KHS Wins Hard Fought Breach of Contract Trial

KHS’s Shahrokh Sheik prevailed in trial on vitally important equitable claims related to a breach of partnership lawsuit for the purchase of real property. In the case, KHS’s client (plaintiff) purchased investment property and placed his partner’s (defendant) name on the deed of title to help the partner qualify for a loan based on the partner’s promise to pay for half; whereby the parties would own and manage the investment together. The parties did not memorialize their partnership agreement in writing. Years later, the partner took possession of the property without consent, then refused to acknowledge the agreement to pay for half the property and claimed full ownership through possession.

PRE-TRIAL LITIGATION

KHS’s client sued for breach of contract and fraud, as well as equitable claims for Promissory Estoppel and Quiet Title, among others. Defendant countersued for declaratory relief as to ownership of the property. After 18 months of litigation, the parties went to trial with the odds stacked against KHS’s client- namely, no written agreement, defendant’s name on the deed as joint tenant, defendant in possession for several years, and no mention of the agreement to pay for half until 4.5 years after purchase.

TRIAL

KHS successfully bifurcated the case and tried the equitable issues first in a bench trial. During the trial, KHS succeeded in getting the countersuit dismissed. After the presentation of the evidence and closing arguments, the judge found there was an oral promise to pay for half of the property and ruled in favor of KHS’s client on all equitable claims.

RULING

The court found the claims fell within a Statute of Frauds exception requiring that agreements in real property be captured in writing, and that the claims were not barred by the statute of limitations. As such, the court ruled KHS’s client prevailed on its claims for Promissory Estoppel, Unjust Enrichment and Constructive Trust, ultimately requiring defendant to relinquish possession and provide an Accounting of all funds unjustly retained.

The court also ruled in favor of KHS’s client on the Quiet Title claim, thereby ordering the removal of the partner’s name from the deed. A claim for Quiet Title requires a showing of “clear and convincing evidence”, i.e. a higher burden of proof than the ordinary standard, and a finding of quiet title based on breach of an oral promise is rare in California case law.

Shahrokh and his team specialize in business and intellectual property litigation as well as outside corporate general counsel services for clients in a variety of industries including entertainment, cannabis, hospitality and more. For more information, contact Shahrokh Sheik at [email protected].

KHS Wins Business Litigation Trial (July 2018)