Confidential
Settlement – $259,887Court
Orange Superior
Attorneys
Plaintiff
Defendant
Michael D. Stewart
(Sheppard Mullin Richter & Hampton LLP)
Facts
Creek & Pines Ltd., a California limited partnership, was formed in July 1981 to purchase, manage and thereafter sell the Creek & Pines Mobile Home Park located in upstate New York, without reinvestment of the sales proceeds. In the fall of 1987, Larry Parker and Thomas Hollingsworth, principals of Parker Hollingsworth Company (the general partner of Creek & Pines Ltd.) entered into a series of negotiations with plaintiffs and their representatives regarding the sale of the Creek and Pines Mobile Home Park. During the course of those negotiations, the general partner of Creek & Pines made certain representations to plaintiffs concerning the condition of the water systems and the septic systems at the Creek and Pines Mobile Home Park. On Dec. 31, 1987, a contract was entered into between plaintiffs and Creek & Pines Ltd. for the purchase of the mobile home park for the price of $1,675,000. Upon taking title to the property, plaintiffs discovered that the representations made by the general partner of Creek & Pines were false and misleading, and that the general partner had knowingly and willfully withheld and concealed material information concerning the defective condition of the subject property. Around Feb. 24, 1988, the sale proceeds from the sale of the mobile home park were transferred to each of the limited partners of Creek & Pines in the form of limited partnership distributions, based upon each limited partner's unit investment. In April 1989, plaintiffs initiated suit against Creek & Pines, Parker Hollingsworth Company, Larry W. Parker and Thomas J. Hollingsworth in New York, where the real property was situated. After several appeals by both plaintiffs and the defendants, and the filing of bankruptcy by the limited partnership, judgment was entered in favor of plaintiffs and against the general partner, its principals and the limited partnership in the total sum of $624,206.23. The final judgment was rendered over seven years after the commencement of the original suit against the limited partnership and its general partner. Accordingly, all of plaintiffs' claims against Creek & Pines, the general partner, and the principals of the general partner, were previously litigated and not at issue in the present case. Plaintiffs registered their judgment in California for purposes of collection. While plaintiffs made extensive efforts to attempt to collect on the sister-state judgment, plaintiffs were unable to locate any assets to satisfy the judgment. Based on plaintiffs' inability to satisfy the judgment, this suit was instituted on May 11, 1998 for the following causes of action: to recover each of the limited partners' contribution in the Creek & Pines limited partnership with accrued interest, pursuant to California Corporations Code Section 15517(4); to set aside a fraudulent transfer; for imposition of a constructive trust; and for an accounting. Two demurrers were filed by various defendants based primarily on a statute of limitations issue as to when plaintiffs claims arose against the limited partners of Creek & Pines. Both demurrers were overruled in their entirety. Plaintiffs were able to settle with all 44 of the defendants who were served in the lawsuit, with settlement negotiations occurring from July 1998 through July 1999 and just prior to the trial date of Aug. 2, 1999. Some defendants settled early in order to avoid litigation expense and were not involved in the demurrers or any further litigation.
Settlement Discussions
After both demurrers were overruled, at least eight defendants whom plaintiffs were able to serve with the lawsuit (a total of 44) settled with plaintiffs for return of their limited partnership contribution and accrued interest from the date of distribution (February 1988), based on each limited partner's initial contribution in the limited partnership. The total settlement for 44 limited partners was $259,887.04 as calculated on 63 units, with one unit equaling an initial contribution of $3,057.00.
Damages
Plaintiffs sought damages in an amount equal to the improper distributions received by the defendants and for interest at the legal rate, but not exceeding Creek & Pines' liability to plaintiff under the judgment entered in New York.
Other Information
Since there were 44 individual defendants, settlement negotiations occurred over a year and were completely resolved by July 6, 1999, just a month prior to the trial date.
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