                                                              FILED
                                                               JAN 04 2013
 1                                                       SUSAN M SPRAUL, CLERK
                                                             U.S. BKCY. APP. PANEL
 2                                                           OF THE NINTH CIRCUIT


 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                              FOR THE NINTH CIRCUIT
 5   In re:                            )       BAP No. CC-12-1226-BePaMk
                                       )
 6   KOKO SARKIS BABIAN,               )       Bk. No. LA 10-48241-PC
                                       )
 7                    Debtor.          )       Adversary No. LA 10-03244-PC
                                       )
 8                                     )
     KOKO SARKIS BABIAN,               )
 9                                     )
                      Appellant,       )
10                                     )
     v.                                )       MEMORANDUM*
11                                     )
     VAHE TAMAMIAN; KRIKOR             )
12   TAMAMIAN,                         )
                                       )
13                    Appellees.       )
                                       )
14
                    Argued and Submitted On November 15, 2012,
15                            at Pasadena, California
16                              Filed January 4, 2013
17               Appeal from the United States Bankruptcy Court
                     for the Central District of California
18
          Honorable Peter H. Carroll, Chief Bankruptcy Judge, Presiding
19
20   Appearances:     Paro Asturian, Esq. of Astourian and Associates
                      Inc. argued on behalf of appellant Koko Sarkis
21                    Babian; Theodore Kenrick Roberts, Esq. of Roberts &
                      Roberts argued on behalf of appellees Vahe Tamamian
22                    and Krikor Tamamian.
23
     Before: BEESLEY,** PAPPAS, and MARKELL Bankruptcy Judges.
24
25
            *
26         This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
27   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8013-1.
28
            **
           Hon. Bruce T. Beesley, Bankruptcy Judge for the District
     of Nevada, sitting by designation.

                                           1
 1                                INTRODUCTION***
 2        This case involves two individuals, two separate bankruptcy
 3   cases, and two separate adversary proceedings.      The individuals
 4   were allegedly partners in a business venture to develop
 5   condominiums.   Finding that they were partners, the same
 6   bankruptcy court that rendered a judgment excepting a debt from
 7   discharge under Section 523(a)(2)(A) as to one debtor imputed that
 8   debtor’s fraudulent conduct to the debtor named in the adversary
 9   proceeding from which this appeal arises.       Because we conclude
10   that was error, we VACATE the judgment entered in this case, and
11   REMAND this matter to the bankruptcy court for further
12   proceedings.
13                              STATEMENT OF FACTS
14   A.   The Pre-bankruptcy Proceedings
15        1.    The Property.
16        In September 2004, debtor/Appellant (“Debtor”) Koko Sarkis
17   Babian, a.k.a. Krikor Babaoghli, together with Garabed Babian,
18   Ashout Markarian ("Markarian"), and Nazaret Moukhtarian
19   (collectively the “co-owners”) purchased unimproved real property
20   known as 1906-1910 New York Drive, Altadena, CA (the "Property")
21   for $235,000.   They purchased the Property with the intention of
22   building condominiums on the Property.     The four individuals took
23   title to the Property as tenants-in-common.
24        Prior to purchasing the Property, the co-owners had an
25
          ***
26          Unless specified otherwise, all    chapter and section
     references are to the Bankruptcy Code,    11 U.S.C. §§ 101-1532, and
27   all Rule references are to the Federal    Rules of Bankruptcy
     Procedure, Rules 1001-9037. All Civil     Rule references are to the
28   Federal Rules of Civil Procedure.

                                        2
 1   unlicensed architect (the “Architect”) investigate whether they
 2   could develop four condominium units on the Property.   The
 3   Architect informed the co-owners prior to purchase that the
 4   Property was suitable for only three condos, due to a problem
 5   requiring street dedication and widening.
 6        Considerable work was needed on the Property before it could
 7   be developed.   Power poles would potentially need to be relocated
 8   and the power lines placed underground.   Debris and asphalt on the
 9   Property had to be removed before development could begin.    The
10   street lights might need to be relocated, or new street lights had
11   to be built.    Also, a bus stop and oak tree might have to be
12   removed.
13        In August 2005, the co-owners sought to take advantage of a
14   favorable real estate market and sell the Property for $660,000.00
15   The Property did not sell.
16        On March 19, 2006, Markarian met with a long-time friend, Dr.
17   Odabashian, in Las Vegas and told him that he and what he referred
18   to as his “partners” had the Property for sale for $500,000.
19   Markarian stated the Property was ready for development of three
20   condos and that the plan and permits were ready.   As soon as the
21   permits were acquired, which would cost approximately $25,000 to
22   $35,000, construction could begin.
23        Markarian knew that the development-related issues created an
24   impediment to economically prudent development of the Property.
25   He also knew that if a prospective buyer became aware of these
26   impediments, the price would have to be substantially reduced, if
27   the Property could be sold for commercial development at all.
28        Markarian did not mention the development issues or potential

                                       3
 1   delays and costs involved in developing the Property, all of which
 2   were known to him for many months.   Instead, Markarian, indirectly
 3   through Dr. Odabashian, told a potential buyer, Vahe Tamamian,
 4   that development of the Property needed nothing more than payment
 5   of the permits.
 6        Markarian wanted to close the sale of the Property quickly.
 7   He told Dr. Odabashian to facilitate such a closing and offered to
 8   enter into an agreement providing for the following conditions:
 9        1.) That the land will be cleared of all excess material
          and the material hauled from the property by the selling
10        party,
11        2.) that the land be cleared as soon as possible after
          July 4th so as to make it possible for the purchaser to
12        start with the building of the project,
13        3.) to hold $4,000 of the purchase amount from
          Mr. Ashout Markarian as a guarantee that such work will
14        be done, and in a timely manner, and
15        4.) that there are no other disclosures the sellers are
          aware of which would make the building of the project
16        prohibitive.
17        5.) Lastly, it is agreed that if the above conditions
          are not met, any expenditures arising out of such non-
18        compliance, including, but not limited to attorney fees,
          interest and delay of initiation of the project will
19        [be] the responsibility of the sellers.
20   Dr. Odabashian drafted the agreement, dated June 29, 2006, which
21   was signed by Markarian and Vahe Tamamian shortly thereafter.
22        On July 30, 2006, Vahe Tamamian and Krikor Tamamian, (the
23   “Appellees”) purchased the Property for $500,000.1   After closing,
24   the Appellees spent six months and over $90,000.00 to clean and
25   remove the asphalt, concrete, and other materials from the
26
27
          1
           The sale price was $55,000 below the co-owners’ appraised
28   market value on the Property.

                                     4
 1   Property, relocate the power poles, and make necessary street
 2   improvements.
 3        2.     The State Court Proceedings.
 4        On February 4, 2008, the Appellees filed a lawsuit against
 5   all four co-owners for fraud and breach of warranty, among other
 6   claims, in the Los Angeles Superior Court, Tamamian, et. al v.
 7   Garabed Babian, et. al, Case #GC040297.        All of the co-owners were
 8   represented by counsel.
 9        The case was heard as a binding arbitration.        Markarian was
10   the only co-owner to arbitrate.2        The non-arbitrating co-owners
11   did not participate or otherwise appear through their counsel.
12               a.   The Arbitration.
13        The arbitration hearing commenced on January 27, 2010, and
14   continued for several sessions until final submission in late
15   May 2010.   On June 17, 2010, the arbitrator issued a thirteen-page
16   Arbitration Award in favor of the Appellees.3
17               b.   Confirming The Arbitration Award.
18        On December 7, 2010, the Appellees’ petition to confirm the
19
20
          2
           During oral argument, Debtor’s counsel explained that
21   Markarian was the only co-owner to sign a mandatory arbitration
     provision in the closing documents during the sale of the
22
     Property to Appellees.
23        3
           The arbitration award included in the record in this appeal
24   does not contain any of the exhibits referenced in the
     arbitration award. Damages awarded were: $4,000.00 for Property
25   clearance; $21,933.00 for relocating the power poles; $65,963.00
     for street improvements; $44,977 for carrying cost on loans, loan
26
     interest, real estate taxes during delay; and $25,000 punitive
27   damages, totaling $161,873.00. Attorney’s fees of $86,673.37
     were allowed. The total award of consequential and punitive
28   damages together with attorney’s fees was $284,546.27.

                                         5
 1   arbitration award against Markarian was granted by the state
 2   court, and a judgment issued in conformity with the arbitration
 3   award.       The court adopted the findings of fact in the arbitration
 4   award and supplemental award, and incorporated them into its
 5   judgment.      No appeal was taken, and the state court judgment
 6   against Markarian became final on March 21, 2011.
 7           3.     Markarian Bankruptcy Case.
 8           On February 16, 2011, Markarian filed a Chapter 7 bankruptcy
 9   petition.      Appellees filed an adversary complaint against
10   Markarian seeking a judgment of nondischargeability under
11   Section 523(a)(2)(A).      On January 4, 2012, the bankruptcy court
12   entered a judgment of nondischargeability against Markarian under
13   Section 523(a)(2)(A), based upon the preclusive effect of the
14   findings against Markarian in the state court.      The court held
15   that the $248,548.37 award was nondischargeable against Markarian,
16   representing the total of the attorney's fees, actual damages, and
17   punitive damages awarded by the state court.      That judgment
18   against Markarian became final and non-appealable on January 18,
19   2012.
20   B.      The Babian Bankruptcy Case.
21           On September 8, 2010, Debtor filed a Chapter 7 bankruptcy
22   case.
23           1.     The Babian Adversary Proceeding.
24           On December 8, 2010, Appellees filed an adversary proceeding
25   against the Debtor seeking a judgment of nondischargeability under
26   Section 523(a)(2)(A).      Debtor filed an answer raising eight
27   affirmative defenses.
28

                                           6
 1               a.   The Summary Judgment Motion.
 2        On September 30, 2011, the Appellees filed a motion for
 3   summary judgment (“Summary Judgment Motion”).4   The Summary
 4   Judgment Motion asserts that, pursuant to the doctrine of
 5   collateral estoppel, the state court’s fraud judgment against
 6   Markarian was preclusive for purposes of the bankruptcy case, and
 7   that Markarian’s fraud could be imputed to Debtor, since they were
 8   partners.
 9        Debtor filed an opposition to the Summary Judgment Motion
10   which was supported by Debtor’s declaration and exhibits.      Debtor
11   argued that: 1) there was no partnership with Markarian, 2) he
12   could not be held liable for acts not in the ordinary course of
13   business of the alleged partnership, 3) he could not be held
14   liable since he made no representations to Appellees, and 4) the
15   court cannot give collateral estoppel effect to a state court
16   arbitration award.
17        On February 14, 2012, the bankruptcy court held a hearing5
18   for the purpose of announcing its findings of fact6 and
19
20        4
           An earlier motion for summary judgment was heard and denied
     by the bankruptcy court. The court specifically granted leave to
21   file a renewed motion for summary judgment should additional
22   information arise during discovery in the case.
          5
23         The transcript of the February 14, 2012 hearing states that
     it is a continuation from a prior hearing in which the court had
24   granted summary judgment. The transcript of the earlier hearing
     is not included in our record.
25
          6
           Although Civil Rule 56(a), applicable here through
26
     Rule 7056, states that a “court should state on the record the
27   reasons for granting or denying the [summary judgment] motion,”
     that typically does not take the form of making findings of fact,
28                                                        (continued...)

                                       7
 1   conclusions of law.   The court’s findings of fact originated from
 2   multiple sources.   The court stated at the beginning of the
 3   hearing that:
 4        [t]he following facts are derived from the Debtor’s
          testimony, and the arbitrator’s finding and award in a
 5        prior state court action against – that was pending
          against all of the defendants, but the state court award
 6        was directed to Mr. Ashout Markarian. [Tr. Hrg.
          (February 14, 2012) at p. 2].
 7
 8   At the conclusion of the hearing, the court stated:
 9        Finally, we have all of the findings against
          Mr. Markarian, both in the state court, for which this
10        Court found preclusive effect in the 523(a) action
          against Mr. Markarian in this court, and upon which the
11        Court based its judgment, finding that the debt of
          $248,548.37 was nondischargeable against Markarian on
12        January 4th, 2012.
13        [T]he Court adopts its findings of fact and conclusions
          of law in the Markarian case that supported its judgment
14        entered on January 4, 2012,7 and holds that the debt of
          Mr. Babian to the Plaintiffs in this adversary
15        proceeding in the amount of $248,548.37, which
          represents actual damages of $161,873, plus attorney's
16        fees of $86,675.37, is nondischargeable under Section
          523(a)(2)(A). [Tr. Hrg. (February 14, 2012) at pp. 13-
17        14].
18        On April 17, 2012 the bankruptcy court entered summary
19   judgment in favor of the Appellees.   The court adopted each of the
20   findings of fact and conclusions of law from the February 14, 2012
21   hearing as well as the court’s findings of fact and conclusions of
22
          6
23         (...continued)
     as summary judgment is appropriate only when there are no facts
24   to be found; that is, when “there is no genuine dispute as to any
     material fact . . . .” Civil Rule 56(a).
25
          7
           Although adopted into the court’s findings of fact and
26
     conclusions of law in this case, the court’s findings of fact and
27   conclusions of law related to the Section 523(a)(2)(A) judgment
     in the Markarian adversary proceeding have not been made a part
28   of this record.

                                      8
 1   law from Markarian’s adversary proceeding.    Although it is
 2   unclear, the court may have imputed Markarian’s fraud as found in
 3   the discharge exception action in his bankruptcy case to Debtor in
 4   this case and granted summary judgment on that basis.8   Debtor
 5   appealed.
 6                               JURISDICTION
 7        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 8   §§ 1334 and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C.
 9   § 158(a)(1).
10                                   ISSUES
11   1.   Did the bankruptcy court err when it applied the doctrine of
12        issue preclusion from the state court judgement to Debtor?
13   2.   Did the bankruptcy court err when it imputed Markarian’s
14        fraud to Debtor?
15   3.   Did the bankruptcy court err when it found that Debtor and
16        Markarian were partners?
17                           STANDARDS OF REVIEW
18        We review de novo the bankruptcy court’s decision to grant
19   summary judgment.   Boyajian v. New Falls Corp. (In re Boyajian),
20   564 F.3d 1088, 1090 (9th Cir. 2009); Lopez v. Emergency Serv.
21   Restoration, Inc. (In re Lopez), 367 B.R. 99, 103 (9th Cir. BAP
22
          8
23          It is not entirely clear which of two different fraud
     judgments against Markarian (the state court judgment, or the
24   Markarian Section 523(a)(2)(A) judgment) the court may have
     deemed preclusive to the Debtor in this case. The bankruptcy
25   court references both judgments in its statement of issues to be
     addressed. It appears more likely that the court relied upon the
26
     Markarian Section 523(a)(2)(A) judgment. As discussed in more
27   detail below, relying upon the Markarian Section 523(a)(2)(A)
     judgment would have been error. See, infra Discussion
28   Section “B.”

                                      9
 1   2007).   Viewing the evidence in the light most favorable to the
 2   non-moving party (i.e., Debtor), we determine whether the
 3   bankruptcy court correctly found that there are no genuine issues
 4   of material fact and that the moving party is entitled to judgment
 5   as a matter of law.    Jesinger v. Nev. Fed. Credit Union, 24 F.3d
 6   1127, 1130 (9th Cir. 1994); Gertsch v. Johnson & Johnson (In re
 7   Gertsch), 237 B.R. 160, 165 (9th Cir. BAP 1999).
 8        The availability of issue preclusion is a question of law the
 9   BAP reviews de novo.     Wolfe v. Jacobson (In re Jacobson), 676 F.3d
10   1193, 1198 (9th Cir. 2012)(citing Dias v. Elique, 436 F.3d 1125,
11   1128 (9th Cir. 2006)).    If issue preclusion is available, the
12   decision to apply it is reviewed for abuse of discretion.       Dias v.
13   Elique, 436 F.3d 1125, 1128 (9th Cir. 2006).       When state
14   preclusion law controls, such discretion is exercised in
15   accordance with applicable state law.       Gayden v. Nourbakhsh (In re
16   Nourbakhsh), 67 F.3d 798, 800-01 (9th Cir. 1995).       A bankruptcy
17   court abuses its discretion when it applies the incorrect legal
18   rule or its application of the correct legal rule is “(1)
19   illogical, (2) implausible, or (3) without support in inferences
20   that may be drawn from the facts in the record.”      United States v.
21   Loew, 593 F.3d 1136, 1139 (9th Cir. 2010) (quoting United States
22   v. Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009)(en banc))
23   (internal quotation marks omitted).
24                                  DISCUSSION
25        Debtor raises several arguments supporting his belief that
26   the bankruptcy court erred in granting the Appellees’ Motion for
27   Summary Judgment.   For the reasons set forth below, we vacate the
28

                                       10
 1   bankruptcy court’s judgment and remand this matter.9
 2   A.   Bankruptcy Court’s Application of Issue Preclusion.
 3        Debtor argues that the bankruptcy court improperly applied
 4   issue preclusion concepts when it adopted the arbitration award
 5   findings related to the alleged partnership between Markarian and
 6   Debtor.
 7        A review of the bankruptcy court's decision reveals that the
 8   court conducted no issue preclusion analysis.   Nonetheless, the
 9   record before us suggests that the bankruptcy court based its
10   decision entirely upon its determinations concerning the existence
11   of a partnership between Markarian and the Debtor, that the sale
12   of the Property took place within the ordinary course of their
13   partnership, and the bankruptcy court’s imputation of Markarian’s
14   fraud as found in the Section 523(a)(2)(A) action in his
15   bankruptcy case to Debtor.10   Under these circumstances, any
16
17        9
           Our efforts to substantively review this case have been
18   significantly hampered by the failure of both parties to fully
     comply with the Federal Rules of Appellate Procedure and the
19   Bankruptcy Appellate Panel Rules. See Fed. R. App. P. 10(b)(2);
     BAP Rule 8006-1. While we may affirm the bankruptcy court's
20   decision on any basis supported in the record, Barnes v. Belice
21   (In re Belice), 461 B.R. 564, 579 (9th Cir. BAP 2011), neither
     party has provided us with a complete version of the record on
22   which the bankruptcy court relied in rendering its decision. In
     this instance, the absence of a complete record has worked
23   against the Appellees’ interests because it has impaired our
     ability to identify whether there are any alternate grounds for
24   affirmance.
25        10
           Although the court identified the issues that it was going
26   to address in its findings and conclusions, the court did not
     conduct the six step issue preclusion analysis regarding either
27   the state court judgment or the Markarian Section 523(a)(2)(A)
     adversary proceeding judgment. See, Khaligh v. Hadaegh
28   (In re Khaligh), 338 B.R. 817, 824-25 (9th Cir. BAP 2006),
     aff’d, 506 F.3d 956 (9th Cir. 2007).

                                      11
 1   reliance upon the arbitration award findings, or the state court’s
 2   adoption of those findings, would have been error.11
 3   B.   Bankruptcy Court’s Determination of Nondischargeability Under
          Section 523(a)(2)(A).
 4
 5        The bankruptcy court had before it deposition evidence
 6   related to the question of Debtor’s alleged partnership with
 7   Markarian and whether the sale of the Property was in the ordinary
 8   course of the partnership.   The court had no evidence to directly
 9   support a finding of fraud, other than the findings of fact and
10   conclusions of law set forth in the arbitration award and state
11   court judgment.   Since the bankruptcy court did not consider the
12   six issue preclusion factors identified in Khaligh, supra, it
13   could not have properly relied on the arbitration award or the
14   state court findings.   Consequently, the court had no valid basis
15   for determining that the Debtor had committed fraud independent of
16   imputing Markarian's fraud, which is discussed below.
17        1.   Imputation of a Partner’s Fraud Under Section
               523(a)(2)(A).
18
          “[A] debt may be excepted from discharge either when (1) the
19
20
          11
           Issue preclusion is not applicable in this case. The
21   issues before the bankruptcy court were different from the issues
     litigated in the state court or in Markarian’s adversary
22   proceeding. Neither the arbitrator, state court, nor bankruptcy
23   court addressed the question of inter-partner imputation.
     Additionally, an arbitration award cannot have nonmutual issue
24   preclusion effect unless the party that did not participate in
     the arbitration agrees to such treatment. Vandenberg v. Super.
25   Ct., 21 Cal.4th 815, 836-37, 88 Cal.Rptr. 366, 381, 982 P.2d 229,
     242-43 (1999); Berglund v. Arthroscopic & Laser Surgery Ctr. of
26
     San Diego, L.P., 44 Cal.4th 528, 537, 187 P.3d 86, 91, 79
27   Cal.Rptr.3d 370, 376 (2008); In re Khaligh, 338 B.R. at 825 n.4.
     There is nothing in our record reflecting that Debtor agreed to
28   be bound by Markarian’s arbitration award.

                                     12
 1   debtor personally commits actual, positive fraud, or (2) the
 2   actual fraud of another is imputed to the debtor under
 3   partnership/agency principles.”    Tsurukawa v. Nikon Precision,
 4   Inc. (In re Tsurukawa), 287 B.R. 515, 525 (9th Cir. BAP 2002)
 5   (“In re Tsurukawa II”).    Actual fraud may be imputed to a debtor
 6   for nondischargeability purposes even where the debtor has no
 7   knowledge of that fraud.   In re Tsurukawa II, 287 B.R. 525-26. See
 8   also, Wheels Unlimited, Inc. v. Sharp (In re Sharp), 2009 W.L.
 9   511640 *4 (Bankr. D. Idaho 2009).
10        The United States Supreme Court has long held that partners
11   can bind each other in liability if they commit wrongful acts
12   within the scope of their partnership business.   In Strang v.
13   Bradner, 114 U.S. 555, 5 S.Ct. 1038, 29 L.Ed. 248 (1885), the
14   Court held that because there was a partnership relationship and
15   because the wrongdoing involved a partnership transaction, the
16   wrongdoing of a partner was imputed to the innocent debtor
17   partners.   The court reasoned that:
18        [e]ach partner was the agent and representative of the
          firm with reference to all business within the scope of
19        the partnership. And if, in the conduct of partnership
          business, and with reference thereto, one partner makes
20        false or fraudulent misrepresentations of fact to the
          injury of innocent persons who deal with him as
21        representing the firm, and without notice of any
          limitations upon his general authority, his partners
22        cannot escape pecuniary responsibility therefor upon the
          ground that such misrepresentations were made without
23        their knowledge.
24   Strang, 114 U.S. at 561, 5 S.Ct. 1038.    Several courts have relied
25   upon Strang to impute the wrongful conduct of one party to a
26   debtor for purposes of nondischargeability.   See, e.g. Tsurukawa
27   v. Nikon Precision, Inc. (In re Tsurukawa), 258 B.R. 192, 197-98
28   (9th Cir. BAP 2001) (“In re Tsurukawa I”); Deodati v. M.M. Winkler

                                       13
 1   & Assoc. (In re M.M. Winkler & Assoc.), 239 F.3d 746, 748-49 (5th
 2   Cir. 2001); BancBoston Mortg. Corp. v. Ledford (In re Ledford),
 3   970 F.2d 1556, 1561 (6th Cir. 1992).
 4        In In re Cecchini, a § 523(a)(6) case, a partner's wrongdoing
 5   that occurred in the ordinary course of the partnership business
 6   was imputed to an innocent partner for nondischargeability
 7   purposes.   Impulsora Del Territorio Sur, S.A. v. Cecchini (In re
 8   Cecchini), 780 F.2d 1440, 1444 (9th Cir. 1986), abrogated on other
 9   grounds, Kawaauhau v. Geiger, 523 U.S. 57, 60, 118 S.Ct. 974,
10   140 L.Ed.2d 90 (1998).   More recently, in In re Tsurukawa II, this
11   panel held that a spouse’s fraud could be imputed to the other
12   spouse under agency principles when they are also business
13   partners.   In re Tsurukawa II, 287 B.R. at 527.   Thus, Markarian’s
14   fraudulent conduct can potentially be imputed to Debtor, his
15   alleged partner, by applying basic partnership principles.12
16        2.     The Bankruptcy Court’s Determination of Partnership
                 Between Markarian and Debtor.
17
          Debtor attacks the bankruptcy court’s determination that
18
     Markarian and Debtor were partners, arguing that Debtor was a
19
     passive investor and engaged in no activity on behalf of the
20
21        12
           In California, each partner is an agent of the partnership
     and binds the partnership for all acts in the ordinary course of
22   the partnership’s business. Cal. Corp. Code § 16301(1)(West
23   2006). All partners are jointly and severally liable for all
     obligations of the partnership. Cal. Corp. Code § 16306(West
24   2006). A partner acting outside the ordinary course of business
     can still bind the partnership if the act was authorized by the
25   other partners. Cal. Corp. Code § 16301(2)(West 2006).
     Consistent with this concept “[a] partnership is liable for loss
26
     . . . caused to a person . . . as a result of a wrongful act or
27   omission . . . of a partner acting in the ordinary course of
     business of the partnership or with authority of the
28   partnership.” Cal. Corp. Code § 16305(a)(West 2006).

                                      14
 1   alleged partnership.   Debtor asserts everything the Debtor did was
 2   consistent with co-ownership, not partnership, and notes that
 3   taking title to the Property as tenants in common13 was
 4   inconsistent with a finding of partnership.     Debtor is correct.
 5   Genuine issues of material fact exist regarding whether the Debtor
 6   and Markarian were partners.
 7        Debtor relies upon several California statutory provisions to
 8   show that he and Markarian were mere co-owners of the Property,
 9   not partners.   For example, joint ownership of property does not,
10   by itself, establish a partnership.     Cal. Corp. Code,
11   § 16202(c)(1) (West 2006).   Nor does sharing gross returns, by
12   itself, establish a partnership.      Cal. Corp. Code § 16202(c)(2)
13   (West 2006).    Although a person receiving a share of profits from
14   a business is presumed to be a partner, the presumption disappears
15   if the profit arises solely from an increase in the value of the
16   collateral, as it did in this case.     Cal. Corp. Code
17   § 16202(c)(3)(E) (West 2006).   Thus, neither joint ownership nor
18   sharing profits are dispositive in determining if there was a
19   partnership.
20        Here, the parties took title to the Property as tenants in
21   common.   In California, holding real property as tenants in common
22   is mutually exclusive with holding title as a partnership.     “An
23   interest in common is one owned by several persons, not in joint
24   ownership or partnership.”   Cal. Civ. Code § 685 (West 2007).
25   There is also a rebuttable presumption that property is not
26
          13
27         Cal. Civil Code § 685 provides “[a]n interest in common is
     one owned by several persons, not in joint ownership or
28   partnership.” Cal. Civil Code § 685 (West 2007)(emphasis added).

                                      15
 1   partnership property, “even if used for partnership purposes,” if
 2   the property is “acquired in the name of one or more of the
 3   partners, without an indication in the instrument transferring
 4   title to the property of the person's capacity as a partner or of
 5   the existence of a partnership and without use of partnership
 6   assets. . . .”   Cal. Corp. Code, § 16204(d) (West 2006).   Here,
 7   the Property was titled in the names of the four individuals as
 8   tenants in common.   As such, there was a rebuttable presumption
 9   that the Property was not partnership property.14
10          Notwithstanding the statutory provisions relied upon by the
11   Debtor, the bankruptcy court and Appellees rely upon other
12   statutory provisions to show that a partnership existed between
13   Markarian and the Debtor.
14          In California, “[t]he association of two or more persons to
15   carry on as co-owners of a business for profit forms a
16   partnership, whether or not the persons intend to form a
17   partnership.”    Cal. Corp. Code § 16202(a) (emphasis added).   Thus
18   two or more individuals carrying on as co-owners of a business for
19   profit may form a partnership, even if they did not intend to form
20   one.    “[C]o-ownership of any sort, as well as profit-sharing, are
21   factors tending to establish partnership.”   In re Tsurukawa II,
22   287 B.R. at 521.
23          Additionally, being passive in business dealings does not
24
25          14
           In California, “[a] partner is not a coowner of
     partnership property and has no interest in partnership property
26
     that can be transferred, either voluntarily or involuntarily.”
27   Cal. Corp. Code § 16501. Munkdale v. Giannini, 35 Cal.App.4th
     1104, 1111, 41 Cal.Rptr.2d 805, n.6 (Cal.App. 1 Dist. 1995) (The
28   partnership owns its property and the partners do not).

                                      16
 1   prevent a finding of partnership.     “[A] partnership can exist as
 2   long as the parties have the right to manage the business, even
 3   though in practice one partner relinquishes the day-to-day
 4   management of the business to the other partner.”    In re Tsurukawa
 5   II, 287 B.R. at 522 (citations omitted).
 6        Ultimately, the existence of a partnership is a question of
 7   fact, determined from the parties' agreement, their conduct, and
 8   the surrounding circumstances.   Holmes v. Lerner, 74 Cal.App.4th
 9   442, 454, 88 Cal.Rptr.2d 130, 139 (Cal.App. 1 Dist 1999).    Since
10   there was no written agreement, the existence of the partnership
11   in this case must be gleaned from the parties conduct and the
12   surrounding circumstances.
13        It is well settled in California that a partnership may
          be formed by parol even though its sole purpose is to
14        deal in real estate. If a partnership is formed and
          real property is dedicated to partnership use and is
15        used by the partnership for its sole benefit, the fact
          that title was acquired by one or more of the partners
16        with their private funds or was owned by them as tenants
          in common prior to the formation of the partnership will
17        not necessarily defeat the claim of the partnership to
          ownership of the property in the absence of an express
18        agreement that it should remain property of those in
          whose names title stood. Under such circumstances the
19        owners of the legal title hold the property in trust for
          the partnership.
20
21   Swarthout v. Gentry, 62 Cal.App.2d 68, 78, 144 P.2d 38, 43
22   (Cal.App. 4 Dist. 1943) (citing Bastjan v. Bastjan, 215 Cal. 662,
23   668, 12 P.2d 6127 (Cal. 1932)) (citations omitted)(emphasis
24   added); En Taik Ha v. Kang, 187 Cal.App.2d 84, 91, 9 Cal.Rptr 425,
25   430 (Cal.App. 2 Dist. 1960) (Ranch property came to the parties as
26   tenants in common, but that character was destroyed when the
27   parties operated it as partnership property and it became a
28   partnership asset.).   See also, Strand v. Clark, 2010 W.L. 2496390

                                      17
 1   (Cal.App. 2 Dist. 2010).   Accord, Cal. Civ. Code Section 686 (West
 2   2006).15
 3        The bankruptcy court determined numerous facts to be
 4   undisputed based on the Debtor's deposition testimony, as well as
 5   the arbitration award and other evidence adopted into the record
 6   which is not available for our review.   As discussed above, any
 7   reliance upon the arbitration findings was improper.   As such, the
 8   facts the court relied on were undisputed only if the Debtor's
 9   deposition testimony supports that conclusion.   The court
10   determined the following facts to be undisputed based on the
11   Debtor's deposition testimony:
12        The Debtor, Mr. Babian, concedes that the Debtor
          co-owned the property with Markarian and other parties.
13        . . .
14                                * * * * *
15        The Debtor concedes that it shared the profits of the
          sale of the property. The Debtor's deposition testimony
16        admissions -- deposition testimony and admissions
          establish that a partnership existed with respect to the
17        property as a matter of law.
18        The Debtor testified that he saw the chance to purchase
          the property for $235,000 as a good investment
19        opportunity. An opportunity to, quote:
20              "Make some money." close quote
21        In response to a question regarding his intentions in
          purchasing the property with the other co-owners, he
22        states, quote:
23              ". . . I was told there is a good opportunity.
                That I should put some money in, and we
24
25        15
           “Every interest created in favor of several persons in
     their own right is an interest in common, unless acquired by them
26
     in partnership, for partnership purposes, or unless declared in
27   its creation to be a joint interest, as provided in Section 683,
     or unless acquired as community property.” Cal. Civ. Code § 686
28   (West 2007) (emphasis added).

                                      18
 1                probably can build it and sell it. And so,
                  you know, I invested some money in order to
 2                make some money out of it."
 3        Deposition, page 11 at lines 19 to 23.
 4        The evidence shows that the property was bought for
          $235,000 by Markarian, the Debtor, and two other
 5        parties, as co-owners in 2004, and they held title as
          tenants in common. According to the Debtor's (sic)
 6        testimony, each party had a 25-percent interest in the
          property. The Debtor further admits that the parties
 7        originally intended to build and sell condominium units
          on the property.
 8
          The co-owners never built the condos. However, the
 9        undeveloped property was eventually sold to Plaintiff
          for $500,000. Each co-owner received proceeds of
10        $125,000, which corresponds to each co-owner’s
          25-percent interest in the property.
11
          Moreover, the Debtor designated the business association
12        as a partnership in the property ownership status, Form
          1099 from Colonial Escrow, which is the form that the
13        Debtor himself filled out.
14   Additional undisputed facts in the record that potentially support
15   the bankruptcy court’s determination that the Debtor and Markarian
16   had formed a partnership include that the co-owners had hired an
17   architect to both conduct a site evaluation (before they bought
18   the Property) and do design structural work on condominiums, and
19   that the parties were pursuing necessary building permits,
20   communicating with Con Edison, and resolving the bus stop problem.
21        Many of the facts the bankruptcy court relied upon are
22   equivocal, in that they relate directly to a California statute
23   that provides that such a fact is either not by itself evidence of
24   a partnership16, creates a rebuttable presumption that property is
25   not partnership property17, or is mutually exclusive with a
26
27        16
               Cal. Corp. Code, §§ 16202(c)(1), (2), and (3).
28        17
               Cal. Corp. Code, §§ 16204(d).

                                        19
 1   partnership18.     Only one fact stands out as unambiguously
 2   supporting a finding of partnership - the 1099 Form that was
 3   filled out by the Debtor identifying the Property as being
 4   partnership property.     However, that fact, alone, is insufficient
 5   to support summary judgment.
 6        Debtor argued that each of the facts noted by the bankruptcy
 7   court is evidence of both co-ownership and of partnership.     We
 8   agree.     Debtor also correctly argues that the bankruptcy court was
 9   compelled to view the evidence and these facts in Debtor’s favor.
10   When Debtor’s deposition testimony is viewed in the Debtor’s
11   favor, we conclude that genuine issues of material fact remain
12   unresolved regarding whether there was a partnership between
13   Markarian and the Debtor.
14        It is worth noting that the bankruptcy court had the benefit
15   of significantly more evidence to evaluate and with which to
16   render its decision.     Unfortunately, that evidence is not present
17   in our record.     The paucity of evidence included in the record in
18   this case has hindered our review and compels our conclusion on
19   this appeal.
20        Having determined that genuine issues of material fact remain
21   regarding the alleged partnership between Markarian and Debtor, we
22   need not reach the remaining issues raised by Debtor.
23                                  CONCLUSION
24        For these reasons, the summary judgment entered by the
25   bankruptcy court is VACATED, and this matter is REMANDED.
26
27
          18
28             Cal. Civil Code § 685.

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