief. However, as with its claim that the court erred in failing to order an accounting (see pt. II., ante), plaintiff did not include a quantum meruit claim in its complaint or request quantum meruit in its prayer; nor did it seek leave to amend the complaint to add a quantum meruit claim. (Cf. Jogani v. Superior Court (2008) 165 Cal.App.4th 901, 906 [describing quantum meruit as "a quasi-contract action to recover the reasonable value of services rendered"].) Accordingly, the trial court did not err in failing to permit plaintiff to recover under the theory of quantum meruit.
As with the claim that the court should have ordered an accounting, plaintiff's failure to keep proper financial records also would have made it very difficult for the court to ascertain any amount of money to which plaintiff might have been entitled under a quantum meruit theory, even had plaintiff properly raised the issue in its complaint.
VI. Alleged Inadequacy of the Trial Court's Analysis of Plaintiff's
Cause of Action For Breach of Fiduciary Duty
Plaintiff contends the court's analysis of the cause of action for breach of fiduciary duty was insufficient.
In its statement of decision, the court found plaintiff's cause of action for breach of fiduciary duty "fails for lack of evidence. The gravamen of this claim is that defendants did not give plaintiff the benefits of the venture and instead lied to [Bonner] about his role in the business. This is alleged to be a breach of fiduciary duties owed under the Partnership Agreement and otherwise. As is set forth above, plaintiff's failure to run the financial aspects of the business as required by the Partnership Agreement excused any performance by the defendants and obviated any fiduciary obligations that may have existed on the part of the defendants toward plaintiff."
In its statement of decision, the court also observed that defendants' accusation of embezzlement was a claimed factual basis for part of plaintiff's breach of fiduciary duty cause of action, "including that the accusation was fabricated, slanderous, and designed to drive the plaintiff from the partnership." The court, however, found evidence that plaintiff failed to comply with the partnership agreement's record keeping and dissemination requirements, as well as "unanswered questions regarding such transactions as the Red Bull promotional fee, the unaccounted for ATM withdrawals and the $30,000 undeposited revenue questions render the defendants' suspicion of embezzlement reasonable."
Plaintiff relies on several cases in which courts have stated that a partner's duty of care does not terminate upon dissolution, but instead continues in a limited way until the winding up of partnership affairs and distribution of assets is complete. (See, e.g., Dickson, Carlson & Campillo v. Pole (2000) 83 Cal.App.4th 436, 445; Oliker v. Gershunoff (1987) 195 Cal.App.3d 1288, 1305; see also Corp. Code, § 16404, subd. (c) ["[a] partner's duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law"].) In this case, however, as we have explained (see pt. III., ante), once plaintiff materially breached the partnership agreement, defendants were discharged from their duties to perform under the agreement. (See Brown, supra, 192 Cal.App.4th at pp. 277-278.) Thus, unlike a functioning partnership that is "winding up" its business (Corp. Code, § 16404, subd. (c)), where the partners still owe each other limited duties (ibid.), plaintiff's material breach of the partnership agreement in the months after the parties entered into that agreement obviated any continuing fiduciary obligations on defendants' part that might otherwise have existed. (See Brown, at pp. 277-278.)
Nor does plaintiff cite to any evidence suggesting that defendants engaged in "grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law" after it was discharged from its obligations under the partnership agreement. (Corp. Code, § 16404, subd. (c).)
VII. Trial Court's Failure to Award Damages to Plaintiff
Plaintiff contends the court erred in finding it had failed to meet its burden as to damages.
In its statement of decision, the court found that plaintiff's claims "also fail due to its failure to meet its burden of proof as to damages from any of the causes of action. Plaintiff's damage evidence was not credible, and to the extent there was any substance to the damage claim, the claimed damages are too speculative to be recovered." In the conclusion of its statement of decision, the court further summarized: "The plaintiff has failed to meet its burden of proof as to each of its causes of action and as to damages on any one of them."
We have concluded the court properly found against plaintiff in its action against defendants. Plaintiff therefore was not entitled to any damages. Accordingly, we need not address this alternative ground upon which the court found against plaintiff.
DISPOSITION
The judgment is affirmed. The parties shall bear their own costs on appeal.
/s/_________
Kline, P.J. We concur: /s/_________
Richman, J. /s/_________
Stewart, J.