Opinion
NOT TO BE PUBLISHED
Mendocino County Super. Ct. Nos. SCUK CVG 05-94867 & 06-96122
SIMONS, J.
In December 2003, appellant Arlen Bauer (Bauer) signed a contract with respondents Gordon Jahnke (Jahnke) and Whistler Management, Inc. (Whistler) (collectively, respondents). This contract substantially changed the pre-existing partnership relationship between Bauer and respondents, and, in part, permitted a buy-out of Bauer’s partnership interest at a price set by a specified formula. Bauer appeals from an order granting respondents’ motion for summary adjudication of his cross-claims and affirmative defenses. Each such claim and defense had rested on Bauer’s contention that his signature on the contract was procured by fraud, by Jahnke’s breach of his fiduciary duties, and in breach of the covenant of good faith and fair dealing. Specifically, Bauer contends that triable issues of fact exist as to whether Jahnke’s failure to notify Bauer prior to the execution of the document of its “true nature and/or possible legal effect” invalidates the contract. We disagree with Bauer and affirm the trial court’s order.
On appeal, Bauer does not appear to challenge the trial court’s summary adjudication of his second cross-claim for declaratory relief or his second, third, fourth, or sixth affirmative defenses. Bauer makes no mention of these claims in his briefs on appeal, and does not contradict respondents’ assertion that these claims appear to have been abandoned on appeal. Therefore, we do not address these claims. (Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649 (Boyle) [“If an appeal is pursued, the party asserting trial court error may not then rest on the bare assertion of error but must present argument and legal authority on each point raised”]; Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 865 (Kurinij) [“the appellant must present argument and authorities on each point to which error is asserted, or else the issue is waived”].)
Background
Bauer and Jahnke have known each other for approximately 16 years. Jahnke is a real estate investor and, before retiring in approximately 1984, was a professor of commercial law at the University of British Columbia. Bauer has worked in the auto upholstery business for approximately 13 years. The two men met when Bauer did upholstery work on Jahnke’s automobile, and became good friends. They flew private planes together, vacationed together, and Bauer stayed at Jahnke’s home on numerous occasions. They also became involved in several business transactions together, including the purchase of a private airplane and a condominium. In these business transactions, Bauer relied on Jahnke’s business and legal expertise.
In February 2000, Jahnke and Bauer signed a general partnership agreement (PA) to invest in a property known as the Big Oak Mini Storage facility (Big Oak). The PA stated Jahnke would sell Bauer a 10 percent interest in Big Oak for $60,000, and Bauer would manage Big Oak for an annual fee. Whistler was not a party to the PA. Sometime thereafter, Bauer invested an additional $60,000, and Jahnke and Bauer reached an agreement that Bauer had a 25 percent interest in Big Oak.
At around 10 p.m. on December 24, 2003, while Bauer was at Jahnke’s home, Jahnke asked Bauer to sign a document. When Jahnke gave Bauer the papers to sign, they were folded over so that only the signature line was showing. Jahnke did not tell Bauer that the document modified the PA or would change his role in Big Oak, but simply told Bauer to sign the document because he needed to give it to his daughter to get it in the mail. At the time Bauer signed the document, he had no knowledge that the document changed the partnership relationship or contained a dissociation or buyout clause, or that Whistler held an interest in Big Oak.
Bauer signed the document. He did not read it before signing. At the time, Bauer was tired, but testified he was capable of figuring out what the document said if he had looked at it. He is able to read, and had not had any alcoholic drinks that night or taken any medication. Jahnke did not threaten to harm Bauer physically or financially if he did not sign. Bauer normally reads documents before signing them. Bauer did not receive a copy of the document after signing it.
The document Bauer signed in December 2003 was entitled “Amended Limited Partnership Agreement” (ALPA), and stated that a limited partnership had been formed between Whistler, general partner, and Jahnke, and Bauer, limited partners. Immediately to the left of Bauer’s signature line appeared the words “Limited Partner.” The ALPA contained a clause labeled in bold capitals “PARTNER DISSOCIATION” that permitted expulsion of a partner with the consent of a majority vote of the remaining partnership, and purchase of the partner’s interest based on a specified formula.
In December 2004, Jahnke presented Bauer with a letter indicating that respondents intended to exercise the option to purchase Bauer’s interest in Big Oak. They offered Bauer $321,145 for his interest in Big Oak, based on the formula contained in the ALPA. Bauer refused to sell his shares of Big Oak, and did not accept any money from respondents.
In January 2006, respondents filed the instant complaint against Bauer, seeking a declaratory judgment that, under the ALPA, respondents were entitled to expel Bauer from the partnership and purchase his interest in Big Oak based on the formula specified in the ALPA. In his answer, Bauer set forth six affirmative defenses: (1) his consent to the ALPA was procured by fraud; (2) his consent was obtained by duress; (3) his consent was obtained by mistake; (4) respondents were guilty of unclean hands in that they were “abusing the authority granted them pursuant to the [ALPA] with the purpose of depriving [Bauer] of the fair value of his investment”; (5) respondents had breached the covenant of good faith and fair dealing; and (6) respondents were guilty of unclean hands in that they had engaged in forum shopping.
Bauer also filed a cross-complaint against respondents, seeking declaratory relief on two bases. First, Bauer sought a declaration that the ALPA was void because his signature was obtained by fraud and in violation of Jahnke’s fiduciary duties in that Jahnke did not notify or explain to Bauer that the document affected the parties’ business relationship and contained an expulsion clause. Second, Bauer sought a declaration that even if the ALPA governed, respondents did not have the right to expel Bauer from the partnership without just cause.
In May 2006, respondents filed a cross-complaint against Bauer, asking that, if the court found the ALPA void, it declare that the operative agreement was the “Limited Partnership Agreement” (LPA), a document allegedly executed by Bauer, Jahnke and Whistler after the PA but before the ALPA.
Summary Adjudication Motion
In June 2006, respondents moved for summary adjudication of the two claims for declaratory relief alleged in Bauer’s cross-complaint, and the six affirmative defenses alleged in his answer. As relevant here, respondents contended that Bauer’s claims for fraud and breach of the covenant of good faith and fair dealing should be summarily adjudicated because Jahnke had no duty to explain or point out provisions of the ALPA to Bauer, and Bauer’s failure to read the ALPA before signing it was unreasonable as a matter of law. In support of their motion, respondents relied largely on Bauer’s deposition statements that he signed the ALPA without reading it, he was capable of understanding the document if he had looked at it, and he was not physically or financially forced to sign the document.
In opposition, Bauer did not dispute that he signed the ALPA, or that the agreement permits expulsion of a partner without cause. Instead, he argued that a triable issue of fact existed as to whether he acted reasonably in not reading the ALPA, given the parties’ fiduciary relationship as business partners, their longstanding friendship, the circumstances of the signing, and Jahnke’s failure to give Bauer notice of the significance of the document he was signing.
Summary Adjudication Ruling
In October 2006, the court granted respondents’ motion for summary adjudication of Bauer’s cross-complaint and affirmative defenses. As relevant here, the court held that Bauer’s first claim for declaratory relief (fraud and violation of fiduciary duties), first affirmative defense (fraud), and fifth affirmative defense (breach of covenant of good faith and fair dealing), lacked legal merit under Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394 (Rosenthal), because Jahnke had no legal obligation to explain the ALPA to Bauer, and Bauer had the capacity and a reasonable opportunity to read the agreement before signing.
The court also granted summary adjudication as to Bauer’s second claim for declaratory relief (expulsion without just cause), second affirmative defense (duress), third affirmative defense (mistake), fourth affirmative defense (unclean hands in exercise of the expulsion provision), and sixth affirmative defense (unclean hands in forum shopping). However, as discussed above, Bauer does not appear to challenge the court’s summary adjudication of these claims, and we do not address them.
In November 2006, based on the parties’ stipulation for entry of judgment, the court issued a judgment declaring that pursuant to the ALPA, Bauer was properly expelled from the Big Oak partnership and had no further interest other than the sum of $321,145, and that Bauer would take nothing by his cross-complaint. Bauer filed a timely appeal.
Discussion
I. Standard of Review
We review the court’s summary adjudication ruling de novo to determine whether the moving party has met its burden of persuasion that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) In their role as cross-defendants moving for summary adjudication of Bauer’s cross-complaint, respondents must show either (1) that Bauer cannot establish one or more elements of a cause of action, or (2) that there is a complete defense. (Code Civ. Proc., § 437c, subd. (p)(2).) In their role as plaintiffs moving for summary adjudication of Bauer’s affirmative defenses, respondents must show that there is no merit to the affirmative defenses. (Code Civ. Proc., § 437c, subd. (f); Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 977-978.) If respondents meet their burden of production, the burden shifts to Bauer to show the existence of a triable issue of fact with respect to that cause of action or affirmative defense. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) Bauer cannot rely on “mere allegations or denials,” but must “set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).) “All doubts as to whether there are any triable issues of fact are to be resolved in favor of the party opposing summary judgment. [Citation.]” (Ingham v. Luxor Cab Co. (2001) 93 Cal.App.4th 1045, 1049 (Ingham).)
II. Fraud and Breach of Fiduciary Duty
In his cross-complaint, Bauer alleged that the ALPA was void because his signature was procured by fraud and in violation of Jahnke’s fiduciary duties, in that Jahnke failed to explain the contents of the agreement to Bauer. In his answer Bauer raised the identical issue as an affirmative defense. On appeal, Bauer contends the trial court improperly granted summary adjudication on this claim, ruling against his first cause of action in his cross-complaint and his affirmative defense. Respondents initially argue Jahnke owed no fiduciary duties to Bauer, because at the time the ALPA was signed Jahnke and Bauer were limited partners under the earlier LPA. Second, respondents argue that, even assuming Jahnke owed Bauer the fiduciary duties of a general partner, there is no fiduciary duty to point out or explain contract provisions. And third, respondents argue that Bauer’s failure to read the ALPA was unreasonable as a matter of law. We conclude that there are triable issues of fact whether, at the time the ALPA was presented to Bauer by Jahnke, the two men were general or limited partners. However, we also conclude that this is immaterial because even if the men were general partners and, therefore fiduciaries, Jahnke breached no duty owed to Bauer as a matter of law.
A. Fraud
Fraud may be actual or constructive. (Civ. Code, § 1571.) The elements of actual fraud are “(1) a false representation or concealment of a material fact, . . . (2) made with knowledge of its falsity or without sufficient knowledge . . . to warrant a representation, (3) with the intent to induce the person to whom it is made to act upon it; and this person must (4) act in reliance upon the representation (5) to his or her damage.” (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 286, p. 315.) Constructive fraud, however, allows relief for negligent omissions that constitute a breach of fiduciary duty. (Tyler v. Children’s Home Society (1994) 29 Cal.App.4th 511, 548 (Tyler).) Constructive fraud consists of “ ‘any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him.’ ” (Civ. Code, § 1573.) “Unlike fraud and undue influence, a constructive fraud claim allows relief for negligent omissions constituting breach of duty in a confidential relationship.” (Tyler, supra, 29 Cal.App.4th at p. 548.) “ ‘Constructive fraud arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice. (Civ. Code, § 1573.)’ [Citation.]” (Estate of Gump (1991) 1 Cal.App.4th 582, 601.)
“ ‘ “In its generic sense, constructive fraud comprises all acts, omissions and concealments involving a breach of legal or equitable duty, trust, or confidence, and resulting in damages to another. [Citations.] Constructive fraud exists in cases in which conduct, although not actually fraudulent, ought to be so treated-that is, in which such conduct is a constructive or quasi fraud, having all the actual consequences and all the legal effects of actual fraud.” [Citation.]’ ” (Estate of Gump, supra, 1 Cal.App.4th at p. 601.) “The difference between actual fraud and constructive fraud is primarily in the type of conduct which may be treated as fraudulent, such as a failure to disclose material facts within the knowledge of the fiduciary. Further, the reliance element is relaxed in constructive fraud to the extent we may presume reasonable reliance upon the misrepresentation or nondisclosure of the fiduciary, absent direct evidence of a lack of reliance. [Citations.]” (Ibid.) “[W]hether a fiduciary duty has been breached, and whether a statement constitutes constructive . . . fraud, depends on the facts and circumstances of each case.” (Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 415.)
B. Existence of Fiduciary Relationship
Bauer argues there is a triable issue as to whether he and Jahnke were general partners and were under a legal duty to deal with each other as fiduciaries at the time the ALPA was signed. A general partnership is a legally recognized fiduciary relationship. (Enea v. Superior Court (2005) 132 Cal.App.4th 1559, 1564 (Enea); Corp. Code, § 16404). A limited partner, however, normally does not have fiduciary obligations to other partners, unless, for example, the limited partner has access to confidential information. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150; 9 Witkin, Summary of Cal. Law, supra, Partnership, § 77, pp. 650-651.)
It is undisputed that Jahnke and Bauer entered into the PA, a general partnership agreement regarding the Big Oak property in 2000. In his declaration, filed in support of the summary adjudication motion, Jahnke claims the two men altered that general partnership relationship by signing the LPA in 2001, converting the general partnership to a limited partnership. A signed, but undated, copy of the LPA was attached to that declaration. Bauer, however, stated in his separate statement of disputed facts that he was not aware of the LPA until 2005, and was not aware that Whistler had an interest in Big Oak until December 2004, when he received a letter stating that respondents were exercising the option to purchase Bauer’s interest. Given the evidence before us, a triable issue of fact exists as to whether the 2000 PA was rendered inoperative by a superseding LPA executed by the parties in 2001.
In their motion, respondents did not set forth in their separate statement of undisputed facts any facts regarding the LPA. In a summary adjudication motion, the moving party “shall include a separate statement setting forth plainly and concisely all material facts which the moving party contends are undisputed.” (Code Civ. Proc., § 437c, subd. (b)(1).) However, as both parties concede, trial courts have discretion to consider facts contained in the evidence submitted on the motion when resolving the motion, even though the facts were not included in the separate statements. (San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 316.)
C. Breach of the Fiduciary Duty not to Conceal
Relying on undisputed facts, respondents contend that Jahnke breached no fiduciary duty owed to Bauer when he presented the ALPA for signature without any explanation of its terms. “Partnership is a fiduciary relationship, and partners are held to the standards and duties of a trustee in their dealings with each other. ‘ “ ‘Partners are trustees for each other, and in all proceedings connected with the conduct of the partnership every partner is bound to act in the highest good faith to his copartner and may not obtain any advantage over him in the partnership affairs by the slightest misrepresentation, concealment, threat or adverse pressure of any kind.’ [Citations.]” ’ (Leff v. Gunter (1983) 33 Cal.3d 508, 514.) Moreover, this duty extends to all aspects of the relationship and all transactions between the partners. ‘ “Each [partner] occupie[s] the position of a trustee to the other with regard to all the partnership transactions, including the transactions contemplated by the firm and constituting the object or purpose for which the partnership was formed.” ’ (Ibid., italics omitted.)” (BT-I v. Equitable Life Assurance Society (1999) 75 Cal.App.4th 1406, 1410-1411; accord: Enea, supra, 132 Cal.App.4th at p. 1564.)
Bauer does not contend that Jahnke made any misrepresentation to him regarding the ALPA. Bauer also denies being subject to any “threat or adverse pressure.” However, he appears to argue that Jahnke breached his fiduciary duty by “active concealment.” As a matter of law, we reject this contention. Jahnke did not “conceal” the terms of the ALPA he physically provided to Bauer. Bauer testified at his deposition that he normally read documents he signed, and he could not recall signing any other document presented by Jahnke that he had not read. Bauer had consumed no alcohol or medication, and though fatigued, he conceded that “if I had looked at [the ALPA] I’d have known what it said.” Bauer agreed if he had wanted to read the document, he would have been able to do so. “Conceal” is defined as “1. to hide; cover or keep from sight. . . 2. to keep secret. . . .” (Random House Webster’s College Dictionary(2001) p. 275, col. 2.) It defies logic to conclude Jahnke “concealed” the terms of the ALPA, simply because Bauer chose not to read it. (See Rosenthal, supra,14 Cal.4th at pp. 425-426.) It may be possible that a fiduciary could be deemed to conceal the terms of an agreement he or she physically provides to another, but not under the facts of this case.
D. Existence of a Fiduciary Duty to Notify or Warn of the Agreement’s “ True Nature”
Bauer principally relies on the existence of a duty that exceeds the fiduciary duty of non concealment. Bauer contends a partner may not obtain another partner’s signature on an agreement containing a provision that materially changes the signing partner’s partnership interest without notifying that partner of the agreement’s “true nature and/or possible legal effect.” Bauer argues triable issues of fact exist as to whether such a duty arose here. We disagree.
None of the authorities cited by Bauer support his argument that a partner has such a duty. In support of his argument, Bauer relies on several cases discussing the fiduciary duties owed by general partners under common law (see, e.g., Laux v. Freed (1960) 53 Cal.2d 512 (Laux); Vai v. Bank of America (1961) 56 Cal.2d 329 (Vai), Page v. Page (1961) 55 Cal.2d 192 (Page)), as well as the statutory provision that codifies the fiduciary duties of a partner. (Corp. Code, § 16404; Enea, supra,132 Cal.App.4th at 1564.) However none of these authorities supports imposition on a general partner of the duty proposed by Bauer. Laux, Vai, and Page discuss in general terms the common law fiduciary duties of partners in factual contexts that are completely unrelated to our own. For example, in Vai, the court found that a husband misrepresented the value of certain community property prior to the execution of a property settlement agreement. (Vai, supra, 56 Cal.2d at pp. 340-342.) This conduct was held to be a violation of his fiduciary duties to disclose and not conceal material facts. (Id. at p. 342.) But, Bauer never attempts to explain how the discussions in any of these three cases supports his contention.
We leave to another day resolution of the question whether under a different set of facts such a duty might arise. Here, there simply is no triable issue as to whether a reasonable person in Bauer’s position could have understood the ALPA without information that Jahnke possessed and chose not to divulge.
Corporations Code section 16404 discusses the fiduciary duties of care and loyalty, but does not separately enumerate the duty to warn proposed by Bauer. In Enea, the court held that this statutory listing of fiduciary duties is not exhaustive or exclusive, and was not intended to make any substantive changes to existing law. (Enea, supra, 132 Cal.App.4th at pp. 1564-1565 [holding that partners’ act of renting partnership-owned office building to themselves at below-market rates violated their fiduciary duties as partners, because section 16404 is not an exclusive list of partners’ fiduciary obligations]. However, Bauer has provided no support for his argument that prior to the enactment of Corporations Code section 16404 a fiduciary duty to warn existed.
Further, imposing such a duty on fiduciaries in the factual context of this case would be unwise for several reasons. First, the precise limits of this duty would be difficult to define: would it have been sufficient for Jahnke to inform Bauer that the ALPA contained an expulsion clause or would the duty require additional notice of the valuation provision? Second, requiring Jahnke to notify Bauer of the “true nature and/or possible legal effect” of the ALPA seems to mandate that Jahnke provide a lawyer’s opinion. Prudence would seem to dictate that this lawyer’s opinion be provided in writing with space for Bauer to sign, acknowledging he had read the opinion. But if such a written opinion had been prepared, paid for and presented to Bauer along with the ALPA, nothing in the record suggests he would have read that opinion before signing both the opinion and the ALPA.
In sum, the well-established fiduciary duties of a general partner to disclose and not conceal material facts were not breached by Jahnke. We reject as impractical and unwarranted Bauer’s attempt to create an entirely new fiduciary duty to notify or warn of a tendered document’s true nature and/or possible legal effect. Bauer concedes he could have read and understood the ALPA before signing it. If he had done so, he could have decided if he needed additional legal or financial advice and obtained it, or declined to sign the document. Jahnke breached no fiduciary duty here.
III. Fifth Affirmative Defense: Breach of Covenant of Good Faith and Fair Dealing
Finally, Bauer contends that there are triable issues of fact as to whether Jahnke’s failure to give Bauer notice of the content of the ALPA constitutes a breach of the covenant of good faith and fair dealing. However, Bauer does not present any authority or argument supporting this proposition. Therefore, we treat it as waived. (Boyle, supra, 137 Cal.App.4th at p. 649; Kurinij, supra, 55 Cal.App.4th at p. 865.) Even if we addressed this argument on the merits, we would reject it. We have already concluded that Jahnke breached no fiduciary duty he owed to Bauer. And the covenant of good faith and fair dealing does not impose fiduciary duties that otherwise would not exist. (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 31.) In the absence of a fiduciary duty, the covenant should not require a party to an agreement who proposes an alteration of that agreement and provides that alteration in writing to also provide a pre-signing explanation of terms to the other party. In the absence of a breach of fiduciary duty owed by Jahnke, there is no question that Bauer was obliged to read the ALPA; a legion of cases bar him from relying on his failure to do so to defeat the agreement he signed. (Rosenthal, supra, 14 Cal.4th at pp. 423-424; Rowland v. PaineWebber Inc. (1992) 4 Cal.App.4th 279, 286, disapproved on another point in Rosenthal, supra, 14 Cal.4th at pp. 415-416.)
Given that Bauer disputes the validity of the ALPA, we construe Bauer’s claim of breach of the covenant of good faith and fair dealing as grounded in Jahnke’s duties under the original PA, not under the ALPA.
Thus Jahnke has established as a matter of law that he did not breach any fiduciary duty or the covenant of good faith and fair dealing by obtaining Bauer’s signature on the ALPA.
Disposition
The order granting summary adjudication of Bauer’s first claim for declaratory relief and first and fifth affirmative defenses is affirmed.
Respondents are entitled to their costs on appeal.
We concur. JONES, P.J., GEMELLO, J.