Horvitz & Levy convinced the California Supreme Court to dismiss review, which reinstated a Court of Appeal opinion reversing a judgment that would have forced a trust to sell its interest in a real estate investment partnership at below-market value.
Plaintiffs Eric Loberg and John Schrillo sued Horvitz & Levy client, Richard Hallberg, Jr., to force a buyout of his interest in a real estate investment partnership formed by his deceased father and three other dentists. Loberg, Schrillo, and Hallberg’s father (Dr. Hallberg) were dentists and held interests in a partnership that owned the dental office building where they practiced. The partners amended their partnership agreement to allow Dr. Hallberg to assign his partnership interest to his living trust, and to substitute the trustee (then Dr. Hallberg) as a general partner in place of Dr. Hallberg individually. When Dr. Hallberg died 15 years later, litigation ensued over whether, despite the substitution, Dr. Hallberg was still a partner at the time of his death, triggering certain buyout provisions that applied in the event of a partner’s death.
The trial court concluded the trust was not a separate legal entity and that Dr. Hallberg was a partner at the time of his death. The trial court stated it was required to follow Presta v. Tepper (2009) 179 Cal.App.4th 909, 918 (Presta), which held that when a trustee of a living trust enters into a partnership in his capacity as trustee, it is the individual, not the trust, that is the partner. The trial court ruled that the buyout provisions applied and granted the relief sought by the plaintiffs, a forced buyout of Hallberg’s interest in the partnership at below-market value. In a published opinion, the Court of Appeal reversed the trial court’s judgment in favor of plaintiffs, concluding that Dr. Hallberg was not a partner when he died because his trust was a “person” that may associate in a partnership under the Uniform Partnership Act of 1994. (UPA; Corp. Code, § 16100 et seq.) The Supreme Court granted review to resolve two issues: whether a trust can be a partner (the conflict between Presta and Han) and whether the death of a partner who has transferred his partnership interest into a trust triggers the buyout-on-death terms in the partnership agreement.
After the plaintiffs filed their briefs in the Supreme Court, Horvitz & Levy sought dismissal of review based on plaintiffs’ concession that living trusts could be partners in California, which eliminated any dispute regarding the conflict between the Court of Appeal’s opinion in in this case and the earlier decision in Presta. In light of that concession, the Supreme Court granted Horvitz & Levy’s motion for dismissal.