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*13 The court also concluded Baer was not involved in management of the controlled accounts. The evidence on this point, the testimony of Tedder, Case, Berens, and Wong, was uniform that Baer played no role in the controlled accounts. The court went on to observe it was Tedder who filed the May 1996 complaint against Baer—the “mastermind of [the] controlled accounts scheme ... was on the same side of this lawsuit as [Plaintiffs].“ There was no credible evidence Baer received compensation or division of profits from Tedder's asset protection services; the only evidence was that IBT and SCSD accepted “ ‘loans' “ from Tedder's clients. The original complaint (and all subsequent complaints) alleged Plaintiffs were lenders and Baer's entities were borrowers responsible for repaying loans.
Finally, the court found, “This case appeared to be a collusive lawsuit between Tedder and [P]laintiffs to get money from Baer that Tedder himself had bilked from [P]laintiffs, without participation by Baer. Some of the money did indeed go to IBT and SCSD as loans, among numerous others who received money from the Tedder-controlled accounts. Baer is already obligated to pay those loans back though his entities as determined by Judge Jameson in [phase 2]. In this case nearly everyone changed his story at some point. [P]laintiffs had the burden of proof and were heavily handicapped by their association and reliance on Tedder, his actions, his destruction of records, and his testimony as well as by their own credibility problems. All of the [P]laintiffs either hid records or destroyed them, some on purpose, some over the lengthy course of this trial through poor record keeping. The effect of all of this on the trier of fact was a failure of proof as to [P]laintiffs' case....“
The court's statement of decision also included a finding Plaintiffs had affirmatively abandoned any claims that Baer was an alter ego of his corporations, IBT and SCSD, because they presented no evidence on this claim.
Judgment; Postjudgment Motions
After the phase 4 statement of decision was entered, the Grammer Limited Partnerships filed a motion for new trial asking the court to strike the finding in its statement of decision that Plaintiffs had abandoned their alter ego claim. They later filed a second motion for new trial on the grounds Baer's statute of limitation defense had been waived because he did not specifically plead Code of Civil Procedure section 340.6 in his answer.
The trial court entered final judgment on May 31, 2011, on all causes of action in the complaint (except those involving Tedder and his wife, as those had been severed due to Tedder's bankruptcy).8 The court entered judgment for each of the Grammer Limited Partnerships against IBT on the breach of contract and common counts causes of action in accordance with Judge Jameson's phase 2 August 30, 2005, statement of decision as follows: Banyan was awarded $700,000; Orange Blossom was awarded $175,000; and Pear Tree was awarded $150,000. Pear Tree was also awarded $70,000 against SCSD. With pre and postjudgment interest, the judgment in favor of the Grammer Limited Partnerships now exceeds $3.5 million. The court entered judgment in Defendants' favor on all remaining causes of action as to the Grammer Limited Partnerships and on all causes of action as to the McGrath Limited Partnerships and Birch. Plaintiffs filed a notice of appeal from the May 31 judgment (the appeal before us). Defendants filed a cross-appeal from the judgment but later dismissed it.
The court subsequently denied the Grammer Limited Partnerships' new trial motion as to their request to strike Baer's statute of limitations defense, but granted the motion as to their request to strike from the statement of decision the finding they affirmatively abandoned their alter ego claim and granted them a new trial as to the alter ego issue only. Baer separately appeals from the order granting new trial on the alter ego claim (Banyan 2, supra, G045797).
*14 The Grammer Limited Partnerships and Baer and SCSD, filed a motions for attorney fees under Nevada Law, which governed the promissory notes on which the Grammer Limited Partnerships recovered. The trial court denied both motions and the Grammer Limited Partnerships, Baer, and SCSD appeal from the order (Banyan 3, supra, G046428).
A. Statute of Limitations
1. Code of Civil Procedure section 340.6 applies to the breach of fiduciary duty claim.
Plaintiffs contend the trial court applied the wrong statute of limitations to the breach of fiduciary duty claim against Baer. They argue Code of Civil Procedure section 340.6, the one-year statue applicable to an action against an attorney arising out of performance of professional services, does not apply because Baer is not an attorney and the breach of fiduciary duty cause of action was not premised upon the provision of legal services. Instead, Plaintiffs contend the only applicable limitations period is the catch-all four-year provision found in Code of Civil Procedure section 343 and under that provision the breach of fiduciary claim is timely. We disagree.
“Whether a [particular] statute of limitations applies ordinarily is a question of law. [Citation.]“ (Embarcadero Mun. Improvement Dist. v. County of Santa Barbara (2001) 88 Cal.App.4th 781, 789.) Code of Civil Procedure section 340.6, subdivision (a), provides, “An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.“
Plaintiffs' breach of fiduciary duty cause of action against Baer that was presented at the phase 4 trial was premised upon the theory attorney Tedder violated his obligations of loyalty to his clients by engaging in self-interested transactions—making loans of client funds to entities in which he (and Baer) had a financial interest. Plaintiffs asserted the making of these self-interested loans without client consent violated both the California Rules of Professional Conduct, rule 3–300 [avoiding acquiring interest adverse to client without disclosure and written consent], and Probate Code section 16004 [trustee may not take part in transaction in which he has interest adverse to beneficiary].
Stoll v. Superior Court (1992) 9 Cal.App.4th 1362 (Stoll ), is instructive. In that case, an attorney was retained by a corporation to help it locate and purchase a ski resort. The attorney did not disclose to the corporate client that he had already entered into a finder's fee agreement with the owner of a ski resort for the sale of the resort. After the sale was complete, the attorney obtained his finder's fee as a result of litigation against the former owner. The corporation then sued the attorney alleging he breached his fiduciary duties by acquiring a pecuniary interest adverse to a client without written consent, having an undisclosed relationship with another party interested in the subject matter of his client's representation, failing to disclose the conflicting interests in writing, and charging an “ ‘unconscionable fee’ “ to the corporation while at the same time expecting a lucrative finder's fee from the adverse party to his client. (Id. at pp. 1365–1366.) The appellate court concluded “although styled as a breach of fiduciary duty, the misconduct alleged ... is nothing more than professional malpractice subject to the one-year statute.“ (Id. at p. 1366.) Because the action was filed more than one-year after the corporate client learned of the finder's fee agreement, it was time barred.
*15 In Quintilliani v. Mannerino (1998) 62 Cal.App.4th 54 (Quintilliani ), an attorney agreed to provide both legal and non-legal administrative consulting services under an independent contractor agreement. (Id. at p. 63.) The court held plaintiffs' claim for negligence as to the non-legal administrative services was not subject to Code of Civil Procedure section 340.6, but the claims for breach of contract, breach of fiduciary duties, and negligent misrepresentation were, because the contract for legal and non-legal services was “inextricably intertwine[d]“ and fiduciary obligations “arose solely from the[ ] attorney-client relationship[ ].“ (Id. at pp. 67–69.)
Plaintiffs argue Stoll, supra, 9 Cal.App.4th 1362, is inapplicable. Pointing out Stoll's discussion of the Legislature's rationale behind providing a shorter statute of limitations for actions involving acts and omissions arising out of the practice of law—to counteract “the potential of lengthy periods of potential liability“ and “thereby reduce the costs of malpractice insurance“ (id. at p. 1368), Plaintiffs argue because Baer is not a lawyer, the concern is not present.
We do not think Code of Civil Procedure section 340.6 can apply so narrowly, particularly under the circumstances of this case. “ ‘[T]he gravamen of a complaint and the nature of the right sued on, rather than the form of the action or relief demanded, determines which statute of limitation applies.’ [Citation.]“ (Quintilliani, supra, 62 Cal.App.4th at p. 66.) Plaintiffs' breach of fiduciary duty claim is premised on the claim attorney Tedder, as part of the asset protection services he was providing, was improperly loaning his law firm clients' funds to entities in which he had a financial interest. And as Tedder's partner in the law firm, non-lawyer Baer was liable for Tedder's breaches of his fiduciary duties. Although Baer is not an attorney, the fiduciary obligations Plaintiffs assert arose from the attorney-client relationship between Tedder and Plaintiffs. (Quintilliani, supra, 62 Cal.App.4th at p. 67.) Indeed, Plaintiffs specifically argue they asserted this new breach of fiduciary duty claim via their summary adjudication motion after Baer was found to be Tedder's partner in fact in the law firm hoping to impose upon Baer the same fiduciary responsibilities owed by their attorney, Tedder.
Plaintiffs also argue Code of Civil Procedure section 340.6 only applies to actions arising out of the performance of legal services. They argue Tedder was performing both legal and non-legal services for the clients. The legal services involved the creation of the clients' asset protection plans—i.e., forming the labyrinth of limited partnerships, including Plaintiffs, to which control of the clients' funds were ceded. But they argue the subsequent management and investment of those funds did not constitute legal services, but were financial or investment services. We disagree.
The clients each retained Tedder to perform legal services to develop complicated schemes to protect their assets and make them harder for potential creditors to reach. Tedder created asset protection plans, which consisted of forming limited partnerships to which the clients would cede control of their money granting control to general partner Tedder. It was the placement and movement of the funds by Tedder that effectuated the asset protection plan. Tedder was not only to invest the money but to ensure the investments were properly documented and secured, implicating the further provision of legal services by Tedder. Under the circumstances, the trial court reasonably concluded the asset management services were “inextricably intertwine[d]“ with the legal services (i.e., estate planning and asset protection) Tedder was providing (Quintilliani, supra, 62 Cal.App.4th at p. 67), and thus the breach of fiduciary duty claim is subject to the one-year statute of limitations.
2. Plaintiffs had notice Tedder was making self-interested loans more than one year before the breach of fiduciary duty claim was asserted against Baer.
*16 Plaintiffs offer a number of reasons as to why the breach of fiduciary duty claim was timely asserted against Baer. Before addressing those specific arguments, we must be mindful of who Plaintiffs are, when they had notice of the loans, and when their self-interested loans breach of fiduciary duty claim was first raised.
Plaintiffs are the limited partnerships who sued to recover on specific loans Tedder caused to be made—not the individual clients (i.e., Messrs. Grammer, McGrath, and Schoenman) who hired Tedder to form the limited partnerships on their behalf and who now through the few limited partnerships remaining in the action are seeking to recover the funds they placed with Tedder for asset protection. Every complaint filed in this case has consistently alleged a unity in the interests of Plaintiffs and Tedder placing them on the same side of the dispute—Tedder suing on behalf of the limited partnerships of which he was general partner. Every complaint has been premised upon allegations of a joint venture between Baer and Tedder to invest in real estate with financing to be obtained by Tedder, specific loans Tedder caused to be made by Plaintiffs (consistently described as the lenders) to Baer and his corporations to finance the Tedder/Baer joint venture real estate acquisition, and Baer and his corporations' failure to repay those loans (or to manage income and profits from the real estate for Tedder's benefit as Baer's partner and for Plaintiffs' benefit as lenders). No complaint has ever alleged the loans were improper in the first place because Plaintiffs were clients of Tedder's, or that Tedder breached any fiduciary duty to Plaintiffs by arranging the loans. It was on those factual allegations that Plaintiffs' complaints (beginning with the first amended complaint filed in 1999) alleged Defendants (i.e., Baer and the two corporations) owed Plaintiffs a fiduciary duty. In the first round of summary adjudication motions—the pre-phase 2 trial motion before Judge McDonald—the trial court found in IBT and SCSD's favor, granting summary adjudication of the breach of fiduciary duty cause of action as to them. And in those motions the Grammer Limited Partnerships specifically conceded there was no fiduciary relationship between them and Baer.
In was not until after the trial court ruled in phase 3 that although Baer was Tedder's partner in fact in the law firm (because of the agreement to split the law firm profits and Baer's administrative involvement with the law firm), Tedder could not recover anything from Baer and had no enforceable interest in any of the real estate, that the Plaintiffs' newly formulated fiduciary duty claim surfaced. In their December 2007 motion for summary adjudication of the breach of fiduciary duty cause of action, the Grammer Limited Partnerships asserted for the first time the partnership between Tedder and Baer in the law firm imposed a fiduciary duty on Baer with regard to Tedder's law firm clients. The Grammer Limited Partnerships asserted for the first time that making loans to entities in which Tedder had a financial interest violated obligations imposed on a fiduciary by the Probate Code and violated the rules of professional conduct for attorneys that prohibit self-interested transactions with a client.
Plaintiffs suggest the pleadings' placing them on the same side of the lawsuit as Tedder was the result of Tedder's control of the litigation (as both general partner of Plaintiffs and as the attorney who filed the original complaint). But the first amended complaint was filed in 1999 by attorney Moshenko, not by Tedder. By then the Grammers had already ousted Tedder as general partner of the Grammer Limited Partnerships, and filed suit against Tedder and Baer in Texas. Moreover, the operative complaint, the sixth amended complaint, was filed in December 2005, long after the Grammer family settled their Texas action against Tedder, by the same attorney who represented the Grammers in the Texas action and who thereafter undertook representing all Plaintiffs and Tedder in this action. Notably, the sixth amended complaint omitted allegations concerning any agreement between Baer and Tedder concerning Baer's participation in Tedder's law firm or the agreement they would split the law firm profits. The sixth amended complaint continued to specifically describe Plaintiffs as “ ‘Tedder's lenders,’ “ from whom Tedder obtained the financing to acquire the various pieces of real estate. It alleged Tedder arranged for Plaintiffs' loans to Baer, IBC, and SCSD for purchase of the real property to be owned by the Tedder/Baer joint venture. The sixth amended complaint specifically alleged Tedder was acting on behalf of Plaintiffs in making the loans, and Tedder was “vested with all necessary right title and interests in the loan[s], and the right (coupled with the duty) to act to enforce [the] loan agreements and collect the debts which each loan represented[.]“
*17 “It is well settled that the one-year limitations period of [Code of Civil Procedure] section 340.6 ‘ “is triggered by the client's discovery of ‘the facts constituting the wrongful act or omission,’ not by his discovery that such facts constitute professional negligence, i.e., by discovery that a particular legal theory is applicable based on the known facts. ‘It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action.’ “ [Citation.]' [Citations.]“ (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 685.)
“Resolution of the statute of limitations issue is normally a question of fact.“ (Fox v. Ethicon Endo–Surgery, Inc. (2005) 35 Cal.4th 797, 810.) The record supports the trial court's finding Plaintiffs (via the individuals who funded them) had notice of the nature of the loans more than a year before the original complaint was filed on May 24, 1996, and certainly more a year before they first alleged a breach of fiduciary duty cause of action in their first amended complaint filed in March 1999.
Don Grammer testified he knew in 1991 or 1992 the Grammer Limited Partnerships funds were being loaned to IBT, and knew the loans were not secured or evidenced by promissory notes, despite Tedder's assurances all loans would be documented and secured. Greg Grammer testified he knew Tedder had an interest in the Ranch and the Grammer Limited Partnerships were making loans to IBT in connection with the Ranch. In 1993, Greg Grammer was sent to work out of Tedder's office to supervise the family's investments, and hired Wong to be the new accountant for the Grammer family's controlled accounts. Wong provided Don Grammer with accounting records and tax returns that contained information on the loans being made. Wong testified money was often moved between the law firm and the Grammer Limited Partnerships and those transfers were often at the direction of a member of the Grammer family. By 1994, Don Grammer was very upset with Tedder over his lax handling of the controlled accounts and was threatening to sue Tedder. In 1995, Don Grammer called Baer and demanded he arrange for the law firm to pay the Grammer family more money. By 1996, the Grammer family had removed Tedder as general partner of the Grammer Limited Partnerships.
Richard McGrath, who funded the McGrath Limited Partnerships, testified he knew by 1992 that Tedder was making loans of McGrath Limited Partnerships funds to Tedder's own entities including the law firm, and Tedder was using his entities as conduits to move McGrath's money around. In 1992, McGrath knew Tedder and Baer were partners in real estate investment, loans were being made by the McGrath Limited Partnerships to IBT to invest in the Ranch, and loans were being made to Tedder's own company, Van Dan, and to the Legal Forum. McGrath agreed he had stopped getting any reports about the status of his controlled accounts by 1996.
In 1995, McGrath asked attorney Reiserer to review the estate plan Tedder had put together and to review “ ‘all loans to Tedder, et al.’ “ Reiserer told McGrath that Tedder's record keeping was atrocious, and McGrath received a letter from Reiserer in April 1996, advising him there were “ ‘gross inaccuracies ... in virtually every aspect of the ... planning that was previously done.’ “ Reiserer specifically warned McGrath about the total lack of documentation of any loans, including of the loan transactions between the McGrath Limited Partnerships and entities associated with Tedder.
*18 Schoenman testified that although Tedder assured him he would receive regular reports about the status of his funds, he never received any reports. By 1994, Schoenman knew “something was amiss“ and consulted with an attorney about suing Tedder but decided not to pursue him.
In sum, substantial evidence supports the trial court's conclusion Plaintiffs had notice through the individuals who owned them before May 1995, more than a year before the original complaint was filed May 24, 1996, that Tedder was using Plaintiffs' funds to make loans to entities in which he had a financial interest or was otherwise misusing the client funds entrusted to him. Accordingly, we turn to Plaintiffs' specific arguments as to why the statute of limitations nonetheless does not bar their breach of fiduciary duty cause of action against Baer.
3. Baer did not waive Code of Civil Procedure section 340.6.
Plaintiffs contend Baer waived Code of Civil Procedure section 340.6 because Defendants did not specifically plead that section in their answer. The trial court denied Plaintiffs' new trial motion brought on this ground. Although Baer does not respond to this specific contention on appeal (he did oppose the new trial motion), we reject it nonetheless.
Generally “[t]here are two ways to properly plead a statute of limitations: (1) allege facts showing that the action is barred, and indicating that the lateness of the action is being urged as a defense and (2) plead the specific section and subdivision. [Citation.]“ (Martin v. Van Bergen (2012) 209 Cal.App.4th 84, 91.) Defendants' answer to the sixth amended complaint raised numerous affirmative defenses including that all causes of action were barred “by the applicable statute of limitations, including but not limited to [Code of Civil Procedure sections] 336a, 337, 337a, 338, 339, 340, and 343[,]“ but the answer did not specifically reference Code of Civil Procedure section 340.6. Plaintiffs argue this is fatal to the trial court's reliance upon the defense.
This case presents a unique circumstance. As already discussed above, Plaintiffs' complaints, including the sixth amended complaint, did not allege the breach of fiduciary duty claim that went to trial in phase 4. The complaints, including the sixth amended complaint, alleged a breach of fiduciary duty premised on allegations Plaintiffs were lenders who made loans to Baer's corporations and all the Defendants breached a fiduciary duty with regards to repayment of the loans. Before the phase 2 trial, the trial court granted IBT and SCSD's motion for summary adjudication of the breach of fiduciary duty cause of action, although it did not grant Baer's summary adjudication motion (despite the Grammer Limited Partnerships' concession he was not a fiduciary). (See Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 476 [“ ‘[a] debt is not a trust and there is not a fiduciary relation between debtor and creditor as such’ “], overruled on other grounds in Riverisland Cold Storage, Inc. v. Fresno–Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1176–1182) New pleadings were filed (Plaintiffs' fifth and then sixth amended complaints) and the parties stipulated Defendants' answer filed to earlier iterations of the complaint (which did not specifically plead Code of Civil Procedure section 340.6), would apply to the sixth amended complaint.
*19 Defendants cannot be faulted for not raising in their answer an affirmative defense that was not, at the time it was filed, suggested by the cause of action as it was alleged. It was not until the Grammer Limited Partnerships' post phase 3 summary adjudication motion that the claim making the loans violated fiduciary duties owed by the Tedder law firm surfaced. Defendants' trial brief filed before trial began fully analyzed the applicability of Code of Civil Procedure section 340.6 to the theory on which Plaintiffs were now proceeding, and the defense was litigated at trial. Defendants' closing trial brief again fully analyzed the defense.
Plaintiffs state in their opening brief they “vigorously objected at every opportunity and requested that Baer be precluded from reliance on [Code of Civil Procedure [s]ection 340.6.“ But they do not cite to any objections made during trial when the defense was being litigated, rather they cite to their objections to the statement of decision and their new trial motion. Under the circumstances presented in this case, the defense was not waived. (See Hydro–Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1165 [“ ‘Under these circumstances, we are satisfied that the attempt to plead [the correct subdivision] should not be treated as a nullity, and that the objection to the manner of pleading it was waived by the failure of plaintiffs to urge such objection in the trial court.’ “)
4. Tedder's continued representation of Plaintiffs did not toll the statute of limitations.
Plaintiffs contend the statute of limitations as to Baer was tolled by Tedder's continued representation of Plaintiffs, even after they became aware of Tedder's actions, and Tedder's continued domination and control of the limited partnerships. Not so.
Code of Civil Procedure section 340.6, subdivision (a)(2), tolls the statute of limitations on a claim so long as “[t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred.“ But in Beal Bank, SSB v. Arter & Hadden, LLP (2007) 42 Cal.4th 503, 508 (Beal Bank ), our Supreme Court ruled the tolling applies only as to the attorney who continues to represent the client, not to the attorney's former firm and partners when the attorney leaves the firm taking the client with him.
In Beal Bank, supra, 42 Cal.4th 503, the attorney's alleged malpractice occurred, and plaintiffs had notice of their injury, while the attorney was employed at the defendant law firm. The attorney left the law firm, taking the plaintiff client with him. The plaintiffs sued the law firm after the one-year statute of limitations ran. The Supreme Court held the tolling of the statute as to the attorney because of his continued representation of the plaintiff, did not operate to toll the statute as to the attorney's former law firm and its partners. “When a lawyer leaves a firm and takes a client with him, the firm's representation of the client ceases. There is no risk the firm will attempt to run out the clock on the statute of limitations by offering reassurances and blandishments about the state of the case. Conversely, the firm loses all ability to mitigate any damage to the client. [Citation.]“ (Id. at pp. 511–512.) Here, Plaintiffs seek to hold Baer liable for Tedder making self-interested loans by virtue of his partnership in Tedder's law firm. The uncontroverted evidence is the Tedder/Baer partnership ended in March 1996 shortly before Tedder filed this action against Baer and his corporations on behalf of Plaintiffs to recover on loans. Tedder's continued representation of Plaintiffs after the partnership ended did not toll the statute of limitations as to Baer.
*20 Plaintiffs contend Beal Bank, supra, 42 Cal.4th 503, is distinguishable because the plaintiff in that case knew their attorney had terminated his affiliation with the defendant law firm. But they had no knowledge Baer was Tedder's partner in the law firm, no knowledge the relationship had ended, and Tedder's domination and control of Plaintiffs prevented them from gaining such knowledge. Again, Plaintiffs' arguments ignore who Plaintiffs are and who they are not. Plaintiffs are the limited partnerships—not the individuals who funded the limited partnerships (i.e., Messrs. Grammar, McGrath, and Schoenman). Tedder (through his Tedder-owned entities) was Plaintiffs' general partner, controlled and managed them, and his knowledge would generally be imputed to the other partners and the limited partnerships. (Corp.Code, sec. 16301, subd. (1) [agent of partnership]; see also GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 881 [knowledge of general partner imputed to partnership].)
Even if Tedder's continued representation of the limited partnerships tolled the statute of limitations as to Tedder, it was not tolled as to Baer once the partnership ended in March 1996. Plaintiffs' reliance on the relation-back doctrine does not aid them. There was no breach of fiduciary duty cause of action alleged in the original complaint filed in April 1996. “An amended complaint relates back to a timely filed original complaint, and thus avoids the bar of the statute of limitations, only if it rests on the same general set of facts and refers to the same ‘offending instrumentalities,’ accident and injuries as the original complaint. [Citations.]“ (Davaloo v. State Farm Ins. Co. (2005) 135 Cal.App.4th 409, 415.) There were no allegations in the original complaint that encompassed Plaintiffs' claim making the loans was improper and constituted a breach of fiduciary duty. Neither the original complaint (nor any other complaint filed in this action), contained allegations of any wrongdoing by Tedder. As the trial court noted in its statement of decision, none of the complaints alleged ultimate facts that apprised Baer he was vicariously liable for Tedder's breaches of his professional duties. The ultimate facts alleged in the original complaint were that Baer and his corporations were liable to repay the specific loans to IBC and SCSD detailed in the complaint.
5. Repudiation of trust relationship by Baer was not required.
Plaintiffs also contend that the statute of limitations on their cause of action against Baer did not begin to run until Tedder unequivocally repudiated his trust relationship with regard to Plaintiffs. They argue Tedder and his law firm were trustees of the assets Plaintiffs put in Tedder's control. Moreover, they assert Grammer, McGrath, and Schoenman's notice of facts that might have put a reasonable person on notice Tedder was misusing client funds by making self-interested loans did not trigger the statute of limitations because in a trust relationship, the “statute [of limitations] does not begin to run absent a clear repudiation of the trust by the trustee, or a known breach of the trustee's duty....“ (Di Grazia v. Anderlini (1994) 22 Cal.App.4th 1337, 1349.) Plaintiffs argue that would not have occurred until they demanded return of their money and Tedder refused—here Tedder continued to make some payments to Plaintiffs after filing the original complaint. But Plaintiffs did know Tedder had breached his fiduciary duties. They were all aware more than one-year before the original complaint was filed that Tedder was not providing accountings of their funds and was making self-interested loans. Grammer was threatening to sue Tedder because of his mishandling of the Grammer Limited Partnerships; Schoenman testified he went so far as to hire an attorney in 1994 to sue Tedder, but decided not to; McGrath testified he knew in 1992 that Tedder and Baer were partners in real estate and Tedder was using McGrath's money to make loans to finance those investments.
*21 Moreover, Plaintiffs' argument ignores the trial court found Baer played no role in the controlled account scheme. The uncontroverted evidence was that although Baer and Tedder had agreed to form a joint venture to mass market estate plans similar to the one Tedder had created for Baer, the plan created for Baer was nothing like the ones created for Grammer, McGrath, and Schoenman. There were no limited partnerships formed and no ceding control of assets to Tedder to put them beyond creditors' reach. Tedder, Case, and Wong all testified Baer had no involvement with the controlled accounts. He did not manage them or direct the movement of funds within them.
6. Concealment of Baer's partnership status did not toll the statute of limitations.
Plaintiffs contend the statute of limitations on their breach of fiduciary duty cause of action against Baer was tolled because Baer “fraudulently concealed“ his partnership status in Tedder's law firm. They argue Baer and Tedder both “relentlessly“ lied throughout these proceedings about Baer's “true status“ as Tedder's law partner. We reject the argument.
Plaintiffs point out that in his cross-complaint, Baer described his relationship with Tedder's law firm as being that of an administrator providing services of a non-lawyer. Tedder's first amended complaint did not describe Baer as his “law partner“ but rather as the administrator and manager of the law firm with the right to receive one-half of the law firm profits and the obligation to pay one-half the law firm's expenses. In the Texas action filed by the Grammers, Baer denied being an owner of Tedder's law firm and the Texas appeals court described Baer as an office administrator, not as his “law partner.“ Following a 1997 State Bar proceeding against Tedder, the State Bar described Baer not as Tedder's “law partner“ but as a “marketing consultant“ to Tedder's law firm. And in the 1999 Givens bankruptcy proceeding, Baer denied his joint venture with Tedder involved asset protection planning.
But Plaintiffs argue that in the phase 3 trial in this proceeding, which occurred in 2006, Baer for the first time testified he regarded himself as a partner equal to Tedder in the law firm. Plaintiffs argue it was not until this startling revelation that non-attorney Baer was Tedder's partner in the law firm that they became aware of their claim Baer was liable for Tedder's breaches of his attorney-fiduciary duties owed them. And “where the facts are such that even discovery cannot pierce a defendant's intentional efforts to conceal his identity, the plaintiff should not be penalized.“ (Bernson v. Browning–Ferris Industries (1994) 7 Cal.4th 926, 937.)
There was no fraudulent concealment of Baer's identity so as to toll the statute of limitations. Baer's identity has always been known to Plaintiffs. We start with the fact the original complaint was filed by Tedder as general partner of Plaintiffs, who was certainly aware of his business arrangement with Baer. Greg Grammer and McGrath both knew of Baer's real estate partnership with Tedder before the original complaint was filed, and Don Grammer called Baer directly in 1995, and demanded he arrange for the law firm to pay the Grammer family more money. Plaintiffs cannot claim they were unaware of Baer's one-half profit sharing interest in the Tedder law firm until the phase 3 trial in 2006. It was an allegation in the first amended complaint filed in 1999. Additionally, Baer testified in 2000 in the Grammers' Texas lawsuit that he and Tedder were “sharing profits“ and the monthly $22,500 payments to the Grammers “were made from our profits.“ It was this profit sharing arrangement that led the trial court in phase 3 to conclude Baer was Tedder's “partner in fact“ in the law firm, but because that arrangement was illegal, neither could recover damages from the other. Plaintiffs' assertion the Baer and Tedder law firm partnership was concealed from them until 2006, and could not have been revealed by their discovery in the case, is without merit.
*22 In conclusion, the trial court correctly determined the breach of fiduciary duty cause of action against Baer is time-barred. For that reason, we need not address Plaintiffs' remaining contentions pertaining to the trial court's alternate basis for ruling against them—they failed to prove their breach of fiduciary duty claim.9
B. Other Findings
Plaintiffs argue there is no factual basis for the finding in the phase 4 statement of decision that, “This case appeared to be a collusive lawsuit between Tedder and ... [P]laintiffs to get money from Baer that Tedder himself had bilked from ... [P]laintiffs, without participation by Baer.“ They also argue there are no grounds for the court finding them somehow responsible for Tedder's destruction of records. That finding (which was part of the collusive lawsuit finding) was that in meeting their burden of proof on breach of fiduciary duty Plaintiffs “were heavily handicapped by their association and reliance on Tedder, his actions, his destruction of records, and his testimony as well as by their own credibility problems. All of the [P]laintiffs either hid records or destroyed them, some on purpose, some over the lengthy course of this trial through poor record keeping.“ Both arguments are devoid of any reasoned legal analysis or citation to authorities. Accordingly, we consider the point waived. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784–785 (Badie ) [when appellant raises issue “but fails to support it with reasoned argument and citations to authority, we treat the point as waived“]; see also Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 (Kim ) [same].)
C. The Alter Ego Finding
Plaintiffs contend the trial court's finding contained in its phase 4 statement of decision they “affirmatively abandoned“ any claim Baer is an alter ego of his corporations because they failed to litigate it in the phase 4 trial is unsupported by substantial evidence. (As this argument pertains only to the Grammer Limited Partnerships we will hereafter refer to them as such, rather than as Plaintiffs.) Baer offers no response to the argument in this appeal, but he separately appeals from the trial court's postjudgment order granting the Grammer Limited Partnerships' motion for new trial on the limited issue of alter ego and striking the abandonment finding from the phase 4 statement of decision. (Banyan 2, supra, G045797.) The Grammer Limited Partnerships state they raise the issue in this appeal as a protective matter, in the event we reverse the new trial order in Banyan 2. However, their argument in this appeal consists only of three sparse paragraphs devoid of any meaningful legal reasoning or analysis of the issue—apparently expecting us to look to the briefs filed in Banyan 2, supra, G045797, to ascertain the facts and arguments pertaining to this issue. Although we would generally consider the argument waived for lack of any meaningful analysis (Badie, supra, 67 Cal.App.4th at pp. 784–785; Kim, supra, 17 Cal.App.4th at p. 979), we will address in this appeal whether the original finding was supported by the record. We conclude the original finding was warranted and the Grammer Limited Partnerships' failure to litigate the alter ego issue in phase 4 constituted an abandonment of that issue. In Banyan 2, supra, G045797, we separately consider the trial court's postjudgment order granting the Grammer Limited Partnerships a new trial on this issue and striking the abandonment finding from the statement of decision.
*23 We begin with a summary of the facts pertinent to this issue. The first amended complaint filed in April 1999, and each subsequent version of the complaint including the operative sixth amended complaint, contained extensive allegations that each corporate defendant (IBT and SCSD) was a sham corporation and each was Baer's alter ego. The 2004 trial status order set forth the order in which the case would be tried. The second phase would cover the claims of the Grammer Limited Partnerships “except alter ego and punitive damages.“ (Italics added.) Later phases would consider the claims of the remaining non-Grammer plaintiffs, issues relating to the relationship of Tedder and Baer and dissolving their joint venture, any remaining claims and cross-claims, followed by alter ego claims, punitive damages claims, and any remaining matters.
After the phase 2 trial took place, but before the phase 2 statement of decision was completed, Judge Jameson retired. The Presiding Judge of the Superior Court requested the Chief Justice of the Supreme Court allow Judge Jameson to return on assignment in this case for the following hearings/events scheduled for March 9, 2005, “statement of decision; [p]roposal of plaintiff to revise Court's ruling.“ Accordingly on February 17, 2005, the Chief Justice assigned Judge Jameson to sit on March 9, 2005, “and until completion and disposition of all causes and matters heard pursuant to this assignment.“ On March 11, 2005, the Chief Justice again assigned Judge Jameson to sit on April 6, 2005, “and until completion and disposition of all causes and matters heard pursuant to this assignment.“ Judge Jameson issued his phase 2 statement of decision on August 30, 2005, in which he found IBT and SCSD liable on five promissory notes Baer had signed on their behalf. (Baer's motion for judgment on the breach of contract cause of action was granted after Judge Jameson issued his ruling, but before he signed the final phase 2 statement of decision.)
In their statement of issues for the 2010 phase 4 trial before Judge Colaw, the Grammer Limited Partnerships stated their contract claims had been resolved in phase 2 and there were “[n]o remaining issues for trial: This claim was fully tried in prior phases. Plaintiffs prevailed on some loan claims, Defendants prevailed on others.“ The only remaining issues were as to their remaining 10th cause of action for breach of fiduciary duty. The statement made no mention of alter ego issues remaining to be tried. The trial court's phase 4 tentative ruling was issued on October 18, 2010, stating this was the “final“ phase of trial. It ruled in Baer's favor, declared Baer the prevailing party, and directed Baer's attorneys to prepare the formal statement of decision. Although the court's tentative ruling made no specific mention of the alter ego allegations, the proposed statement of decision stated: “All causes of action in all complaints and cross-complaints not adjudicated in prior phases were all at issue in [phase 4].... Moreover, the named plaintiffs sought to prove Baer was and is the alter ego of IBT and SCSD. However, prior to trial ... plaintiffs filed their [phase 4 statement of issues] in which [they] affirmatively abandoned all of their causes of action and claims except for [b ]reach of [f]iduciary [d]uty against Baer. As a result of their affirmative abandonment of all but one of their remaining causes of action, [p]laintiffs produced no evidence and sought no relief for any other cause of action or claim at issue in [phase 4].“ (Italics added.)
The Grammer Limited Partnerships filed objections to the proposed statement of decision, including to the finding they abandoned alter ego claims. They asserted there was no evidence supporting the finding because they could pursue Baer as an alter ego of his corporations by way of a postjudgment motion to amend the judgment under Code of Civil Procedure section 187, and such a motion would be “in the exclusive jurisdiction of retired Judge Jameson, who presided over the phase 2 trial.“ The trial court signed the statement of decision as proposed by Baer and it was entered on February 24, 2011.
*24 On March 29, 2011, the Grammer Limited Partnerships filed a motion for new trial asking the court to strike the finding they abandoned their alter ego claim and allow the alter ego issue to be litigated. The Grammer Limited Partnerships' attorney declared he believed attorney fees and alter ego claims relating to the phase 2 breach of contract claims on which the Grammer Limited Partnerships prevailed were to be decided postjudgment by retired Judge Jameson because his assignment by the Chief Justice (six years earlier) stated it was to last “until completion and disposition of all causes and matters heard pursuant to [these] assignment[s].“ Moreover, Hartmann declared, after the phase 4 statement of decision was signed, he attempted to schedule his motions before Judge Jameson, but was informed Judge Jameson now had a conflict. Apparently, in unrelated litigation that took place several years after Judge Jameson retired, Baer's counsel, David A. Robinson, and opposing counsel in that case selected Judge Jameson from a list of two retired judges proposed by the trial court to act as a provisional neutral director of the corporation involved in the litigation.
The trial court entered the final judgment in this case on May 31, 2011. On July 19, 2011, the trial court ruled on the Grammer Limited Partnerships' new trial motion. The trial court rejected any suggestion by the Grammer Limited Partnerships that Baer's counsel, Robinson, had done anything wrong or intentionally interfered with Judge Jameson's ability to hear postjudgment motions pertaining to the contract issues that were tried in phase 2. Nonetheless, because of the confusion about whether the alter ego issue was a matter within Judge Jameson's “sole jurisdiction to decide“ as a post phase 2 trial matter, the trial court granted the new trial motion as to the Grammer Limited Partnerships' request to strike the finding they had abandoned their alter ego claim. Baer filed a separate notice of appeal from that order and in that appeal he largely argues the trial court lost jurisdiction to grant new trial. (Banyan 2, supra, G045797.)10
We reject the Grammer Limited Partnerships' argument the original finding in the phase 4 statement of decision they abandoned their alter ego claims was not supported by substantial evidence. They contend their claim Baer was an alter ego of his corporations was one which, at their option, could be either litigated directly during trial or litigated by way of a postjudgment motion to amend the judgment under Code of Civil Procedure section 187 to add Baer as an additional judgment debtor. Moreover, they contend such a postjudgment motion would have been within the sole jurisdiction of Judge Jameson who presided over the phase 2 trial. Thus their failure to put on any evidence relating to the alter ego claim at the final phase of the trial could not constitute an abandonment of that claim.
The Grammer Limited Partnerships' argument is based on a faulty premise: i.e., that they had the “option“ to simply ignore their own pleadings and litigate the alter ego issue when and as they pleased. Contrary to the Grammer Limited Partnerships' assertion below that alter ego liability is almost always raised by way of a motion to amend the judgment, “The alter ego issue is ordinarily raised by the pleadings, either affirmatively in the complaint [citation] or negatively in the answer [citation]. Nonetheless, even when not pleaded, that issue may be resolved at trial [citations], at a hearing to determine the true identity of the judgment debtor [citations], or even in a separate action subsequent to the action against the fictitious corporate defendant.“ (Hennessey's Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1358, italics added.)
*25 A motion under Code of Civil Procedure section 187 is generally brought to add a nonparty to a judgment for collection purposes, when the judgment creditor has been unsuccessful in its efforts at collecting on the judgment against the named judgment debtor. (See Leek v. Cooper (2011) 194 Cal.App.4th 399, 419 [“[u]nder some circumstances a judgment against a corporation may be amended to add a nonparty alter ego as a judgment debtor“ (italics added) ].) “Occasionally, a judgment creditor obtains a judgment against a corporation only to discover later that the corporation has few or no assets and is controlled by a nonparty alter ego. In this event, the judgment creditor may be able to amend the judgment to add the alter ego as a judgment debtor and enforce the judgment against that debtor (who, presumably, has assets). [Citation.] [para.] A California court may use ‘all the means necessary’ to carry its jurisdiction into effect. [ (Code Civ. Proc., sec. 187....) ] [para.] This includes amending a judgment against a corporation to add a nonparty alter ego as a judgment debtor. [Citations.] [para.] The amendment does not add a new defendant; it merely sets forth the true name of the real defendant. [Citations.]“ (Ahart, Cal. Practice Guide: Enforcing Judgments and Debts (The Rutter Group 2013) paras. 6:1564–1565, p. 6G–74.)
The equitable postjudgment procedure permitted by Code of Civil Procedure section 187 is not simply an alternative means of litigating an issue pleaded in the complaint against a named party to the action. Indeed, cases have held that when a judgment creditor was aware of alter ego relationship before trial, amendment of the judgment to add the known alter ego was not appropriate. In Jines v. Abarbanel (1978) 77 Cal.App.3d 702, 717, the court held a trial court erred by amending a judgment against a doctor to add his professional corporation as a judgment debtor because the plaintiff was aware of corporation's existence before trial: “Nothing was irregular, nothing was concealed. Plaintiffs' attorneys concede they were aware of the existence of the corporation before the case was tried. [para.] There was no legal basis for the postjudgment order adding the corporation as a judgment debtor.“ (Ibid. See Ahart, Cal. Practice Guide: Enforcing Judgments and Debts, supra, para. 6:1573, p. 6G–78 [“If the creditor learns of the alter ego's existence before trial, the complaint may be amended to add the alter ego as a party“].)
Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, does not compel a different result. In that case, plaintiffs sued several limited liability companies for breach of contract, and sued the manager of the companies (who had been the owner of the companies, but who had earlier transferred ownership of them to a trust), for different claims including breach of fiduciary duty. The manager was not sued for breach of contract and there were no alter ego allegations in the complaint. The case was arbitrated. Plaintiffs prevailed on the breach of contract cause of action against the companies, but the manager prevailed on the causes of action against him. The arbitration award was reduced to a judgment. After plaintiffs' unsuccessful efforts to collect on the judgment against the companies, they filed a motion to amend the judgment to add the manager as a judgment debtor. The appellate court concluded the manager could be pursued as an alter ego, even though he had prevailed in the arbitration. The manager had not been a party to the breach of contract cause of action, and thus, he did not prevail on the contract cause of action. (Id. at p. 507.) Additionally, the court observed when the case was arbitrated plaintiffs had no reason to suspect the manager was an alter ego of the corporations. (Ibid.)
But this is not a case in which the Grammer Limited Partnerships were unaware of Baer's identity or of their claim he is an alter ego of his corporations. He is not a third party being brought into the case only when it was discovered during the judgment collection process the judgment debtors did not have any assets. Indeed, the Grammer Limited Partnerships' alter ego claims have been front and center in their pleadings throughout this litigation, and the original trial scheduling order specifically referenced it as one of the issues to be tried in this case. Baer was sued for breach of contract and prevailed. The question of alter ego liability could have been pursued throughout the case, and yet it was not raised with the trial court for determination at the time of the phase 4 trial, which was to be the final phase of the litigation. Under the circumstances, the finding the Grammer Limited Partnerships had abandoned their alter ego claim was warranted.
*26 The judgment is affirmed. In the interests of justice, each side shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
Although there were 19 named plaintiffs in the original complaint, by the end only seven (related to the three clients) remained and those seven limited partnerships are the appellants here. They include: Banyan Limited Partnership (Banyan), Pear Tree Limited Partnership (Pear Tree), and Orange Blossom Limited Partnership (Orange Blossom), formed on behalf of Don Grammer and his family (hereafter sometimes referred to collectively as the Grammer Limited Partnerships); CTM Limited Partners (CTM), Selvin Limited Partnership (Selvin), and Trails End Limited Partnership (Trails End), formed on behalf of Richard McGrath and his family (hereafter sometimes referred to collectively as the McGrath Limited Partnerships); and Birch International Investment Limited Partners (Birch), formed on behalf of Dan Schoenman. (All the appellants will hereafter be collectively referred to as Plaintiffs unless the context indicates otherwise.)
On the court's own motion, we take judicial notice of our unpublished opinions in these cases. (Evid.Code, sec. 452, subd. (d); Cal. Rules of Court, rule 8.1115(b)(1).)
The law firm has had many names over the years reflecting ever-changing attorney partners, none of whom were named in this action, but for convenience we will refer to it as the law firm.
A third corporation, the Legal Forum, Inc., was formed to conduct asset protection seminars and publish related materials. Legal Forum was a named plaintiff in this action. But the stock in Legal Forum was all issued to Baer's corporation, IBT, which led the trial court to ultimately conclude Baer controlled Legal Forum and Tedder had no authority to sue Baer on Legal Forum's behalf. There are no further issues in this case concerning Legal Forum.
During the course of this litigation, Tedder lost his law license in a disciplinary proceeding relating to different law firm clients but involving the same asset protection scheme, filed for bankruptcy, was convicted of several federal felonies relating to an illegal gambling operation, and was serving a federal prison sentence by the time the final phase of this litigation was tried.
Although Judge McDonald had previously granted IBT and SCSD's motion for summary adjudication of the breach of fiduciary duty cause of action, the fifth and sixth amended complaint realleged the cause of action as to all Defendants. However, Plaintiffs agree the cause of action as tried in phase 4 pertains only to Baer.
For example, Banyan had as its general partner Key Enterprises, and as its limited partner an entity called Apple Orchard Limited Partnership, which was controlled by Don Grammer.
A corrected final judgment nunc pro tunc was entered November 15, 2011.
Plaintiffs also briefly argue there is “no substance“ to Baer's affirmative defense of unclean hands. They argue that because their conduct in attempting to protect assets from creditors was not directed at Baer, he has no standing to assert such a defense. (See Pepper v. Superior Court (1977) 76 Cal.App.3d 252, 259 [improper conduct must be directed at person raising claim].) There is no mention of the affirmative defense in the trial court's statement of decision, and therefore, we need not consider the point further.
On September 30, 2011, the Grammer Limited Partnerships filed a motion to amend the judgment to add Baer as a judgment debtor. The trial court stayed ruling on that motion until these appeals are resolved. The Grammer Limited Partnerships petitioned this court for writ relief from the stay, which we denied without opinion. (Banyan Limited Partnership et al. v. Superior Court (Dec. 29, 2011, G046154)).
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