Case Name: Republic Properties Corp., et al. v. Mission West Properties, L.P., et al.
Case No.: 1-11-CV-215827 (consolidated with 1-13-CV-255093)

Defendants West Coast Venture Capital, Inc. (“WCVCI”) and Berg & Berg Enterprises, Inc. (“Berg & Berg”) (collectively, “Defendants”) each demur to the fourth amended complaint (“4AC”) filed by plaintiffs Republic Properties Corporation (“Republic”), Mentmore Partners, LLC, Steven Grigg and David Peter (collectively, “Plaintiffs”) in Case No. 1-11-CV-215827. Berg & Berg also demurs to the first amended complaint (“FAC”) filed by Plaintiffs in Case No. 1-13-CV-255093.

On February 21, 2014, Plaintiffs filed the 4AC against Defendants in Case No. 1-11-CV-215827 asserting claims for (1) breach of contract, (2) breach of fiduciary duty, (3) imposition of constructive trust, (4) tortious interference with contract and (5) restitution.

On March 27, 2014, Plaintiffs filed the FAC against Defendants Case No. 1-13-CV-255093 asserting claims for (1) breach of contract and (2) specific performance.

On April 14, 2014, Defendants filed the instant demurrer to the fourth and fifth causes of action in the 4AC on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

On April 16, 2014, Defendants filed the demurrer to the first and second causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (Id.)

Defendants’ Demurrers to the 4AC

Plaintiffs’ fourth cause of action alleges that WCVCI and Berg & Berg interfered with the written limited partnership agreement (the “Agreement”) between Hellyer Avenue Limited Partnership (“HALP”), of which Plaintiffs are all partners, and WCVCI by (1) executing a May 2010 agreement between WCVCI and Mission West Properties, L.P. (“MWPLP”) to extend or refinance a previous loan without Republic’s signature or written approval despite the knowledge that the Agreement required such approval and (2) intentionally inducing MWPLP and Mission West Properties, Inc. (“MWPI”) to refuse to remedy the foregoing breach of the Agreement or allow extension/refinancing of the loan in 2013.

Defendants assert that this claim is deficient because Plaintiffs have failed to plead intentional acts on the part of WCVCI and Berg & Berg which were designed to induce a breach or disruption of the Agreement. (See Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148 [stating that a plaintiff must plead (1) the existence of a valid contract between the plaintiff and a third party, (2) the defendant’s knowledge of that contract, (3) the defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship, (4) actual breach or disruption of the contractual relationship and (5) resulting damage in order to state a claim for intentional interference with the performance of a contract].) The Court finds that this argument is without merit. In pleading that Defendants executed an agreement with MWPLP in order to obtain loan proceeds despite the knowledge that doing so without Republic’s approval violated the Agreement, Plaintiffs have sufficiently pleaded intentional acts on the part of Defendants designed to disrupt that agreement. The tort of intentional interference with a contract “does not require that the actor’s primary purpose be disruption of the contract” and it can exist in circumstances in which “the actor does not act for the purpose of interfering with the contract or desire it but knows that the interference is certain or substantially certain to occur as a result of his action.” (Quelimane v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 56.) Plaintiff has not only pleaded that Defendants knew their conduct would result in the breach of the Agreement, but that they intended for it to do so. (4AC at ¶¶ 50. 51.) This is sufficient to survive demurrer. Accordingly, Defendants’ demurrers to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action are OVERRULED.

As Plaintiffs have validly stated a claim for tortious interference with contract and the viability of the fifth cause of action is dependent on this claim, Defendants’ demurrers to the fifth cause of action for restitution on the ground of failure to state facts sufficient to constitute a cause of action are OVERRULED. (See McBride v. Boughton (2004) 123 Cal.App.4th 379, 388 [“restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct”].)

Berg & Berg’s Demurrer to the FAC

According to the allegations of the FAC, Defendants breached the HALP by failing to make fee payments and net cash flow distributions required thereunder. Berg & Berg asserts that Plaintiffs’ first cause of action for breach of contract is deficient because it is not a party to the HALP Agreement and therefore has no obligations to Plaintiffs arising therefrom. In opposition, Plaintiffs insist that the Court must accept its allegations as true for the purposes of the demurrer, including allegations that Berg & Berg has held itself out as partner in HALP. Plaintiffs further contend that Berg & Berg is bound to its representations in prior cases between the parties involving the same agreement that it was a party in HALP.

While is true as a general matter that Berg & Berg is not a signatory to the HALP Agreement attached to the complaint and “facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence” (Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 767), there is nothing in the Agreement which contradicts Plaintiffs’ allegation that Berg & Berg is a partner in HALP, a signatory to the Agreement. Under Corporations Code section 15910.01, a partner may maintain a direct action against the limited partnership for legal and equitable relief. Further, contrary to Berg & Berg’s assertion in its moving papers, the Court of Appeal in Mission West Properties, L.P v. Republic Properties Corp. (2011) 197 Cal.App.4th 707 did not hold that it was not a partner in HALP.
Finally, Berg & Berg previously argued in the consolidated matter involving the same parties and the HALP Agreement, case. No. 1-11-CV-215827, supra, that it was an indispensable party to the matter. In the absence of fraud, the admissions of an attorney in open court are binding upon the client. (See In re Rebekah R. (1994) 27 Cal.App.4th 1638, 1649.) To the extent that this earlier representation was made in error or is not true, it is beyond the pleadings and thus Court accepts Plaintiffs’ allegation of Berg & Berg’s role in the instant action as true.

Consequently, Berg & Berg’s demurrer to the first cause of action for breach of contract on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.

Berg & Berg asserts the same argument in connection with Plaintiffs’ second cause of action for specific performance and therefore, for the same reasons as articulated above, its demurrer to the second cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.