Timothy Demartini v. Michael Demartini ( 2020 )

UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT DEC 23 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
TIMOTHY P. DEMARTINI; MARGIE Nos. 17-16400
DEMARTINI, 18-15882
Plaintiffs-Appellees, D.C. No.
2:14-cv-02722-JAM-CKD
v. Eastern District of California,
Sacramento
MICHAEL J. DEMARTINI; RENATE
DEMARTINI, ORDER
Defendants-Appellants.
Before: O'SCANNLAIN and PAEZ, Circuit Judges, and SIMON,* District Judge.
The memorandum disposition filed in this case on July 6, 2020 is hereby
amended. An amended memorandum disposition is filed concurrently with this
order. With this amendment, the panel has voted unanimously to deny the petition
for panel rehearing with respect to the July 6, 2020 memorandum disposition.
In addition, the panel has voted to deny the petition for panel rehearing and
petition for rehearing en banc with respect to the panel’s July 6, 2020 opinion. The
panel has voted unanimously to deny the petition for panel rehearing. Judge Paez
has voted to deny the petition for rehearing en banc, and Judge O’Scannlain and
Judge Simon have so recommended. The full court has been advised of the
*
The Honorable Michael H. Simon, United States District Judge for the
District of Oregon, sitting by designation.
petition for rehearing en banc, and no judge has requested a vote on whether to
rehear the matter en banc. Fed. R. App. P. 35.
The petitions for panel rehearing and the petition for rehearing en banc are
DENIED. No subsequent petitions for rehearing or rehearing en banc may be
filed.
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NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 23 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
TIMOTHY P. DEMARTINI; MARGIE Nos. 17-16400
DEMARTINI, 18-15882
Plaintiffs-Appellees,
D.C. No.
v. 2:14-cv-02722-JAM-CKD
MICHAEL J. DEMARTINI; RENATE
DEMARTINI, AMENDED MEMORANDUM*
Defendants-Appellants.
Appeal from the United States District Court
for the Eastern District of California
John A. Mendez, District Judge, Presiding
Argued and Submitted December 11, 2019
Pasadena, California
Before: O’SCANNLAIN and PAEZ, Circuit Judges, and SIMON,** District Judge.
Michael and Renate DeMartini appeal from summary judgment on all three
of their counterclaims against Michael’s brother, Timothy DeMartini, and his wife,
Margie. Michael and Renate also appeal from a jury verdict against them on
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Michael H. Simon, United States District Judge for the
District of Oregon, sitting by designation.
Timothy and Margie’s breach of contract claim.1 The facts of this case are known
to the parties and we do not repeat them here.
I
Michael and Renate argue that the district court erred by granting summary
judgment on each counterclaim.
A
The district court properly granted Timothy and Margie’s motion for
summary judgment on Michael and Renate’s counterclaim for declaratory relief
insofar as the counterclaim sought the declaration of a “global partnership.” While
there is a genuine issue of material fact as to the scope of the oral partnership
agreement allegedly formed by Michael and Timothy DeMartini in the 1970s, any
such agreement was not one that would create what the district court termed a
“global partnership” extending to the Coan Ranch, Maltman Drive, Dorsey East
Main Street, and 625 Idaho Maryland Road properties and to the DeMartini Auto
Sales, DeMartini RV Sales, and DeMartini Sunshine Body Shop businesses. Fed.
R. Civ. P. 56(a). Michael and Renate failed to produce essential evidence that the
profits from these properties and businesses were shared by the couples or that
1
We address Michael and Renate’s appeal from the order amending the
complaint, severing the partnership dissolution claim, and remanding for resolution
in state court in an opinion filed concurrently with this memorandum disposition.
See DeMartini v. DeMartini, Nos. 17-16400 & 18-15882, – F.3d – (9th Cir. 2020).
2
Michael and Renate participated in the management of such properties and
businesses. See Cal. Corp. Code § 16202 (defining partnership formation); Greene
v. Brooks, 45 Cal. Rptr. 99, 102 (Dist. Ct. App. 1965) (same); see also Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986) (establishing that the party with the burden of
proof at trial must “make a showing sufficient to establish the existence of an
element essential to that party’s case” to survive summary judgment).
B
The district court erred, however, by granting Timothy and Margie’s motion
for summary judgment on Michael and Renate’s counterclaim for breach of
partnership. Failing to construe the pleadings of the pro se counterclaimants
liberally, the district court asserted that the breach claim “was predicated on the
existence of a global partnership agreement.” Michael and Renate never used the
term “global partnership.” Their counterclaim asserts a breach of the alleged oral
partnership established by the brothers in the 1970s. Although there is no genuine
issue of material fact as to a partnership agreement comprising the full range of
properties and businesses listed in Michael and Renate’s counterclaim, Michael and
Renate nonetheless produced evidence that the business managing and leasing
commercial real estate at the 12759 parcel was a partnership between the two
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couples.2 Specifically, they produced evidence that could show that the couples
shared profits, participated in the management of the property, and held themselves
out as a partnership when leading the property. Such evidence is enough to create a
question of fact as to the existence of a partnership. See Spier v. Lang, 53 P.2d 138,
141 (Cal. 1935); Holmes v. Lerner, 88 Cal. Rptr. 2d 130, 138 (Ct. App. 1999); Bank
of Cal. v. Connolly, 111 Cal. Rptr. 468, 477–78 (Ct. App. 1973). Indeed, before the
post-trial amendment of the district court order, the magistrate judge’s Findings and
Recommendations acknowledged that whether the 12759 parcel was held by a
partnership was an open question of fact.3
A breach of partnership action is a species of the breach of contract action in
which the partnership agreement is the contract. See Gherman v. Colburn, 140 Cal.
Rptr. 330, 342–43 (Ct. App. 1977). The district court erred by concluding that
Timothy and Margie did not breach the contract because “[t]here is no evidence of
a contract with specific terms, i.e., majority vote required for the decisions.” In the
absence of specific terms, partnership agreements conform to a series of default rules
set forth by statute. See Cal. Corp. Code § 16103(a). The alleged breaches—actions
taken by Timothy DeMartini without a majority vote—are either the sort of decisions
2
“The 12759 parcel” refers to the properties located at 12759, 12757, and 12761
Loma Rica Drive, collectively.
3
The magistrate judge erroneously referred to the purported partnership concerning
the 12759 parcel as part of the partnership dissolution claim that had been separately
remanded to state court. That claim concerned only the 12731 parcel.
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made “in the ordinary course of business” that require a majority vote under
California’s default rules or even the sort of extraordinary actions that require
unanimity. Id. § 16401(j). Likewise, Michael and Renate assert breaches of
fiduciary duties that partners also owe by default. See id. § 16404. Thus, there are
genuine issues of fact material to Michael and Renate’s breach of partnership claim,
rendering summary judgment improper.
C
The district court erred, in part, by granting Timothy and Margie’s motion for
summary judgment on Michael and Renate’s defamation counterclaim. According
to the district court, Michael and Renate “failed to create a triable issue of fact as to
the elements of defamation, including the requirement to prove actual damages.”
However, Michael and Renate asserted both defamation per quod, for which actual
damages must be proved, and defamation per se, for which damages may be
assumed. See Contento v. Mitchell, 104 Cal. Rptr. 591, 592 (Ct. App. 1972); Judicial
Council of California Civil Jury Instructions (2020), CACI No. 1704. Contrary to
the district court, Michael and Renate’s failure to create a triable issue of fact as to
actual damages does not defeat a defamation per se claim.
Further, Michael and Renate identified evidence that creates a triable issue on
the other elements of their defamation per se claim. Specifically, they allege that
Timothy told a tenant that Michael embezzled $1600 of partnership funds, stole
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Timothy’s Social Security number, and impersonated Timothy. According to
Michael’s declaration, such statements were false and known to be false. In addition,
the accusation of criminal conduct like embezzlement, theft, and false impersonation
falls within the grounds for defamation per se set forth under California Civil Code
section 46(1). See Cunningham v. Simpson, 461 P.2d 39, 42 (Cal. 1969); Barnes-
Hind, Inc. v. Superior Court, 226 Cal. Rptr. 354, 358 (Ct. App. 1986) (“Perhaps the
clearest example of [defamation] per se is an accusation of a crime.”).
The remaining allegedly defamatory statements do not survive summary
judgment, however, either because Michael and Renate failed to “support the
assertion” of a genuine dispute as to such a statement’s falsity, see Fed. R. Civ. P.
56(c)(1), or because the statements do not fit any of the enumerated grounds for
defamation per se, see Cal. Civ. Code § 46(1)–(4). Accusations that Michael is a
difficult partner, when made to a tenant who is not alleged to be a potential partner,
do not “have a natural tendency to lessen the profits” of Michael’s real estate or
engineering businesses and are therefore not defamatory on their face. Cal. Civ.
Code § 46(3); Regalia v. The Nethercutt Collection, 90 Cal. Rptr. 3d 882, 888 (Ct.
App. 2009).
II
At the jury trial, the district court categorically excluded as irrelevant any
evidence that the 12759 parcel was held in partnership on the assumption that the
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summary judgment ruling settled the question of whether such a partnership existed.
The district court also excluded evidence of what the couples owed each other for
the joint management of the 12759 parcel because such evidence would require a
complex equitable accounting and Michael and Renate’s prayer for equitable
accounting had been rejected as part of the summary judgment on the breach of
partnership claim. In the absence of the erroneous grant of summary judgment,
evidence that Timothy and Margie paid off the Westamerica loan with partnership
assets would undoubtedly have been relevant to Michael and Renate’s defenses on
the breach of contract claim, including defenses of failure to mitigate damages and
breach of fiduciary duty.
We reverse the erroneous exclusion of partnership and mitigation evidence,
vacate the judgment on the breach of contract claim, and remand for a new trial
because the exclusion of such evidence “likely tainted the jury’s verdict.” Guerin v.
Winston Indus., Inc., 316 F.3d 879, 885 (9th Cir. 2002). By excluding evidence that
the brothers had operated the 12759 parcel as a partnership, the district court
effectively prevented Michael and Renate from raising any of their defenses except
waiver. Although the jury found that Michael and Renate breached their contract to
reimburse half the balance of the Westamerica loan, “the district court seems to have
preordained that result by preventing [Michael and Renate] from providing the jury
with an alternate explanation.” Id. Specifically, Michael and Renate could not make
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their case that the loan was a partnership loan, that Timothy breached his fiduciary
duties by depositing partnership funds into a personal account, and that Timothy and
Margie failed to apply partnership funds to the outstanding debt. “Thus, we
conclude that the exclusion of this evidence tainted the verdict and was an abuse of
discretion.” Id.III
AFFIRMED in part, REVERSED in part, and REMANDED for proceedings
consistent with this disposition.
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