Preview
Kevin R. Brodehl (SBN 197657) E-FILED
PATTON SULLIVAN BRODEHL, LLP 10/19/2018 10:55 AM
6600 K011 Center Parkway, Suite 250 FRESNO COUNTY SUPERIOR COURT
Pleasanton, California 94566
By: C. York, Deputy
Telephone — (925) 600-1 800
Facsimile — (925) 600-1 802
kbrodehl@psblegal.com
Attorneys for Plaintiffs
O(DmNGU‘I-PODN—‘k
Morris Garcia and Sharon Garcia
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF FRESNO
MORRIS GARCIA and SHARON GARCIA, Case N0. 15CECG02784
as individuals and former Trustees 0f the
Morris and Sharon Garcia Family Trust Dated PLAINTIFFS MORRIS GARCIA AND
December 28, 1996, SHARON GARCIA’S OPPOSITION
i I
T0 DEFENDANTS’ MOTION T0
Plamnffs, STRIKE COST BILL 0R IN THE
— VS-—
ALTERNATIVE
ENFORCEMENT 0F JUDGMENT
STAY
JOHN GARCIA, and JANIE GARCIA as
individuals and as Trustees of the John and
Janie Garcia Family Trust Dated January 2,
1997; VISTA DEL SOL FARMS, a Limited
Liability Company; VISTA DEL SOL
FARMS I,a Limited Liability Company; and
DOES 1 through 20, inclusive,
Defendants.
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Plaintiffs MORRIS GARCIA and SHARON GARCIA submit the following Opposition
to Defendants’ Motion to Strike Cost Bill 01‘in the Altemative Stay Any Enforcement of
Judgment.
I. INTRODUCTION AND BACKGROUND
Plaintiffs Mon‘is and Sharon Garcia prevailed on appeal in an Opinion issued by the Fifth
District Court of Appeal on May 22, 201 8. (Fifth District Court of Appeal Case No. F073735.)
The Opinion concluded by stating: “Plaintiffs shall recover their costs on appeal.” The
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PATTON S U LLIVA N
BRODELIL LLl' OPPOSITION TO DEFENDANTS’ MOTION TO STRIKE COSTS BILL Casc No‘ lS-CECG-02784
PLEASANTON, CALIFORNIA
—A
Remittitur dated Juiy 23, 201 8 stated the same. For this court’s convenience, the Opinion and
ho Remittitur are attached to this brief as Exhibits A and B, respectively.
C» As a matter 0f law, and as expressly directed by the Opinion, Plaintiffs are entitled to
¢>
recover their costs on appeal. They timely filed a Memorandum 0f Costs on Appeal (Judicial
Ch Council Foxm APP-013) on August 29, 2018 claiming total costs in the amount 0f $3,330.] 8.
CD Defendants John and Janie Garcia have not moved to tax any of the specific amounts
‘4
claimed on the Memo of Costs. Instead, they have asserted a blanket motion to strike the entire
CD Memo of Costs on the purported grounds that “Plaintiffs have not prevailed on the merits of the
«3 case” and that any award of costs pursuant to the Court of Appeal’s direction would be
CD “premature.” (Defendants’ Motion, p. 2:7—1 1 .) They alternatively argue, without citing any
-A
authority, that the court should “stay” enforcement of the cost award.
ho Defendants’ motion is legally flawed and cannot succeed. Defendants rely on incorrect
GO
and inapplicable authorities for their motion to strike. Those authorities govern only recovery 0f
$>
trial court costs following final adjudication. Different authorities, ignored by Defendants,
Ch govern the recovery of appellate costs. Further, there is no authority whatsoever supporting
CD Defendants’ alternative request for a “stay” of the cost award, and Defendants’ request violates
‘4 well-established mics governing the enforceability 0f money judgments and orders.
CD Accordingly, Defendants’ motion should be denied.
MNMMNMNNAAAAAAAAAA
GD
II. ARGUMENT
CD A. Defendants’ Motion to Strike must be denied because it is based 0n the
wrong legal authorities, and conflicts with the express directions of the Court
'
—*
0f Appeal.
ha
As stated in the Ieading California treatise, “The right to recover costs on appeal is
00
governed solely by CRC 8.278.” (Eisenberg, et. a1, Califomia Practice Guide: Civil Appeals and
¢> Writs [Rutter Group], §14:55, emphasis added.) Under California Rules of Court, Rule 8.278,
(n “the patty prevailing in the Court of Appeal in a civil case is entitled to costs 0n appeal” and
CD “prevailing party” is defined as including the Appeilant following a reversal of a judgment or
‘4
order. (Cal. Rules of Ct, Rule 8.278(a).)
28 ///
2
SULLIVAN
PA'I‘I‘ON
BRODEuLLLP OPPOSITION TO DEFENDANTS’ MOTION TO STRIKE COSTS BILL Case No. lS-CECG-02784
PLEASANTON, CALIFORNIA
“If the appellate court’s opinion specifies a costs award, the trial court may not deviate
from that specification. A party who is dissatisfied with the costs award must seek relief in the
appellate court before remittitur is issued[.]” (Eisenberg, et. a1,California Practice Guide: Civil
Appeals and Writs [Rutter Group], §14:70.1, emphases added, citing Harbour Landing—Dalfann,
@mflmm-hOJNA
Ltd. v. Anderson (1996) 48 Cal.AppA‘h 260, 265 [trialcourt erred in denying prevailing appellant
costs explicitly ordered in remittitur].)
Defendants’ motion fails t0 mention any of the authorities above. Instead, Defendants”
motion appears to be based 0n Code 0f Civil Procedure section 1032, which does not apply here.
Plaintiffs do not seek costs as the “prevailing party in the action” pursuant to section 1032. They
seek costs as the prevailing party on appeal as authorized by California Rules of Court, Rule
8.278 and as expressly directed by the Court 0f Appeal. As held by long-standing authority, “a
successfill party on appeal has the right t0 execute on its award of costs on appeal even before
the underlying case isdecided. [A] successful litigant on appeal may immediately enforce an
award of costs on appeal because ‘there is n0 interdependence between the judgment for costs on
the former appeal and any judgment which may be subsequently entered in the main case.”
(Fundamental Investment etc. Realty Fund v. Gradow (1994) 28 Ca1.App.4“‘ 966, 972, emphasis
added, citing and quoting First National Bank v. Stansbury (193 1) 214 Cal. 190, 192.)
“A valid costs memorandum establishes a prima facie
Nmm‘bWNAomemU‘l-bWN-AO
NNNNNNNNAAAAAAAAA-x
case for recovery. Thus, the
burden is on the party moving to strike 01‘tax costs to establish that each disputed item is not
recoverable.” (Eisenberg, et. a1,Califomia Practice Guide: Civil Appeals and Writs [Rutter
Group], §14:109, emphasis original, citing Bach v. County ofBut't‘e (1989) 215 Cal.App.3d 294,
308 and Pratt v. Robert S. Odell & Co. (1944) 63 Cal.App.2d 78, 8i.) Defendants have utterly
failed t0 meet their burden here. They essentially ask this court t0 ignore the express instructions
of the Court of Appeal, which this court cannot do.
Accordingly, Defendants’ Motion to Strike must be denied.
///
///
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3
PATTON SULLIVAN
OPPOSITION TO DEFENDANTS’ MOTION TO STRIKE COSTS BILL Case N0. 15-CECG-02784
BRODEHL LLl'
PLEASANION, CALIFORNIA
B. Defendants’ alternative request to “stay” the forthcoming order awarding
costs on appeal must be denied because it is contrary t0 governing law.
“An award of costs 0n appeal is enforceable in the same manner as a money judgment.”
(Eisenberg, et. a1, California Practice Guide: Civil Appeals and Writs [Rutter Group], §14:1 1 1,
citing Cal. Rules of Ct, Rule 8.278(c)(3) and Alan S. v. Superior Court (2009) 172 Cal.App.4‘h
COQNOUU‘IACONA
238, 241 [trial court lacks authority t0 make appellate costs payable in installments]; see also
Fundamental Investment, supra, 28 Cal.App.4‘h at 972 [holding that a “successful litigant on
appeal may immediately enforce an award 0f costs on appeal because there isno
interdependence between the judgment for costs on the former appeal and any judgment which
may be subsequently entered in the main case.”].)
An award 0f appellate costs by the coult of appeal constitutes a separate judgment.
(Lucky v. United Properties Investment, Inc. v.Lee (2013) 213 Cal.App.4"‘ 635, 654-656.)
Under well-recognized rules goveming enforcement of money judgments, a stay 0f enforcement
can be obtained only by the posting 0f an appropriate bond after a notice of appeal has been filed.
(Code Civ. Proc. §917.1.)
Accordingly, Defendants’ alternative request for a “stay” must be denied.
III. CONCLUSION
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For all of the foregoing reasons, Plaintiffs respectfully request that Defendants’ motion
chnAC‘ON—‘OQmNOUU‘l-wa—‘O
be denied. None of the itemized cost amounts have been challenged by Defendants. The court
should enter a cost award as expressly instructed by the Court of Appeal.
DATED: October 19, 2018 PATTON SULLIVAN BRODEHL LLP
By= 7C
KevinR.
K
Brodehl
@V/
Attorneys f01 Plaintiffs Monis Garcia and
Sharon Garcia
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PATTON SULLIVAN Case No. lS-CECG-02784
BRODEHL LLP OPPOSITION DEFENDANTS’ MOTION TO STRIKE COSTS BILL
'l'O
PLEASANTON, CALIFORNIA
COURT 0F APPEAL
HFrH APPELLAIE 915mm
LEE)
MAY 22 2018
a, d0
[ Deputy
NOT T0 BE PUBLISHED IN THE OFFICIAL REPORTS
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
MORRIS GARCIA et al., etc.,
F073735
Plaintiffs and Appellants,
(Super. Ct. N0. ISCECGOZ784)
v.
JOHN GARCIA etc., et aL, OPINION
Defendants and Respondents.
MORRIS GARCIA et a1.,
F074263
Plaintiffs and Appellants;
(Super. Ct. Nos. 12CECGO3902,
v. 13CECG00135 & 15CECG01410)
JOHN GARCIA etc), er a1.,
Defendants and Respondents.
APPEAL from judgments of the Superior Court of Fresno County. Kristi Culver
Kapetan, Judge.
Wendel, Rosen, Black & Dean and Kevin R. Brodehl for Plaintiffs and Appellants.
Gilmore Magness Leifer, David M. Gilmore and Katherine M. Rigby for
Defendants and Respondents.
—ooOoo-
I
Plaintiffs borrowed money and guaranteed other loans in connection with a real
estate development. The development failed, the loans went into default, and in April
2010 the bank obtained a $2.4 million judgment against plaintiffs. To collect its
EXHIBITA
judgment, the bank foreclosed on real property collateral worth about $1 .1 million and
obtained a charging Order against plaintiffs’ one~ha1f economic interest in two California
limited liability companies. (Fonnér Corp. Code, § 17302 [charging orders].)1 When the
limited liability companies made no payments subject to the charging order, the bank
foreclosed on the “economic interests” plaintiffs held in the companies? At the
foreclosure auction, the bank crédit bid and purchased the economic interests for $1.5
million. Afier the foreclosure, the limited liability companies sold their real estate,
ceased their farming operations, and distribfzted over $5 million to the bank as the holder
of 50 percent of the economic interests in the companies. The limited liability companies
then dissolved. _
Plaintiffs sued the manager of the limited liability companies who, along with his
wife, owned the other half of the companies. Plaintiffs alleged a‘
breach of fiduciary duty,
arguing that, despite the foreclosure, they retained an interest in their original capital
éontributions and accumulated capital of the companies, which should have been returned
to them instead of being included in the $5 million transfexred to the bank. The manager
and his wife filed a demurrer, contending plaintiffs had no right to a return of capital and,
instead, the bank had a rightffil claim to the funds as the holder of one-half of {he
“economic interests” in the limited liability companies. The trial court agreed,
concluding plaintiffs retained n0 rights to a return of capital and, thus, were not damaged
by the allegedly wrongful conduct. The court sustained the demurrer without leave to
lamend. Plaintiffs appealed.
Based oh statutory definitions that cannot be altered by the terms of a limited
liability company agreement, we conclude the trial court correctly determined plaintiffs
1
A11 unlabeled statutory references are to the Corporations Code.
2 The term “[e]conomic interest” was defined in the operating agreements of the
limited liability companies and also by former section 17001, subdivision. (n).
retained no rights to the return of gapital, whether characterized as a capital interest or
have alleged a breach o‘f fiduciary
capital account. However, we also conclude plaintiffs
duty based on the manager’s failure to make distributions that would have been paid to
the bank pursuant to its charging order. Plaintiffs alleged the failure to make
distribfitions caused the bank to foreclose, which caused the companies to cease farming
operations, liquidate their land and go out of existence. These allegations, which are
accepted as true for purposes of the demurrer, are sufficient to allege the manager did not
act in the best interests of the companies or the plaintiffs, which constitutes a breach of
the manager’s fiduciary duty in matters committed to the manager’s discretion.
We therefore reverse the order dismissing plaintiffs’ lawsuit and the order
imposing sanctions. ,
'
FACTS
Appellants Morris Garcia and Sharon Garcia, husband and wife, were plaintiffs
below. Respondents John Garcia and Janie Garcia were defendants. Resiaondénts Vista
Del Sol Farms, LLC and Vista De’lt Sol Farms I, LLC were nominal defendants?
In 1979, Morris and his nephew John formed a partnership named G2 Farms,
which grew cotton and related crops. Later the pannership expanded into almonds.
Sometime after its formation, Sharon and Janie acquitted interests in G2 Farms. and, as a
regult, each partner owned a 25 percent interest.
In 2004, Morris formed a real estate development company flamed Wasco Rose,
LLC (Wasco Rose). A corporation owned by Morris and Sharon, Western Ag Realty,
Inc. (Western Ag), held a majority interest in Wasco Rose. Aspart of Wasco Rose’s
operations, Morris purchased land in Wasco, California, which he planned to develop by
3
We refer to the individuals by their first name because they share the same
surname. Morris and Sharon are referred to collectively as plaintiffs. John and Janie are
referred to collectively as defendants. Vista Del Sol Farms, LLC and Vista Del Sol
Farms I, LLC are referred to collectively as the LLC’ s
building single~family housing. Morris, Sharon and Western Ag took out loans from the
Bankof Stockton (Bank) to finance the project. In addition, Wasco Rose obtained loans
from the Bank, Which were partiaily secured by real property located in Wasco. Morris
and Western Ag personally guaranteeé the loans made t0 Wasco Rose.
In August 2009, after the loans went into default, the Bank filed a lawsuit against
plaintiffs and Western Ag seeking repayment 0f .the loans. The action was filed in San
Joaquin County Superior Court.
While the Bank’s lawsuit was pending, plaintiffs and defendants decided to
convert the G2 Farms partnership into the two LLC’s. The LLC’s were capitalized by
each partner of G2 Farms contributing their 25 percent interest in the partnership, which
established each member’s capital account. In return, Morris, Sharon, John find Janie
became members 0f the LLC’s, with each member owning a 25 pgrcent interest in each
company. On January 1, 2010, the reorganization was formalized by filing articles 0f
organizatidn for both LLC’s with the California Secretary of State. The articles identified
I
GZ Famis‘ as the converting entity.
John was appointed as the manager 0f each of the LLC’S and handled the day-to—
Morris handled nonfarming activities such as financing, leasing
day farming operations.
and water district issues. The operating agreements of the LLC’s stated that their pn'mary
purpose was to engage in farming and felated activities. Sections 5.7 0f the operating
agreements stated: “Standard of Care. The fiduciary duties a Manager owes to the
Company and the other MemBers are those 0f a director 0f a California corporation t0 the
t
corporation and itsshareholders.”
In April 2010, the Bank obtained a judgment against Morris, Sharon and Western
Ag in the amount 0f $358,920.56, plus interest and attofney fees and a separate judgment
‘
against Morris and Western Ag in the amount of $2,190,246.99, plus interest and attorney
fees. T0 enforce itsjudgment, Bank filed a motion and application of a charging order.4
On July 2, 2010, the court granted Bank’s motiOn and~issued a charging order
against plaintiffs Mbrris and SharOn’s economic interest ifi the LLC’s. Under the
-
charging order, th; p1a'intiffs’ 25 percent interests in the LLC’s were “charged as assets 0f
[the plaintiffs,]
‘tfie
proceeds of which shall be applied to pay the uns atisfied portion 0f ‘
fulllp”
the Judgment entered in the pending action until-such Judgment is satisfied in
I
The charging order refused t0 appoint a receiver and stated a writ 0f executiofi (which >
was [not issued) was the proper means to levy the retirement plan and IRA account.
fl
201 1 Bankrugtcy
Plaiptiffs allege they attempted t0 access their capital accounts in the LLC’S t0
repay the amounts owed t0 the Bank. John, in his capacity as manager, and John and
Janie, in their capacities as members, denied plaintiffs access to their capital in the
LLC’s. Plaintiffs allege they had n0 alternative except bankmptcy protection.
Onn filed a chapter 7 bankruptcy petifion in the federal
March 3 1,201 1, plaintiffs
bankruptcy court. Plaintiffs claimed approximately $18,500 of the value of their
membership interest in one 0f the LLCis was exempt from execution. Their bankruptcy
schedule 0f property claimed as exempt estimated the value of the membership interest in
the LLC at over $2.2 millions On July 5, 201 1, the bankruptcy court entered an order
stating plaintiffs were “granted a discharge under section 727 of title 11, United States
Code.”
4 Another Way the Bank attempted to collect the meney owed was by conducting a
nonjudi'cial foreclosure sale of real property that partially secured the Wasco Rose loans.
The sale occurred in August 2010 and approximateiy $1,147,725 in proceeds were
applied to reduce the judgment held by the Bank.
5 On June 23, 201 1, the Bank obj ected t0 plaintiffs’ claim 0f exemption. About
nine months later, 0n March 15, 2012, the bankmptcy court overruled the Bank’s
objection to the claim 0f exemption.
2012 Foreclosure 0n Economic Interests
John, as manager of the LLC’S, did not make anydistribution t0 the Bank pursuant
t0 the July 2010 charging order. Eventually, the Bank moved to foreclose 0n the
economic interests 0f plaifitiffs in the LLC’S based 0n the April 201 0 judgments.
On May 4, 2012, the foreclosure sale was held. The Bank made an opening credit
bid of $1 ,5 million and n0 one else submitted a competing bid. The bid specified that (1)
of Western Ag, Morris
l
$500,000 would be credited against the jbint and several liability
.and Sharon and
(2) $1 million would be credited against the joint and several liability of .
~
Western Ag and Morris.
On August 9, 2012, the court entered an order 0f foreclosure and sale to the Bank.
The order stated: “The respective 25% ‘economic interests’ of MORRIS F. GARCIA
and SHARON A. GARCIA in []each 0f the respective LLCs as defined in Cal. Corp.
hereby foreClosed so that [Morris and Sharon] shall thereafter have n0
Code § 17001(n) is
further ‘econorfiic interest’ in either 0f the LLCS.” The order stated the economic
interests were sold t0 the Bank, which “shall thereafter have the rights 0f an assignee 0f
said economic interests.” The order also directed the Bank t0 file a pafiial satisfaction [Of
«
judgment.
Sale ofAssets ofLLC ’s and Dissolution
In November 2013, plaintiffs learned that defendants, acting for the LLC’S, had
sold all of the real property owned by the LLC’s t0 Samara Ranches, LLC. The real
Defendants signed
property éonsisted of seven parcels totaling approximately 400 acres.
a grant deed coven'ng the sewn parcel and, delivered it to the buyer. The grant deed was
recorded on November 26, 2013. Plaintiffs were not given an oppofiunity t0 vote on the
Plaintiffs allege they would have not agreed to the sale if they
sale 0f the real property.
had been given an opportunity t0 vote.
.
In December 2013, John filed statements of information for each LLC with the
California Secretary of State. The statements listed John as chief executive officer and
Janie and the Bank as the managers of the LLC’s.
An undated “AGREEMENT FOR DISSOLUTION 0F VISTA DEL SOL” was
entered into by the Bank, John and Janie with reference to “Vista Del Sol, a California
limited liability company.” The agreement stated “Vista Del Sol shall be dissolved as of
June 30, 2014 and thereafter shall no longer engage in any business or operations.”
On July 16, 2014, the Bank received a payment of $2.5 million from the LLC’s.
On November 5, 2014,. the Bank received payments totaling $2,526,933: 15 from the
LLC’s. The general ledger of one of the LLC’s shows these transfers ‘
as withdrawals by
the Bank from a capital account.
In April 2015, John filed a “Certificate of Dissolution of a Limited Liability
Company” for each of the LLC’s. Each certificate stated the dissolution of the LLC was
caused by the vote of a majority of the memberé of the LLC.
On June 3, 2015, John filed a “Certifiéate of Cancellation of a Limited Liability
Company” for each of the LLC’s, which cancelled {heir articles of organization. The
certificates stated that (1) the “dissolution was made by the vote of all of the members”
and (2) all tax returns required under California statute had or would be filed with the
California Franchise Tax Board.
v
PROCEEDINGS
Fiduciary Dug; Lawsuit
In May 2015, plaintiffs filed their complaint for'breach of fiduciary duty,
conversion, unjust enrichment, accounting, imposition of constructive trust and
declaratory relief against John and Janie (super. ct. case No. 15CECG01410).6 The
6 The lawsuit was assigned superior court'case No. 15CECG01410 and was
consolidated with ('1)an earlier lawsuit filed by the Bank against John, Janie, Momis,
Sharon and the LLC’s, superior coult case No. 12CECG03 902 (lead case); and (2) a
7.
complaint al‘so listed the LLC’s as nominai defendants. A scn'es of demurrers and
amended pleadings followed. _
In May 2016, plaintiffs filed a third amended complaint, which is one of the
operative pleadings for purposes 0f this appeal. By that point, plaintiffs’ claims against
the Bank had been combined with'their claims against John and Janie. The claims stated
were for breach of fiduciary duty, conversion, money had and received, unjust
enrichment, accounting, imposition of constructive trust and declaratory relief. Plaintiffs
alleged an economic interest in a limited liability company was a “profits interest” that
entitled the holder to share in the income, gains, losses, deductions and credits and to
receive distributions from the stream of income produced in the ordinary course of
business. Plaintiffs also alleged a memgership interest in a limited liability company was.
a “capital interest” that Entitled the holder to the capital account attributable to that
member and to vote and otherwise participate in the management of the company.
Plaintiffs further alleged that they owned 50 percent of the membership (i.e.,capital)
'in
interests the LLC’s and, as a result, were entitled to possession of the value of their
capital accounts despite the Bank’s acquisition of their economic (i.e., profit) interests in
the LLC’s. Consequently, in plaintiffs’ view, the payments of over $5 million made to
Bank in 2014 should have been made to them because the payments consisted of the
value of plaintiffs’ capital accounts in the 'LLC’s.
‘
The Bank challenged the third amended complaint by filing a demurrer, one of the
subjects ofthis appeal. On June 14, 2016, the trial court sustained the Bank’s demurrer
without leave to amend. The court concluded the Bank held the economic interests in the
LLC’s, which entitled the Bank to receive funds paid from the capital accounts. As a
result, the court concluded plaintiffs had failed to state causes of action against the Bank
lawsuit filed by another of plaintiffs’ creditors against the Bank, superior court case No.
13CECG00135. This appeal does not challenge rulings made in these two earlier
lawsuits.
for money had and received, unjust enrichment, restitution 0r imposition of a constructive
O
trust.
On June 20, 2016, defendants filed a demurrer t0 the third amended complaint,
'
contending none 0f the claims alleged facts sufficient to constitute a cause of action.
Defendants argued the Bank, as a result of its foreclosure, had become the owner 0f all
economic interests in the LLC’S and plaintiffs had n0 right to any value in the capital
accounts 0f the LLC’s or to any distributions from the LLC’S. Based 0n this theory,
which was the same theory the Bank presented in its earlier demurrer, defendants argued
plaintiffs failed to state how they were damaged.
011 July 22, 2016, the trial court issued an order sustaining the demurrer t0 the
entire third amended complaint without leave t0 amend. The court rejected plaintiffs’
theory that they were entitled to a refund 0f their capital contributions and concluded any
money in the capital accounts would go only to the holder 0f the economic interests in the
LLC’s, which was the Bank. The court determined all 0f plaintiffs’ claims failed t0 state
a cause _0f action because the allegations did not support the existence 0f any money
I
damages as t0 plaintiffs.
In August 2016, the court signed a request for dismissal that ordered the dismissal
0f the plaintiffs’ third amended complaint with prejudice.7 Later that month, plaintiffs
filed a notice of appeal relating the dismissal 0f their claims against the defendants. The
nofice 0f appeal did not extend to the dismissal obtained by the Bank.
Elder Abuse Lawsuit
In December 201 5, plaintiffs filed a first amended complaint for damages for
financial elder abuse, superior court case No. 15CECG02784 (elder abuse action).
Plaintiffs acknowledge that the factual allegations in the elder abuse action largely
7
An order sustaining a demurrer is not appealable, while an order dismissing the
complaint is. (Munoz v. Davis (1983) 141 Cal.App.3d 420, 431; see Code Civ. Proc., §
904.1.)
mirrored the allegations in their third amended complaint in the fiduciary duty lawsuit.
Plaintiffs asserted the facts alleged constituted “financial abuse” within the meaning of
Welfare and Institutions Code section 15610.30, subdivision (a). They also asserted they
qualified as “elders” because they were over 65 years 0f age. Plaintiffs alleged
defendants represented they would comply with the Charging order obtained by the Bank
by continuing t0 made regular distributions until the judgment was satisfied in full, but
failed t0 make such distributions. Plaintiffs supported this allegation by attaching a copy
of a March 12, 2012, letter from defendants’ attorney stating the LLC’s “will simply
proceed with paying off the judgment creditors through payment 0f distn'butions which
otherwise would have been paid t0 Morris and Sharon pursuant to their economic
interests.” This letter was sent shortly before the May 4, 2012, foreclosure sale.
In February 2016, defendants filed a motion for sanctions, contending the elder
abuse action was frivolous and lacked iegal and factual merit. Defendants requested
attorney fees in the about of $13,037.90.
In April 2016, the triai court granted the motion and imposed sanctions in the
amount 0f $5,940 against plaintiffs and their attorney. The court determined the elder
abuse action lacked merit'under an obj ective standard and constituted a frivolous filing
under Code of Civil Procedure section 128.7. Plaintiffs filed a timely notice 0f appeal of
‘the order imposing sanctions.
'
DISCUSSION
I.
I
STANDARD OF REVIEW FOR GENERAL DEMURRERS
Appellate courts independently review £111order sustaining a general demurrer and .
state a
'
make a de novo determination of whether the pleading “alleges facts sufficient to
cause 0f action under any legal theory.” .
(McCall v. PacifiCare ofCal., Inc. (2001) 25
I
Cal.4th 412, 415.) Generally, appellate courts “give the complaint a reasonable
interpretation, reading itas a whole and itsparts in their context.” (City ofDinuba v.
10.
County ofTulare (2007) 41 CalAth 859, 865.) The demurrer istreated as admittifig all
material facts properly pleaded, butdoes not admit the truth of contentions, deductions 0r
conclusions 0f law. (Ibid. )
The pleader’ s contentions or conclusions of law are not controlling because
appellate coufls must independently decide questions 0f law without deference t0 the
legal conclusions 0f the‘pleader or the trial court. (Villery v. Department ofCorrections
& Rehabilitation (2016) 246 Cal. App 4th 407, 413 .) Legal questions include the
interpretation of a statute and the application 0f a statutory provision to facts assumed to
‘
be tru6 for purposes of the demurrer. (Ibid)
II. BREACH OF FIDUCIARY DUTY: RETURN OF CAPITAL
A.’ Elements 0f a Breach of Fiduciary Duty Claim
The elements 0f a cause of action for breach 0f fiduciary duty are (1) the existence
(2) the breach of a fiducialy duty arising from
0f a fiduciary reiationship, that
relationship, and (3) damages ploximately caused by that breach. (Knox v. Dean (2012)
205 Ca1.App.4th 417, 432; see Oasis West Realty, LLC v. Goldman (201 1) 51 Cal.4th
h
81 1, 820.) Gen
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Kevin R. Brodehl (SBN 197657) E-FILED PATTON SULLIVAN BRODEHL, LLP 10/19/2018 10:55 AM 6600 K011 Center Parkway, Suite 250 FRESNO COUNTY SUPERIOR COURT Pleasanton, California 94566 By: C. York, Deputy Telephone — (925) 600-1 800 Facsimile — (925) 600-1 802 kbrodehl@psblegal.com Attorneys for Plaintiffs O(DmNGU‘I-PODN—‘k Morris Garcia and Sharon Garcia SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF FRESNO MORRIS GARCIA and SHARON GARCIA, Case N0. 15CECG02784 as individuals and former Trustees 0f the Morris and Sharon Garcia Family Trust Dated PLAINTIFFS MORRIS GARCIA AND December 28, 1996, SHARON GARCIA’S OPPOSITION i I T0 DEFENDANTS’ MOTION T0 Plamnffs, STRIKE COST BILL 0R IN THE — VS-— ALTERNATIVE ENFORCEMENT 0F JUDGMENT STAY JOHN GARCIA, and JANIE GARCIA as individuals and as Trustees of the John and Janie Garcia Family Trust Dated January 2, 1997; VISTA DEL SOL FARMS, a Limited Liability Company; VISTA DEL SOL FARMS I,a Limited Liability Company; and DOES 1 through 20, inclusive, Defendants. NNNMNNNNA—k&a_‘gggé4 \IO3CII#CON—¥OCOQ>\IG)01AWNA Plaintiffs MORRIS GARCIA and SHARON GARCIA submit the following Opposition to Defendants’ Motion to Strike Cost Bill 01‘in the Altemative Stay Any Enforcement of Judgment. I. INTRODUCTION AND BACKGROUND Plaintiffs Mon‘is and Sharon Garcia prevailed on appeal in an Opinion issued by the Fifth District Court of Appeal on May 22, 201 8. (Fifth District Court of Appeal Case No. F073735.) The Opinion concluded by stating: “Plaintiffs shall recover their costs on appeal.” The /// 28 l PATTON S U LLIVA N BRODELIL LLl' OPPOSITION TO DEFENDANTS’ MOTION TO STRIKE COSTS BILL Casc No‘ lS-CECG-02784 PLEASANTON, CALIFORNIA —A Remittitur dated Juiy 23, 201 8 stated the same. For this court’s convenience, the Opinion and ho Remittitur are attached to this brief as Exhibits A and B, respectively. C» As a matter 0f law, and as expressly directed by the Opinion, Plaintiffs are entitled to ¢> recover their costs on appeal. They timely filed a Memorandum 0f Costs on Appeal (Judicial Ch Council Foxm APP-013) on August 29, 2018 claiming total costs in the amount 0f $3,330.] 8. CD Defendants John and Janie Garcia have not moved to tax any of the specific amounts ‘4 claimed on the Memo of Costs. Instead, they have asserted a blanket motion to strike the entire CD Memo of Costs on the purported grounds that “Plaintiffs have not prevailed on the merits of the «3 case” and that any award of costs pursuant to the Court of Appeal’s direction would be CD “premature.” (Defendants’ Motion, p. 2:7—1 1 .) They alternatively argue, without citing any -A authority, that the court should “stay” enforcement of the cost award. ho Defendants’ motion is legally flawed and cannot succeed. Defendants rely on incorrect GO and inapplicable authorities for their motion to strike. Those authorities govern only recovery 0f $> trial court costs following final adjudication. Different authorities, ignored by Defendants, Ch govern the recovery of appellate costs. Further, there is no authority whatsoever supporting CD Defendants’ alternative request for a “stay” of the cost award, and Defendants’ request violates ‘4 well-established mics governing the enforceability 0f money judgments and orders. CD Accordingly, Defendants’ motion should be denied. MNMMNMNNAAAAAAAAAA GD II. ARGUMENT CD A. Defendants’ Motion to Strike must be denied because it is based 0n the wrong legal authorities, and conflicts with the express directions of the Court ' —* 0f Appeal. ha As stated in the Ieading California treatise, “The right to recover costs on appeal is 00 governed solely by CRC 8.278.” (Eisenberg, et. a1, Califomia Practice Guide: Civil Appeals and ¢> Writs [Rutter Group], §14:55, emphasis added.) Under California Rules of Court, Rule 8.278, (n “the patty prevailing in the Court of Appeal in a civil case is entitled to costs 0n appeal” and CD “prevailing party” is defined as including the Appeilant following a reversal of a judgment or ‘4 order. (Cal. Rules of Ct, Rule 8.278(a).) 28 /// 2 SULLIVAN PA'I‘I‘ON BRODEuLLLP OPPOSITION TO DEFENDANTS’ MOTION TO STRIKE COSTS BILL Case No. lS-CECG-02784 PLEASANTON, CALIFORNIA “If the appellate court’s opinion specifies a costs award, the trial court may not deviate from that specification. A party who is dissatisfied with the costs award must seek relief in the appellate court before remittitur is issued[.]” (Eisenberg, et. a1,California Practice Guide: Civil Appeals and Writs [Rutter Group], §14:70.1, emphases added, citing Harbour Landing—Dalfann, @mflmm-hOJNA Ltd. v. Anderson (1996) 48 Cal.AppA‘h 260, 265 [trialcourt erred in denying prevailing appellant costs explicitly ordered in remittitur].) Defendants’ motion fails t0 mention any of the authorities above. Instead, Defendants” motion appears to be based 0n Code 0f Civil Procedure section 1032, which does not apply here. Plaintiffs do not seek costs as the “prevailing party in the action” pursuant to section 1032. They seek costs as the prevailing party on appeal as authorized by California Rules of Court, Rule 8.278 and as expressly directed by the Court 0f Appeal. As held by long-standing authority, “a successfill party on appeal has the right t0 execute on its award of costs on appeal even before the underlying case isdecided. [A] successful litigant on appeal may immediately enforce an award of costs on appeal because ‘there is n0 interdependence between the judgment for costs on the former appeal and any judgment which may be subsequently entered in the main case.” (Fundamental Investment etc. Realty Fund v. Gradow (1994) 28 Ca1.App.4“‘ 966, 972, emphasis added, citing and quoting First National Bank v. Stansbury (193 1) 214 Cal. 190, 192.) “A valid costs memorandum establishes a prima facie Nmm‘bWNAomemU‘l-bWN-AO NNNNNNNNAAAAAAAAA-x case for recovery. Thus, the burden is on the party moving to strike 01‘tax costs to establish that each disputed item is not recoverable.” (Eisenberg, et. a1,Califomia Practice Guide: Civil Appeals and Writs [Rutter Group], §14:109, emphasis original, citing Bach v. County ofBut't‘e (1989) 215 Cal.App.3d 294, 308 and Pratt v. Robert S. Odell & Co. (1944) 63 Cal.App.2d 78, 8i.) Defendants have utterly failed t0 meet their burden here. They essentially ask this court t0 ignore the express instructions of the Court of Appeal, which this court cannot do. Accordingly, Defendants’ Motion to Strike must be denied. /// /// 28 /// 3 PATTON SULLIVAN OPPOSITION TO DEFENDANTS’ MOTION TO STRIKE COSTS BILL Case N0. 15-CECG-02784 BRODEHL LLl' PLEASANION, CALIFORNIA B. Defendants’ alternative request to “stay” the forthcoming order awarding costs on appeal must be denied because it is contrary t0 governing law. “An award of costs 0n appeal is enforceable in the same manner as a money judgment.” (Eisenberg, et. a1, California Practice Guide: Civil Appeals and Writs [Rutter Group], §14:1 1 1, citing Cal. Rules of Ct, Rule 8.278(c)(3) and Alan S. v. Superior Court (2009) 172 Cal.App.4‘h COQNOUU‘IACONA 238, 241 [trial court lacks authority t0 make appellate costs payable in installments]; see also Fundamental Investment, supra, 28 Cal.App.4‘h at 972 [holding that a “successful litigant on appeal may immediately enforce an award 0f costs on appeal because there isno interdependence between the judgment for costs on the former appeal and any judgment which may be subsequently entered in the main case.”].) An award 0f appellate costs by the coult of appeal constitutes a separate judgment. (Lucky v. United Properties Investment, Inc. v.Lee (2013) 213 Cal.App.4"‘ 635, 654-656.) Under well-recognized rules goveming enforcement of money judgments, a stay 0f enforcement can be obtained only by the posting 0f an appropriate bond after a notice of appeal has been filed. (Code Civ. Proc. §917.1.) Accordingly, Defendants’ alternative request for a “stay” must be denied. III. CONCLUSION NNNNNNNNAAAAA-k-Xg-X-t For all of the foregoing reasons, Plaintiffs respectfully request that Defendants’ motion chnAC‘ON—‘OQmNOUU‘l-wa—‘O be denied. None of the itemized cost amounts have been challenged by Defendants. The court should enter a cost award as expressly instructed by the Court of Appeal. DATED: October 19, 2018 PATTON SULLIVAN BRODEHL LLP By= 7C KevinR. K Brodehl @V/ Attorneys f01 Plaintiffs Monis Garcia and Sharon Garcia 28 4 PATTON SULLIVAN Case No. lS-CECG-02784 BRODEHL LLP OPPOSITION DEFENDANTS’ MOTION TO STRIKE COSTS BILL 'l'O PLEASANTON, CALIFORNIA COURT 0F APPEAL HFrH APPELLAIE 915mm LEE) MAY 22 2018 a, d0 [ Deputy NOT T0 BE PUBLISHED IN THE OFFICIAL REPORTS IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT MORRIS GARCIA et al., etc., F073735 Plaintiffs and Appellants, (Super. Ct. N0. ISCECGOZ784) v. JOHN GARCIA etc., et aL, OPINION Defendants and Respondents. MORRIS GARCIA et a1., F074263 Plaintiffs and Appellants; (Super. Ct. Nos. 12CECGO3902, v. 13CECG00135 & 15CECG01410) JOHN GARCIA etc), er a1., Defendants and Respondents. APPEAL from judgments of the Superior Court of Fresno County. Kristi Culver Kapetan, Judge. Wendel, Rosen, Black & Dean and Kevin R. Brodehl for Plaintiffs and Appellants. Gilmore Magness Leifer, David M. Gilmore and Katherine M. Rigby for Defendants and Respondents. —ooOoo- I Plaintiffs borrowed money and guaranteed other loans in connection with a real estate development. The development failed, the loans went into default, and in April 2010 the bank obtained a $2.4 million judgment against plaintiffs. To collect its EXHIBITA judgment, the bank foreclosed on real property collateral worth about $1 .1 million and obtained a charging Order against plaintiffs’ one~ha1f economic interest in two California limited liability companies. (Fonnér Corp. Code, § 17302 [charging orders].)1 When the limited liability companies made no payments subject to the charging order, the bank foreclosed on the “economic interests” plaintiffs held in the companies? At the foreclosure auction, the bank crédit bid and purchased the economic interests for $1.5 million. Afier the foreclosure, the limited liability companies sold their real estate, ceased their farming operations, and distribfzted over $5 million to the bank as the holder of 50 percent of the economic interests in the companies. The limited liability companies then dissolved. _ Plaintiffs sued the manager of the limited liability companies who, along with his wife, owned the other half of the companies. Plaintiffs alleged a‘ breach of fiduciary duty, arguing that, despite the foreclosure, they retained an interest in their original capital éontributions and accumulated capital of the companies, which should have been returned to them instead of being included in the $5 million transfexred to the bank. The manager and his wife filed a demurrer, contending plaintiffs had no right to a return of capital and, instead, the bank had a rightffil claim to the funds as the holder of one-half of {he “economic interests” in the limited liability companies. The trial court agreed, concluding plaintiffs retained n0 rights to a return of capital and, thus, were not damaged by the allegedly wrongful conduct. The court sustained the demurrer without leave to lamend. Plaintiffs appealed. Based oh statutory definitions that cannot be altered by the terms of a limited liability company agreement, we conclude the trial court correctly determined plaintiffs 1 A11 unlabeled statutory references are to the Corporations Code. 2 The term “[e]conomic interest” was defined in the operating agreements of the limited liability companies and also by former section 17001, subdivision. (n). retained no rights to the return of gapital, whether characterized as a capital interest or have alleged a breach o‘f fiduciary capital account. However, we also conclude plaintiffs duty based on the manager’s failure to make distributions that would have been paid to the bank pursuant to its charging order. Plaintiffs alleged the failure to make distribfitions caused the bank to foreclose, which caused the companies to cease farming operations, liquidate their land and go out of existence. These allegations, which are accepted as true for purposes of the demurrer, are sufficient to allege the manager did not act in the best interests of the companies or the plaintiffs, which constitutes a breach of the manager’s fiduciary duty in matters committed to the manager’s discretion. We therefore reverse the order dismissing plaintiffs’ lawsuit and the order imposing sanctions. , ' FACTS Appellants Morris Garcia and Sharon Garcia, husband and wife, were plaintiffs below. Respondents John Garcia and Janie Garcia were defendants. Resiaondénts Vista Del Sol Farms, LLC and Vista De’lt Sol Farms I, LLC were nominal defendants? In 1979, Morris and his nephew John formed a partnership named G2 Farms, which grew cotton and related crops. Later the pannership expanded into almonds. Sometime after its formation, Sharon and Janie acquitted interests in G2 Farms. and, as a regult, each partner owned a 25 percent interest. In 2004, Morris formed a real estate development company flamed Wasco Rose, LLC (Wasco Rose). A corporation owned by Morris and Sharon, Western Ag Realty, Inc. (Western Ag), held a majority interest in Wasco Rose. Aspart of Wasco Rose’s operations, Morris purchased land in Wasco, California, which he planned to develop by 3 We refer to the individuals by their first name because they share the same surname. Morris and Sharon are referred to collectively as plaintiffs. John and Janie are referred to collectively as defendants. Vista Del Sol Farms, LLC and Vista Del Sol Farms I, LLC are referred to collectively as the LLC’ s building single~family housing. Morris, Sharon and Western Ag took out loans from the Bankof Stockton (Bank) to finance the project. In addition, Wasco Rose obtained loans from the Bank, Which were partiaily secured by real property located in Wasco. Morris and Western Ag personally guaranteeé the loans made t0 Wasco Rose. In August 2009, after the loans went into default, the Bank filed a lawsuit against plaintiffs and Western Ag seeking repayment 0f .the loans. The action was filed in San Joaquin County Superior Court. While the Bank’s lawsuit was pending, plaintiffs and defendants decided to convert the G2 Farms partnership into the two LLC’s. The LLC’s were capitalized by each partner of G2 Farms contributing their 25 percent interest in the partnership, which established each member’s capital account. In return, Morris, Sharon, John find Janie became members 0f the LLC’s, with each member owning a 25 pgrcent interest in each company. On January 1, 2010, the reorganization was formalized by filing articles 0f organizatidn for both LLC’s with the California Secretary of State. The articles identified I GZ Famis‘ as the converting entity. John was appointed as the manager 0f each of the LLC’S and handled the day-to— Morris handled nonfarming activities such as financing, leasing day farming operations. and water district issues. The operating agreements of the LLC’s stated that their pn'mary purpose was to engage in farming and felated activities. Sections 5.7 0f the operating agreements stated: “Standard of Care. The fiduciary duties a Manager owes to the Company and the other MemBers are those 0f a director 0f a California corporation t0 the t corporation and itsshareholders.” In April 2010, the Bank obtained a judgment against Morris, Sharon and Western Ag in the amount 0f $358,920.56, plus interest and attofney fees and a separate judgment ‘ against Morris and Western Ag in the amount of $2,190,246.99, plus interest and attorney fees. T0 enforce itsjudgment, Bank filed a motion and application of a charging order.4 On July 2, 2010, the court granted Bank’s motiOn and~issued a charging order against plaintiffs Mbrris and SharOn’s economic interest ifi the LLC’s. Under the - charging order, th; p1a'intiffs’ 25 percent interests in the LLC’s were “charged as assets 0f [the plaintiffs,] ‘tfie proceeds of which shall be applied to pay the uns atisfied portion 0f ‘ fulllp” the Judgment entered in the pending action until-such Judgment is satisfied in I The charging order refused t0 appoint a receiver and stated a writ 0f executiofi (which > was [not issued) was the proper means to levy the retirement plan and IRA account. fl 201 1 Bankrugtcy Plaiptiffs allege they attempted t0 access their capital accounts in the LLC’S t0 repay the amounts owed t0 the Bank. John, in his capacity as manager, and John and Janie, in their capacities as members, denied plaintiffs access to their capital in the LLC’s. Plaintiffs allege they had n0 alternative except bankmptcy protection. Onn filed a chapter 7 bankruptcy petifion in the federal March 3 1,201 1, plaintiffs bankruptcy court. Plaintiffs claimed approximately $18,500 of the value of their membership interest in one 0f the LLCis was exempt from execution. Their bankruptcy schedule 0f property claimed as exempt estimated the value of the membership interest in the LLC at over $2.2 millions On July 5, 201 1, the bankruptcy court entered an order stating plaintiffs were “granted a discharge under section 727 of title 11, United States Code.” 4 Another Way the Bank attempted to collect the meney owed was by conducting a nonjudi'cial foreclosure sale of real property that partially secured the Wasco Rose loans. The sale occurred in August 2010 and approximateiy $1,147,725 in proceeds were applied to reduce the judgment held by the Bank. 5 On June 23, 201 1, the Bank obj ected t0 plaintiffs’ claim 0f exemption. About nine months later, 0n March 15, 2012, the bankmptcy court overruled the Bank’s objection to the claim 0f exemption. 2012 Foreclosure 0n Economic Interests John, as manager of the LLC’S, did not make anydistribution t0 the Bank pursuant t0 the July 2010 charging order. Eventually, the Bank moved to foreclose 0n the economic interests 0f plaifitiffs in the LLC’S based 0n the April 201 0 judgments. On May 4, 2012, the foreclosure sale was held. The Bank made an opening credit bid of $1 ,5 million and n0 one else submitted a competing bid. The bid specified that (1) of Western Ag, Morris l $500,000 would be credited against the jbint and several liability .and Sharon and (2) $1 million would be credited against the joint and several liability of . ~ Western Ag and Morris. On August 9, 2012, the court entered an order 0f foreclosure and sale to the Bank. The order stated: “The respective 25% ‘economic interests’ of MORRIS F. GARCIA and SHARON A. GARCIA in []each 0f the respective LLCs as defined in Cal. Corp. hereby foreClosed so that [Morris and Sharon] shall thereafter have n0 Code § 17001(n) is further ‘econorfiic interest’ in either 0f the LLCS.” The order stated the economic interests were sold t0 the Bank, which “shall thereafter have the rights 0f an assignee 0f said economic interests.” The order also directed the Bank t0 file a pafiial satisfaction [Of « judgment. Sale ofAssets ofLLC ’s and Dissolution In November 2013, plaintiffs learned that defendants, acting for the LLC’S, had sold all of the real property owned by the LLC’s t0 Samara Ranches, LLC. The real Defendants signed property éonsisted of seven parcels totaling approximately 400 acres. a grant deed coven'ng the sewn parcel and, delivered it to the buyer. The grant deed was recorded on November 26, 2013. Plaintiffs were not given an oppofiunity t0 vote on the Plaintiffs allege they would have not agreed to the sale if they sale 0f the real property. had been given an opportunity t0 vote. . In December 2013, John filed statements of information for each LLC with the California Secretary of State. The statements listed John as chief executive officer and Janie and the Bank as the managers of the LLC’s. An undated “AGREEMENT FOR DISSOLUTION 0F VISTA DEL SOL” was entered into by the Bank, John and Janie with reference to “Vista Del Sol, a California limited liability company.” The agreement stated “Vista Del Sol shall be dissolved as of June 30, 2014 and thereafter shall no longer engage in any business or operations.” On July 16, 2014, the Bank received a payment of $2.5 million from the LLC’s. On November 5, 2014,. the Bank received payments totaling $2,526,933: 15 from the LLC’s. The general ledger of one of the LLC’s shows these transfers ‘ as withdrawals by the Bank from a capital account. In April 2015, John filed a “Certificate of Dissolution of a Limited Liability Company” for each of the LLC’s. Each certificate stated the dissolution of the LLC was caused by the vote of a majority of the memberé of the LLC. On June 3, 2015, John filed a “Certifiéate of Cancellation of a Limited Liability Company” for each of the LLC’s, which cancelled {heir articles of organization. The certificates stated that (1) the “dissolution was made by the vote of all of the members” and (2) all tax returns required under California statute had or would be filed with the California Franchise Tax Board. v PROCEEDINGS Fiduciary Dug; Lawsuit In May 2015, plaintiffs filed their complaint for'breach of fiduciary duty, conversion, unjust enrichment, accounting, imposition of constructive trust and declaratory relief against John and Janie (super. ct. case No. 15CECG01410).6 The 6 The lawsuit was assigned superior court'case No. 15CECG01410 and was consolidated with ('1)an earlier lawsuit filed by the Bank against John, Janie, Momis, Sharon and the LLC’s, superior coult case No. 12CECG03 902 (lead case); and (2) a 7. complaint al‘so listed the LLC’s as nominai defendants. A scn'es of demurrers and amended pleadings followed. _ In May 2016, plaintiffs filed a third amended complaint, which is one of the operative pleadings for purposes 0f this appeal. By that point, plaintiffs’ claims against the Bank had been combined with'their claims against John and Janie. The claims stated were for breach of fiduciary duty, conversion, money had and received, unjust enrichment, accounting, imposition of constructive trust and declaratory relief. Plaintiffs alleged an economic interest in a limited liability company was a “profits interest” that entitled the holder to share in the income, gains, losses, deductions and credits and to receive distributions from the stream of income produced in the ordinary course of business. Plaintiffs also alleged a memgership interest in a limited liability company was. a “capital interest” that Entitled the holder to the capital account attributable to that member and to vote and otherwise participate in the management of the company. Plaintiffs further alleged that they owned 50 percent of the membership (i.e.,capital) 'in interests the LLC’s and, as a result, were entitled to possession of the value of their capital accounts despite the Bank’s acquisition of their economic (i.e., profit) interests in the LLC’s. Consequently, in plaintiffs’ view, the payments of over $5 million made to Bank in 2014 should have been made to them because the payments consisted of the value of plaintiffs’ capital accounts in the 'LLC’s. ‘ The Bank challenged the third amended complaint by filing a demurrer, one of the subjects ofthis appeal. On June 14, 2016, the trial court sustained the Bank’s demurrer without leave to amend. The court concluded the Bank held the economic interests in the LLC’s, which entitled the Bank to receive funds paid from the capital accounts. As a result, the court concluded plaintiffs had failed to state causes of action against the Bank lawsuit filed by another of plaintiffs’ creditors against the Bank, superior court case No. 13CECG00135. This appeal does not challenge rulings made in these two earlier lawsuits. for money had and received, unjust enrichment, restitution 0r imposition of a constructive O trust. On June 20, 2016, defendants filed a demurrer t0 the third amended complaint, ' contending none 0f the claims alleged facts sufficient to constitute a cause of action. Defendants argued the Bank, as a result of its foreclosure, had become the owner 0f all economic interests in the LLC’S and plaintiffs had n0 right to any value in the capital accounts 0f the LLC’s or to any distributions from the LLC’S. Based 0n this theory, which was the same theory the Bank presented in its earlier demurrer, defendants argued plaintiffs failed to state how they were damaged. 011 July 22, 2016, the trial court issued an order sustaining the demurrer t0 the entire third amended complaint without leave t0 amend. The court rejected plaintiffs’ theory that they were entitled to a refund 0f their capital contributions and concluded any money in the capital accounts would go only to the holder 0f the economic interests in the LLC’s, which was the Bank. The court determined all 0f plaintiffs’ claims failed t0 state a cause _0f action because the allegations did not support the existence 0f any money I damages as t0 plaintiffs. In August 2016, the court signed a request for dismissal that ordered the dismissal 0f the plaintiffs’ third amended complaint with prejudice.7 Later that month, plaintiffs filed a notice of appeal relating the dismissal 0f their claims against the defendants. The nofice 0f appeal did not extend to the dismissal obtained by the Bank. Elder Abuse Lawsuit In December 201 5, plaintiffs filed a first amended complaint for damages for financial elder abuse, superior court case No. 15CECG02784 (elder abuse action). Plaintiffs acknowledge that the factual allegations in the elder abuse action largely 7 An order sustaining a demurrer is not appealable, while an order dismissing the complaint is. (Munoz v. Davis (1983) 141 Cal.App.3d 420, 431; see Code Civ. Proc., § 904.1.) mirrored the allegations in their third amended complaint in the fiduciary duty lawsuit. Plaintiffs asserted the facts alleged constituted “financial abuse” within the meaning of Welfare and Institutions Code section 15610.30, subdivision (a). They also asserted they qualified as “elders” because they were over 65 years 0f age. Plaintiffs alleged defendants represented they would comply with the Charging order obtained by the Bank by continuing t0 made regular distributions until the judgment was satisfied in full, but failed t0 make such distributions. Plaintiffs supported this allegation by attaching a copy of a March 12, 2012, letter from defendants’ attorney stating the LLC’s “will simply proceed with paying off the judgment creditors through payment 0f distn'butions which otherwise would have been paid t0 Morris and Sharon pursuant to their economic interests.” This letter was sent shortly before the May 4, 2012, foreclosure sale. In February 2016, defendants filed a motion for sanctions, contending the elder abuse action was frivolous and lacked iegal and factual merit. Defendants requested attorney fees in the about of $13,037.90. In April 2016, the triai court granted the motion and imposed sanctions in the amount 0f $5,940 against plaintiffs and their attorney. The court determined the elder abuse action lacked merit'under an obj ective standard and constituted a frivolous filing under Code of Civil Procedure section 128.7. Plaintiffs filed a timely notice 0f appeal of ‘the order imposing sanctions. ' DISCUSSION I. I STANDARD OF REVIEW FOR GENERAL DEMURRERS Appellate courts independently review £111order sustaining a general demurrer and . state a ' make a de novo determination of whether the pleading “alleges facts sufficient to cause 0f action under any legal theory.” . (McCall v. PacifiCare ofCal., Inc. (2001) 25 I Cal.4th 412, 415.) Generally, appellate courts “give the complaint a reasonable interpretation, reading itas a whole and itsparts in their context.” (City ofDinuba v. 10. County ofTulare (2007) 41 CalAth 859, 865.) The demurrer istreated as admittifig all material facts properly pleaded, butdoes not admit the truth of contentions, deductions 0r conclusions 0f law. (Ibid. ) The pleader’ s contentions or conclusions of law are not controlling because appellate coufls must independently decide questions 0f law without deference t0 the legal conclusions 0f the‘pleader or the trial court. (Villery v. Department ofCorrections & Rehabilitation (2016) 246 Cal. App 4th 407, 413 .) Legal questions include the interpretation of a statute and the application 0f a statutory provision to facts assumed to ‘ be tru6 for purposes of the demurrer. (Ibid) II. BREACH OF FIDUCIARY DUTY: RETURN OF CAPITAL A.’ Elements 0f a Breach of Fiduciary Duty Claim The elements 0f a cause of action for breach 0f fiduciary duty are (1) the existence (2) the breach of a fiducialy duty arising from 0f a fiduciary reiationship, that relationship, and (3) damages ploximately caused by that breach. (Knox v. Dean (2012) 205 Ca1.App.4th 417, 432; see Oasis West Realty, LLC v. Goldman (201 1) 51 Cal.4th h 81 1, 820.) Gen