Property Trust v. Orange Mall Development Assocs.

Filed 10/16/06 1680 Property Trust v. Orange Mall Development Assocs. CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from orders of dismissal of the Superior Court of Los Angeles County, Conrad A. Aragon, Judge. Affirmed in part, reversed in part.

Law Offices of Richard A. Love; Richard A. Love, Beth A. Shenfeld, for Plaintiffs and Appellants.

Dwyer, Daly Brotzen & Bruno, LLP, Toni Rae Bruno, Ethan J. Tyer, for Defendants and Respondents Orange Mall Development Associates, Shoprop Associates, and Anne P. Newman; Seyfarth Shaw LLP and T. Larry Watts for Defendants and Respondents Ampton Investments, Inc. and Laurence N. Strenger.

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Plaintiffs and appellants 1680 Property Trust, Michael L. Epstein Trust, and Stephen Ellis Gordon and Linda S. Gordon Revocable Trust[1] (collectively plaintiffs) appeal the dismissal of their action against defendants and respondents Ampton Investments, Inc. (Ampton), and Laurence N. Strenger (collectively the Ampton defendants), Orange Mall Development Associates (OMDA), Shoprop Associates (Shoprop), and Anne P. Newman (Ms. Newman) (OMDA, Shoprop, and Ms. Newman are sometimes referred to collectively as the Newman defendants)[2], after the trial court sustained, without leave to amend, the Newman defendants’ demurrer to the second amended complaint and the Ampton defendants’ demurrer to the third amended complaint.

We hold as follows: Plaintiffs’ second amended complaint fails to state a cause of action for breach of fiduciary duty against Ms. Newman as an individual, as a “de facto” general partner of OMDA and Shoprop, or for personal liability as trustee of the Newman Family Trust (Newman Trust)[3] the general partner of OMDA and Shoprop. Plaintiffs’ second amended complaint fails to state a cause of action for breach of fiduciary duty or an accounting against OMDA and Shoprop. We therefore affirm the trial court’s order of dismissal based on its order sustaining, without leave to amend, the demurrer of the Newman defendants. Plaintiffs’ third amended complaint states a cause of action against the Ampton defendants for aiding and abetting a breach of fiduciary duty by the Newman Trust. Accordingly, we reverse the order of dismissal based on its order sustaining the demurrer of the Ampton defendants.

BACKGROUND[4]

A. The Parties

OMDA and Shoprop are limited partnerships that once owned the Mall of Orange (the Mall), a retail center located in Orange, California. Plaintiffs were limited partners of OMDA and Shoprop. Before October 1995, the general partners of OMDA and Shoprop were the Newman Trust and LeRoy H. Brettin. Harry Newman, Jr. was the sole trustee of the Newman Trust until his death on October 19, 2001. After his death, Ms. Newman became the successor trustee of the Newman Trust.

Laurence Strenger is a California attorney who was Harry Newman, Jr.’s personal lawyer and who represented Mr. Newman in various business interests. Mr. Strenger is a shareholder of or principal in Ampton, a California corporation.

B. The Nomura Transaction

In October 1995, LeRoy H. Brettin assigned his interests in OMDA and Shoprop to Newman Shopping Center Developments, Inc., which became a general partner of both OMDA and Shoprop. Before March 1997, OMDA and Shoprop owned 100% of the Mall, which was in a strong financial position, with an approximate total debt obligation of $10 million. By letters dated February 10, 1997 and March 3, 1997, the Newman Trust informed plaintiffs that the Mall was being refinanced in order to retire an existing 10% floating rate mortgage with a new $28,250,000 mortgage at a 12-year fixed interest rate of 8% and a 30-year amortization rate, to obtain additional capital to re-tenant and redevelop the Mall, and to enable OMDA and Shoprop to acquire the partnership interests formerly held by LeRoy H. Brettin and transferred to Newman Shopping Center Developments, Inc. The March 3, 1997 letter solicited the limited partners’ approval for the transaction and disclosed that as part of the refinancing, the OMDA and Shoprop partnership agreements would be amended to assign OMDA’s and Shoprop’s interests in the Mall to a new partnership known as H.M.A. Enterprises -- Mall of Orange, L.P. (HMA), in exchange for a corresponding percentage ownership interest in HMA, and that a new entity named N.T.L. Mall of Orange, Inc. (NTL), a Delaware corporation 100% owned by the Newman Trust, would be the general partner of HMA.

The March 3, 1997 letter further stated that the proposed lender for the transaction was Nomura Asset Capital Corporation (Nomura), which would make a $28,250,000 loan to HMA, through a combination of a first mortgage, mezzanine debt and capital loan, and that the allocation of the loans among the three financing mechanisms was to be determined by the Mall leasing results as of August 31, 1997. The letter also disclosed that the dilution in the OMDA and Shoprop partners’ ownership interests, after the financing, would result in Nomura obtaining between a 30% and 50% equity interest in HMA, depending on the Mall’s leasing results; that Harry Newman, Jr. would remain in control of HMA; and that Nomura would have the usual powers in the event of default.

By letter dated March 21, 1997, the Newman Trust informed plaintiffs that the amount of the loan would be $26,000,000, allocated as $22,025,151.72 for the senior debt/first mortgage, $1,790,427.34 for the mezzanine loan, and $2,184,420.94 for the capital loan; and that Nomura’s partnership interest would be between 40% to 60%.

Plaintiffs allege that defendants concealed, inter alia, the following information concerning the Nomura transaction: Simultaneously with the refinancing of the Mall, the Newman Trust, on behalf of a different limited partnership in which plaintiffs had no interest, entered into a separate transaction with Nomura to refinance the Sea-Tac mall, a retail center in the state of Washington in which plaintiffs had no ownership interest; Nomura was unwilling to refinance the Sea-Tac mall unless it also made the loan to refinance the Mall; Nomura was accorded the right to convert portions of the loan balance for the Mall into an equity ownership interest in HMA, thereby diluting plaintiffs’ equity interest in HMA beyond that represented, and plaintiffs’ interests in HMA would be subordinate to the equity interest acquired by Nomura; Nomura was accorded a buy-sell right, exercisable after September 1, 1998, to set a price at which it could either sell its equity interest in HMA to the other partners or purchase the remaining HMA partnership interests; plaintiffs would lose certain voting rights concerning the Mall; and the Ampton defendants were paid an $850,000 brokerage fee out of the proceeds of the Nomura loan for the Mall. Plaintiffs allege that they would not have approved the transfer of the OMDA and Shoprop interests in the Mall had this information been disclosed.

Plaintiffs approved necessary steps in the Nomura refinancing of the Mall, and the transaction closed on March 26, 1997. After the Nomura transaction closed, the Newman Trust, OMDA, Shoprop, and the Ampton defendants attempted to refinance the Mall. On October 11, 1999, Nomura exercised its right to reallocate the loan balances and convert them to partnership interests in HMA. The first trust deed mortgage balance was reduced from $21,662,184.45 to $15,500,000. The mezzanine loan balance became $1,255,500 from $2,113,361, “converted into 241.1 Class B units in HMA and cancelled, and the Class B units were assigned to Partnership Acquisition Trust XXVI (PAT XXVI) which was wholly owned or controlled by Nomura.” The capital loan was adjusted to $9,728,016.25 from $2,707,970, “converted to 1,945.6 Class C units in HMA and cancelled and the Class C units were assigned to PAT XXVI.” On October 28, 1999, Nomura securitized the $15,500,000 first trust deed mortgage and sold it to LaSalle Bank National Association. On October 16, 2000, Nomura invoked the buy-sell provision of the 1997 refinancing transaction (that had been undisclosed to plaintiffs), offering to sell its Class B and C units or buy the interest it did not own for $7,500,000. To prevent Nomura from obtaining ownership of the Mall through exercise of the buy-sell provision, defendants filed a lawsuit against Nomura on December 8, 2000.

By letter dated December 12, 2000, Harry Newman, Jr., as trustee of the Newman Trust, advised plaintiffs of Nomura’s attempt to exercise its buy-sell right, the $7,500,000 offer price, and that a lawsuit had been filed in order to prevent Nomura from obtaining ownership of the Mall. The letter stated that if Nomura’s buy-sell transaction closed, plaintiffs would receive nothing for their equity interests held by OMDA and Shoprop in HMA. The letter also stated that the Mall was believed to be worth $3,000,000 more than the $15,500,000 first mortgage.

After the death of Harry Newman, Jr. on October 19, 2001, Anne P. Newman became an unelected “de facto” general partner of OMDA and Shoprop. She became the trustee of the Newman Trust, which was the general partner of those entities. The partnership agreements for those entities provided that the partnerships were to dissolve upon the death of the general partner and new partnerships would be formed in which the remaining partners would elect a new general partner.

In December 2001, the Newman Trust and the Ampton defendants entered into a settlement agreement, presumably with Nomura, later memorialized in a writing dated March 18, 2002. The terms of the settlement were as follows: By March 20, 2002, Nomura was to be paid $5,850,000 as the redemption price for certain of its equity interest in HMA; by March 20, 2002, Nomura was to be paid a $750,000 deposit (denominated as the “Sea-Tac deposit”) pursuant to a loan purchase agreement enabling the Newman Trust to purchase $52 million in obligations owed by Sea-Tac to Nomura for a total purchase price of $38,750,000; defendants would deliver to Nomura a grant deed to the Mall and a judgment of foreclosure in favor of Nomura in the civil action, both of which would be returned to defendants unless there was not timely payment of the $5,850,000 redemption price and/or the $750,000 Sea-Tac deposit.

On February 25, 2002, HMA entered into an agreement to sell the Mall to a buyer for a purchase price of $24,831,164. The terms of the transaction included the buyer’s assumption of the $15,172,634 first mortgage, paying HMA $7,800,000 in cash, paying Ampton a $1,100,000 fee in connection with the sale of the Mall, paying $300,000 to the Newman Trust’s attorneys, and paying $459,000 to a real estate broker for the Newman Trust. Upon learning of the fees to be paid to the Ampton defendants, plaintiffs objected to the fees and requested a written justification for those fees. Plaintiffs contend that the Newman Trust and Ms. Newman ignored this request. In April 2002, the prospective buyer of the Mall demanded and received a $635,000 reduction in the purchase price. The sale closed on April 4, 2002.

Despite requests thereafter, plaintiffs did not receive certain information concerning the transaction. In 2003, the Sea-Tac Mall transaction was completed, but neither HMA, OMDA, nor Shoprop was repaid a $750,000 Sea-Tac deposit made out of the proceeds of the sale of the Mall.

C. Procedural History

On September 27, 2004, plaintiffs filed their complaint, alleging causes of action for breach of fiduciary duty and an accounting. The Ampton defendants filed a demurrer and motion to strike. While that motion was pending, plaintiffs filed a first amended complaint, which alleged the same two causes of action. The Newman defendants and the Ampton defendants filed separate demurrers and motions to strike the first amended complaint. After the hearing on the demurrers and motions to strike, the trial court sustained both demurrers with leave to amend.

On April 11, 2005, plaintiffs filed a second amended complaint alleging the same two causes of action for breach of fiduciary duty and an accounting. The second amended complaint added Anne P. Newman as a named defendant in her capacity as trustee of the Newman Trust. The Newman defendants and the Ampton defendants filed separate demurrers and motions to strike the second amended complaint. After the hearings on the demurrers and motions to strike, the trial court sustained the demurrer of the Ampton defendants with leave to amend, and denied their motion to strike. The trial court sustained the demurrer without leave to amend as to the Newman defendants, overruled the demurrer of the Newman Trust, and denied the Newman defendants’ motion to strike. The complaint was amended by interlineation to show that the correct designation of the Newman Trust to be Anne Newman as successor trustee of the Newman Family Trust.

Plaintiffs filed a third amended complaint on July 8, 2005, alleging the same causes of action for breach of fiduciary duty and an accounting. The Ampton defendants filed a demurrer and motion to strike, and the trial court sustained the demurrer without leave to amend. Orders of dismissal as to the Newman defendants and Ampton defendants were filed on August 25, 2005.

DISCUSSION

A. Standard of Review

“On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment. [Citation.]” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) The legal sufficiency of the complaint is reviewed de novo. (Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790.)

B. Breach of Fiduciary Duty

Plaintiffs appeal the dismissal of their breach of fiduciary claims against Ms. Newman, OMDA, Shoprop, and the Ampton Defendants. They contend that defendants breached fiduciary duties owed to them by misrepresenting and failing to disclose material information concerning, and having conflicts of interest with respect to, the 1997 Nomura refinancing that resulted in the conversion of their interests in OMDA and Shoprop into non-voting, diluted shares of HMA, the successor owner of the Mall; accorded Nomura the right to convert a portion of the loan into an equity interest in HMA and to exercise a buy-sell provision that enabled it to force a sale of the Mall; and that culminated in a distressed sale of the Mall at a price substantially lower than its actual value and paying inappropriate fees to Ampton. Plaintiffs further claim that defendants failed to comply with provisions of the OMDA and Shoprop limited partnership agreements concerning replacement of the Newman Trust as the general partner after the death of Harry Newman, Jr.

To state a cause of action for breach of fiduciary duty, a plaintiff must allege (1) the existence of a fiduciary duty, (2) breach of that duty, and (3) damage proximately caused by the breach of fiduciary duty. (Mendoza v. Rast Produce Co., Inc. (2006) 140 Cal.App.4th 1395, 1405.)

1. Ms. Newman

Plaintiffs contend the trial court erred by sustaining the demurrer, without leave to amend, as to Ms. Newman individually. They maintain that she is personally liable for breach of fiduciary duty as a “de facto” general partner of OMDA and Shoprop because she assumed the role (as successor trustee of the Newman Trust) of general partner of OMDA and Shoprop in violation the terms of the partnership agreements. They allege that the terms of the Shoprop and OMDA partnership agreements provided that both partnerships be dissolved upon the death of the general partner, and that the agreements further provided that upon the death of Harry Newman, Jr., the Newman Trust’s interests in OMDA and Shoprop would be converted to Class B limited partnership interests, that a new partnership be formed, and that the remaining partners elect a new general partner. They further allege that these events did not occur upon the death of Harry Newman, Jr. in October 2001, but that after October 19, 2001, Ms. Newman “represented to plaintiffs and others that Newman Trust remained the general partner of OMDA and Shoprop” and that she “held herself out, individually, as the trustee of the Newman Trust, and as the General Partner of OMDA and Shoprop” in contravention of the terms of the partnership agreements. Plaintiffs further contend that Ms. Newman is personally liable under Probate Code section 18002 for intentional torts she committed as successor trustee of the Newman Trust.

Plaintiffs’ second amended complaint states no cause of action for breach of fiduciary duty by Ms. Newman as an individual. Ms. Newman as an individual was not a partner or co-owner with plaintiffs in any entity in this action, nor was she in her capacity as an individual a party to any agreement at issue. She was alleged to be the trustee of the Newman Trust after October 19, 2001. The Newman Trust was the sole shareholder of the entity that was the general partner of HMA, and the Newman Trust was the general partner of OMDA and Shoprop.

Plaintiffs allege no facts that establish the existence of any duty owed to them by Ms. Newman individually in connection with the 1997 Nomura financing, the 1999 dilution of their partnership interests, or the October 2000 exercise by Nomura of its buy-sell rights. Ms. Newman did not become trustee of the Newman Trust, the general partner of OMDA and Shoprop, until after these events, and she accordingly breached no duty to plaintiffs in connection with these events.

Plaintiffs fail to allege how Ms. Newman’s succession to her deceased husband as trustee of the Newman Trust in October 2001 constituted a breach of fiduciary duty. Plaintiffs allege that the terms of the OMDA and Shoprop partnership agreements did not allow Ms. Newman, in her capacity as trustee, to assume the duties of the general partner of OMDA and Shoprop, and that Ms. Newman “refused to have members of the partnerships vote on the replacement general partner after Harry Newman’s death.” But the general partner was the Newman Trust, not Harry Newman, Jr. Even if Ms. Newman was some sort of “de facto” partner, plaintiffs do not allege that they objected to her succession or sought to invoke their right under the partnership agreements to elect a replacement general partner. They also do not allege how they were damaged by Ms. Newman assuming the role of general partner, or if she can be viewed as having done so.

Plaintiffs allege that Ms. Newman assumed her role long after the events that led to the Nomura litigation. Plaintiffs allege no facts that establish any breach of duty by Ms. Newman in connection with the December 2001 settlement of the Nomura litigation. There is no indication that given what had occurred before and the nature of the litigation, the settlement itself was inappropriate. That the settlement encompassed claims relating to two different loan transactions with Nomura does not render it necessarily unfair. Plaintiffs do not allege that in connection with the settlement, Ms. Newman knowingly misappropriated monies from HMA, OMDA, or Shoprop and transferred them to other entities or that she authorized the inappropriate expenditure of funds owned by HMA, OMDA or Shoprop for or on behalf of other entities.

Similarly, plaintiffs allege no facts that establish a breach of fiduciary duty by Ms. Newman in connection with the 2002 “distress sale” of the Mall under the circumstances that existed at the time of the sale. The sale itself was triggered by Nomura’s exercise of the buy-sell rights accorded it under the terms of the 1997 financing transaction. Plaintiffs do not allege that Ms. Newman could, in 2002, have prevented the sale of the Mall, nor do they allege that the Mall was sold at a price below its 2002 market value. Although plaintiffs allege that the buyer of the Mall “demanded and received a $635,000 reduction in the purchase price,” they do not allege that this price reduction was unreasonable, unfair, or anything but the result of an arm’s length negotiation.

Plaintiffs claim that Ms. Newman and the Newman Trust refused to provide them with documents and information they requested concerning the sale of the Mall; however, they do not allege that the result would or could have been different had they been given the documents they sought. They thus fail to allege any damage as a result of the Newman Trust’s refusal of their request for information. Plaintiffs allege that the Newman Trust disregarded their objection to a $1,100,000 fee paid to the Ampton defendants as part of the sale of the Mall; however, they do not allege that the fee was not earned or legally owing, or that Ms. Newman paid Ampton with the knowledge that Ampton was not entitled to the fee.

Probate Code section 18002 does not provide a basis for imposing liability on Ms. Newman individually. That statute provides, “A trustee is personally liable for torts committed in the course of administration of the trust only if the trustee is personally at fault.” (Probate Code, § 18002.) Under Probate Code section 18002, a trustee may be liable for obligations arising out of ownership of property only if the trustee personally acted or failed to act intentionally or negligently. (18 Cal. Law Rev. Com. Rep. (1986) pp. 588-589, fns. omitted.) For reasons discussed, plaintiffs failed to demonstrate any personal fault on the part of Ms. Newman. The trial court did not err by granting the demurrer without leave to amend as to Ms. Newman.

2. OMDA and Shoprop

a. Derivative Action

Plaintiffs contend the trial court erred by sustaining the demurrer, without leave to amend, as to the breach of fiduciary duty cause of action against OMDA and Shoprop. In so doing, plaintiffs “misconceive[] the nature of a partnership by erroneously assuming that a partnership, including a limited one, is a separate legal entity which, like a corporation, is distinct from the members thereof.” (Bedolla v. Logan & Frazer (1975) 52 Cal.App.3d 118, 127.) “‘In the State of California . . . a partnership, unlike a corporation, is considered to be, not a legal entity, but an association of individuals.’ [Citation.]” (Ibid.) “Partnership is a fiduciary relationship, and partners are held to the standards and duties of a trustee in their dealings with each other.” (BT-I v. Equitable Life Assurance Society (1999) 75 Cal.App.4th 1406, 1410.) Plaintiffs’ cause of action for breach of fiduciary duty and injury to their interests as limited partners must therefore be asserted in their action as individuals against the general partner or, in the event the injury was to the partnership as a whole, in a derivative action on behalf of the partnership. (Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 428-430 (Everest).) Plaintiffs have cited no authority indicating they can sue OMDA and Shoprop for a breach of fiduciary duty. Plaintiffs did not seek to bring a derivative action on behalf of the partnerships as a whole, nor did the second amended complaint allege the necessary conditions for instituting and maintaining such an action. (Corp. Code, § 15702.) The demurrer as to OMDA and Shoprop was therefore properly granted.

b. Accounting

Plaintiffs appeal the dismissal of their accounting cause of action against OMDA and Shoprop.[5] The right to an accounting is dependent upon the validity of a plaintiff’s underlying claims. (Duggal v. G.E. Capital Communications Services, Inc. (2000) 81 Cal.App.4th 81, 95.) Because plaintiffs have no breach of fiduciary duty claim against OMDA and Shoprop, their cause of action for an accounting necessarily fails.

3. Ampton Defendants

Plaintiffs contend their third amended complaint states a cause of action against the Ampton defendants for aiding and abetting the Newman Trust’s alleged breaches of fiduciary duty. To state a claim for liability based on aiding and abetting the commission of intentional tort, plaintiffs must allege that the Ampton defendants knew the Newman Trust’s conduct constituted a breach of duty and that they gave substantial assistance or encouragement to so act, or that the Ampton defendants gave substantial assistance to the Newman Trust in accomplishing a tortious result and the Ampton defendants’ own conduct, separately considered, constituted a breach of duty to plaintiffs. (See Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 846; Rest.2d Torts (1979) § 876, subds. (b), (c).)

When analyzing the sufficiency of a claim for aiding and abetting a breach of fiduciary duty, a reviewing court must first “‘identify precisely the breach of fiduciary duty for which [the plaintiffs] seek[] to hold [the defendants] liable.’ [Citation.]” (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1149 (Casey).) “[U]nder California law an aider and abettor must have ‘actual knowledge of the primary violation.’” (Id. at p. 1148, quoting Nielson v. Union Bank of California, N.A. (C.D. Cal. 2003) 290 F.Supp.2d 1101, 1119.)

Plaintiffs allege in their third amended complaint that the Newman Trust concealed from them material terms of the Nomura transaction, including alleged conflicts of interest that existed between the Newman Trust and plaintiffs; that the Nomura financing transaction was entered into so that the Newman Trust could also refinance the Sea-Tac mall; that Nomura would have the right to further dilute plaintiffs’ interests beyond the disclosed dilution and the right to exercise a buy-sell provision enabling Nomura to set a price at which it could either sell its equity interest or purchase the remaining equity interests in HMA; and plaintiffs would lose any voting rights concerning the Mall. Plaintiffs claim that had they known these facts, they would not have consented to the transaction. Plaintiffs allege that the Ampton defendants “knew of, and knowingly participated in” the “omissions made by defendants in conjunction with obtaining plaintiffs’ uninformed approval of the Nomura transaction”; “[t]he failure or refusal by defendants to pay what was and is owed to plaintiffs[] by virtue of their limited partnership interests in OMDA and Shoprop”; “[t]he transfer, conversion, and/or appropriation by defendants to themselves and to their benefit of the assets or property owned by or due to OMDA and Shoprop, and the self-dealing(s) by defendants to the detriment of plaintiffs”; and “[t]he waste and unreasonable disposal by defendants of assets and moneys of OMDA and Shoprop without good or valuable consideration of reasonable business basis, in bad faith and without reasonable benefit to the limited partnerships, including but not limited to, the payment and allowance of exorbitant fees to Ampton, Strenger . . . .” The third amended complaint also alleges that the Ampton defendants “provided substantial assistance and/or encouragement” by “[c]oncealing, or advising defendants to conceal, from plaintiffs the actual terms of the Nomura transaction”; “[c]oncealing, or advising defendants to conceal, from plaintiffs the information or facts omitted from the letters of February 11, 1997, March 3, 1997, and March 21, 1997; and by “[n]egotiating, and attempting to extort exorbitant fees from, re-financing attempts after March 1997. . . . “ These allegations are sufficient to state a cause of action against the Ampton defendants for aiding and abetting the Newman Trust’s concealment of material terms of a partnership transaction.

Citing Casey, supra, 127 Cal.App.4th 1138, the Ampton defendants argue that plaintiffs’ allegations are insufficient to establish aiding and abetting liability because they do not allege that the Ampton defendants had actual knowledge of a specific tort that the Newman Trust sought to accomplish as a result of its non-disclosure. Casey, which involved the duties owed by a bank to nondepositors, is distinguishable. In that case, the trustee of a bankrupt corporation sued a bank for aiding and abetting a fraudulent scheme by the corporation’s officers to loot corporate assets, and the trial court sustained the bank’s demurrer for failure to state a cause of action. The court of appeal affirmed the order sustaining the demurrer on the ground that the bank could not be held liable for aiding and abetting a depositor’s breach of fiduciary duty absent actual knowledge of the underlying wrong the depositor was perpetrating. (Id. at p. 1141.) The court reasoned that under California law, a bank owes no duty to nondepositors to investigate or disclose suspicious activities on the part of an account holder, and that the bank’s “alleged knowledge of . . . suspicious account activities -- even money laundering -- without more, does not give rise to tort liability.” (Id. at p. 1151.) The court concluded that because California law limits the duties owed by a bank to nondepositors, in order to overcome these limitations, a plaintiff seeking to hold a bank liable for aiding and abetting an account holder’s wrongdoing must allege that the bank had actual knowledge that the account holder was misappropriating funds. (Id. at pp. 1151-1152.)

No such limitations of duty are involved here. In this case, the “primary violation“ alleged was the general partner’s concealment of material terms of a transaction involving partnership interests and property. (Callison and Sullivan, Partnership Law and Practice (2006), § 12:5 [“The duty of loyalty includes a duty to disclose all material facts concerning the partnership business, together with all facts connected with transactions involving partnership interests and property”]; Leff v. Gunter (1983) 33 Cal.3d 508, 514 [“‘”[I]n 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.]’”].) The third amended complaint alleges that the Ampton defendants knew of the concealment and “provided substantial assistance and/or encouragement” by “advising defendants to conceal[] from plaintiffs the actual terms of the Nomura transaction.” These allegations are sufficient to state a cause of action for aiding and abetting the breach of a fiduciary duty[6]. The trial court erred by granting the demurrer of the Ampton defendants as to the breach of fiduciary duty cause of action.

C. Leave to Amend

Citing the trial court’s minute order dated March 21, 2005, plaintiffs claim that the trial court imposed unreasonable restrictions on their ability to amend after sustaining the demurrer of the Newman defendants to the first amended complaint and sustaining the demurrer of the Ampton defendants to the second amended complaint. The March 21, 2005 minute order states in relevant part as follows: “ The court hears argument and sustains the Newman Demurrers with leave to amend. Amendment to include the Breach of Fiduciary Duty and Accounting Causes of Action. . . . . . . The court hears argument and sustains the Strenger Demurrers. No additional causes of action shall be included as to these defendants.”

The March 21, 2005 minute order imposes no restriction on plaintiff’s ability to amend the complaint with respect to the claims asserted against the Newman defendants. Although the minute order states that plaintiffs could add no additional causes of action against the Ampton defendants, the transcript from the June 21, 2005 hearing makes clear that plaintiffs were not seeking to amend the second amended complaint to add a new legal theory of recovery against the Ampton defendants. When the trial court stated that plaintiffs would be accorded the opportunity to amend the second amended complaint to include specific allegations as to how the Ampton defendants facilitated the Newman Trust’s alleged breaches of fiduciary duty, the following exchange occurred : [PLAINTIFFS’ COUNSEL]: . . . What I would suggest, your honor, is this. I’m going to leave all the allegations as they are. I’m going to add a third cause of action specifically naming Ampton and Strenger and I’ll provide the allegations the court has requested within the context of that cause of action. [THE COURT]: No, I don’t want you to add a new cause of action because then we’ll have a new theory. [PLAINTIFFS’ COUNSEL]: No, no. Same theory, your honor. [THE COURT]: Well, all I want you to do is just add a couple of paragraphs in here to show how Ampton and Strenger participated in Harry’s alleged malfeasance and Harry’s concealments and his double dealing and everything else that’s alleged in the complaint. I don’t want a new cause of action and I don’t want a complete overhaul of this pleading. So just amend the two causes of action but insert those paragraphs.”

Plaintiffs have not indicated what they would have added or changed in the amended pleading absent the trial court’s alleged restrictions. The record discloses no abuse of discretion by the trial court in denying plaintiffs an opportunity to amend their first and second amended complaints. (Hendy v. Losse (1991) 54 Cal.3d 723, 742.)

DISPOSITION

The order of dismissal is reversed as to the Ampton defendants. The order of dismissal is affirmed as to Ms. Newman, OMDA and Shoprop. The parties will bear their respective costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

MOSK, J.

We concur.

TURNER, P. J. KRIEGLER, J.

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[1] On May 10, 2006, we granted plaintiff’s motion to substitute as a party Ruth Ann Runnels Lamonica, Trustee of the Lamonica Family Trust, in place of Joseph B. Lamonica, deceased, a former trustee of the Stephen Ellis Gordon and Linda S. Gordon Revocable Trust.

[2] The Ampton defendants and the Newman defendants are sometimes referred to collectively as the defendants.

[3] The trial court overruled the demurrer of the Newman Trust to plaintiffs’ second amended complaint. The Newman Trust, designated as Anne Newman as successor trustee of the Newman Trust, is not a party to this appeal.

[4] The background is a summary of the allegations of the second amended and third amended complaints.

[5] Plaintiffs’ opening brief does not address the dismissal of their accounting cause of action against the Ampton defendants, and that issue is accordingly abandoned. (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216-217.)

[6] Because we conclude that plaintiffs’ allegations are sufficient to state a claim for aiding and abetting a breach of fiduciary duty (see Neilson v. Union Bank (C.D. Cal. 2003) 290 F.Supp.2d 1101), we need not address plaintiffs’ argument that they stated a claim against the Ampton defendants as “de facto” partners.