London v. Boshes

Filed 8/8/07 London v. Boshes CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from orders and a judgment of the Superior Court of Los Angeles County. James A. Bascue and Bruce Dodds,*Judges. Affirmed in part, reversed in part and remanded with directions.

Corin L. Kahn for Cross-complainants and Respondents.

Baker, Kenner & Nahra, Robert C. Baker and Laurence C. Osborn for Cross-defendant and Appellant.

____________________

This large and complicated appeal arises out of the winding up of a partnership. Appellant Ralph W. Boshes (Boshes), one of the original partners of The Verdugo 5 partnership, asserts, inter alia, that the trial court erred in (1) finding that he did not have a right to purchase the partnerships real property at liquidation upon dissolution; (2) failing to conduct a proper accounting for the partnership; (3) determining that respondents Ronald Lasken (Lasken) and the London Trust[1]each held a 40 percent interest in the partnership and its property; (4) applying equitable doctrines against Boshes and his claims asserted in this litigation; and (5) imposing costs against Boshes and denying his request for attorney fees. Like the trial court, we are largely unpersuaded by Boshess contentions.

We agree with Boshes that the trial court erred in failing to conduct a proper accounting for the partnership. The matter is remanded to the trial court to conduct a complete accounting of the partnership; an account must be taken from the beginning until the end of the partnership. We also agree with Boshes that the trial court erred in ordering him to pay the balance owed to the receiver ($1,600) as of November 22, 2005; because that amount was not set forth in respondents memoranda of costs, Boshes was not given an opportunity to challenge that cost. Thus, that portion of the trial courts judgment requiring Boshes to pay $1,600 is reversed and remanded to the trial court for proper allocation.

In all other respects, the judgment is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

Formation of the Partnership and Partnership Agreement

In 1965, Boshes, Hiram Isaih London (Hiram), Sydney Sinclair (Sinclair), Michael S. Berman (Berman), and Melvin Lasken (Melvin) formed a partnership to purchase a certain parcel of real property and construct and operate an apartment building on that property. Their partnership, named The Verdugo 5, is governed by a written agreement of partnership (the agreement).[2]

Berman Transfers His Partnership Interest to Melvin; Melvin Transfers His Interest to a Trust

In 1968, Berman transferred his interest in the partnership to Melvin. In so doing, he never offered his partnership interest to the other partners, as contemplated by paragraph 13 of the agreement. He did, however, inform Boshes of the transfer, and Boshes was not happy about it; in fact, he told Berman that what he had done was wrong.

Beginning in 1969, and in every year thereafter, the partnerships annual tax accountings reflected the doubling of Melvins ownership interest in the partnership. Copies of those tax records were provided to every partner, including Boshes.

In 1990, Melvin transferred his interest in the partnership to the Lasken Trust.

In 1996, Melvin passed away. Lasken is Melvins sole heir and the sole beneficiary under the Lasken Trust.

Sinclair Transfers His Partnership Interest to Hiram and Norma London (Norma); Hiram and Norma Transfer Their Interest to a Trust

In 1977, Sinclair transferred his partnership interest to Hiram and Norma. Like Berman, he did not offer his partnership interest to the other partners before transferring his interest. And, annual tax accountings thereafter reflected Hiram and Normas 40 percent ownership interest.

Later, in 1984, Hiram and Norma transferred their interest to the London Trust. In 2000, Hiram passed away. Norma, his widow, is the sole beneficiary of the London Trust.

Boshes Takes Over Management of the Partnership

Sometime in 2001, Boshes learned that Hiram had died. On July 5, 2001, he sent a letter to Norma, advising her that since he was the only remaining partner, [he was] obligated to take over full management and control of the partnership and the . . . partnership property. He informed her that he had retained Ray Meline, Esq., (Meline) to assist him, and requested that she transmit to Meline all of the books and records and files for the . . . property.

Boshes Sends Letter to Lasken and Norma

On December 3, 2001, Boshes notified Lasken and Norma of complaints regarding the partnerships management. Specifically, he was dissatisfied with the financial records that had been maintained and turned over to him. After informing them that his accountant, Harry Lerman (Lerman) had reviewed what financial records existed, Boshes then represented that he had been advised that the best and most equitable solution for all parties would be for [him] to purchase the partnership property as presently constituted. He offered a purchase price of $850,000; [a]fter deducting for one-half of the outstanding debt and crediting for one-third of the cash reserves, each would realize $100,000 in cash now.

Meanwhile, Boshes had retained Lerman to take over the partnership accounting; Boshes instructed him to change 25 years of reporting ownership and distributions divided 40/40/20 to 33/33/33[3]on the state and federal tax filings.

Procedural History

On April 22, 2002, Boshes filed a petition for court approval of final accounting of general partnership and for an order of termination against Norma and Lasken.[4] In response, Lasken filed a cross-complaint against the partnership, Boshes, Norma, individually and as trustee of the London Trust, and others, for partition and sale of partnership real property, declaratory relief, and dissolution of partnership. Later, Norma, individually and on behalf of the London Trust, filed a cross-complaint against the partnership, Boshes, Lasken, and others.

In June 2003, Norma filed a motion to appoint a referee pursuant to Code of Civil Procedure section 639. Lasken supported her motion. Boshes filed a response regarding the potential appointment of a referee.[5]

On July 15, 2003, the trial court ordered the parties to meet and confer and file a brief setting forth and agreeing to the scope of the reference. Later, on July 28, 2003, the trial court appointed a referee to address all issues dealing with the original five partners and the dissociation of any or all of them. Specifically, the scope and duties of the referee included: (1) identifying the individual partners of the partnership upon formation; (2) determining the time and manner and effect of Bermans transfer to Melvin, including the dissociation of Berman; (3) determining the ownership interest in the assets of the partnership by Lasken at the present time; (4) determining the time and manner of Sinclairs transfer to Hiram, including the dissociation of Sinclair; (5) determining the interest of Norma or the London Trust at the present time; (6) determining the individual ownership interests of Boshes, Norma, the London Trust, and Lasken in the assets of the partnership; (7) conducting an accounting of the interests of Boshes, Norma or the London Trust, and Lasken at this time in the assets of the partnership; (8) determining whether any individual in this action has a right to purchase the assets of the partnership at this time; (9) determining the value of all assets held by the partnership or in the name of the partnership at this time, which assets would be available for distribution upon the winding up of the partnership; (10) determining whether the actions of Boshes or the lack of action by Boshes in not challenging or otherwise objecting to or ostensibly approving the transfers of Berman to Melvin and from Sinclair to Hiram and Norma act as an estoppel to his challenge at the present time; and (11) determining the equitable issues of laches and the statute of limitations regarding Boshess lack of action as applied to the partnerships affairs. While the trial court initially ordered the partnership to pay the cost of the reference, it allowed the referee to make a recommendation to the court as to the allocation of costs.

Referees Report

After seven days of hearings, the referee submitted his report. In accordance with the trial courts order, and as is relevant to this appeal, he found that Berman transferred his 20 percent interest in the partnership to Melvin on July 22, 1968. As for the agreements requirement that a withdrawing partner, such as Berman, offer his partnership interest to the other partners on a proportionate basis prior to any transfer of interest, the referee concluded that it is certain from all the received evidence, including but not limited to the Federal and State Partnership Tax Returns . . . , Schedule K-1s issued to each partner and the testimony of the witnesses . . . , including, especially . . . Boshes, that the four remaining partners either knew or reasonably should have known of this transfer. The referee pointed out that Boshes was an educated and successful businessman, who managed the affairs of the Partnership and kept its books and records from the time of formation until October 16, 1968. From that point until mid-2001, when he resumed management of the Partnerships affairs, . . . Boshes referred to himself as a silent partner, a passive partner and a piss partner. Of significance is the fact that . . . Boshes attended law school in the late 1970s, becoming a member of the California State Bar in 1981. Of even greater importance though is that . . . Boshes laid back and quietly waited to see whether he as the youngest partner would survive his associates and thereby benefit economically at the expense of surviving widows and children. Unfairly to the other partners, Boshes kept this alternate plan to himself (this is all in my brain, my state of mind) even though the evidence established that he knew his colleagues believed his Partnership interest was and remained the original 20% allocated to him and so identified in his capital account.

Furthermore Provision 16 of the Partnership Agreement [an arbitration clause] provided a mechanism for any Partner to address disputes or issues. In a period lasting almost forty years from 1965 through the present time . . . Boshes failed to avail himself of this opportunity to resolve a dispute over Partnership transfers. Such procedure would have placed the other partners on notice as to . . . Boshes[s] secret claims but he claims not to have believed in arbitration

Based upon the foregoing, the referee concluded that the effect of the transfer from Berman to Melvin was to vest Lasken with a 40 percent interest in the partnership.

The referee next considered Laskens ownership interest in assets of the partnership. He found that Melvin executed a trust on May 8, 1990, and transferred his partnership interest to the trust on that date. After Melvin died on December 16, 1996, the successor trustee distributed the trusts 40 percent interest in the partnership to Lasken as the beneficiary thereof. Consequently, the referee determined that Lasken enjoyed a 40 percent interest in the partnerships assets.

The referee then turned to the question of Sinclairs transfer and dissociation from the partnership. He concluded that Sinclair dissociated from the partnership in 1977 when he sold his 20 percent interest to Hiram and Norma; [t]he effect of this transfer was to vest [Hiram and Norma] with a joint 40% interest in the Partnership. As for Boshess complaint that he was not offered the opportunity to buy Sinclairs interest, the referee determined that it is quite clear that he knew or reasonably should have known of the transfer . . . [and] did nothing.

Next, the referee determined that in 1984, Hiram and Norma transferred their 40 percent interest in the partnership to the London Trust. Because that transfer was valid, the London Trust held a 40 percent interest in the partnership. When Hiram died on May 20, 2000, his surviving spouse, Norma, became the sole beneficiary of the London Trust.

Then, the referee determined the interests of Lasken, Boshes, and the London Trust. The referee found that the partners who had withdrawn from the partnership did not comply with the agreements requirement that those partners offer their shares to the remaining partners for purchase. However, because all partners, including Boshes, knew or reasonably should have known of the transfers from Berman to Melvin and from Sinclair to Hiram and Norma, and no one objected over the next 30 years, equitable principles, including laches, estoppel, and unclean hands, barred Boshes from now objecting to the transfers of partnership interests. At all times, Boshes had a remedy to address his complaint, namely through arbitration, as set forth in paragraph 16 of the agreement. His election not to utilize this procedure amounted to a waiver of his right to now contest the transfers. Consequently, the referee found that Lasken and the London Trust each held a 40 percent interest in the partnership assets and Boshes held a 20 percent interest in the partnership assets.

As for an accounting, the referee concluded that the partnerships principal asset (the apartment building) was worth at least $1.5 million. He also noted that the partnerships counsel, Meline, was holding approximately $90,000 in cash or its equivalent. Consequently, the referee recommended that the property be listed for sale at $1.6 million, with 40 percent of the net sale proceeds to be distributed to Lasken and the London Trust each, and 20 percent to be distributed to Boshes.

The referee then considered whether Boshes had a right to purchase the assets of the partnership at this time. He found that no such present right exists. Specifically, the referee found no evidence that the partners, at the time of formation, contemplated that a surviving partner would somehow have a vested right to purchase the partnership assets. Moreover, Boshess claim was not supported by equitable principles.

Next, the referees report addressed distribution and the winding up of the partnerships affairs. The referee concluded that all reference-related costs, including the partnerships attorneys fees, Lermans fees, monies paid to Alternative Dispute Resolution (ADR), fees paid to the referee, reporting costs, and others, should be accumulated and divided with one-half charged to Boshess capital account and the other 50% co-equally between the London Trust and Lasken. In so suggesting, the referee understood that such adjustments in one sense would penalize . . . Boshes by making him assume one-half of the total costs/expenses or a sum greater than would otherwise be warranted by his 20% Partnership interest. Nevertheless, this is far less that the 80% and/or 90% that the London and Lasken interests have argued should be charged against . . . Boshes.

Further, the referee noted that Boshes was the major cause of the expense incurred in this Reference. From the very beginning it has been apparent that . . Boshes believed he had virtually nothing to lose and everything to gain by taking tenuous legal positions regarding Partnership rights and responsibilities. Indeed, his interests and those of . . . Meline, acting as counsel for the Partnership have corresponded virtually without exception. In this regard, . . . Boshes has used the Partnership assets as his personal piggy-bank in order to finance his objectives in this Reference. Bearing a co-equal proportion of the total costs and expenses . . . would barely satisfy principles of equitable expense allocation and basic fairness.

Finally, the referee considered equitable principles, finding that, based upon the foregoing, Boshes was estopped from challenging the transfers that occurred decades ago, and that the doctrine of laches and the statute of limitations barred Boshes from challenging the transfers made by Berman to Melvin in 1968 and by Sinclair to Hiram and Norma in 1977.

Trial Court Adopts Referees Findings

The referees report was submitted to the trial court and the partnership and Boshes lodged objections. After conducting a hearing on the referees report and the objections filed thereto, the trial court adopted the findings of the referee. An interlocutory judgment was entered.

Appointment of a Receiver

In addition to largely incorporating the referees findings, the interlocutory judgment appointed a receiver to manage the partnerships business affairs. The receiver was instructed to obtain from Meline and Boshes all documents necessary to make a complete accounting of the partnership for 2001 through 2004. The receiver was also ordered to hire an accountant to prepare and submit an independent accounting. The trial court further ordered that the cost of the receiver and the accountant be borne equally among the partnership, Boshes, the London Trust, and Lasken. Finally, the trial court ordered the receiver to list the partnership property for sale at a minimum price of $1.6 million.

Receiver Distributes Funds

On December 2, 2004, and on April 1, 2005, the trial court granted the receivers petitions to distribute all funds of the partnership, without a bond and prior to the entry of a final judgment.

Judgment

On August 31, 2005, judgment was entered.

The London Trust and Lasken Seek Costs

Following entry of judgment, respondents each filed a memorandum of costs. They both sought to recover the costs of the receivership. In support of his memorandum of costs, Lasken asked the trial court to exercise its discretion to award costs not specifically prohibited by Code of Civil Procedure sections 1032 and 1033.5, subdivision (c)(4).

Boshes filed motions to strike and tax costs requested by respondents. He also separately opposed Laskens request that the trial court exercise its discretion to award costs not specifically prohibited by statute.

On November 22, 2005, the trial court denied Boshess motions. Specifically, it determined that pursuant to Code of Civil Procedure section 1033.5, subdivision (c)(4), it had the authority to exercise its discretion to grant the costs sought in the [m]emoranda [of costs filed by respondents], including in particular 80% of the cost of the receiver and the CPA who was hired by the receiver, which was the total amount of these costs that was paid by London and Lasken. The trial court based this decision upon the finding that Boshes had pursued untenable and improper positions throughout the litigation.

At the hearing, on Laskens counsels oral motion, the trial court also ordered that Boshes pay the remaining balance due ($1,600) ADR for the services provided by the receiver.

Boshess Appeal

This timely appeal followed.

DISCUSSION

Boshes raises a host of arguments on appeal, each of which is separately addressed. In so doing, we note the applicable standards of review. To the extent we are called upon to interpret the agreement, the de novo standard of review applies. (Warburton/Buttner v. Superior Court (2002) 103 Cal.App.4th 1170, 1180.) Factual disputes are reviewed for substantial evidence, and when two or more inferences can reasonably be deduced from the facts, we are without the power to substitute our deductions for those of the trial court. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873874.) We review the trial courts exercise of its equitable powers under the abuse of discretion standard. (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 755.) Under that standard, we resolve all evidentiary conflicts in favor of the judgment and determine whether the courts decision falls within the permissible range of options set by the legal criteria. [Citations.] (Id. at p. 771.)

I. Boshess Alleged Right to Purchase the Property at Liquidation

Boshes first claims that the trial court erred in determining that he did not have a right to purchase the partnership property at liquidation, upon dissolution of the partnership. According to Boshes, pursuant to paragraph 3 of the partnership agreement, he had an absolute right to purchase the property for $975,000, its value in 2000, when the partnership dissolved as a matter of law.

Paragraph 3 of the agreement provides: The parties mutually agree that at any time after completion of the apartment building, the real property or any other asset of the partnership may be sold, upon the written approval of any four partners, at such price as shall be agreeable to said partners; however, no partnership asset shall be sold prior to the completion of said building without the written approval of all of the partners. Any partner or partners desiring to purchase any partnership asset is hereby given a right of first refusal.

This provision of the partnership agreement does not support Boshess contention. The language of the agreement is clear. While the agreement does provide each partner with a right of first refusal to purchase any partnership asset, four partners must first approve the sale in writing. That did not occur here. As such, Boshes cannot now claim that he, as the last surviving partner, can purchase the property.

Even if Boshes could establish that he had a right to purchase the property (which he cannot), he still has no right to purchase the property for $975,000. His theory appears to be as follows: A partnership cannot have only one partner (Zapara v. County of Orange (1994) 26 Cal.App.4th 464, 469); thus, once Boshes became the last surviving partner, the partnership dissolved as a matter of law. That occurred in 2000, when Hiram died. Because the partnership dissolved as a matter of law in 2000, Boshes is entitled to exercise his right of first refusal and purchase the property at its then value. The parties stipulated that the propertys value in 2000 was $975,000.

We cannot agree with this analysis. First, the partnership did not dissolve in 2000, when Hiram died. Paragraph 14 of the partnership agreement provides, in relevant part: In the event of the death of any partner, his widow shall automatically succeed to the interests of the deceased partner in and to the partnership and the assets thereof, without any administration by the decedents executors, administrators or otherwise, however, if said deceased partner shall not be survived by any widow, then said interest shall pass to his estate and to such distributes as shall be determined by the court administering his estate. Provided, however, that this partnership shall not be terminated by reason of the death of any partner, and the surviving partners shall have, and hereby are given, the exclusive right to continue, carry on and operate the business of said partnership.

Again, the plain language of this paragraph controls. The death of any partner does not dissolve the partnership; rather, the deceased partners interest passes to his widow or to his estate. That is exactly what the trial court determined occurred here. When Hiram passed away, his interest passed to Norma, his widow.[6] The partnership did not dissolve.

In challenging the trial courts judgment, Boshes objects to the referees interpretation of the agreement; he claims that the trial court, not the referee, was required to interpret the scope of the agreement. This objection has been forfeited for appellate review. It is a general rule of appellate review that arguments waived at the trial level will not be considered on appeal. (CaliforniaState Auto. Assn. Inter-Ins. Bureau v. Antonelli (1979) 94 Cal.App.3d 113, 122.) Here, Boshes directs us to no evidence that he objected to the scope of the referees duties. Rather, based upon the limited record provided to us, it appears that Boshes did not object or oppose the request for a referee; he merely filed a response. And, we cannot begin to speculate as to the contents of that response.

Boshes also argues that the referee erred in considering extrinsic evidence in connection with the interpretation of paragraph 3 of the agreement. According to Boshes, paragraph 3 is not ambiguous and its plain language provides for a right of first refusal. While we agree with Boshess supposition that paragraph 3 is unambiguous, we cannot adopt his construction of this contractual provision. Rather, as set forth above, we conclude that there is nothing in paragraph 3 that gives a surviving partner the automatic right to purchase the partnership property.

In support of his assertion, Boshes argues that Lasken and the London Trust, mere transferees, are not entitled to any appreciation of the real property assets of the partnership. As discussed in parts III and IV, infra, we are not convinced.

II. The Trial Court Failed to Conduct a Proper Accounting

Boshes asserts that the trial court failed to conduct a proper accounting as provided for under Corporations Code section 16807.

A. Factual Background

Following the court trial, at which the trial court adopted the findings of the referee, the trial court appointed a receiver and instructed the receiver to hire an accountant to prepare and submit an independent accounting of the partnership. To allow the accountant to perform this function, the parties were ordered to turn over all financial documents to the receiver. Lasken was directed to prepare a proposed interlocutory judgment.

In accordance with the trial courts instruction, Lasken submitted a proposed interlocutory judgment. At paragraph 12, that document instructed the parties to provide the receiver with all documents relevant and necessary for making a complete accounting of the costs and expenses of the [partnership] for the calendar years 2001, 2002, 2003, and that portion of 2004. Boshes objected to the proposed interlocutory judgment on the grounds that it did not conform to the minute order and violated Corporations Code sections 16401 and 16807 as well as case law that required an accounting for the entire term of the partnership. The trial court overruled Boshess objections and signed the proposed interlocutory judgment, limiting the accounting of the partnership to the four years specified.

On March 8, 2005, the receiver filed a final accounting of the partnership. The report cover[ed] the period from January, 2001 through the present time as required by the Interlocutory Judgment in this matter. At the hearing on the receivers final report and accounting, the trial court adopted the receivers recommendations, including his accounting of the partnerships assets and liabilities.

B. Analysis

It is, undoubtedly, generally true, that in an action to dissolve a partnership, and for a settlement of its affairs, the account must be taken from the beginning until the end of the partnership. (Stretch v. Talmadge (1884) 65 Cal. 510, 511.)

Initially, it appears that the trial court ordered a full accounting of the partnership. However, Lasken submitted a proposed interlocutory judgment that restricted the years of the accounting to 2001 through 2004. Despite Boshess objection to this limitation, the trial court signed the proposed interlocutory judgment, and the receiver, in accordance therewith, only performed an accounting for those years.

Keeping in mind the principle that an appellate court presumes that the judgment appealed from is correct (Denham v. Superior Court (1970) 2 Cal.3d 557, 564) and in light of Boshess arguments, both at trial and on appeal, we conclude that substantial evidence supports the trial courts implied finding that an accounting had been taken until 2001, yet an accounting was still required from 2001 through 2004. Boshess arguments during this litigation focus on the alleged ineffective transfers. And, his request for a complete accounting stems from his claim that the transfers were invalid. After all, if the transfers were invalid, then a complete accounting would have been required to reallocate partnership distributions.

However, Boshes does not appear to contend that a full accounting was required from the inception of the partnership if the transfers were valid. For example, he directs us to no evidence that any partnership distributions before 2001 were improper. He also does not challenge any credits or charges made to the partnership accounts prior to 2001.

Moreover, the evidence, namely the tax returns, indicates that a proper partnership accounting was performed at least until 2001.

Under these circumstances, we conclude that Boshes received his right to a full accounting of the partnership. (Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1050; Brewer v. Simpson (1960) 53 Cal.2d 567, 583 [we adopt all intendments and inferences to affirm the judgment unless the record expressly contradicts them].)

III. Laskens Interest in the Partnership

Boshes argues that the trial court erred in concluding that Lasken holds a 40 percent interest in the partnership and in the partnership property.

A. Factual Background[7]

Melvin was one of the original five partners in the partnership. In 1968, Berman, one of the other five original partners, transferred his interest in the partnership to Melvin. In so doing, he never offered his partnership interest to the other partners, as contemplated by paragraph 13[8]of the partnership agreement. He did, however, inform Boshes of the transfer, and Boshes was not happy about it; in fact, he told Berman that what he had done was wrong.

On May 8, 1990, Melvin transferred his interest in the partnership to the Lasken Trust. In 1996, Melvin passed away. Lasken, his son, is the sole beneficiary of the Lasken Trust.

B. Boshess Claim Based Upon Bermans Failure Offer His Partnership Shares to All Partners

According to Boshes, Bermans transfer to Melvin was defective because Berman did not offer his partnership shares to all of the other partners prior to the transfer to Melvin. Thus, Melvin never had a 40 percent interest in the partnership property. For the same reasons, Boshes argues that Melvins transfer of his partnership interest to the Lasken Trust failed. We are not convinced.

Regardless of whether Boshes properly summarizes the law regarding partnership transfers and whether a transferee only is entitled to partnership profits at the time a partner withdraws, his arguments are simply too late. The trial court did not abuse its discretion in precluding Boshes from prevailing on these legal theories pursuant to the doctrines of laches, estoppel, and unclean hands. (In re Marriage of Fogarty & Rasbeary (2000) 78 Cal.App.4th 1353, 13641365 (Fogarty); Cuadros v. Superior Court (1992) 6 Cal.App.4th 671, 675; Lovett v. Carrasco (1998) 63 Cal.App.4th 48, 55.)

1. Laches

Laches is an equitable defense to the enforcement of stale claims. It may be applied where the complaining party has unreasonably delayed in the enforcement of a right, and where that party has either acquiesced in the adverse partys conduct or where the adverse party has suffered prejudice. . . .  [Citations.] (Fogarty, supra, 78 Cal.App.4th at pp. 13591360; see also In re Marriage of Copeman (2001) 90 Cal.App.4th 324, 333, superseded by statute on other grounds as stated in In re Marriage of Fellows (2006) 39 Cal.4th 179, 185 [In practice, laches is defined as an unreasonable delay in asserting an equitable right, causing prejudice to an adverse party such as to render the granting of relief to the other party inequitable. [Citation.] Thus, if a trial court finds (1) unreasonable delay; and (2) prejudice, and if its findings are not palpable abuses of discretion, a finding of laches will be upheld on appeal. [Citation.]].)

Here, Boshes unreasonably delayed in asserting his challenge to the transfers (1) from Berman to Melvin, and (2) from Melvin to the Lasken Trust. At the time of the transfer, Berman informed Boshes that he was transferring his interest in the partnership to Melvin. But, Boshes did nothing. Moreover, following the transfer, the partnerships annual tax accountings reflected the doubling of Melvins ownership interest in the partnership. Copies of those tax records were provided to Boshes. Still Boshes did nothing, even though he had a remedy available to him: he could have initiated arbitration proceedings, as permitted by paragraph 16 of the partnership agreement.

Instead, as Boshes readily admits, he developed a theory, while in law school in the early 1980s, that the transfer from Berman to Melvin was defective and that the remaining partners still held an equal interest in the partnership. In other words, even though all documents indicated otherwise, Boshes believed that he and the two remaining partners each held a one-third interest in the partnership. Despite developing this claim years before, Boshes kept this theory to himself and deliberately waited to pursue his claims. Not until December 3, 2001, did Boshes reveal his theory, in a letter to Norma and Lasken. At around the same time, Boshes hired an accountant, who changed the tax reporting records from what they had been (40 percent to the Lasken Trust/40 percent to the London Trust/20 percent to Boshes) to what Boshes believed they should be (33 percent to the Lasken Trust, the London Trust, and Boshes, each).

This intentional delay has caused prejudice. All of Boshess partners, who could have offered evidence on the issues now raised, have passed away. Moreover, because Melvin has passed away, the taxes that he paid on the purported excess portion of the partnership distributions of income cannot be recovered.

Boshes asserts that the doctrine of laches is inapplicable because the statute of limitations had not yet run on his accounting cause of action. His theory is flawed.

Although labeled a cause of action for an accounting, Boshes actually asserted claims for breach of contract and breach of fiduciary duty against respondents. His theory is that his partners either breached the partnership agreement or breached their fiduciary duties owed to him by unlawfully transferring their partnership interests, to his detriment. Those allegedly wrongful transfers occurred years ago, in 1968 (Berman to Melvin) and 1977 (Sinclair to Hiram and Norma), or, arguably, as late as 1984 (Hiram and Norma to the London Trust) and 1990 (Melvin to the Lasken Trust). Because the statutes of limitation on Boshess actual claims for breach of contract and breach of fiduciary duty ran well before he initiated this action in 2002, his claims are untimely. (Quintilliani v. Mannerino (1998) 62 Cal.App.4th 54, 66 [The statute of limitations to be applied is determined by the nature of the right sued upon, not by the form of the action or the relief demanded].)

Boshes offers no legal authority to support his suggestion that the statute of limitations was tolled until dissolution of the partnership. (Sprague v. Equifax, Inc., supra, 166 Cal.App.3d at p. 1050.) In fact, such a result would be nonsensical, particularly here. Paragraph 16 of the partnership agreement provides, in relevant part: Any disputes and questions whatsoever which shall arise during the existence of this partnership between the parties hereto, concerning this agreement or the construction or application thereof, or on any account, valuation (including valuation for purposes of sale under paragraph 12 above) or division of assets, profits, debts or liabilities to be made hereunder, or any act or omission of any partner, or any matter in any way relating to the partnership business, or the affairs of the partnership, or the rights, duties or liabilities of any party hereunder shall be submitted to arbitration. In other words, the parties had a mechanism available to them to resolve any disputes regarding the partnershiparbitration. It follows that there was no reason to delay resolution of disputes, as Boshes did.

2. Estoppel

In general, [e]quitable estoppel, also called estoppel in pais, estoppel by conduct, and estoppel by misrepresentation, arises from declarations or conduct of the party estopped. Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it. (13 Witkin, Summary of Cal. Law (10th ed. 2005) Equity, 190 at p. 527, quoting Evid. Code, 623.) A valid claim of equitable estoppel consists of the following elements: (a) a representation or concealment of material facts (b) made with knowledge, actual or virtual, of the facts (c) to a party ignorant, actually and permissibly, of the truth (d) with the intention, actual or virtual, that the ignorant party act on it, and (e) that party was induced to act on it . (13 Witkin, supra, 191 at pp. 527-528.) If any of these elements is missing, there can be no estoppel. (Id. at p. 528; see also City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 489 [summarizing the requisite elements for equitable estoppel as: (1) the party to be estopped was apprised of the facts, (2) the party to be estopped intended by conduct to induce reliance by the other party, or acted so as to cause the other party reasonably to believe reliance was intended, (3) the party asserting estoppel was ignorant of the facts, and (4) the party asserting estoppel suffered injury in reliance on the conduct].)

Boshes is estopped from challenging the 40/40/20 ownership of the partnership property. For years, the partnership operated with the understanding that there were only three partners (Boshes, Melvin, and Hiram) with unequal distributions. Only Boshes knew that he intended to challenge those distributions, and he concealed that theory until after they had passed away. His concealment induced them to act: they continued operating the partnership, and receiving distributions, in accordance with the 40/40/20 ownership. Under these circumstances, Boshes cannot now challenge the partnership transfers.

3. Unclean Hands

The defense of unclean hands arises from the maxim, He who comes into Equity must come with clean hands. (Blain v. Doctors Co. (1990) 222 Cal.App.3d 1048, 1059 (Blain).) The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim. [Citations.] The defense is available in legal as well as equitable actions. [Citations.] . . . 

The unclean hands doctrine protects judicial integrity and promotes justice. It protects judicial integrity because allowing a plaintiff with unclean hands to recover in an action creates doubts as to the justice provided by the judicial system. Thus, precluding recovery to the unclean plaintiff protects the courts, rather than the opposing partys, interests. [Citations.] The doctrine promotes justice by making a plaintiff answer for his own misconduct in the action. It prevents a wrongdoer from enjoying the fruits of his transgression. [Citations.]

Not every wrongful act constitutes unclean hands. But, the misconduct need not be a crime or an actionable tort. Any conduct that violates conscience, or good faith, or other equitable standards of conduct is sufficient cause to invoke the doctrine. [Citations.]

The misconduct that brings the unclean hands doctrine into play must relate directly to the cause at issue. Past improper conduct or prior misconduct that only indirectly affects the problem before the court does not suffice. The determination of the unclean hands defense cannot be distorted into a proceeding to try the general morals of the parties. [Citation.] Courts have expressed this relationship requirement in various ways. The misconduct must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants. [Citation.] [T]here must be a direct relationship between the misconduct and the claimed injuries . . . so that it would be inequitable to grant [the requested] relief. [Citation.] The issue is not that the plaintiffs hands are dirty, but rather that the manner of dirtying renders inequitable the assertion of such rights against the defendant. [Citation.] The misconduct must prejudicially affect . . . the rights of the person against whom the relief is sought so that it would be inequitable to grant such relief. [Citation.]

From these general principles, the Blain court gleaned a three-pronged test to determine the effect to be given to the plaintiffs unclean hands conduct. Whether the particular misconduct is a bar to the alleged claim for relief depends on (1) analogous case law, (2) the nature of the misconduct, and (3) the relationship of the misconduct to the claimed injuries. [Citations.] (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978979.) Consistent with the case law, we will analyze the parties contentions under the three prongs.

a. Analogous case law

No analogous case law is identified by the parties to aid our analysis.

b. Nature of the misconduct

The trial court did not abuse its discretion in finding that Boshes engaged in misconduct, namely in delaying his challenge to the intrapartner transfers. He admits that he deliberately delayed in raising his objections; and, as set forth above, this delay certainly caused prejudice to the parties involved.

c. Relationship of misconduct to claimed injuries

Likewise, the trial court did not abuse its discretion in finding that Boshess misconduct relates directly to the claim he is asserting now. He asserts that he is entitled to years of partnership income that he claims he was denied. Under these circumstances, Boshess deliberate and deceitful conduct precludes his claims.

C. Boshess Claim that Lasken Cannot Take Under Paragraph 14 of the Partnership Agreement

Boshes also claims that Melvins interest in the partnership did not transfer to Lasken because Lasken is not the widow, heir, devisee, or legal representative, the persons who may take an interest in the partnership if an original partner dies.

Pursuant to paragraph 14 of the agreement, quoted above, Lasken properly inherited his fathers interest in the partnership property. He is the sole heir of Melvins estate, and he is the sole beneficiary of the Lasken Trust.

IV. The London Trusts Interest in the Partnership

Boshes contends that the trial court erred in finding that the London Trust holds a 40 percent interest in the partnership and its property.

A. Factual Background[9]

Hiram was one of the original five partners in the partnership. In 1977, Sinclair transferred his partnership interest to Hiram and Norma. He did not offer his partnership interest to the other partners before transferring his interest. Annual tax accountings thereafter reflected Hiram and Normas 40 percent ownership interest.

Later, in 1984, Hiram and Norma transferred their interest to the London Trust. In 2000, Hiram passed away. Norma, his widow, is the beneficiary of the London Trust.

B. Analysis

For the same reasons set forth above, Boshess challenges to the (1) transfer by Sinclair to Hiram, and (2) transfer from Hiram to the London Trust fail. Boshes unreasonably delayed in challenging the transfers. It follows that we affirm the trial courts finding that the London Trust holds a 40 percent interest in the partnership assets.

V. Costs Imposed Against Boshes

Boshes challenges a host of costs awarded against him and in favor of respondents on the grounds that they are disguised sanctions. Normally, we review the trial courts order awarding costs for abuse of discretion, however, de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of . . . costs in this context ha[s] been satisfied amounts to statutory construction and a question of law. [Citations.] (Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 978.) In other words, because the right to costs is governed strictly by statute [citation], a court has no discretion to award costs not statutorily authorized. (Ladas v. CaliforniaState Auto. Assn. (1993) 19 Cal.App.4th 761, 774.)

A. Boshes was charged with 50 percent of the entire cost of the reference proceeding

1. Factual Background

As set forth above, the referee recommended in his report that [a]ll Reference-related costs . . . should be accumulated and divided with one-half charged to [Boshess] capital account and the other 50% divided co-equally between the London Trust and . . . Lasken and charged 25% each to their respective capital accounts. In so recommending, the referee recognized that such adjustments in one sense would penalize . . . Boshes by making him assume one-half of the total costs/expenses or a sum greater than would otherwise be warranted by his 20% Partnership interest. Nevertheless, this is far less tha[n] the 80% and/or 90% that the London and Lasken interests have argued should be charged against [Boshess] Partnership account. The referee further explained: [I]t should be noted that . . . Boshes, practically speaking, was the major cause of the expense incurred in this Reference. From the very beginning it has been apparent that . . . Boshes believed he had virtually nothing to lose and everything to gain by taking tenuous legal positions regarding Partnership rights and responsibilities. Indeed, his interests and those of . . . Meline, acting as counsel for the Partnership have corresponded virtually without exception. In this regard, . . . Boshes has used the Partnership assets as his personal piggy-bank in order to finance his objectives in this Reference. Bearing a co-equal proportion of the total costs and expenses (i.e., 50% to Boshes and 50% to the London and Lasken interests) would barely satisfy principles of equitable expense allocation and basic fairness.

Over Boshess objection, in its interlocutory judgment, the trial court adopted the referees recommendation and ordered Boshes to assume one-half of the costs of the reference.

2. Boshess Contentions

Boshess objection to this portion of the interlocutory judgment is unclear. At times, it appears that he is arguing that, pursuant to statute, he only may be assessed the referees fees, not the costs of the entire reference proceeding. At other times, he seems to suggest that because he was found to hold only a 20 percent interest in the partnership, the trial court improperly required him to bear half of the costs of the reference. For the sake of completeness, we address both theories.

3. Analysis

Litigation costs are determined by statute. (Code Civ. Proc., 1032, 1033.5.) Code of Civil Procedure section 1033.5 sets forth the items allowable as costs under Code of Civil Procedure section 1032. Notably, subdivision (c)(4) provides: Items not mentioned in this section and items assessed upon application may be allowed or denied in the courts discretion. (Code Civ. Proc., 1033.5, subd. (c)(4).) Additionally, Code of Civil Procedure section 645.1, subdivision (b), provides that the trial court may order the parties to pay the fees of referees . . . in any manner determined by the court to be fair and reasonable, including an apportionment of the fees among the parties. (Code Civ. Proc., 645.1, subd. (b).)

The trial courts allocation of the costs of the reference satisfies these statutory parameters. Exercising its discretion, the trial court determined that Boshes should be responsible for one-half of the costs of the reference.

Boshes claims that there was no basis for the finding that he was the major cause of the expense incurred by advancing tenuous legal positions. We disagree. As discussed above, Boshess claims based upon the agreement are completely unfounded. While they may have been based upon some sort of strained construction of the agreement and the Corporations Code, Boshes deliberately delayed in bringing those claims in a transparent attempt to usurp the entire partnership property from his partners and their widows and heirs. In so doing, he unnecessarily drove up the costs of the litigation, and initiated a lengthy evidentiary hearing, which the referee noted was a waste of time and money. Under the circumstances, the trial court did not abuse its discretion in allocating the costs of the reference as it did.

Boshess assertion that the trial court only had the authority to award the referees fees as costs, and not the costs of the reference, fails as well. As set forth above, pursuant to Code of Civil Procedure section 1033.5, subdivision (c)(4), the trial court had the discretion to allow or deny costs not specified in the statute.

Citing Code of Civil Procedure section 639, subdivision (d)(6)(A),[10]Boshes casually asserts that the trial courts failure to make a finding regarding an economic inability to pay a pro rata share of the costs of the reference nullifies the allocation order. We conclude that this argument has been waived.

The law casts upon the party the duty of looking after his legal rights and of calling the judges attention to any infringement of them. If any other rule were to obtain, the party would in most cases be careful to be silent as to his objections until it would be too late to obviate them, and the result would be that few judgments would stand the test of an appeal. (In re Christina L. (1992) 3 Cal.App.4th 404, 416.) It is a general rule of appellate review that arguments waived at the trial level will not be considered on appeal. (CaliforniaState Auto. Assn. Inter-Ins. Bureau v. Antonelli, supra, 94 Cal.App.3d at p. 122.) It is unfair to the trial court and the adverse party to give appellate consideration to an alleged procedural defect which could have been presented to, and may well have been cured by, the trial court. (Steve J. v. Superior Court (1995) 35 Cal.App.4th 798, 810811.)

At the London Trusts request, the trial court appointed a referee pursuant to Code of Civil Procedure section 639. The order does not contain a finding regarding the parties economic abilities, or lack thereof, to pay the costs associated with the reference. There is no evidence in the appellate record, however, that Boshes objected to that aspect of the trial courts order. Rather, the appellate record indicates that despite the trial courts omission, Boshes actively participated in the reference. In fact, the referee expressly found that Boshes was the one who lengthened the time of and escalated the costs of the reference. And, that finding was adopted by the trial court. In light of Boshess failure to object to the trial courts noncompliance with Code of Civil Procedure section 639, subdivision (d)(6)(A) and his overly zealous participation in the reference proceeding, we conclude that Boshes waived this objection to the trial court order.

In sum, Boshess conclusion that the trial courts order requiring him to bear one-half of the costs of the reference does not amount to an improper sanctions award.

B. Boshes was charged with $48,025.04 in interest

1. Factual Background

In its interlocutory judgment, the trial court ordered the appointment of a receiver to manage the business affairs and make a complete accounting of the partnership. A receiver was appointed on April 28, 2004, and he took control of all partnership funds and property. In September 2004, the partnerships primary asset, the apartment building in Burbank, was sold, with approximately $1.6 million in net proceeds. In December 2004, the receiver paid out $900,000 as a partial and proportionate distribution to respondents. The receiver held approximately $700,000, the balance of the partnerships liquidated assets, until April 2005. On April 1, 2005, the trial court adopted the receivers final report.

On or around April 11, 2005, Lasken filed a motion for adjustment to final accounting for reimbursement of improper use of partnership profits and for interest calculable on a particular day. In that motion, Lasken argued, pursuant to Civil Code section 3287 and Chazan v. Most (1962) 209 Cal.App.2d 519, that because of Boshess misappropriation of partnership assets, he owed Lasken and the London Trust interest on monies held by Boshes and on the proceeds from the sale of the apartment building. The trial court agreed and, after a hearing, granted Laskens request that Boshes pay interest on certain portions of the proceeds from the partnership apartment building since September 30, 2004.

2. Analysis

On appeal, Boshes challenges a portion of the award of interest on the grounds that the trial court added an additional amount of interest payable to respondents without notice or a hearing.

We are not persuaded. Boshes was provided with notice of respondents request for interest. There were no due process violations.

As for the remainder of the interest award, Boshes contends that the award was improper because [t]here is no basis to allocate interest charges to Boshes for still advocating his frivolous position. Rather, citing Chazan v. Most, supra, 209 Cal.App.2d at page 524, he claims, that interest may only be allocated where the managing partner fails to make a proper accounting and distribution. In other words, because he was not managing the partnerships books and records, he cannot be liable for interest on the delayed payments to Lasken and the London Trust.

Boshes construes the case law too narrowly. Admittedly, the Court of Appeal in Chazan v. Most, supra, 209 Cal.App.2d at page 524 held: Where the accounting and distribution of partnership assets are delayed through the fault of the partner having possession, interest may be allowed from the date when the balance should have been ascertained and paid over. (Chazan v. Most, supra, 209 Cal.App.2d at p. 524.) But, what is evident from other authority, is that if distributions are delayed as a result of a partners improper conduct, then a trial court may exercise its discretion and award interest. (See, e.g., Speka v. Speka (1954) 124 Cal.App.2d 181, 186187 [because the appellants conduct made it impossible to settle the partnership affairs amicably, the trial court acted well-within its discretion in considering the equities of the situation and awarding interest to the other partner].)

Applying those principles, we conclude that the trial court correctly balanced the equities of the situation and awarded interest against Boshes and in favor of respondents. While he may not have been the managing partner at the rele