Filed 7/24/26 Groth v. Gilad CA1/5

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

WILLIAM GROTH et al.,
Plaintiffs and Respondents,
A169301/A174191
v.
AMI GILAD et al., (Contra Costa County
Super. Ct. No. MSC10-02872)
Defendants and Appellants.

These consolidated appeals are the second and third
appeals filed by Ami Gilad and Roy Gilad in a long-running
dispute about a loan William Groth made to fund a cigar club
business that subsequently failed. When the loan was not repaid
in full, Groth and Groth Holdings & Consulting, Inc. (collectively,
plaintiffs) sued Ami, Roy, Legacy Cigar Club, Inc., 65 Oak Court,
LLC, and K.A.D. Alliance, Inc. (collectively, defendants),1 alleging
(among other causes of action) breach of a written promissory
note. In a prior appeal (Groth et al. v. Gilad et al. (Nov. 18, 2019,
A151497/A150493) [nonpub. opn.] (Groth I)),2 this court

Legacy Cigar Club, Inc., 65 Oak Court, LLC, and K.A.D.
1

Alliance, Inc. are not parties to this appeal.
2 Although we originally deferred ruling on the Gilads’

unopposed request for judicial notice of the record, briefs, and
opinion filed in Groth I, we now grant the request. (See Evid.
Code, §§ 452, subd. (d), 459, subd. (a).)
1
addressed that cause of action, held that the promissory note was
ambiguous with respect to whether the parties intended the cigar
club partnership to be obligated on the note, that triable issues of
material fact precluded the trial court’s summary adjudication
ruling—made in the plaintiffs’ favor—on the breach of contract
cause of action, and reversed the judgment because the summary
adjudication ruling prejudiced the subsequent bench trial.

On remand, the trial court held bifurcated bench trials,
found that both the cigar club partnership and a subsequently
formed corporation were liable on the note, and entered judgment
in favor of the plaintiffs and against the Gilads on the breach of
contract cause of action and other claims. (See Corp. Code,
§ 16306, subd. (a) [general rule is “all partners are liable jointly
and severally for all obligations of the partnership unless
otherwise agreed by the claimant or provided by law”].)3

The Gilads now appeal from that judgment and a post-
judgment award of attorney fees to Groth. The Gilads assert the
trial court erred by declining to retry causes of action not affected
by our prior opinion, by failing to conclude, as a matter of law,
that the Gilads bore no personal liability under the note because
the partnership did not exist at the time of the note’s execution,
and that the fees order must also be reversed if plaintiffs are no
longer the prevailing party. We disagree and affirm.

BACKGROUND

A.

In June 2008, Groth, Roy, Ami, and Frank Carozza signed
a “Partnership Engagement Letter,” which states that an
unnamed partnership, to which they would “contribute capital
equally,” “shall generally engage in the business of a [cigar

3Undesignated statutory references are to the
Corporations Code.
2
club].”4 A month later, Ami opened a bank account under the
name “Ami Gilad Business Account,” which was used exclusively
for the cigar club business.

The partners decided to buy a building to house the cigar
club and entered escrow on a property in Danville. A limited
liability company (65 Oak Court, LLC) was later formed to
purchase the property. Based on the terms of the real estate
contract, the partnership would forfeit a $100,000 deposit if the
sale did not go through.

After Roy’s numerous efforts to secure financing (from both
banks and “hard money lenders”) appeared to have failed to
secure enough financing, Ami contacted Groth and asked for
financial assistance to “bridge the gap” before a loan came
through. Ami instructed Groth that funds needed to be deposited
into the partnership account but that they would be moved to the
LLC account before closing.

On September 17, 2008, Groth deposited $735,000 in Ami’s
business account (the partnership account), according to Ami’s
instructions. Ami in turn opened an account for the newly
formed LLC and moved the funds to the LLC account. Groth
testified that he viewed a portion (roughly $610,000) as a “short-
term loan.” He was particularly concerned that he be repaid
quickly because he had withdrawn a large portion of the funds
from a retirement account, and he understood that he would
incur substantial penalties and tax liability if the funds were not
returned to his retirement account within a short period of time.

At the last minute, better financing was obtained and not
all of Groth’s funds were needed to close the transaction.
$610,000 of Groth’s money was paid into the escrow but was
refunded when no longer needed at closing. Because Roy closed

Carozza later withdrew from the cigar club venture and is
4

not named as a defendant in the plaintiffs’ operative complaint.
3
the partnership account the day that he moved Groth’s funds into
the LLC account, there was no partnership account into which
the refund could be deposited. With Groth’s authorization, the
refund was made to the LLC account.

On October 9, 2008, Groth spoke with Ami, in a parking lot,
and they agreed that $125,000 of Groth’s contribution would be
considered a capital contribution. Roy and Ami each made equal
capital contributions. This left approximately $610,000 as
Groth’s loan. Groth explained that, if the latter amount was not
needed for the closing, he needed the money back to replenish his
retirement account. Ami told him that the business needed more
operating capital. Groth told Ami that if his funds were to be
used as operating capital, “you and Roy have to go on the hook
. . . with me.” Ami agreed, saying, “[d]on’t worry about it. We’ll
do that.”

Legacy Cigar Club, Inc. was incorporated about a week
later, on October 15, 2008.

Ami prepared a promissory note using a form he found on
the internet. The first draft of the note, sent to Groth by Ami via
email on January 28, 2009, was in the amount of $610,001 and
was signed by Ami on behalf of “Legacy Cigar Club, a California
Corporation.” Groth asked for changes—specifically he asked to
change the principal amount to $600,000 to reflect a $10,001
payment by the LLC to Groth, to add the corporation as an
obligor by changing Ami’s signature block to read “Ami M. Gilad,
CFO, Legacy Cigar Club,” and to have Roy sign the note as a
representative of the partnership.

Ami changed the note as requested. Thus, the signed and
revised promissory note provides “the undersigned hereby jointly
and [s]everally promise to pay” Groth $600,000 plus five percent
interest per year. (Italics added.) It was backdated to October 9,
2008. At the end of the text, there are three signature blocks.
The term “[w]itnessed:” appears before the signature blocks and
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no entity or person is explicitly identified as lender, borrower,
debtor, or obliger. Roy signed the revised note as “Roy Gilad –
Secretary [¶] Legacy Cigar Club.” Groth signed the revised note
as “Bill Groth – President [¶] Legacy Cigar Club.” Ami also
signed the revised note as “Ami Gilad CFO for [¶] Legacy Cigar
Club [¶] (A California Corporation).”

The note has not been repaid. Both Roy and Ami denied
personal liability on the note, claiming that only the corporation
is obligated. Groth testified that it was his understanding that
there was more than one obligor and that the three partners, in
addition to the corporation, were liable on the promissory note.

B.

Plaintiffs sued the Gilads, Legacy Cigar Club, Inc., the
LLC, and K.A.D. Alliance, Inc., in September 2010. The
operative complaint alleged numerous causes of action, including,
among others, breach of contract (promissory note), negligence,
breach of fiduciary duty, negligent misrepresentation, intentional
infliction of emotional distress, and negligent infliction of
emotional distress.

In particular, Groth alleged he loaned over $600,000 to the
partnership in 2008, with the understanding that Roy and Ami
would be personally obligated on the loan. Groth also alleged he
and the Gilads signed a written promissory note documenting the
loan agreement that provided Ami, Roy, and “Legacy Cigar Club”
would repay the principal and interest at five percent per year.
Groth then alleged he performed under “the loan agreement,”
that “the note” became due in 2010, and that the defendants
“breached said loan agreement by . . . refusing to pay back the
loan principal and interest.”

In 2015, Groth filed a motion for summary adjudication
with respect to his breach of contract cause of action. The
Honorable Steven K. Austin (Ret.) granted Groth’s motion and

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explained: “The Gilads have not created a triable issue on the
formation of a partnership. [¶] . . . [¶] . . . On September 17, 2008,
[Groth] deposited $735,000 in the Ami Gilad Business Account,
which included the $610,001 loan. . . . That same day, Ami
transferred the funds from the Ami Gilad Business Account to
the 65 Oak Court LLC account. . . . These facts show that on
September 17, 2008, [Groth] loaned $610,001 to the partnership.
[¶] . . . [¶] . . . The language of the promissory note does not
clearly show that a novation was intended. . . . In addition, the
note states that the undersigned are jointly and severally liable
for the note, and each individual signed the note. Thus, it
appears from the language of the note, that it expanded liability
on the loan to include the Legacy Cigar Club, Inc., but did not
release the individuals from liability.” (Italics added.)

At a court trial on plaintiffs’ remaining causes of action and
the Gilads’ cross-complaint, the trial court (the Honorable Judith
S. Craddick (Ret.)) relied on the summary adjudication ruling to
exclude certain evidence proffered by the Gilads with respect to
existence of either the partnership or a loan to the partnership.
Judge Craddick issued a statement of decision finding, among
other things, that a partnership existed, that the parties were
jointly and severally liable on the note, that Ami was negligent in
providing tax advice to Groth, and that the Gilads were liable for
numerous breaches of fiduciary duty. On the plaintiffs’ breach of
contract cause of action, judgment was entered against the Gilads
for $400,000 plus interest.

The Gilads appealed from that judgment and, in the prior
Groth I opinion, this Division reversed the judgment because a
triable issue of material fact precluded summary adjudication.
(Groth I, supra, A151497/A150493.) Groth I explained that—on
the question of whether the parties agreed the partnership (as
opposed to solely the corporation) was obligated on the note—the
evidence supported competing inferences, which meant summary

6
adjudication was erroneously granted. This Division also agreed
with the Gilads that the erroneous summary adjudication ruling
prejudiced the subsequent bench trial. (Ibid.)

Groth I explained: “The[] signatures [on the note]
reasonably suggest only the corporation is obligated. Yet, in
conflict with that understanding, both versions also provide for
joint and several liability on the ‘undersigned.’ . . . [¶] To resolve
the ambiguity, the fact finder will need to consider the conflicting
extrinsic evidence presented by the parties. . . . [¶] In short, we
agree with the Gilads that there are competing reasonable
inferences regarding their personal liability on the note. A
triable issue of material fact precludes summary adjudication.
Our conclusion moots the defendants’ appeal (A151497) from the
post-judgment fees order and the parties’ remaining arguments
[regarding Judge Craddick’s damage calculations that would be
moot if there was no partnership or the partnership was not
liable on the note].” (Groth I, supra, A151497/A150493.)

On remand, a bifurcated court trial was held (before the
Honorable Edward G. Weil) to determine the intended obligors on
the note. The trial court, in its statement of decision, wrote: “As
the Court of Appeal held, the four corners of the agreement are
ambiguous, because the apparent indication that that signatories
signed on behalf of Legacy Cigar Club, a corporation, is not
consistent with the statement that the signatories ‘jointly and
severally promise’ to pay, a concept which would not apply where
there is only a single obligor. . . . [¶] Going back to the time before
the note was negotiated and signed, it is clear that from the time
that the $735,000 contribution was determined to be a capital
contribution of $125,000 and a loan of $610,000, that the loan
was a loan to the partnership. On September 17, 2008, [when
Groth deposited $735,000 in the partnership account], the
Corporation did not exist. The loan bore no interest rate and did
not have a specified repayment date. The history of the dealings

7
between the parties was consistent with the existence of a
partnership, and that the individuals would be personally liable
for the debts of the enterprise, at least relative to each other.”

The trial court stated that the parties had different
understandings on the key issue—“whether the subsequent note
executed in January of 2009 relieved the partnership of its
obligation and replaced it with the corporation.” The court
explained: “Groth believed that Roy and Ami remained
personally liable on the note (in addition to the Corporation). At
the same time, Roy and Ami believed that only the corporation
was liable.” The court continued: “Civil Code section 1649
provides that ‘If the terms of a promise are in any respect
ambiguous or uncertain, it must be interpreted in the sense in
which the promisor believed, at the time of making it, that the
promisee understood it.’ (Bunnett v. Regents of University of
California (1995) 35 Cal.App.4th 843, 853.) . . . The Gilads are
the promisors, i.e., the ones promising to repay $600,000. Groth
is the promisee. Ami and Roy, at the time of making the promise
to repay the money, believed that the new language had
restricted the duty to repay to the corporation. But they also
knew that Groth understood the agreement otherwise-he
understood that the use of the corporate identifications on the
note expanded the liability on the debt to include the corporation,
but did not eliminate the liability of the partnership. His belief
was reasonable under the circumstances. Thus, despite Ami and
Roy’s contrary understanding, it is Groth’s understanding that
must be enforced, because Ami and Roy knew of Groth’s
understanding.”

C.

Thereafter, the second phase of bifurcated trial commenced,
before the Honorable Charles S. Treat (Ret.). Judge Treat
concluded that Groth I decided the summary adjudication ruling
was erroneous and only required retrial of the intertwined

8
partnership and promissory note issues, construed Judge Weil’s
statement of decision as establishing the existence of partnership
responsibilities between the parties, and effectively “revived”
Judge Craddick’s statement of decision on the tax negligence and
emotional distress causes of action.

On the plaintiffs’ breach of written contract cause of action,
judgment was entered in their favor—for $400,000 plus interest.
The Gilads were also ordered to pay Groth $50,000 in general
damages and $84,299.33 for breach of fiduciary duty. Ami was
further ordered to pay plaintiffs a total of $449,419.71 (inclusive
of interest) on the tax negligence claim. On Ami’s cross-
complaint against the plaintiffs, Ami obtained judgment in the
amount of $10,350 and otherwise took nothing. In reliance on an
attorney fees clause in the note, the trial court also ordered the
Gilads to pay attorney fees to the plaintiffs based on their status
as the prevailing party.

DISCUSSION

A.

The Gilads contend Judge Treat erred by refusing to retry
unspecified “prior legal rulings” that were purportedly reversed
by Groth I. Having reviewed the issue de novo (Ducoing
Management, Inc. v. Superior Court (2015) 234 Cal.App.4th 306,
313 [standard of review]), we disagree.

The Gilads rely on this Division’s purported unqualified
reversal in Groth I. True, the disposition of the prior appeal
reads: “The judgment and the post-judgment fees order are
reversed.” (Groth I, supra, A151497/A150493.) Ordinarily, such
an unqualified reversal—i.e., a reversal without directions to the
trial court—remands the cause for a new trial on all issues
presented by the pleadings. (Hall v. Superior Court (1955) 45
Cal.2d 377, 381; Weightman v. Hadley (1956) 138 Cal.App.2d 831,
836.) On remand, the parties are in the same position as if the
9
cause had never been tried, “ ‘with the exception that the opinion
of the court on appeal must be followed so far as applicable.’ ”
(Hall, at p. 381.)

However, several limitations exist with respect to the
general unqualified reversal rule. First, the general rule does not
govern—the case will not be set for retrial—if the appellate
opinion as a whole establishes a contrary intent. (Stromer v.
Browning (1968) 268 Cal.App.2d 513, 518-519.) “ ‘Judgment
reversed’ at the end of an opinion is, of course, strong indication”
that retrial is mandatory. (Id. at p. 518.) But “[i]t is the
substance of the opinion that controls, not the form of the order.”
(In re Anna S. (2010) 180 Cal.App.4th 1489, 1500, italics added;
accord, Snapp v. State Farm Fire & Casualty Co. (1964) 60 Cal.2d
816, 821.)

Second, retrial is not required—despite an unqualified
reversal—where no issues of fact remain to be tried. (Bank of
America v. Superior Court (1990) 220 Cal.App.3d 613, 621; Moore
v. City of Orange (1985) 174 Cal.App.3d 31, 34-35.) “[W]hen it is
said an unqualified reversal ‘remands the case for a new trial,’ it
means a new trial as defined by section 656 of the Code of Civil
Procedure, i.e., ‘a re-examination of an issue of fact.’ ”
(Weightman v. Hadley, supra, 138 Cal.App.2d at p. 838.) “Where
the facts of a case are undisputed, there is no reason for such a
reexamination.” (Bank of America, at p. 621.)

The Gilads attempt to elevate form over substance. The
Groth I opinion—read as a whole—establishes this Division’s
intent that the trial court retry (or try for the first time) the
factual issues we identified with respect to plaintiffs’ breach of
written contract cause of action as well as any factual issues that
needed to be redetermined because the promissory note and
partnership claims were intertwined. (Groth I, supra,
A151497/A150493.)

10
 Although Groth I did not specifically direct that the
judgment should remain intact for distinct causes of action not
impacted by resolution of the factual issue identified therein, it is
also true that there was absolutely no discussion, in Groth I or
the Gilads’ opening briefs in either that appeal or the instant
appeal, of the distinct tax negligence or emotional distress claims.
(Ibid.) Yet these are the claims that Judge Treat proposed he
would not retry—and instead revive Judge Craddick’s prior
statement of decision—and to which the Gilads arguably
preserved an objection. The Groth I opinion, taken as a whole,
cannot be read to direct or imply that the distinct issues of tax
negligence and emotional distress were to be readjudicated by a
factfinder. (Ibid.) Thus, the trial correctly determined the
Stromer exception applied. (Stromer v. Browning, supra, 268
Cal.App.2d at p. 518.)

Furthermore, when Judge Treat asked the parties what
issues had not already been resolved (by Judge Craddick and
Judge Weil) that required witness testimony on remand, the
Gilads conceded there were no remaining factual issues that
necessitated witness testimony. The Gilads’ counsel stated
explicitly that they only had exhibits, which were largely
undisputed, and that “[t]he core of our case is a legal case.” Any
error was invited by this concession. (See Mary M. v. City of Los
Angeles (1991) 54 Cal.3d 202, 212 [“[u]nder the doctrine of invited
error, when a party by its own conduct induce[d] the commission
of error, it may not claim on appeal that the judgment should be
reversed because of that error”]; Bank of America v. Superior
Court, supra, 220 Cal.App.3d at p. 621; Moore v. City of Orange,
supra, 174 Cal.App.3d at pp. 34-35.)

B.

The Gilads also insist they have no personal liability on the
note because “the partnership was no longer in existence at the
time the promissory note was executed.” To the extent the

11
Gilads’ raise a substantial evidence argument, it is both forfeited
and fails on its merits. Also, the law does not support the Gilads’
additional points.

1.

The Gilads forfeit their substantial evidence argument by
failing adequately to provide citations to the record and an
adequate summary of the relevant facts. In numerous instances
in their appellate briefs, the Gilads make factual statements with
no record citation. They also fail to fairly summarize (much less
cite the record to support) the plaintiffs’ evidence. It is not our
role to search the record for evidence that supports the parties’
contentions. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246;
Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)

In any event, ample evidence supports the challenged
finding—that the Gilads were aware of Groth’s belief the
promissory note would obligate both the partners and the
corporation. Groth testified about a conversation he had with
Ami in a parking lot, on October 9, 2008, where Groth expressed
his desire that the Gilads be personally responsible on the loan
and to have the loan memorialized in writing. Ami agreed,
saying, “[d]on’t worry about it. We’ll do that.” Groth said that, in
that same time period, Roy made similarly reassuring comments
to him. Groth also testified, “I told Ami specifically that Roy had
to sign on behalf of the partnership.”

Ami may have denied that he ever agreed to be personally
liable during any conversation in a parking lot, but the trial court
explicitly credited Groth’s testimony on this point. It is not our
role to reweigh the evidence or second guess the trial court’s
credibility determinations. (See Conservatorship of O.B. (2020) 9
Cal.5th 989, 1008.)

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 2.

The Gilads also contend that, by October 2008, the
partnership was terminated “by operation of law.” Their
argument relies on the legally unsupported premise that the
partnership was dissolved or converted no later than the date of
incorporation.

Generally, relations among partners and between the
partners and the partnership are governed by the partnership
agreement and the Corporations Code—to the extent the
partnership agreement does not conflict. (§ 16103, subd. (a).)

The engagement letter itself does not demonstrate that the
partnership was dissolved by October 2008. (See § 16801 [listing
events that will dissolve partnership including (among others)
“express will to dissolve,” “expiration of the term or the
completion of the undertaking,” and “event agreed to in the
partnership agreement resulting in the winding up of the
partnership business”].) The engagement letter states that it is
“a temporary agreement until a professional agreement which
will be formulate[d] by an attorney.” But the letter also states:
“Duration. The partnership shall commence business on June 23,
2008 and shall continue until terminated by the partner’s
agreement, or by operation of law.” (Italics added.)

Other provisions of the Corporations Code do not fill the
gap. Section 16904 provides that a partnership’s conversion into
another entity becomes effective “upon the earliest date that all
of the following shall have occurred: [¶] (1) The approval of the
plan of conversion by the partners of the converting partnership
as provided in Section 16903. [¶] (2) The filing of all documents
required by law to create the converted other business entity,
which documents shall also contain a statement of conversion, if
required under Section 16906. [¶] (3) The effective date, if set
forth in the plan of conversion, shall have occurred.” (Italics
added.)
13
 Section 16903, subdivision (a), in turn, provides: “A
partnership that desires to convert to a domestic or foreign other
business entity shall approve a plan of conversion. The plan of
conversion shall state the following: [¶] (1) The terms and
conditions of the conversion. [¶] (2) The place of the organization
of the converted entity and of the converting partnership and the
name of the converted entity after conversion, if different from
that of the converting partnership. [¶] (3) The manner of
converting the partnership interests of each of the partners into
shares of, securities of, or interests in the converted entity. [¶] (4)
The provisions of the governing documents for the converted
entity, including the limited partnership agreement, limited
liability company articles of organization and operating
agreement, or articles or certificate of incorporation if the
converted entity is a corporation, to which the holders of interest
in the converted entity are to be bound. [¶] (5) Any other details
or provisions as are required by laws under which the converted
entity is organized. [¶] (6) Any other details or provisions that are
desired.” (Italics added.)

The Gilads’ argument is premised on wholly eliminating
the statutory requirement that a converting partnership have a
plan of conversion. The Gilads do not point us to any plan of
conversion. And we cannot construe closure of the partnership
bank account or the incorporation as ipso facto accomplishing
conversion. (See §§ 16903, subd. (a), 16904.)

On October 24, 2008, the parties did execute a mutual
release that released Carozza from any liability, relinquished his
interest in the business, and reimbursed his capital contribution.
But, again, this document cannot be construed as an approved
plan of conversion or be understood to have dissolved the
partnership. The release does not mention the partnership,
much less its dissolution, conversion, or the details required by
section 16903.

14
 3.

Finally, the Gilads are wrong to insist that any claim for
breach of the promissory note is barred by the statute of
limitations.

The Gilads’ debt arises from a written promissory note, not
an oral contract, which means a four-year statute of limitations
applies. (See Code Civ. Proc., § 337, subd. (a).) It is undisputed
that any breach occurred on July 23, 2010, when the Gilads failed
to pay the sum due under the promissory note. Contrary to the
Gilads’ assertion that the breach of promissory note cause of
action was not alleged until the plaintiffs filed their second
amended complaint, plaintiffs first alleged the cause of action
when they filed their first amended complaint, on June 19, 2013.
Plaintiffs’ breach of written contract cause of action is not barred
by the statute of limitations.

C.

In their appeal of the post-judgment fees order (A174191),
the Gilads only argue that the attorney fee award must fall if the
judgment is reversed. Because we affirm the judgment, we
affirm the order awarding attorney fees without further
discussion.

DISPOSITION

The judgment and post judgment attorney fees order are
affirmed. Plaintiffs are entitled to their costs on appeal.

BURNS, J.
WE CONCUR:

JACKSON, P. J.
SIMONS, J.

Groth et al. v. Gilad et al. (A169301/A174191)

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