2013-00140374-CU-CO

Perry Colburn vs. William S Winer

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Toledo, Margaret Carew

*** If oral argument is requested, the parties are directed to notify the clerk and
opposing counsel at the time of the request which of defendants’ 22 Undisputed
Material Facts and/or plaintiffs’ 4 Additional Material Facts will be addressed at
the hearing and the parties should be prepared to point to specific evidence
which is claimed to show the existence or non-existence of a triable issue of
material fact. ***

Defendants William Winer (“Winer”) and United Compost and Organics’ (“UCO”)
(collectively “Defendants”) motion for summary judgment based on the statute of
limitations is GRANTED because the moving papers satisfied Defendants’ initial
burden of production under Code of Civil Procedure §437c(p)(2) and shifted to
plaintiffs the burden to produce admissible evidence showing the existence of at least
one triable issue of material fact which precludes summary judgment, but plaintiffs
failed to carry their burden, thereby mandating summary judgment against plaintiffs as
a matter of law.

Both moving and opposing counsel are admonished for failing to comply with CRC
Rule 3.1350(g), requiring a single volume of evidence (including declarations) with a
table of contents when the evidence exceeds 25 pages.

Plaintiffs’ counsel is admonished for failing to comply with CRC Rules 2.111(3) and
3.1350(f) and (h), with the latter requiring that the separate statement in opposition
describe “the nature of the dispute” for each fact claimed to be disputed.

Plaintiffs’ written objections to evidence are overruled.

Defendants’ written objections to evidence are overruled except for Nos. 30, 33-35, 38,
41, 44-45, 47-48, 54, 56, 59, 65, 70, 86, 93, 95-97, 112, 115-118, 120-121, 124-126,
128-129, 130-134 and 137, each of which is sustained.

This litigation arises out of an alleged oral partnership agreement between plaintiffs
and Defendants in 2004 whereby the parties would jointly own, develop and market a
line of “Happy Frog” gardening products originally created by Winer. The profits, if
any, ultimately derived from this joint venture would be distributed not according to any
set formula but rather based on the parties’ subsequent agreement, taking into
account the parties’ respective efforts and other appropriate considerations. Plaintiffs’
now allege that defendants have failed and refused to abide by their obligations under
the oral partnership agreement. Their complaint filed on 2/21/2013 purports to assert
causes of action for breach of contract, declaratory relief, intentional
misrepresentation, accounting, misappropriation/conversion, breach of the covenant of
good faith and fair dealing, and breach of fiduciary duty. Defendants now move for summary judgment against plaintiffs on the ground that
each of their causes of action is barred by the applicable statutes of limitations as a
matter of law. Defendants rely on 22 Undisputed Material Facts (“UMF”) as support for
their motion. In particular, UMF Nos. 18-20 essentially assert that in late 2008 or no
later than September 2009, plaintiffs were told by Larry McCracken that the “Happy
Frog” gardening products were profitable and given they had not yet received any
compensation for their efforts, plaintiffs then began to suspect that defendant Winer
had breached his obligations under the alleged partnership agreement. In fact,
according to the evidence, plaintiffs shortly thereafter began looking into whether the
“Happy Frog” products were generating profits which should then be distributed
pursuant to the parties’ agreement. Specifically, plaintiff Zinda Colburn testified in
pertinent part:

“Q. When was the first time that someone raised this issue about whether or
not you had been compensated?
A. Boy, I don’t know that I could answer that. I couldn’t recall that, but I do know
one notable time that stands out. It would have been in 2008 or possibly 2009 we
were at the Eureka Brewery with Larry McCracken. He was the general manager of
FoxFarm.
…
[A.] And we were having a social dinner with him, and he said, boy, I hope you
guys got paid well for that [Happy Frog] name because Willy [Winer] is making bank on
that name. And that’s to quote what Larry said. And I remember looking at him, and I
wasn’t quite sure where he was going with that because it was almost like he knew we
had an agreement with Willy, but because he was the general manager, he also knew
the flow of money and when the checks were being written out and to whom. And he
hadn’t seen anything like that. So my impression was he was trying to find out if Willy
was paying us on the side because obviously payment was due because he was
noting that Willy was making so much money on our name and our partnership and
our efforts to market those products, so that was my take on it.
…
Q. After Larry asked you that question, what did you say in response to that to
Larry?
A. I was shocked. I was shocked and stunned because it was the first
realization in my mind that my friend Willy may have had other not-so-honorable
motives with dealing with us. It was my first realization that we need to talk to Willy
about this. We need to get this settled because if you — because prior to that when we
would request money — we’d request a conversation with Willy about how the [Happy
Frog] line was doing, are we making money, are we where we need to be yet, we were
always assured that we’re getting there. … And so because of the nature of our
relationship of being very good friends,…I really didn’t have any reason to be too
concerned about it. … So when Larry said that, I was taken aback, and it really was
the first time I had a thought that he might not be acting in our best interest.
Q. My question was after Larry asked you that question, what did you say in
response to Larry?
A. After I got over being stunned and all those thoughts went through my head,
I said no, we haven’t been compensated.
…
Q. You said that one of the thoughts that ran through your head was we need
to get this settled. What do you mean by that?
A. … And I felt like we had gotten to the point where…with the alert from Larry
and that we needed to talk to Willy and find out where and when we were going to be
able to get compensated for our efforts and what the ongoing relationship was going to
be with respect to the Happy Frog products.
Q. You also said that at that dinner one of the thoughts that ran through your
mind for the first time was the thought that Willy might not be acting in your and Perry’s
best interests, correct?
A. Uh-huh.
Q. Did you think at that point that Willy may have breached obligations to you
as part of your alleged oral partnership?
A. I didn’t think of it in those words, but yes.
Q. What words did you think of it in?
A. Well, what I just stated, that he probably, you know, could — the question
occurred to me maybe he wasn’t acting in our best interest because when we had
approached him with the fact before, he kept saying we’re almost there, we’re almost
there. And then Larry’s telling me that it is profitable. Where Willy had alluded to the
fact that we’re getting there, but we’re not quite there yet.
Q. After learning from Larry that Willy may have breached his obligations to
you, did you take any action to investigate whether that was true or not?
A. Perry and I talked about it and made plans to talk to Willy. But as I said, it
was a really difficult time,…, we delayed talking to Willy. …
…
Q. Other than talking to Perry and making plans to speak with Willy, did you
take any action to investigate whether Willy had breached any duties that he owed to
you?
A. I took notice in a more accurate way, a more observant way, of the numbers,
the sales figures that were being given to us. My awareness was up on that.
Q. When you say your awareness was up, are you saying that you reviewed
documents that were provided to you regarding the Happy Frog sales figures?
A. That would be a fair statement.
Q. Did you do anything else?
A. No. I don’t believe so.
Q. In reviewing the numbers about the sales figures of the Happy Frog
products, what did you learn?
A. I learned that we were selling nationwide a great deal more than I had
considered prior to [Larry’s] comment.
Q. When did you learn that?
A. Sometime between the time Larry said it and the time he died.
Q. And I’m sorry. … When did he die?
A. October of 2009.
Q. How is it that you recall right now that that’s when you learned it?
A. Because my awareness of it or my concern for it wasn’t there until Larry
brought it up.
Q. At the point that you learned that FoxFarm was selling nationwide a great
deal more Happy Frog products than you had considered or understood previously, did
that piece of information cause you to take any action, further action?
A. The action I’ve already spoken of.
…
Q. … By October of 2009, what information did you have that Willy may have
breached obligations to you that he owed you as part of the alleged oral partnership?
A. By 2009 what? What was the next word, what evidence?
Q. No. My question was by October of 2009, what information did you have
that —
A. What information.
Q. — that Willy may have breached obligations to you that he owed you as part
of the alleged oral partnership?
A. I had the information from Larry. I had sales figures and information to see
approximately the sales the company was doing. I had the common knowledge of
being part of the — and a leader in the sales team that the increase in distribution, the
increase in trade shows, the increase in customers was common and broad
knowledge in the office that we were doing well.
Q. When you say approximately the sales, why do you say approximately?
A. Did I? Can you read it back to me.
…
THE WITNESS: I didn’t know exactly to the penny what the company was
doing, but I had, you know, if we were doing a $1,000,000.35, we would have said we
were doing a million dollars. That’s what I meant.
Q. …At the point in October of 2009 when you had all of this information, did
you discuss with Perry whether you should take any action at that time to address this
issue with Willy?
A. Yes.
Q. And what was the substance of those discussions?
A. Exactly what you said. We discussed that we needed to take action with
this, but we were very mindful of the sensitive nature of what was going on in the
office. With Larry being gone and abruptly being gone, everyone was a bit blindsided
by this, and it would have been a rude time to bring up such a thing given the nature of
the relationship with Willy and our relationship with Larry and Heather and all the other
team. It would have been an inappropriate thing to do. … [W]e decided to go on our
holiday and come back in February,…, and pick it up then.
Q. In October of 2009, how much money did you think you were owed by
Willy?
A. I couldn’t have known that because the numbers I saw, the sales figures
were approximate, and they were — I did not see specifically broken down how much
Happy Frog’s fertilizer was being sold or Happy Frog soils. I knew that the numbers
had increased, and I could see the sales figures for certain stores but not everybody.
So I had an idea, but I didn’t know the exact number, so I couldn’t know what number
to ask for.
Q. In your own mind, did you quantify what you thought you should be paid?
A. I didn’t go there because I wanted to be accurate with the numbers before
we talked about it.
Q. Did you have any sense that this was a significant obligation that needed to
be paid to you?
A. Yes.” (Defs.’ Ex K (Depo. Z. Colburn), pp.226-239.)

This Court holds that the above-cited testimony is sufficient to establish the statute of
limitations on plaintiffs’ claims against Defendants based on the alleged partnership
agreement evidence commenced no later than September 2009, when Mr. McCracken
died. (UMF 21.) Consequently, Defendants satisfied their initial burden of production
under Code of Civil Procedure §437c(p)(2) and successfully shifted to plaintiffs the
burden to produce admissible evidence which shows the existence of a triable issue of
material fact. In the absence of any triable issue, plaintiffs’ filing of the present action
more than three (3) years later on 2/21/2013 is untimely and thus barred by the
statutes of limitations applicable to the causes of action now being asserted against
Defendants.

Plaintiffs oppose the motion. First, plaintiffs request to continue the hearing on this motion in order to obtain further discovery, particularly the deposition of defendant
Winer. Plaintiffs insist that this deposition is “essential” to the opposition because it
“goes to the heart of the defendants’ motion” based on the statute of limitations
defense. More specifically, the opposition maintains that defendant “Winer’s answers
to questions planned…may directly contradict the factual basis” of the summary
judgment motion. However, plaintiffs’ request pursuant to Code of Civil Procedure
§437c(h) must be denied because plaintiffs explicitly waived their right to request a
(further) continuance when Defendants agreed in October 2013 to continue the
hearing on this motion from its original date in December 2013 to January 2014.
(Supp. Decl. of Toledo, Ex. I.) Additionally, the request is also denied because
plaintiffs have failed to establish not only that this deposition could not have
reasonably been completed prior to the hearing on this motion (originally set for
December 2013, continued to January 2014 and then continued again to March 2014)
but also that Mr. Winer’s own testimony would create any triable issue of material fact
relating to the commencement of the statute of limitations. Given that plaintiffs were
aware as early as September 2013 Defendants were preparing this motion and that
this motion was ultimately filed in filed in November 2013, the Court remains
unconvinced that the deposition of defendant Winer could not with reasonable
diligence have been started and completed well in advance of the December 2013 or
January 2014 hearing date. Regardless, in light of plaintiff Zinda Colburn’s testimony
cited above, the Court must reject the suggestion that any testimony defendant Winer
might provide would be sufficient to establish any triable issue of material fact which
would preclude summary judgment based on the statutes of limitations governing the
causes of action asserted by plaintiffs. Coupled with plaintiff’s failure request the
continuance “as soon as possible” (see, Weil & Brown, Civil Procedure Before Trial,
Ch. 10:207.6), this Court exercises its discretion and denies the continuance sought by
plaintiffs. (See, e.g., Cooksey v. Alexakis (2004) 123 Cal.App.4th 246, 251, 255-256;
Combs v. Skyriver Communications, Inc. (2008) 159 Cal.App.4th 1242, 1270.)

Second, plaintiffs contend that six (6) of Defendants’ 22 UMF are disputed and they
also offer four (4) Additional Material Facts (“AMF”) of their own which are claimed to
preclude summary judgment on the statute of limitations grounds. Because the Court
holds that Defendants’ moving papers satisfied their initial burden of production under
Code of Civil Procedure §437c(p)(2), the burden has shifted to plaintiffs to produce
admissible evidence showing the existence of at least one triable issue of material fact
which precludes judgment as a matter of law. However, as will now be shown,
plaintiffs have failed to carry this burden and have therefore failed to defeat summary
judgment in favor of Defendants.

Plaintiffs insist that UMF Nos. 5-7 are all disputed but this is not borne out by the
record. Regardless, each of these UMF relate to things which occurred in 2003, well
before the alleged oral partnership agreement in 2004, and none of these UMF has,
either individually or collectively, any legal significance to the commencement of the
statute of limitations on the claims asserted in this lawsuit. Consequently, any
technical dispute over UMF Nos. 5-7 would not rise to the level of a triable issue of
material fact which would otherwise preclude summary judgment here.

The opposition argues that UMF Nos. 18-20 are also each in dispute. As noted above,
these UMF essentially state that sometime in late 2008 or in 2009, Mr. McCracken told
plaintiffs the “Happy Frog” products were generating sizeable income and because
they had not yet received a share of that income, plaintiffs then began to suspect that
defendant Winer was not abiding by the duties/obligations under the alleged partnership agreement. The opposition’s claim that UMF Nos. 18-20 “disputed” is
premised solely on Paragraph 17 of plaintiff Zinda Colburn’s own declaration.
However, to the extent this paragraph of Ms. Colburn’s Declaration contradicts her
own unequivocal deposition testimony cited above regarding plaintiffs’ dinner
conversation with Mr. McCracken at a brewery in Eureka and the significance she
attributed to that conversation, it need not be considered by the Court. (See, e.g.,
D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 21.) Regardless,
Defendants’ additional objections to this evidence on other grounds have been
sustained. (See, Defs.’ Obj. to Evid., Nos. 33-35.) For all these reasons, the Court
finds no admissible evidence which establishes the existence of any triable issue of
material fact with respect to UMF 18, 19 or 20.

Finding no dispute over any of the 22 UMF offered by Defendants, the Court now turns
to the four (4) AMF advanced by the opposition. None of these AMF are deemed to
create a triable issue of material fact which precludes summary judgment here since
none of these AMF have any legal relevance to the question of whether or not the
statute of limitations commenced in 2008 or 2009 when plaintiffs first learned that the
“Happy Frog” products were profitable and plaintiffs first suspected that defendant
Winer might not be abiding by the alleged partnership agreement, even going so far as
to look more closely at the sales records/documentation. (Defs.’ Ex K (Depo. Z.
Colburn), pp.226-239.)

The final issue which needs to be addressed is plaintiffs’ contention that Defendants’
failure to make payments under the partnership agreement was a separate and distinct
breach which triggered successive limitation periods governing plaintiffs’ claims. The
“continuous accrual” theory only applies where there is a continuing or recurring
obligation on the part of a defendant and “each new breach of such an obligation
provides all the elements of a claim–wrongdoing, harm, and causation [cite]–each
may be treated as an independently actionable wrong with its own time limit for
recovery” and “To determine whether the continuous accrual doctrine applies here, we
look not to the claim’s label… but to the nature of the obligation allegedly breached.
[Cite.]” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1199-1200.)
In Aryeh , the plaintiff sued defendant for fraud in connection with a lease which
required the former to make monthly payments to the latter and thus, the Supreme
Court found that the defendant’s duty “not to impose unfair charges in monthly bills”
was a continuing one, susceptible to recurring breaches with each one triggering a
new statute of limitations. (Id., at 1200.) This conclusion was reinforced by the
allegations in the operative complaint that defendant had on a recurring monthly basis
imposed excess charges. (Id., at 1201.) Contrary to plaintiffs’ suggestion, the litigation
at bar does not involve any regularly recurring obligations or breaches which are a
prerequisite to the application of the “continuous accrual” theory. Not only does the
complaint contain no allegations which so much as suggest any recurring obligations
on the part of Defendants under the oral partnership agreement but the evidence now
before the Court uniformly establishes that any obligation to distribute profits had not
actually been agreed upon and would instead be determined on a future date, taking
into account various considerations. Consequently, plaintiffs’ reliance on the
“continuous accrual” theory as a means to escape the statute of limitations is
misplaced as a matter of law.

For the foregoing reasons, this Court can find no triable issue of material fact and
summary judgment in favor of Defendants based on the statute of limitations is
therefore warranted under Code of Civil Procedure §437c(c).