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Tentative Ruling
Re: Kozub v. Arakelian
Case No. 15 CE CG 02112
Hearing Date: February 8th, 2018 (Dept. 403)
Motion: Plaintiff’s Motion for Summary Judgment

Tentative Ruling:

To deny plaintiff’s motion for summary judgment. (Code Civ. Proc. § 437c.)

Explanation:

Plaintiff moves for summary judgment as to the sole cause of action for declaratory relief with regard to the interpretation of the judgment in the underlying action, Kozub v. Josephine, case no. 08 CE CG 00102. He contends that the clear and unambiguous language of the judgment states that he is the sole and exclusive owner of the right to receive a 5% share of Margo Josephine’s share of the profits from the River Park Properties partnership (“RPP”), and thus Margo had no right to sell his share of RPP when she sold her own interest in RPP to the Josephine Trust. Thus, plaintiff concludes that he is entitled to a declaration that the sale of Margo’s interest in RPP did not transfer his property interest to the Trust and did not affect his right to receive 5% of the profits from RPP.

First, plaintiff may seek declaratory relief to interpret the meaning and effect of a prior judgment. “[W]here a declaratory judgment is sought not to challenge the validity or to seek a modification of a prior judgment, but merely to interpret the judgment and determine its effect on the rights and duties of the parties, … such relief is proper.” (Sandler v. Casale (1981) 125 Cal.App.3d 707, 713, internal citations omitted.) However, to the extent that a plaintiff seeks relief that would effectively rewrite the prior judgment or add new language to it, the request for relief is improper. (Pacific Gas and Elec. Co. v. City & County of San Francisco (2012) 206 Cal.App.4th 897, 919, fn. 17; Culbertson v. Cizek (1964) 225 Cal.App.2d 451, 462.)

Here, it appears that plaintiff is asking the court to determine an issue that was never decided by the court in the underlying action, namely whether Margo’s sale of her share of RPP affected plaintiff’s right to continue to receive profits from RPP. While plaintiff contends that the judgment found that he was the “sole and exclusive” owner of the right to receive a 5% share of Margo’s share of the profits from RPP and thus that Margo did not have a right to sell his interest without his knowledge or consent, the judgment does not directly address the question of whether Margo had the right to sell

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her interest in RPP, or how such a sale would affect plaintiff’s interest in her share of the profits.

The judgment states that, “Kozub, as Trustee of the Kozub Family Trust, and his/its successors and assigns, owns a personal property interest as an assignee of five percent (5%) of the profits attributable to Josephine’s original twenty two and a half percent (22.5%) partnership interest in the River Park Properties Partnership and its successor limited partnerships.” (Judgment filed on October 9th, 2013 in case no. 08 CE CG 00101, page 1, ¶ 1.) The judgment also defines “profits” to mean “Any and all receipts of cash or loan repayments under the provisions of the partnership agreement(s) by Josephine as a partner in any of the River Park limited partnership(s), successors of River Park Properties Partnership, from operations and capital events, including but not limited to refinancing transactions and sales.” (Id. at p. 2, ¶ 3, emphasis added.) In addition, the judgment states that Josephine will pay to Kozub an amount equal to 5% of her share of the profits, as defined above, attributable and proportionate to Josephine’s original 22.5% interest in RPP, on a quarterly basis. (Id. at p. 2, ¶ 4.)

Thus, there is no language in the judgment that directly addresses the question of whether Margo had the right to sell off her interest in the partnership, and thereby to effectively sell off plaintiff’s right to receive profits from the partnership as well. Nevertheless, a partner does generally have the right to sell off his or her interest in a partnership. (Corp. Code § 16503, subd. (a).) A partner’s interest in a share of the partnership’s profits is that partner’s personal property, and thus the partner may assign it. (Security First National Bank v. Whittaker (1966) 241 Cal.App.2d 554, 557; Corp. Code

§§ 15026; 15027.) Also, once a partner has sold his or her interest in the partnership, the relationship between the selling partner and the other partners immediately ceases. (Vai v. Bank of America National Trust & Savings Assn. (1961) 56 Cal.2d 329, 339.) Therefore, it does appear that Margo had the right to sell her interest in RPP to the Josephine Trust.

While plaintiff argues that Margo had no right to sell property that she did not own, i.e. plaintiff’s 5% interest in receiving distributions from her part of the partnership, as discussed above, Margo did have the right to sell her own interest in RPP. Whether her right to sell her own interest in RPP also included the right to sell plaintiff’s right to receive a percentage of the profits that would have gone to Margo is not clear from the face of the judgment.

Indeed, the judgment appears to contemplate that Margo had the right to sell off her interest in the partnership, since the definition of “profits” includes cash from “operations and capital events, including but not limited to refinancing transactions and sales.” (Judgment at p. 2, ¶ 3, emphasis added.) This language appears to indicate that Margo had the right to sell her share of the partnership, although it is somewhat ambiguous and might include other types of sales transactions. If Margo had the right to sell her interest in the partnership, as appears likely, then plaintiff was simply entitled to a payment equal to the value of his interest in her share of the partnership. Indeed, this appears to be exactly what the Trust attempted to accomplish when they sent plaintiff a check for his share of Margo’s interest in RPP.

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Furthermore, once Margo had sold her interest in RPP, it appears that plaintiff no longer had any right to receive a share of profits from the partnership, since his right to receive profits was based on Margo’s right to receive profits pursuant to her 22.5% share of RPP. After Margo sold her share of RPP, she no longer had the right to receive any profits from the partnership, and thus plaintiff’s right to profits also ceased to exist. To put it simply, 5% of nothing is still nothing. Thus, plaintiff has not met his burden of showing that he is entitled to summary judgment as a matter of law on the declaratory relief claim. At the least, there is a disputed issue of material fact as to whether Margo had the right to sell her interest in the partnership under the judgment, and whether plaintiff had any right to continue receiving a share of the profits from the partnership regardless of the sale.

In addition, to the extent that plaintiff seems to argue that the judgment gives him the right to refuse to consent to the sale of Margo’s partnership interest in RPP, his contention is inconsistent with the language of the statement of decision in the underlying case, as well as the Corporations Code regarding the rights of assignees of partnership interests.

Under Corporations Code section 16503, subdivision (a), “A transfer, in whole or in part, of a partner’s transferable interest in the partnership is permissible. However, a transfer does not do either of the following: … (2) As against the other partners or the partnership, entitle the transferee, during the continuance of the partnership, to participate in the management or conduct of the partnership business, to require access to information concerning partnership transactions, or to inspect or copy the partnership books or records.” (Corp. Code, § 16503, subd. (a)(1), (2).) A transferee merely has the right to receive distributions that would otherwise have gone to the transferor, and to “receive upon the dissolution and winding up of the partnership business, in accordance with the transfer, the net amount otherwise distributable to the transferor.” (Corp. Code, § 16503, subd. (b)(1), (2).)

In his statement of decision, Justice Dibiaso found that plaintiff’s father, Walter Kozub, and Joe Josephine had not formed a partnership when Joe sold Walter a 5% share of the partnership profits from RPP, and that plaintiff therefore had no right to manage or interfere with partnership business. (September 29th, 2010 Statement of Decision, at pp. 28-29.) Instead, Joe had merely sold a property interest to Walter that gave him the right to receive 5% of the profits of Joe’s share of the partnership. (Ibid.)

Here, plaintiff appears to be arguing that he had the right to be informed and consulted with before Margo could sell her share of RPP, and that he could refuse to give his consent to the sale because it would affect his ownership rights to receive 5% of the profits from Margo’s share. However, plaintiff’s theory would appear to be inconsistent with Corporations Code section 16503 and the express language of the statement of decision in the underlying case. If plaintiff is not a partner of RPP, then he has no right to interfere with or be consulted about partnership business. As a result, plaintiff has failed to show that he had the right to be informed of the proposed sale of Margo’s share of RPP, or that he had a right to deny his consent to the sale. At the very least, there is a triable issue of fact as to whether the judgment gave him the right to

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refuse his consent to the sale, or even be consulted before the sale was final. Thus, the court intends to deny plaintiff’s motion for summary judgment.1

Pursuant to CRC 3.1312 and CCP §1019.5(a), no further written order is necessary. The minute order adopting this tentative ruling will serve as the order of the court and service by the clerk will constitute notice of the order.

Tentative Ruling
Issued By: KCK on 02/06/18
(Judge’s initials) (Date)