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This case was last updated from Los Angeles County Superior Courts on 06/13/2019 at 00:16:47 (UTC).

ALIA SAWALQAH VS SUSAN RIECHEL

Case Summary

On 11/02/2016 ALIA SAWALQAH filed a Personal Injury - Motor Vehicle lawsuit against SUSAN RIECHEL. This case was filed in Los Angeles County Superior Courts, Burbank Courthouse located in Los Angeles, California. The case status is Disposed - Dismissed.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****9420

  • Filing Date:

    11/02/2016

  • Case Status:

    Disposed - Dismissed

  • Case Type:

    Personal Injury - Motor Vehicle

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Burbank Courthouse

  • County, State:

    Los Angeles, California

 

Party Details

Plaintiff and Petitioner

SAWALQAH ALIA

Defendants and Respondents

RIECHEL SUSAN

DOES 1 TO 25

Attorney/Law Firm Details

Plaintiff and Petitioner Attorney

OHANIAN RAFFI H. ESQ.

Defendant and Respondent Attorney

HOUGHTON LOWELL G. ESQ.

 

Court Documents

PROOF OF SERVICE SUMMONS

11/14/2016: PROOF OF SERVICE SUMMONS

ANSWER TO COMPLAINT

12/12/2016: ANSWER TO COMPLAINT

DEMAND FOR JURY

12/12/2016: DEMAND FOR JURY

Unknown

12/12/2016: Unknown

NOTICE OF SETTLEMENT OF ENTIRE CASE

3/7/2017: NOTICE OF SETTLEMENT OF ENTIRE CASE

REQUEST FOR DISMISSAL

4/12/2017: REQUEST FOR DISMISSAL

 

Docket Entries

  • 04/12/2017
  • Request and Entry of Dismissal (With prejudice; Entire action of all parties and all causes of action ); Filed by Attorney for Plaintiff/Petitioner

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  • 04/12/2017
  • REQUEST FOR DISMISSAL

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  • 04/12/2017
  • Request for Dismissal; Filed by Alia Sawalqah (Plaintiff)

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  • 03/07/2017
  • NOTICE OF SETTLEMENT OF ENTIRE CASE

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  • 03/07/2017
  • Notice-Settlement; Filed by Attorney for Plaintiff/Petitioner

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  • 03/07/2017
  • Notice of Settlement; Filed by Alia Sawalqah (Plaintiff)

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  • 12/12/2016
  • CIVIL DEPOSIT

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  • 12/12/2016
  • Demand for Jury Trial; Filed by Susan Riechel (Defendant)

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  • 12/12/2016
  • Receipt; Filed by Susan Riechel (Defendant)

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  • 12/12/2016
  • Answer; Filed by Susan Riechel (Defendant)

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1 More Docket Entries
  • 12/12/2016
  • Receipt (CIVIL DEPOSIT ); Filed by Attorney for Defendant/Respondent

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  • 12/12/2016
  • Answer; Filed by Attorney for Defendant/Respondent

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  • 12/12/2016
  • DEMAND FOR JURY

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  • 11/14/2016
  • Proof-Service/Summons; Filed by Attorney for Plaintiff/Petitioner

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  • 11/14/2016
  • Proof-Service/Summons; Filed by Alia Sawalqah (Plaintiff)

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  • 11/14/2016
  • PROOF OF SERVICE SUMMONS

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  • 11/02/2016
  • Complaint; Filed by Alia Sawalqah (Plaintiff)

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  • 11/02/2016
  • SUMMONS

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  • 11/02/2016
  • Complaint

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  • 11/02/2016
  • COMPLAINT FOR PERSONAL, INJURIES; DEMAND FOR JURY TRIAL

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Tentative Rulings

Case Number: BC639420    Hearing Date: August 11, 2020    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

AMTAX HOLDINGS 2001-J, LLC, et al.

vs.

PRESERVATION PROPERTIES, LLC, et al.

Case No.: BC638420

(Consolidated With: BC638505)

Hearing Date: August 11, 2020

Plaintiff’s motion for summary adjudication of the first and fourth causes of action is DENIED.

On October 1, 2018, Amtax Holdings 2001-U, LLC (Amtax U) filed a third amended complaint (TAC) against Preservation La Brea, LLC, Corridor Economic Development Corporation n/k/a Ausar Economic Development Corporation, James Perley, Western American Properties, LLC, Anita Landecker, Squier Properties, David Perel, and Preservation La Brea, LP as a nominal Defendant, alleging: (1) breach of written contract; (2) breach of written contract; (3) breach of implied covenant of good faith; (4) breach of fiduciary duty (directly); and (5) breach of fiduciary duty (indirectly).

On October 1, 2018, Amtax Holdings 2001-J, LLC (Amtax J) filed a third amended complaint (TAC) against Preservation La Brea, LLC, Corridor Economic Development Corporation n/k/a Ausar Economic Development Corporation, James Perley, Western American Properties, LLC, Anita Landecker, Squier Properties, David Perel, and Preservation La Brea, LP as a nominal Defendant, alleging: (1) breach of written contract; (2) breach of written contract; (3) breach of implied covenant of good faith; (4) breach of fiduciary duty (directly); (5) breach of fiduciary duty (indirectly); (6) declaratory relief; (7) judicial dissolution[1]; and (8) foreclosure.

Defendants/Cross Complainants Preservation La Brea, LP and Preservation La Brea LLC filed a second amended cross-complaint (SAXC) against Amtax U and Amtax J (collectively, Amtax). The SAXC asserts claims for: (1) disassociation of limited partner; (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) intentional interference with prospective economic damage; (5) intentional interference with contract; (6) declaratory relief—approval of financing; and (7) declaratory relief—termination.

Now, Amtax U-J moves for summary adjudication of its first and fourth causes of action against Defendant/Cross-Complainant Preservation LA Brea, LLC (AGP) and Defendant Ausar Economic Development Corporation f/k/a Corridor Economic Development Corporation (MGP, and with AGP, collectively, General Partners). The Court notes that the General Partners also have a pending motion for summary adjudication as to the first and second causes of action.

Below, the Court analyzes Amtax’s motion.

Legal Standard

MSJ.A by Plaintiff/Cross-Plaintiff. Plaintiffs may shift the burden of proof to the opposition by submitting evidence as to every element of the cause of action.  (Code Civ. Proc. § 437c(p)(1); WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525, 532.) Where a plaintiff has made this showing, the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense thereto. (Code Civ. Proc. § 437c(p)(1).) 

The moving party’s burden on summary judgment “is more properly one of persuasion rather than proof, since he must persuade the court that there is no material fact for a reasonable trier of fact to find, and not to prove any such fact to the satisfaction of the court itself as though it were sitting as the trier of fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 fn.11, original italics.)

Evidentiary Objections

CCP section 437c, subdivision (q) provides:

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

The General Partners’ objections are overruled.

Factual Background

The Partnerships were formed in October 2000. (TAC-J ¶ 12.) The PLBLP Agreement was amended April 20, 2001 and remains operative. (TAC-U ¶ 16.)  The PGLP Agreement was amended June 30, 2001 and remains operative. (TAC-J ¶ 17.) Each of the Partnerships operates an apartment complex that qualifies for low-income housing tax credits as provided in Section 42 of the Internal Revenue Code, with the tax credits distributed to the partners of the Partnership according to their percentage equity interests. (SAXC ¶ 13.) Amtax is the sole limited partner in each Partnership, and it owns a 99.99% interest in each Partnership. (TAC-U ¶ 18; TAC-J ¶ 19.) Thus, under the terms of the agreements, virtually all the tax credits go to Amtax as the sole investor-limited partner.  The Administrative General Partners of each Partnership are solely responsible for managing and operating the complexes. (SAXC ¶¶ 14-15.) 

The Agreements contain provisions that allow Amtax to leave the Partnerships after the tax credits expired. Specifically, the Agreements allow Amtax to make a request after January 1, 2016 to the General Partners to either (1) sell the property to a third party, or (2) purchase or arrange for a third party to purchase Amtax’s interest in the Partnership for the fair market value of that interest, subject to approval by Amtax. (TAC-J ¶ 24; Agreement, Art. VII, § 7.4 (the “Election Clause”).) Upon receiving that request, the General Partners is to “(1) ‘determine which course of action it desires to utilize’ (i.e., arrange for a sale or purchase), and (2) ‘use its best efforts in order to close the purchase or sale’ within a two-year period.” (TAC-J ¶ 25 (quoting Agreement, Art. VII, § 7.4).) 

A separate provision of the Agreements provides that each Partnership may refinance loans or replace Letters of Credit only if it first receives Amtax’s prior written consent. (TAC-J ¶ 29.) The Agreements also explicitly provide that the Administrative General Partners do not have any authority to increase or otherwise refinance any Partnership indebtedness. (TAC-J ¶ 30.) 

As of December 2015, there were several debt instruments encumbering the Sacramento Complex, including an irrevocable Letter of Credit set to expire 12/14/16. (SAXC ¶¶ 16-21.) Unless the Letter of Credit was renewed, replaced, or the bond debt refinanced, the trustee for the tax-exempt bonds was required to send out a notice of redemption and draw on the letter of credit before it expired. (SAXC ¶ 21.) 

In anticipation of these deadlines, in March 2016, PPLLC (the Administrative General Partner of PGLP) informed Amtax that PPLLC was attempting to obtain replacement financing. (SAXC ¶ 24.) Here, Amtax’s version of the story is that it refused to approve refinancing because refinancing would not have been in the best economic interest of the Partnership. (TAC-U ¶ 42.) Defendants’ version of the story is that, via letter dated May 4, 2016, Amtax refused to approve refinancing unless PPLLC agreed to buyout terms that would allow Amtax to exit the Partnerships. (SAXC ¶ 25.) PPLLC would not agree to this proposal, and as a result Amtax did not approve of any refinancing. 

On August 10, 2016, Amtax notified PPLLC that it was exercising its right to dissolve the Partnership, as well as its right under the Election Clause to force a sale of the Complex or a buyout of its interest. (SAXC ¶ 28.) PPLLC elected to buy Amtax’s interest rather than sell the Sacramento Complex. (SAXC ¶ 29.) However, Amtax continues to refuse to approve the refinancing. (SAXC ¶¶ 32-35.) As a result, some of the debt instruments went into default. (SAXC ¶¶ 40-44.) Because no refinancing has occurred, the Partnership cannot meet the Complex’s underlying loan obligations, and as a result is at risk of losing the Sacramento Complex to foreclosure, which would render Defendants’ interest in the Partnerships worthless. (Ibid.

I. Breach of Contract

Amtax argues it is entitled to summary adjudication as to its first cause of action because its evidence establishes that the General Partners breached: (1) Section 4.5.A(ii) of the Partnership Agreement by unreasonably withholding their consent to Amtax’s dissolution demand; and (2) Section 7.4.I by failing to exercise “best efforts’ to either sell the Property or buyout Amtax’s interests.

The elements for breach of contract cause of action are: (1) existence of contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach (or anticipatory breach); and (4) resulting damage.  (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.) A plaintiff may seek specific performance, an equitable remedy, as an alternative to damages, but a plaintiff may not receive both for breach of contract to the extent such an award would constitute a double recovery. (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409.)

Specifically, a claim for specific performance must establish the following: (1) A specifically enforceable type of contract, sufficiently certain in its terms [citation]; (2) adequate consideration, and a just and reasonable contract [citation]; (3) The plaintiff's performance, tender, or excuse for nonperformance [citation]; (4) The defendant's breach [citation]; (5) Inadequacy of the remedy at law [citation]; and (6) In addition, the defense of the statute of frauds must be anticipated in the complaint. [Citation.] (Darbun Enterprises, Inc., supra, 239 Cal.App.4th at p.409, fn 5.)

“[W]here a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing. This principle is discussed in [Kendall v. Ernest Pestana, Inc. (1985) 40 Cal.3d 488, 501], which holds that good faith and reasonableness are questions of fact. Denying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable.” (Peak-Las Positas Partners v. Bollag (2009) 172 Cal.App.4th 101, 106.)  

In Peak-Las Positas Partners, supra, 172 Cal.App.4th, plaintiff partnership entered into a contract to purchase 4.5 acres of adjoining defendant’s land. The purchase agreement provided that escrow would close upon approval of a lot line and no later than two years after the opening of escrow, unless extended by mutual consent of buyer and seller. The parties agreed to extend escrow five years after it was discovered that a lot line adjustment would be needed, and numerous project changes would be needed before city officials could adjust the lot lines. Plaintiff continued to make project changes in order to receive the lot line adjustment from the city. However, at the end of five years, plaintiff needed more time to submit the changes to City and requested a two-year escrow extension. Defendant denied the request, and plaintiff sued for specific performance. Defendant appealed after the trial court ruled that he had acted unreasonably by denying the escrow extension. In upholding the trial court’s ruling, the Court of Appeal noted that defendant’s proffered reasons for denying escrow were refuted by the evidence. For example, defendant argued that plaintiff had breached the purchase agreement by not keeping him informed about the status of the agreement and because plaintiff intended to cut down trees in violation of the agreement. However, the evidence showed that defendant had been kept “well informed of the progress” of plaintiff’s efforts, and that “no credible evidence was presented” that plaintiff would be breaching the agreement by planning to cut down a collection of eucalyptus trees. The Court was satisfied that this conduct was objectively unreasonably as a matter of law.

Section 4.5.A(ii) of the Partnership Agreement provides:

[Amtax] shall have the right: . . . (ii) [t]o dissolve the Partnership upon the consent of the Managing General Partner and Administrative General Partner, which consent may not unreasonably be withheld.

7.4.I of the Partnership Agreement provides:

[A]t any time after the fifteenth anniversary of the first day of the first taxable year of the applicable Tax Credit Compliance Period…, the Investor Limited Partner may request that the Administrative General Partner, at the election of the Administrative General Partner, do one of the following: (i) sell the Apartment Complex to a third party, or (ii) purchase or arrange for a third party to purchase, the Limited Partners Interests in the Partnership for the fair market value of the Interests, but in all events such purchase and sale shall be for terms which are approved by the Investor Limited Partner. The Administrative General Partner shall have a period of two (2) years after the receipt of such request from the Investment Limited Partner in which to use its best efforts in order to close the purchase or sale of the Apartment Complex or Partnership Interests, as the case may be…. [T]he terms of such purchase of either the Apartment Complex or the Interest shall be subject to the Investment Limited Partner’s Consent…. [P]rovided however, that the Investor Limited Partner shall not be obligated to Consent to a sale in the event that it is not satisfied with the purchase price so determined … or by the other terms of the purchase and sale.

(UF No. 14.)

Here, the parties do not dispute that a valid and binding contract was entered into. As such, the issue before the Court here is whether: (1) Plaintiff’s evidence establishes that the General Partners unreasonably withheld consent to dissolve the partnership, such that they breached the contract, and (2) whether an adequate remedy at law exists. (Darbun Enterprises, Inc., supra, 239 Cal.App.4th at p. 409, fn 5).

A. Element of Breach

Amtax argues that the General Partner’s withholding of consent was objectively unreasonable as a matter of the law. Amtax states that the General Partners provided the following reasons for why they withheld consent to dissolve the partnership: (1) the partnership could not be voluntarily dissolved without the prior written consent of the lender; (2) dissolution would have harmed the Partnership by impacting the provision of low-income housing to “poor and distressed” people; and (3) dissolution of would deprive General Partner AGP of its “right” under 7.4.I of the Partnership Agreement to purchase Amtax’s limited partnership interest.

Plaintiff submitted the following evidence to show that the General Partner’s first explanation (i.e., required written consent from the Lender) was objectively unreasonable:

· After Amtax served its demand to dissolve the Partnership, the General Partners did not nothing in response, “…apart from the AGP discussing the matter with its counsel.” (UF Nos. 120-121.)

· The General Partners explained that it withheld consent because the Partnership could not be “voluntarily dissolved without the prior written consent of the Lender.” However, this was purely speculative and the General Partners took no steps to determine whether the “Lender” would consent to dissolution (UF No. 112.)

· When Amtax required a call with the General Partners and the “Lender” to discuss the dissolution, the General Partners ignored Amtax’s request.

· Once PCI took over as the lender, PCI executed a “forbearance” which precluded PCI from commencing a judicial or non-judicial foreclose action until the earlier of April 27, 2019 or the occurrence of a “Forbearance Termination” event. Given that the General Partners now knew PCI would not commence a foreclosure action, they had no reason not to approach PCI regarding whether they would give written consent to the allow the dissolution of the partner. Accordingly, Amtax argues this explanation is disingenuous.

Amtax submitted the following evidence to show that the General Partner’s second explanation (i.e., harm to the partnership) was objectively unreasonable:

· The Property was required by law under Cal.Rev. & Tax Code section 12206(h)-(i) to be operated as low-income housing for at least “30 consecutive taxable years,” regardless for whether it was sold to a new owner.

· The Partnership Agreement unambiguously states that the Property may be sold “in accordance and compliance with the Regulatory Agreement and consistent with the charitable purposes of the [MGP]. (UF No. 4). As such, the parties clearly contemplated that the Property could be sold and continue to be used for low-income housing in accordance with regulatory Agreement and the MGP’s charitable purpose, without harming the Partnership.

· The purpose of the Partnership Agreement, as provided in that agreement, included, “financing, rehabilitating, owning, maintaining, operating, and selling or otherwise disposing of” the Property.” (UF No. 4, emphasis added.)

Amtax submitted the following evidence to show that the General Partner’s third explanation (i.e., deprivation of the right to purchase Amax’s interest) was objectively unreasonable:

· The Partnership Agreement does not grant General Partner AGP a legal “right” to purchase Amtax’s limited partnership interest. Rather, Section 7.4.I gives Amtax the right to request that the AGP arrange the sale of the Property or a buy-out of Amtax’s limited partnership interest at fair market.

B. Availability of an Adequate Remedy at Law

Amtax argues that no adequate remedy at law exists. Specifically, Amtax argues that only the dissolution of the partnership can release the parties from the responsibilities and burden of a partnership, and this is something a damages award cannot provide. Amtax also cites to Navarro v. Perron (2004) 122 Cal.App.4th 797, 802, as standing for the proposition that “…where there is more than one appropriate remedy for a wrong, the party who is wronged has the election of remedies.” Applied to the facts there, the Court of Appeals concluded that a plaintiff, as the nonbreaching partner, was entitled to either damages or specific performance of a partnership agreement where one of the partners repudiated the existence of the partnership and converted all the partnership assets.

Moreover, Amtax notes that Section 13.7.C, subsection (1) of the Partnership Agreement, acknowledges, “damages at law may be an inadequate remedy for breach or threat of breach of any provisions hereof,” subsection (2) authorizes enforcement by “specific performance, injunction, or other equitable remedy,” and subsection (3) states that the parties’ “intention by this paragraph [is] to make clear that under this Agreement the respective rights and obligations of the Partners shall be enforceable in equity as well as at law or otherwise.” (UF No. 29.)

Amtax has submitted evidence as to every element of its breach of contract cause of action. Accordingly, the burden shifts to the General Partners to show that a triable issue of material fact exists as to the cause of action or a defense thereto. (Code Civ. Proc. § 437c(p)(1).) 

The General Partners submitted evidence to show that there was no breach, that its refusal to dissolve the partnership was reasonable, and that Amtax cannot show it suffered damages.

The General Partners submitted evidence that there was no breach because Amtax failed to perform its obligations after Amtax made a Section 7.4.I request. After Amtax’s request, the General Partners elected to buyout Amtax’s partnership interest, and appointed an appraiser to determine the fair market value of Amtax’s interest. The General Partners submitted evidence that on eight different occasions they attempted to buyout Amtax’s interest, but that Amtax never responded and did not appoint an appraiser. (SS ¶¶ 25, 32, 37, 39, 44, 46, 48, 52-54.) Moreover, the General Partners argue that, given these repeated efforts, Amtax cannot argue the General Partners did not use its best efforts to close of the purchase of the interest of the two years.

The General Partners note that Section 7.4.I states that, “[a]fter receipt of a request [to buyout or sell] from [Amtax], the [General Partners] shall determine which course of action it desires to utilize.” Based on this language, the decision of whether to sell the property (thereby dissolving the partnership), or buyout Amtax’s interest (thereby preserving the partnership), rests exclusively with the General Partners. The General Partners opted to buyout Amtax’s interest, and appointed an appraiser to determine the value of Amtax’s interest, as required under the Partnership Agreement. Amtax failed to appoint an appraiser.

As additional evidence that their refusal to consent to the dissolution of the Partnership was reasonable, the General Partners submitted evidence that Section 2.5 of the Partnership Agreement provides:

A. The Partnership shall continue in full force and effect until December 31, 2052, except that the Partnership shall be dissolved prior to such date upon the happening of any of the following events:

(i) The sale or other disposition of all or substantially all the assets of the Partnership

(ii) A Terminating Event with respect to a General Partner unless the business of the Partnership is continued pursuant to Article VIII;

(iii) The election to dissolve the Partnership made in writing by the General Partners with the Consent of the Investor Limited Partner and any Requisite Approvals or by the Investor Limited Partner pursuant to Section 4.5; or

(iv) The entry of a final decree of dissolution of the Partnership by a court of competent jurisdiction.

Under Section 2.5 of the Partnership Agreement, only a General Partner’s election to dissolve, consented to by Amtax, constitutes a terminating event. The General Partners therefore argue that given that none of the events which allowed for termination under the Partnership Agreement occurred, the General Partner’s refusal to consent to dissolution was not unreasonable.

The General Partners submitted evidence to show that their decision not to ask their lender for consent to dissolve was reasonable. One of the conditions of the Forbearance Agreement was that the Partnership was and would remain a limited partnership in good standing under the laws of the State of California with the necessary power and authority to perform its obligations under those agreements. (RF ¶¶ 37, 94.) Given that its ability to perform under the Forbearance Agreement required that it remain a partnership, its refusal to request consent to dissolve from the lender was not unreasonable.

The Court concludes that this evidence creates a triable issue of material fact as to whether the General Partner’s refusal to consent to the dissolution was unreasonable. Unlike the defendant in Peak-Las Positas Partners whose explanations for denying escrow were clearly pretextual, General Partners explanations for why they refused to dissolve the partnership are based on a reasonable interpretation of the Partnership Agreement, and their obligations under the Forbearance Agreement. Accordingly, the Court concludes that based on the above evidentiary facts, a reasonable trier of fact could conclude that the General Partners acted reasonably by refusing to dissolve the partnership.

Based on the foregoing, summary adjudication of the first cause of action is denied.

II. Breach of Fiduciary Duty

“The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. [Citation.]” (Tribeca Companies, LLC v. First American Title Insurance Company (2015) 239 Cal.App.4th 1088, 1114.)  Breach of fiduciary duty may be resolved on summary judgment “if the circumstances do not permit a reasonable doubt as to whether the defendant’s conduct violates the degree of care exacted of him or her.” (Harvey v. The Landing Homeowners Assn. (2008) 162 Cal. App. 4th 809, 822.)

A plaintiff asserting claims for breach of fiduciary duty or for negligence is required to plead damages for both claims. The damages must be proximately caused by the alleged breach of duty. (See Mendoza v. City of Los Angeles (1998) 66 Cal.App.4th 1333; Tribeca Companies, LLC v. First American Title Insurance Company (2015) 239 Cal.App.4th 1088, 1114.) 

Section 15904.08(a) of the California Corporations Code provides that “a general partner owes to the limited partnership and the other partners . . . the duties of loyalty and care.” A general partner’s duty of loyalty includes, among other things, the obligation “to account to the limited partnership and hold as trustee for it any property, profit, or benefit derived by the general partner in the conduct . . . of the limited partnership’s activities or derived from a use by the general partner of limited partnership property, including the appropriation of a limited partnership opportunity.” Id. at subd. (b)(1).

Moreover, the General Partners’ duties also include the “obligation[] of full disclosure” of information “regarding partnership affairs.” Wortham & Van Liew v. Superior Court, 188 Cal. App. 3d 927, 933 (1987); Universal Sales Corp. v. California Press Mfg. Co., 20 Cal.2d 751, 771-72 (1942) (noting that, in joint venture, “the defendant owed to the plaintiff the duty of fair, open, honest disclosure”).

In Enea v. Superior Court (2005) 132 Cal.App.4th 1559, 1567, defendant partners in a general partnership rented out space in a building owned by the partnership for less than market value rent. First, defendant partners argued that there was no provision in the partnership agreement that stipulated that the property must be leased for fair market value or that required the partners to maximize rental profits. Second, defendants argued that the primary purpose of the partnership was to purchase and hold investments, and their conduct was consistent with this purpose. In reversing the lower court’s ruling which had granted summary adjudication in defendants’ favor, the Court of Appeal noted that defendants’ former argument is “predicated on the wholly untenable notion that they were entitled to [self-deal] unless the agreement explicitly declared otherwise, and their latter argument “hardly justified summary adjudication.”

Here, Amtax argues that “….the undisputed facts establish that the General Partners put their own interests ahead of Amtax…Specifically, after Amtax demanded dissolution, the General Partners entered into the Disguised Refinancing, which was intentionally designed not to ‘look like a refinance’ so as not to ‘blow [the General Partners] out of the water’ with Amtax. These transactions created an unjustifiable conflict of interest, as consenting to dissolution would have jeopardized [one of the General Partner’s] cash collateral. The members of the [General Partnership] engaged in further self-dealing by signing the Side Agreement, an arrangement that ensured [one of the General Partners] would eventually get to be ‘the buyer of [the Property]’ and that an ‘entity that [one of the General Partners] was involved in would have the right to syndicate the property.’” (Opp., 22:15-25; UF Nos. 99, 101-12, 103, 104-105, 108.) In other words, Amtax’s fourth cause of action concerns two agreements: (1) a Forbearance Agreement, and (2) a Side Agreement. Amtax argues that the General Partners breached their fiduciary duty by entering into the Forbearance Agreement, because this agreement is a concealed effort to evade the Partnership Agreement’s refinancing prohibition. Amtax argues that General Partners breached their fiduciary duty by entering into the Side Agreement, because this agreement is a seal-dealing agreement.

As evidence that the General Partners’ Forbearance Agreement is actually a concealed refinance agreement, Amtax submitted evidence of emails obtained through discovery in which Mr. Perley, one of the General Partners wrote:

· Mr. Perley: “[T]hey want to structure the buyout agreements, it looks like a refinance that we are not allowed to do . . . vs. a forbearance of the existing loans which we are allowed to do. If these purchases look like refinances that could hurt our legal case substantially[.]” (RSS 72.)

· Mr. Perley: “The loan Buyer . . . has been very eager to close and has been exasperated several times by the process. . . . Most of the hold ups were due to . . . the difficulty in making this a loan forbearance rather than a refinance (a refinance is not allowed per the LPA).” (Ibid.)

· Mr. Perley: “We are not trying to hold you up and want to close quickly also. The tricky part is satisfying your requirements and not having it look like a refinance which will blow us out of the water with Alden Torch. We are working hard on this.” (Ibid.).

This evidence suggests that the General Partners attempted to conceal the true nature of the Forbearance Agreement. As such, the evidence supports a reasonable inference that the General Partners breached their duty of “fair, open, honest disclosure.” (Universal Sales Corp., supra, 20 Cal.2d at p. 771-72.)

Amtax has submitted evidence as to every element of its breach of fiduciary duty cause of action. Accordingly, the burden shifts to the General Partners to show that a triable issue of material fact exists as to the cause of action or a defense thereto. (Code Civ. Proc. § 437c(p)(1).) 

Here, the General Partners submitted evidence that they were not required to get Amtax’s consent to enter into the Forbearance Agreement. Specifically, Section 2.4(ii) of the Partnership Agreement authorizes the Partnership “[t]o … finance and improve … any real state and any personal property necessary, convenient or incidental to the accomplishment of the purposes of the Partnership.” (RF ¶ 1.) While the Partnership Agreement does not define refinance or forbearance, the General Partners cite to Boerner v. Colwell Co. (1978) 21 Cal.3d 37, 44 to illuminate the difference. The Court in Boerner defined a forbearance as “…the giving of further time for the repayment of an obligation or an agreement not to enforce a claim at its due date.” (Boerner, supra, 21 Cal.3d at p.44, fn. 7.) By contrast, “[a] refinancing occurs when an existing obligation . . . is satisfied and replaced by a new obligation undertaken by the same consumer. Holbert v. Fremont Investment & Loan (2009) 179 Cal. App. 4th 1067, 1078. In other words, a forbearance delays enforcement action under an existing obligation, whereas refinancing replaces an existing obligation with an entirely new obligation. Here, because the Forbearance Agreement delays the time in which repayment is due, while stipulating that each of the loan documents “remains in full force and effect in accordance with its express written terms,” it is a forbearance agreement, rather than a refinancing, and therefore expressed allowed for under Section 2.4(ii) of the Partnership Agreement.

The General Partners also submitted evidence that they did not attempt to conceal the Forbearance or Side Agreements from Amtax. First, the General Partners submitted evidence that Amtax knew that the Partnership was in default because Amtax deliberately forced that default by refusing to consent to a refinance. (RF ¶¶ 275, 277, 279.) The General Partners submitted proposed forbearance terms to Amtax, who in turn also submitted proposed forbearance terms. The Lender rejected Amtax’s purchase offer, and accepted the other offer. (RF ¶ 290.)

Second, the General Partners submitted evidence that the Side Agreement was not an act of self-dealing, but rather was an agreement to: (1) meet and decide on strategy to buy out Amtax; (2) provide for quarterly financial statements to the members, and (3) if successful in buying out Amtax’s interest, restructure their interests in the General Partnership. (RF ¶¶ 233, 351.)

The General’s Partner’s evidence is sufficient to create a triable issue of material fact as to whether the General Partners attempted to conceal the existence, and true nature of, the Forbearance Agreement. (“Whether a fiduciary duty exists is generally a question of law, but whether a defendant breached that duty towards the plaintiff is a question of fact,” Marzec v. California Public Employees Retirement System (2015) 236 Cal.App.4th 889, 915.)

Moreover, unlike in Enea, supra, 132 Cal.App.4th at p. 1567 where the self-dealing defendant partners cost the partnership additional revenues by occupying partnership property below market rate, there is a clear triable issue of fact as to whether the General Partners’ Side Agreement, which has not resulted in any monetary loss to the partnership, amounted to self-dealing such that it amounted to a breach of their fiduciary duty. (Enea, supra, 132 Cal.App.4th 1559, 1567.)

Based on the foregoing, summary adjudication of the fourth cause of action is denied.

It is so ordered.

Dated: August , 2020

Hon. Jon R. Takasugi

Judge of the Superior Court


[1] On February 28, 2019, Amtax dismissed its dissolution cause of action.

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

AMTAX HOLDINGS 2001-J, LLC, et al.

PRESERVATION PROPERTIES, LLC, et al.

(Consolidated With: BC638505)

On October 1, 2018, Amtax Holdings 2001-J, LLC (Amtax J) filed a third amended complaint (TAC) against Preservation La Brea, LLC, Corridor Economic Development Corporation n/k/a Ausar Economic Development Corporation, James Perley, Western American Properties, LLC, Anita Landecker, Squier Properties, David Perel, and Preservation La Brea, LP as a nominal Defendant, alleging: (1) breach of written contract; (2) breach of written contract; (3) breach of implied covenant of good faith; (4) breach of fiduciary duty (directly); (5) breach of fiduciary duty (indirectly); (6) declaratory relief; (7) judicial dissolution[1]; and (8) foreclosure.

Defendants/Cross Complainants Preservation La Brea, LP and Preservation La Brea LLC filed a second amended cross-complaint (SAXC) against Amtax U and Amtax J (collectively, Amtax). The SAXC asserts claims for: (1) disassociation of limited partner; (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) intentional interference with prospective economic damage; (5) intentional interference with contract; (6) declaratory relief—approval of financing; and (7) declaratory relief—termination.

Now, Defendant Cross-Complainant Preservation LA Brea, LLC (AGP) and Defendant Ausar Economic Development Corporation f/k/a Corridor Economic Development Corporation (MGP, and with AGP, collectively, General Partners) move for summary adjudication of Amtax’s first and second causes of action. The Court notes that Amtax also has a pending motion for summary adjudication as to the first and fourth causes of action.

Below, the Court analyzes the General Partner’s motion.

Legal Standard

MSJ.A by Defendant/Cross-Defendant.

The moving party’s burden on summary judgment “is more properly one of persuasion rather than proof, since he must persuade the court that there is no material fact for a reasonable trier of fact to find, and not to prove any such fact to the satisfaction of the court itself as though it were sitting as the trier of fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 fn.11, original italics.)

Evidentiary Objections

CCP section 437c, subdivision (q) provides:

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

Factual Background

The Partnerships were formed in October 2000. (TAC-J ¶ 12.) The PLBLP Agreement was amended April 20, 2001 and remains operative. (TAC-U ¶ 16.)  The PGLP Agreement was amended June 30, 2001 and remains operative. (TAC-J ¶ 17.) Each of the Partnerships operates an apartment complex that qualifies for low-income housing tax credits as provided in Section 42 of the Internal Revenue Code, with the tax credits distributed to the partners of the Partnership according to their percentage equity interests. (SAXC ¶ 13.) Amtax is the sole limited partner in each Partnership, and it owns a 99.99% interest in each Partnership. (TAC-U ¶ 18; TAC-J ¶ 19.) Thus, under the terms of the agreements, virtually all the tax credits go to Amtax as the sole investor-limited partner.  The Administrative General Partners of each Partnership are solely responsible for managing and operating the complexes. (SAXC ¶¶ 14-15.) 

The Agreements contain provisions that allow Amtax to leave the Partnerships after the tax credits expired. Specifically, the Agreements allow Amtax to make a request after January 1, 2016 to the General Partner to either (1) sell the property to a third party, or (2) purchase or arrange for a third party to purchase Amtax’s interest in the Partnership for the fair market value of that interest, subject to approval by Amtax. (TAC-J ¶ 24; Agreement, Art. VII, § 7.4 (the “Election Clause”).) Upon receiving that request, the General Partner is to “(1) ‘determine which course of action it desires to utilize’ (i.e., arrange for a sale or purchase), and (2) ‘use its best efforts in order to close the purchase or sale’ within a two-year period.” (TAC-J ¶ 25 (quoting Agreement, Art. VII, § 7.4).) 

A separate provision of the Agreements provides that each Partnership may refinance loans or replace Letters of Credit only if it first receives Amtax’s prior written consent. (TAC-J ¶ 29.) The Agreements also explicitly provide that the Administrative General Partners do not have any authority to increase or otherwise refinance any Partnership indebtedness. (TAC-J ¶ 30.) 

As of December 2015, there were several debt instruments encumbering the Sacramento Complex, including an irrevocable Letter of Credit set to expire 12/14/16. (SAXC ¶¶ 16-21.) Unless the Letter of Credit was renewed, replaced, or the bond debt refinanced, the trustee for the tax-exempt bonds was required to send out a notice of redemption and draw on the letter of credit before it expired. (SAXC ¶ 21.) 

In anticipation of these deadlines, in March 2016, PPLLC (the Administrative General Partner of PGLP) informed Amtax that PPLLC was attempting to obtain replacement financing. (SAXC ¶ 24.) Here, Amtax’s version of the story is that it refused to approve refinancing because refinancing would not have been in the best economic interest of the Partnership. (TAC-U ¶ 42.) Defendants’ version of the story is that, via letter dated May 4, 2016, Amtax refused to approve refinancing unless PPLLC agreed to buyout terms that would allow Amtax to exit the Partnerships. (SAXC ¶ 25.) PPLLC would not agree to this proposal, and as a result Amtax did not approve of any refinancing. 

On August 10, 2016, Amtax notified PPLLC that it was exercising its right to dissolve the Partnership, as well as its right under the Election Clause to force a sale of the Complex or a buyout of its interest. (SAXC ¶ 28.) PPLLC elected to buy Amtax’s interest rather than sell the Sacramento Complex. (SAXC ¶ 29.) However, Amtax continues to refuse to approve the refinancing. (SAXC ¶¶ 32-35.) As a result, some of the debt instruments went into default. (SAXC ¶¶ 40-44.) Because no refinancing has occurred, the Partnership cannot meet the Complex’s underlying loan obligations, and as a result is at risk of losing the Sacramento Complex to foreclosure, which would render Defendants’ interest in the Partnerships worthless. (Ibid.

I. Breach of Contract

Amtax’s first cause of action for breach of contract arises out of the Partnership Agreement entered into by the General Partners and Amtax.

The General Partners argue that Amtax cannot state a claim for breach of contract because: (1) Amtax never appointed an appraiser, a necessary step to a purchase or sale under Section 7.4.I; (2) the General Partner’s refusal to consent to the dissolution of the partnership was reasonable; and (3) Amtax cannot show it suffered damages as a result of a breach of Section 7.4.I

The elements for breach of contract cause of action are: (1) existence of contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach (or anticipatory breach); and (4) resulting damage.  (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.) A plaintiff may seek specific performance, an equitable remedy, as an alternative to damages, but a plaintiff may not receive both for breach of contract to the extent such an award would constitute a double recovery. (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409).

Notwithstanding the foregoing, at any time after the fifteenth anniversary of the first day of the first taxable year of the applicable Tax Credit Compliance Period and after the expiration of the option period, the Investor Limited Partner may request that the Administrative General Partner, at the election of the Administrative General Partner, do one of the following: (i) sell the Apartment Complex to a third party, or (ii) purchase or arrange for a third party to purchase, the Limited Partners Interests in the Partnership for the fair market value of the Interests, but in all events such purchase and sale shall be for terms which are approved by the Investor Limited Partner. The Administrative General Partner shall have a period of two (2) years after the receipt of such request from the Investment Limited Partner in which to use its best efforts in order to close the purchase or sale of the Apartment Complex or Partnership Interests, as the case may be, it being understood and agreed that no such purchase or sale shall take place prior to the close of the Tax Credit "compliance period" with respect to the Apartment Complex (as defined in Section 42(i) of the Code). After receipt of a request from the Investment Limited Partner, the Administrative General Partner shall determine which course of action it desires to utilize. If it determines to locate a third party purchaser, the terms of such purchase of either the Apartment Complex or Interests shall be subject to the Investment Limited Partner's Consent. The purchase price of the Apartment Complex or the Investor Limited Partner Interest under this section, as the case may be, shall be equal to the fair market value of the Apartment Complex or the Interest, as the case may be. Fair market value shall be determined by the Investor Limited Partner and the Administrative General Partner, as the case may be, each retaining an appraisal from a qualified MAI appraiser. In the event that the two appraisers do not agree on the fair market value, the appraisers shall agree on the appointment of a third appraiser, whose appraisal shall be binding on the parties, provided however, that the Investor Limited Partner shall not be obligated to Consent to a sale in the event that it is not satisfied with the purchase price so determined by the foregoing process or by the other terms of the purchase and sale. In the event that the purchase price and other terms are satisfactory to the Investor Limited Partner, the purchase and sale of the Apartment Complex or Interests, as applicable, shall be closed within a period of ninety (90) days after such price has been determined, but in no event earlier than the close of the. "compliance period".

After receipt of a request from the Investment Limited Partner, the Administrative General Partner shall determine which course of action it desires to utilize”), and appointed an appraiser to determine the fair market value of Amtax’s interest. Specifically, the General Partners submitted evidence that on eight different occasions they attempted to buyout Amtax’s interest, but that Amtax never responded and did not appoint an appraiser. (SS ¶¶  25, 32, 37, 39, 44, 46, 48, 52-54.) Moreover, the General Partners argue that, given these repeated efforts, Amtax cannot argue the General Partners did not use its best efforts to close of the purchase of the interest of the two years.

The General Partners also submitted evidence that its refusal to consent to the dissolution of the Partnership was reasonable. Specifically, the General Partners submitted evidence that Section 2.5 provides:

A. The Partnership shall continue in full force and effect until December 31, 2052, except that the Partnership shall be dissolved prior to such date upon the happening of any of the following events:

(i) The sale or other disposition of all or substantially all the assets of the Partnership

(ii) A Terminating Event with respect to a General Partner unless the business of the Partnership is continued pursuant to Article VIII;

(iii) The election to dissolve the Partnership made in writing by the General Partners with the Consent of the Investor Limited Partner and any Requisite Approvals or by the Investor Limited Partner pursuant to Section 4.5; or

(iv) The entry of a final decree of dissolution of the Partnership by a court of competent jurisdiction.

Given that the Partnership Agreement mandates the continuation of the Partnership unless one of those four events occurs, and none of those events have occurred, the General Partners contend their refusal to consent to dissolution was not unreasonable.  

II. Breach of Contract

Amtax’s second cause of action for breach of contract arises out of allegations that the General Partners breached the Partnership Agreement by entering into a Forbearance Agreement.

The General Partners argue that Amtax cannot state a claim for breach of contract because the Partnership Agreement does not require Amtax’s consent to enter into a forbearance, and because the forbearance is not a refinance.

The elements for breach of contract cause of action are: (1) existence of contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach (or anticipatory breach); and (4) resulting damage.  (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.) A plaintiff may seek specific performance, an equitable remedy, as an alternative to damages, but a plaintiff may not receive both for breach of contract to the extent such an award would constitute a double recovery. (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409).

By contrast, “[a] refinancing occurs when an existing obligation . . . is satisfied and replaced by a new obligation undertaken by the same consumer. Holbert v. Fremont Investment & Loan (2009) 179 Cal. App. 4th 1067, 1078. In other words, a forbearance delays enforcement action under an existing obligation, whereas refinancing replaces an existing obligation with an entirely new obligation. Here, the General Partners argue that because the Forbearance Agreement delays the time in which repayment is due, while stipulating that each of the loan documents “remains in full force and effect in accordance with its express written terms,” it is a forbearance agreement, rather than a refinancing, and therefore expressed allowed for under Section 2.4(ii) of the Partnership Agreement. (SS ¶ 72.) 

· Mr. Perley: “[T]hey want to structure the buyout agreements, it looks like a refinance that we are not allowed to do . . . vs. a forbearance of the existing loans which we are allowed to do. If these purchases look like refinances that could hurt our legal case substantially[.]” (RSS  72.)

· Mr. Perley: “The loan Buyer . . . has been very eager to close and has been exasperated several times by the process. . . . Most of the hold ups were due to . . . the difficulty in making this a loan forbearance rather than a refinance (a refinance is not allowed per the LPA).” (Ibid.)

· Mr. Perley: “We are not trying to hold you up and want to close quickly also. The tricky part is satisfying your requirements and not having it look like a refinance which will blow us out of the water with Alden Torch. We are working hard on this.” (Ibid.)

This evidence is sufficient to create a triable issue of material fact as to whether the General Partners designed the Forbearance Agreement to be a “refinance agreement in forbearance clothing,” such that it amounts to a breach of the Partnership Agreement. (“Normally, the determination of whether a breach of an obligation is a material breach … is a question of fact,” Brown v. Grimes (2011) 192 Cal.App.4th 265, 277.)

It is so ordered.

Dated: August 11, 2020

Hon. Jon R. Takasugi

Judge of the Superior Court


[1] On February 28, 2019, Amtax dismissed its dissolution cause of action. 

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