Guttman v Guttman

Bruce Guttman (Bruce), Phillip Guttman (Phillip), and Judith Douglas (Judith) are siblings and co-equal general partners of the Guttman Family Limited Partnership (the partnership), which owns real estate in Los Angeles. Bruce sued to dissolve the partnership, and Phillip and Judith initiated a statutory procedure to buy Bruce out. Believing the appraisals to be undervalued, Bruce dismissed his complaint without prejudice. The trial court granted Phillip’s and Judith’s motion to vacate the dismissal.

“We treat the appeal, which is from anon appealable order, as a petition for writ of mandate. Because the court did not err in granting the motion to vacate Bruce’s dismissal of his complaint, we deny the petition.”

Factual and procedural summary.

The dissolution cause of action Bruce filed claimed that, among other things, Phillip and Judith did not allow Bruce to act as a general partner. Bruce asked for a dissolution of the partnership. Phillip and Judith filed a motion invoking a statutorily limited partnership buyout. The trial court stayed the dissolution and identified three appraisers to appraise the FMV of the properties as of Sept.18, 2018. In November 2019, the parties lodged the appraisals with the trial court. The values submitted were $37,180,000, $38,300,000,and $39,037,000. Phillip and Judith argued that the statute and the judge’s order required that at least two of the appraisers reach a consensus on the value, so the appraisers’ work was not yet complete. Bruce disagreed and argued that it was up to the court to determine the value, not the appraisers.

The court held a conference in January 2020 and sided with Bruce that a consensus of two appraisers was not required and that the court“ can come up with numbers that are different from what the appraisers themselves came up with.” Conducting additional fact-finding, the trial court asked Phillip’s and Judith’s counsel to determine whether the appraisers were willing to meet to determine a consensus. Bruce objected, and his counsel asserted that the values were “lowballed” and should be closer to $58 million. Bruce filed for a complete dismissal of the complaint without prejudice, and the court accepted the dismissal. Phillip and Judith filed an ex parte application to vacate the dismissal.“ After a hearing, the court granted the motion to vacate the dismissal and ‘reinstated’ its August 16, 2019, order, stating that the dismissal ‘was improperly entered.’ The trial court reasoned that, just because one party was unhappy with the appraisals, there should not be a procedure for one party to overturn the appraisals unilaterally and start over.

Plaintiff filed a notice of appeal on June 20, 2020.

Appealability.

Although Phillip and Judith have not challenged the appeal, the appellate court has to consider whether the trial court has entered an order or judgment that is appealable. A judgment or order was not appealable unless made so by statute. The appellate court, “finding no statutory authority for an appeal from an order vacating a voluntary dismissal, conclude that the order is not appealable.” Both sides encourage the appellate court to treat the appeal as a petition for writ of mandate. The appellate court decided to do just that.

Limited partnership dissolution and the statutory buyout procedure.

The statute, Section 15908.02(b), allows that “the other partners may avoid the dissolution of the limited partnership by purchasing for cash the partnership interests owned by the partners so initiating the proceeding…at their fair market value.” If the application is granted, it stays the winding up of the business. The court appoints appraisers to determine the value of the properties. The language in the statute “does not limit the court’s ability to select among the various appraisals or independently determine the value of the parties’ interests.”

The court then provided a time period for payment of a value decree. If payment were made within that time frame, the purchased party must surrender their partnership interests to the partnership.

No dismissal after the court granted the buyout motion.

A plaintiff’s right to dismissal was not absolute. A plaintiff must request dismissal before the commencement of a trial. The definition of a trial was not applied easily in this case. Once the trial court granted the buyout motion, the dissolution case stayed. The merits of the dissolution case were never tried. The partnership was dissolved if the purchasing parties failed to pay for the moving party’s shares. The Supreme Court disagreed with the dismissal process, stating it would prolong litigation. It said further that “courts will consider the policy goal of avoiding ‘abuse by plaintiffs who, when led to suppose a decision would be adverse, would prevent such decision by dismissing without prejudice and refiling, thus subjecting the defendant and the courts to wasteful proceedings and continuous litigation.’ Here, Bruce’s dismissal would frustrate the statutory scheme under Section 15908.02, the buyout procedure. “If Bruce is allowed to dismiss his dissolution action and then file a new action for dissolution, he would effectively nullify the order staying the action and denying Phillip and Judith the relatively quick and efficient resolution of the issue the buyout procedure was intended to provide.” The granting of the buyout motion determined that there would be no trial, thus effectively disposing of the dissolution action. Bruce’srequest for dismissal was made after the granting of the buyout motion. However, Bruce had not provided any scenario to argue for a dismissal, and it was, therefore, not given.

No dismissal when defendants seek affirmative relief.

A plaintiff may not dismiss an action when a defendant seeks affirmative relief in the case. If the dismissal were granted, it would act not as a defense but as defeating the plaintiff’s cause of action. “Phillip and Judith contend that they sought affirmative relief through the court-approved buyout procedure and that Bruce was thereby prevented from voluntarily dismissing his complaint. We agree.”

Disposition.

“The appeal from the order dated February 18, 2020, granting the motion to vacate the dismissal, is dismissed. Deeming the appeal as a petition for writ of mandate, the petition is denied.”