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1 SHARTSIS FRIESE LLP
RICHARD F. MUNZINGER (Bar #217902)
2 DANIEL M. PONIATOWSKI (Bar #306754)
One Maritime Plaza, Eighteenth Floor 9/30/2020
3 San Francisco, CA 94111-3598
Telephone: (415) 421-6500
4 Facsimile: (415) 421-2922
Email: rmunzinger@sflaw.com
5 Email: dponiatowski@sflaw.com
6 Attorneys for Kafele T. Hodari, MD, Inc
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8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 FOR THE COUNTY OF BUTTE
10
OMAR JAY ON and BARBARA ON, Case No. 19cv03856
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Petitioners,
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SAN FRANCISCO, CA 94111-3598
v. KAFELE T. HODARI, MD, INC’S
SHARTSIS FRIESE LLP
ONE MARITIME PLAZA
OPPOSITION TO MOTION TO SET
EIGHTEENTH FLOOR
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STEPHEN A. VANNUCCI, M.D., INC. and ASIDE AND VACATE JUDGMENT IN
14 NORTH VALLEY DERMATOLOGY FAVOR OF KAFELE T. HODARI, MD,
CENTER, INC
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Respondents. Date: October 14, 2020
16 Time: 9:00 a.m.
Dept: 7
17 Judge: Hon. Sandra L. McLean
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Case No. OPPOSITION TO MOTION TO SET ASIDE AND VACATE
19cv03856 JUDGMENT IN FAVOR OF KAFELE T. HODARI, MD, INC
1 Respondent KAFELE T. HODARI, MD, INC (“KHI”) hereby opposes Petitioners OMAR
2 JAY ON and BARBARA ON’s (“Petitioners”) Motion to Set Aside and Vacate Judgment in
3 Favor of KHI (“Motion to Vacate”).
4 I. INTRODUCTION
5 The instant motion arises from an arbitration proceeding resulting in an award (the
6 “Arbitration Award”) in favor of Petitioners and against North Valley Dermatology Center, a
7 California partnership (“NVDC”), and Steven A. Vannucci M.D., Inc. (“SAVI”), a partner of
8 NVDC. KHI, a former partner of NVDC, was never named as a party to the arbitration. On
9 December 31, 2019, Petitioners instituted the above-captioned proceeding to confirm the
10 Arbitration Award as a judgment. NVDC filed for bankruptcy and all proceedings against it were
11 stayed, but Petitioners obtained a judgment on the Arbitration Award against SAVI (the “SAVI
12 Judgment”). Petitioners then brought a motion to amend the SAVI Judgment to include, among
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13 other things, KHI as an additional judgment debtor (the “Motion to Amend”). That motion was
14 denied with prejudice, and as to KHI, judgment was entered on September 17, 2020 (the “KHI
15 Judgment”). A true and correct copy of the KHI Judgment, which appends the Court’s original
16 Order denying the Motion to Amend, is attached as Exhibit 1 to the declaration of Daniel M.
17 Poniatowski, submitted herewith (the “Poniatowski Decl.”).
18 By the instant Motion, Petitioners seek to set aside and vacate the KHI Judgment. But as
19 discussed in detail below, Petitioners are not entitled to the relief they seek. The KHI Judgment is
20 a final determination of Petitioners’ attempt to hold KHI liable for the Arbitration Award. As the
21 authorities cited in the KHI Judgment explain, because KHI was not a party to the arbitration, it
22 cannot be held liable now for any judgment resulting from those arbitration proceedings.
23 Accordingly, the KHI Judgment is proper and the Motion to Vacate should be denied.
24 II. LEGAL STANDARD
25 “A judgment is the final determination of the rights of the parties in an action or
26 proceeding.” Civ. Proc. Code § 577. Court’s look to the substance and effect of the adjudication
27 rather than its form to determine whether it constitutes a final determination sufficient to satisfy
28 Section 577. Melbostad v. Fisher, 165 Cal. App. 4th 987, 995-96 (2008). A judgment is proper
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Case No. OPPOSITION TO MOTION TO SET ASIDE AND VACATE
19cv03856 JUDGMENT IN FAVOR OF KAFELE T. HODARI, MD, INC
1 where no issue among the parties is left for future consideration and no further judicial action is
2 required to finally determine the rights of the parties. Id. Where multiple parties are involved in
3 a proceeding, a judgment is appropriate if it “leaves no issue to be determined as to one party.”
4 Nguyen v. Calhoun, 105 Cal. App. 4th 428, 437 (2003).
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III. THE KHI JUDGMENT IS A FINAL DETERMINATION OF PETITIONERS’
6 ATTEMPT TO HOLD KHI LIABLE FOR THE ARBITRATION AWARD
7 Examining the totality of Petitioner’s Motion To Amend and the reasoning and effect of
8 the resulting KHI Judgment, it is clear that the KHI Judgment was a final determination and
9 forecloses Petitioner from adding KHI as an additional judgment debtor on a judgment arising
10 from the arbitration proceedings.
11 A. Petitioners’ Motion To Amend Was Exhaustive And Resulted In A Final
Judgment On The Merits As To KHI.
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13 As an initial matter, Petitioners seek to cast the proceeding against KHI as a narrow,
14 limited attempt to add KHI to the SAVI Judgment arising out of the Arbitration Award.
15 Petitioners argue that their Motion to Amend only relied on Code of Civil Procedure section 187,
16 and that the resulting KHI Judgment denying their Motion to Amend was limited to only those
17 grounds. But that is not the case. On the contrary, while the Motion to Amend cited Section 187,
18 it invoked legal authorities well beyond that in an attempt to hold KHI liable for the SAVI
19 Judgment. While the Motion to Amend relied on the Court’s “broad inherent power to control,
20 supervise, and administer matters before [it] - which powers are partially codified in sections 128
21 and 187 of the Code of Civil Procedure,” it also argued that “the authority of courts to make such
22 orders as to effectuate justice are not limited to statutory enactments - rather that authority derives
23 from the California State Constitution as based upon the historic powers of the judiciary.”
24 Poniatowski Decl., Ex. 2 at 7:10-20. The Motion to Amend also relied on a theory of joint and
25 several partnership liability under Corporations Code § 16306 (id. at 1:19-2:9) as well as
26 arguments for continued liability under the Bankruptcy Code (id. at 9:5-13:26). Petitioners’
27 Motion to Amend was thus exhaustive, leaving no stone unturned with respect to legal theories.
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1 All of these arguments were presented to the Court via Petitioners’ briefing and evidence
2 in support of their Motion to Amend, and Petitioners’ counsel was given a chance to argue them
3 at the hearing on the motion. Having received these arguments and evidence, the Court denied
4 the portion of Petitioners’ motion seeking to add KHI as a judgment debtor to the SAVI Judgment
5 with prejudice. Poniatowski Decl., Ex. 1 at Ex. A at 2:19-22. The Court ultimately entered the
6 KHI Judgment, at issue here, which provides in part as follows: “The Court, having denied
7 Petitioners’ motion to add KHI as an additional judgment debtor to the February 13, 2020
8 judgment, IT IS ORDERED THAT: Judgment denying Petitioners’ motion is hereby entered in
9 favor of Respondent KAFELE T. HODARI, MD, INC and against Petitioners OMAR JAY ON
10 and BARBARA ON.” Id. at 2:1-4. The KHI Judgment is clear and leaves no issue to be
11 determined as to KHI.
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B. The Judgment Resolves All Arguments Petitioners Have Raised Or Could Raise
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In The Future To Add KHI To A Judgment Arising From The Arbitration
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Proceedings.
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The legal authorities cited in the KHI Judgment foreclose any possibility of Petitioners
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adding KHI to any judgment arising from the arbitration proceedings because KHI was never a
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party to those proceedings. The KHI Judgment cites Fazzi v. Peters, 68 Cal. 2d 590 (1968),
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which is controlling. Poniatowski Decl., Ex. 1 at 1:14-15. In Fazzi, the plaintiff sued a
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partnership but did not include the partners of the partnership as defendants. Id. at 591. Despite
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this, the trial court entered default judgment against both the partnership and the partners, later
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denying the motion of one of the partners to set aside the judgment. Id. at 592. The California
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Supreme Court reversed the lower court and ordered that the judgment against the partner, who
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was never a party to the underlying proceeding, be vacated and set aside. Id. at 598. The
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Supreme Court reasoned that “a judgment may not be entered either for or against a person who is
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not a party to the proceeding, and any judgment which does so is void to that extent.” Id. at 594
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(internal citations and quotations omitted); see also id. at 597 (disproving of case “insofar as it
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holds than an individual judgment may be rendered against a partner not joined as a defendant in
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an action against the partnership of which he is, or is alleged to be, a member”). The other case
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1 cited by the KHI Judgment, Triplett v. Farmers Ins. Exchange, 24 Cal. App. 4th 1415 (1994),
2 holds similarly. Id. at 1420 (“Although section 187 has been interpreted to allow flexibility in
3 proceedings, it has never been construed to allow imposition of liability on an entity which was
4 never a party to the action.”).
5 Fazzi analyzed former Code of Civil Procedure section 338, a statue providing partnership
6 creditors with a path to hold the partners of a partnership liable for the obligations of the
7 partnership. 68 Cal. 2d at 592. But the Supreme Court in Fazzi explained that former Section
8 338 “was never intended to abrogate that principle in suits against unincorporated business
9 associations. . . . that a judgment may not be entered either for or against one not a party to an
10 action or proceeding.” Id. at 594 (internal quotations omitted). Today’s version of the statute,
11 codified as Code of Civil Procedure section 369.5, makes this plain:
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A member of the partnership or other unincorporated association
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may be joined as a party in an action against the unincorporated
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association. If service of process is made on the member as an
14 individual, whether or not the member is also served as a person
upon whom service is made on behalf of the unincorporated
15 association, a judgment against the member based on the member’s
personal liability may be obtained in the action, whether the
16 liability is joint, joint and several, or several.
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18 Civ. Proc. Code § 369.5(b) (emphasis added).
19 In their Motion to Vacate, Petitioners recycle arguments raised in their Motion to Amend
20 that they are entitled pursue KHI for the Arbitration Award via Corporations Code section 16306
21 (Motion to Vacate at 7:1-7) and the Bankruptcy Code (id. at 7:8-17). These arguments were
22 raised and denied in the Motion to Amend, and are not subject to re-litigation here. See supra,
23 III.A. Even so, neither of these theories support Petitioners. Corporations Code section 16306
24 provides that partners are liable jointly and severally for partnership obligation “unless otherwise
25 agreed by the claimant or provided by law.” Corp. Code § 16306(a). Importantly, Corporations
26 Code section 16307 provides that “[a] judgment against a partnership is not by itself a judgment
27 against a partner. A judgment against a partnership may not be satisfied from a partner’s assets
28 unless there is also a judgment against the partner.” Corp. Code § 16307(c). Here, there is no
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Case No. OPPOSITION TO MOTION TO SET ASIDE AND VACATE
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1 judgment against KHI as Petitioner’s Motion to Amend was denied, and Petitioners are entirely
2 foreclosed from obtaining a judgment against KHI on the Arbitration Award because KHI was
3 not a party to the arbitration, as discussed in detail above.
4 Petitioners arguments under the Bankruptcy Code fail for the same reason. Petitioners
5 rely on Section 723(a) of the Bankruptcy Code, which provides that the bankruptcy trustee of a
6 partnership in bankruptcy may make a claim against partners of the partnership for any deficiency
7 between property of the partnership and the amount of allowed claims against the partnership “to
8 the extent that under applicable nonbankruptcy law such general partner is personally liable for
9 such deficiency.” 11 U.S.C. § 723(a). Accordingly, here Section 723(a) looks to state law to
10 determine KHI’s liability to Petitioners. Of course, as discussed in detail above, no such liability
11 exists because no judgment exists against KHI for the Arbitration Award, nor can a judgment
12 ever exist because KHI was not a party to the arbitration.
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13 The bankruptcy court in Ehrenberg v. WSCR, Inc. (In re Hoover WSCR Assocs.), 268 B.R.
14 227 (Bankr. C.D. Cal. 2001), aff’d 2005 Bankr. LEXIS 3267 (B.A.P. 9th Cir.), confronted and
15 rejected the very arguments Petitioners make here. In Ehrenberg, the bankruptcy trustee of a
16 limited partnership sought to hold a general partner liable under Section 723(a) for a judgment
17 against the limited partnership even though the general partner was not a party to the underlying
18 litigation and not a judgment debtor. Id. at 228-29. The Court refused to grant the trustee this
19 relief, reasoning that Section 723(a) required looking to state law and that the issue was
20 controlled by Code of Civil Procedure section 369.5, which sets forth the “procedure by which a
21 partnership creditor may obtain a judgment against a partner.” Id. at 234. The court held as
22 follows:
23 The general provision for the liability of partners under Cal. Corp.
24 Code § 16306(a) does not establish the liability of any particular
partner, it merely provides a basis for liability. The establishment
25 of liability of any specific partner under Cal. Corp. Code §
16306(a) requires compliance with the procedural mandate of Cal.
26 Civ. Proc. Code § 369.5. To rule otherwise would render that
provision of California law a nullity. In addition, Cal. Corp. Code
27 § 16306(a) provides that partners are liable for partnership debts
28 “unless otherwise .. . provided by law” (emphasis added). In this
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1 case, Cal. Corp. Code § 16307(c) is just such a provision, as is the
statute of limitations which bars Koukladases from obtaining
2 judgment against WSCR. Cal. Corp. Code § 16307(c) specifically
3 insulates a partner’s assets from the claims of partnership creditors
unless the latter has a judgment against the partner on the
4 partnership debt. It defies logic to conclude that California law
should be read to say that a partner is “personally liable” for a
5 partnership debt which may not be satisfied from that partner’s
personal assets. California law does not support that reasoning, §
6 723(a) does not demand it and I will not apply it here.
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The Koukladases can never obtain a judgment against WSCR on
8 its claim against the debtor. Therefore, WSCR is not “personally
liable” for that partnership debt. By application of § 723(a), then,
9 WSCR is not liable to the trustee for any portion of that claim in
this proceeding.
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11 Id. at 235 (underlining added, italics in original).
12 In sum, the KHI Judgment is a clear denial of the relief Petitioners seek against KHI,
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13 which is to add KHI to a judgment emanating from the arbitration proceedings to which KHI was
14 not a party. Pursuant to the authorities cited in the KHI Judgment and discussed in detail above,
15 there is no path to Petitioners obtaining such a judgment in the future. The KHI Judgment is
16 proper and should not be disturbed.
17 IV. CONCLUSION
18 For the foregoing reasons, the KHI Judgment should stand, and Petitioners’ Motion to
19 Vacate should be denied.
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Dated: September 30, 2020 SHARTSIS FRIESE LLP
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22 /s/ Daniel M. Poniatowski
By: DANIEL M. PONIATOWSKI
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Attorneys for Kafele T. Hodari, MD, Inc
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