Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC348994, Mark Mooney, Judge.
Ernster Law Offices, John H. Ernster and Phil J. Montoya, Jr. for Plaintiff and Appellant.
Patton Boggs, Patrick F. McManemin and J. Thomas Gilbert for Defendants and Respondents.
EPSTEIN, P.J.
American Housing Construction, Inc. appeals from judgment against it after the trial court sustained respondents’ demurrer to its first amended complaint without leave to amend. We find no error and affirm the judgment.
FACTUAL AND PROCEDURAL SUMMARY
Since this is an appeal from a judgment of dismissal after the court sustained a demurrer, we draw our factual summary from the allegations of the first amended complaint (the charging pleading) and from those matters properly subject to judicial notice. (Coast Plaza Doctors Hospital v. Blue Cross of California (2009) 173 Cal.App.4th 1179, 1183.)
Evergreen-Brooklyn Village Partners, Ltd. (Evergreen-Brooklyn) is a limited partnership governed by an Amended and Restated Agreement of Limited Partnership, dated June 29, 1995 (the partnership agreement). Under this agreement, the general partners were the nonprofit corporation Proyecto Esperanza, Inc. (Proyecto), designated the managing general partner, and appellant American Housing Construction, Inc. designated the administrative general partner. The limited partners were respondents Related California Corporate Partners I, L.P., designated the limited partner and Related Corporate SLP, L.P., designated the special limited partner.
Proyecto Esperanza, Inc. was not a party to the action giving rise to this appeal.
The partnership was formed to facilitate the funding, construction, and operation of a low-income housing development in Los Angeles. Construction was to be funded from a combination of investment by the limited partners, conventional loan sources, and an affordable housing loan from the Los Angeles Housing Department (the City loan), which was available based on Proyecto’s status as a nonprofit general partner. The City loan was due and payable in 1996. It was anticipated that it would be converted before that date into a permanent loan, due in 2036, but paperwork for the conversion was not completed by the City. By 2004, Proyecto had halted its operations, including services it was obligated to perform under the agreement. The City informed the partnership that a replacement nonprofit general partner was necessary for finalization of the affordable housing loan. This was not done.
On December 6, 2005, City filed an action against the partnership (City of Los Angeles v. Evergreen-Brooklyn Village Partners, Ltd., et al. (No. BC344009); the foreclosure action). According to the allegations of that complaint, Evergreen-Brooklyn had failed to pay principal and interest due on its loan, despite demand for payment, and had failed to pay property taxes for the years 2002, 2003, and 2004. Based on these defaults, City sought specific performance of the assignment of rents clause in the loan, appointment of a receiver, and judicial foreclosure.
The foreclosure action was not dismissed or abated within 60 days of its commencement. Pursuant to article XI, chapter 11.4 (A) (iv) (b) of the partnership agreement, if “any Lender shall have commenced foreclosure proceedings against the Apartment Complex (whether judicial or otherwise), and such proceedings shall not have been stayed or dismissed within 60 days... then, in any such event (a ‘Major Default’) the Special Limited Partner shall have the right, but not the obligation, in its sole discretion,... to remove the General Partner as General Partner of the Partnership and to appoint itself or any of its Affiliates to succeed such General Partner as a General Partner of the Partnership in accordance with the provisions of Section 11.2 hereof....”
In February 2006, the special limited partner removed appellant as a general partner on the grounds that the foreclosure action had been commenced and had not been dismissed or abated within 60 days of its filing. Appellant was replaced by respondent 420 North Evergreen Avenue, LLC as the new general partner.
The first amended complaint erroneously states the removal occurred in February 2007, rather than February 2006.
Evergreen-Brooklyn and appellant then brought this action against the limited partner, the special limited partner and the new general partner (collectively respondents), asserting various causes of action arising out of appellant’s removal as general partner. The court granted respondents’ motion for judgment on the pleadings, and gave appellant an opportunity to amend the complaint. Appellant filed a first amended complaint, alleging several new causes of action. Respondents’ demurrer to the first amended complaint was sustained without leave to amend and judgment was entered against appellant. This is a timely appeal from the judgment of dismissal.
DISCUSSION
Appellant argues that it has adequately alleged all the elements of each cause of action. “The well-pled allegations that we accept as true necessarily include the contents of any exhibits attached to the complaint. Indeed, the contents of an incorporated document (in this case, the agreement) will take precedence over and supercede any inconsistent or contrary allegations set out in the pleading. In the case of such a conflict, we will look solely to the attached exhibit.” (Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1409.) Appellant attached and incorporated the partnership agreement into its first amended complaint. As we explain, the terms of the agreement contradict, and thus supercede, the allegations in the first amended complaint.
The core allegations underlying all of appellant’s causes of action are that respondents had an obligation to remove Proyecto as a general partner and install a replacement nonprofit general partner to enable the partnership to finalize a permanent loan from the City; that respondents’ failure to perform this obligation forced the partnership into technical default, resulting in the City’s foreclosure action; that respondents failed to follow the notice requirements in the partnership agreement when they removed appellant as a general partner; and that if appellant was properly removed, its interest should have been converted to that of a Class B Limited Partner.
Although the first amended complaint names both Related California Corporate Partners I, L.P. and Related Corporate SLP, L.P. as defendants in most causes of action, only the latter, as the special limited partner, had, and exercised, the right under the partnership agreement to remove appellant as a general partner.
Nowhere in the agreement is there a provision requiring respondents to remove or replace a general partner. Instead, section 10.2(A) of the agreement provides that the general partner may not admit any additional partners to the partnership without the consent of the special limited partner. “Consent of the Special Limited Partner” is defined in article I of the agreement as “the prior written consent or approval of the Special Limited Partner, which may be granted or withheld in its sole discretion.” (Italics added.)
The partnership agreement also provides in chapter 11.4.A (iv) that if “any Lender shall have commenced foreclosure proceedings against the Apartment Complex (whether judicial or otherwise), and such proceedings shall not have been stayed or dismissed within 60 days... then, in any such event (a ‘Major Default’) the Special Limited Partner shall have the right, but not the obligation, in its sole discretion,... immediately in the case of the occurrence of an event specified in... clause (iv) of this Section 11.4.A, to remove the General Partner as General Partner of the Partnership and to appoint itself or any of its Affiliates to succeed such General Partner as a General Partner of the Partnership in accordance with the provisions of Section 11.2 hereof.”
The agreement gives the special limited partner the right, but not the obligation, in its sole discretion to remove a general partner in the event a foreclosure action is filed and persists for 60 days. It also gives the special limited partner sole discretion to consent to admission of additional partners. Where acts are expressly authorized by the terms of an agreement, implied terms should not be read to vary the express terms. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 375.) The special limited partner had sole discretion to remove or replace a general partner, and appellant’s attempt to create a different obligation by its allegations in the first amended complaint must be disregarded.
The removal provision also defeats appellant’s allegation that respondents did not follow the removal language in the agreement by failing to provide a 60-day cure period. There is a provision for 10-day notice and in some circumstances, a 60-day cure period where the removal is for a material breach of the partnership agreement under section 11.4.A (i) (b). But appellant’s removal was under section 11.4.A (iv) (b), based on a “major default” – the filing of a foreclosure proceeding. Under that provision, if after 60 days, the foreclosure proceeding has not been stayed or dismissed, a major default has occurred and the special limited partner has the right, but not the obligation, to remove the general partner “immediately....” The court took judicial notice of the foreclosure action filed by the City on December 6, 2005. There are no allegations that the action was either stayed or dismissed within 60 days of that filing. According to the first amended complaint, respondent removed appellant as general partner on February 14, 2006. This is more than 60 days after the commencement of the foreclosure action, and thus complies with the terms of the removal provision in the partnership agreement.
Contrary to appellant’s assertion at oral argument, we find no allegation that during the 60 days after the foreclosure action was filed, respondents precluded appellant from resolving the matter with the City. What appellant alleged was that within 10 days of sending a “default notice” to appellant, respondents “contacted the City and advised the City to no longer have any dealings with AMERICAN.” Respondents notified appellant of its “Major Default” after the expiration of the 60-day period in which the foreclosure action remained pending, so respondents’ subsequent notification to the City did not interfere with appellant’s ability to resolve the foreclosure before that 60-day period ended.
Appellant cites article XI of the partnership agreement to support its allegations that upon removal, its status should have been converted to Class B Limited Partner. Section 11.1.C of article XI provides that “Upon the Involuntary Withdrawal of a General Partner, its General Partner Interest shall automatically become an Interest of a Class B Limited Partner.” “Involuntary Withdrawal” is defined in the agreement as “any Withdrawal caused by the Bankruptcy of a General Partner.” In contrast, “The removal of a General Partner pursuant to Section 11.4.A hereof (other than Section 11.4.A (i)(d) hereof) shall be treated for purposes of this Agreement as a voluntary withdrawal of such General Partner from the Partnership.” Under Section 11.1.B, “In the event of a Withdrawal of a General Partner (other than an Involuntary Withdrawal)... the Interest of the General Partner who so Withdrew,... shall immediately and automatically terminate on the effective date of such Withdrawal... and such General Partner shall have no further right to participate in the management or operation of the Partnership or to receive any future allocations of Profits and Losses, any distributions from the Partnership or any other funds or assets of the Partnership....” Appellant’s removal is to be treated as a voluntary withdrawal, and thus appellant was not entitled to Class B Limited Partner status. Respondents’ alleged actions were in conformity with the partnership agreement, and hence do not constitute a breach of contract.
Nor has appellant stated a cause of action for negligence. “[C]onduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551.) The first amended complaint alleges that respondents breached duties which arose from their status as partners with appellant—duties which are necessarily dependent on, not independent of the partnership agreement.
In the fraud cause of action, appellant alleges that prior to City’s filing of the foreclosure action, respondents “had actual knowledge” that City had not converted the construction loan to a permanent loan but concealed this information from appellant, and failed to assert the statute of limitations based on this failure to convert the loan as a defense to the foreclosure action. Again, the terms of the partnership agreement undercut the allegations.
Under the agreement, appellant and the other general partner were responsible for taking all actions necessary and appropriate to carry out the purposes of the partnership. These duties included preparation of reports required by taxing bodies and governmental agencies. The general partners were authorized “to sell, lease, exchange, refinance or otherwise transfer, convey or encumber all or substantially all of the assets” of the partnership, subject to approval of the terms of such transaction by the special limited partner. As administrative general partner, appellant also was required to prepare and deliver to the limited partners balance sheets and statements of income or loss or changes in financial position and cash flow, and other written reports and information regarding the operations of the partnership. No such obligations are imposed on the limited partners. In the face of the contractual obligations, any allegation of concealment of information regarding the loan or the foreclosure action cannot be accepted as true. There also is no basis for the requisite reliance, since appellant was charged with duties which would necessarily have informed it of the status of the loan and the consequent foreclosure. Appellant has not and cannot state a cause of action for fraud.
The cause of action for breach of fiduciary duty is premised largely on the same conduct underlying the breach of contract claims—failure to replace Proyecto, removal of appellant, and failure to follow the removal procedures in the partnership agreement. As we explained, none of these allegations state a claim because respondents’ alleged conduct was in accordance with the terms of the partnership agreement. More importantly, limited partners are not charged with a fiduciary duty to the general partners of a limited partnership. (See Corp. Code, § 15636.) In contrast, “a general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to... the partnership and the other partners.” (Corp. Code, § 15643, subd. (b).) This would include the fiduciary duties set out in Corporations Code section 16404. Thus, it was appellant who owed a fiduciary duty to respondents, not vice versa.
The causes of action for intentional and negligent interference with prospective economic advantage fare no better. “[A] plaintiff seeking to recover for an alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff’s expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.” (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.) Appellant alleges that respondents interfered with its relations with the City and the California Tax Credit Committee by the same conduct we find was permitted under the partnership agreement. There is thus no wrongful conduct upon which appellant’s claims for interference can be based.
There being no basis for relief stated in the preceding causes of action, there also is no basis for appellant’s causes of action for injunctive and declaratory relief. In light of the authority granted to the special limited partner under the partnership agreement, there appears no reasonable possibility appellant can amend to state a cause of action. The trial court properly sustained the demurrer without leave to amend.
DISPOSITION
The judgment is affirmed. Respondents shall have their costs on appeal.
We concur: WILLHITE, J., MANELLA, J.