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Sacramento Suncreek Apartments, LLC v. Cambridge Advantaged Properties II

July 30, 2010


APPEAL from a judgment of the Superior Court of Sacramento County, Loren E. McMaster, Judge. Affirmed. (Super. Ct. No. 05AS02621).

The opinion of the court was delivered by: Hull, J.


California's long-arm statute permits the exercise of personal jurisdiction "on any basis not inconsistent with the Constitution of this state or of the United States." (Code Civ. Proc., § 410.10.) Under the Due Process Clause of the United States Constitution, a nonresident may be subject to personal jurisdiction in the forum state if he has maintained sufficient purposeful contacts with the state, the claims asserted against him arise from those contacts, and the exercise of jurisdiction comports with fair play and substantial justice. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268-269.)

In this matter, plaintiffs assert claims against two nonresident limited partners of an Oregon limited partnership that owned and operated an apartment complex in this state for many years. The claims arise from mold discovered at the apartment complex after it was sold to plaintiffs. However, prior to the assertion of claims against them, the nonresident limited partners, who were themselves limited partnerships, liquidated their interests in the Oregon limited partnership and dissolved.

Despite their dissolutions, the nonresident limited partners specially appeared in this action and moved to quash service and to dismiss. The trial court concluded it lacks personal jurisdiction over the limited partners and granted the motion. Plaintiffs appeal.

We agree there is no personal jurisdiction under the circumstances presented. The only contact between the nonresident limited partners and this state was their investment in a partnership that operated in this state, and plaintiffs' claims do not arise from that investment but from the partnership's business. We therefore affirm the order granting the motion to quash and to dismiss.

Facts and Proceedings

Defendant Cambridge Advantaged Properties II (CAP II) was a limited partnership formed on June 25, 1985, under the laws of the State of Delaware. It had approximately 3,000 limited partners who contributed over $35 million in assets. Defendant Related and Cambridge Associates Limited Partnership (RCALP) was also a Delaware limited partnership that served as the general partner for CAP II. (CAP II and RCALP are hereafter referred to collectively as defendants.)

Defendants invested as limited partners in other limited partnerships (project partnerships) that purchased or leased and operated apartment complexes for low and moderate income tenants. One such project partnership was Suncreek-268, an Oregon limited partnership, which owned and operated Sacramento Suncreek Apartments (Suncreek Apartments), an apartment complex located in Sacramento. Defendants invested as limited partners in Suncreek-268 on or about December 20, 1985. At the time, all construction on the apartment complex had been completed and it was operating and producing income.

Except for their ownership interest in Suncreek-268, defendants owned no property in California. Their offices and personnel were located in New York, New York, and they conducted no other business in California.

On June 29, 2001, Suncreek-268 sold Suncreek Apartments to plaintiff Sacramento Suncreek Apartments, LLC (Sacramento Suncreek).

By 2001, most of the limited partnership interests held by defendants in the various project partnerships, including Suncreek-268, had been liquidated, and defendants began winding up their affairs.

In 2002, mold was discovered at Suncreek Apartments and tenants began filing suit against Sacramento Suncreek and Suncreek-268. The apartments were vacated in 2003, and the lawsuits were settled in 2004 and 2005. Sacramento Suncreek and its administrative member, plaintiff Commercial Ventures, Inc. (Commercial Ventures), suffered losses as a result. (Sacramento Suncreek and Commercial Ventures are hereafter referred to collectively as plaintiffs.)

On June 17, 2005, plaintiffs initiated this action against Suncreek-268 and others alleging, among other things, negligent construction of the Suncreek Apartments, breach of contract, and fraud. Plaintiffs later added defendants as Doe defendants on their claims for negligent construction, breach of implied warranty, breach of contract, and equitable indemnity.

On September 23, 2005, CAP II filed a Certificate of Cancellation in Delaware, the final step in winding up its affairs. RCALP filed a Certificate of Cancellation on May 23, 2007. At the time of such filings, neither defendant was aware of plaintiffs' lawsuit or the alleged mold problems.

On September 25, 2008, defendants specially appeared and moved to quash service and to dismiss the complaint as to them. They argued they can no longer be sued as legal entities and the trial court lacks personal jurisdiction over them.

Plaintiffs opposed the motion, arguing defendants had sufficient minimum contacts to support personal jurisdiction. Plaintiffs further argued that, despite dissolution of defendants, plaintiffs may recover from defendants' partners, at least to the extent of distributions they received upon dissolution. Plaintiffs also requested leave to amend the complaint.

The trial court granted the motion to quash and to dismiss. The court concluded plaintiffs must first proceed against defendants in the Delaware Court of Chancery to set aside the dissolutions. The court also concluded defendants lacked sufficient minimum contacts to allow the exercise of personal jurisdiction over them. Finally, the court denied plaintiffs' request for leave to amend.


I. Preliminary Matters

Before addressing the merits of plaintiffs' appeal, we must consider two preliminary matters. Defendants move to strike two portions of plaintiffs' opening brief and one document in the joint appendix. They also request judicial notice of various items. We consider first the motion to strike.

As discussed more fully below, on pages 11 through 16 of their opening brief, plaintiffs argue that, because the limited partners of Suncreek-268 would be subject to taxation in California on income received from the partnership, they are subject to personal jurisdiction in this state as well. Defendants argue this "taxable jurisdiction" theory was not pursued below and therefore may not be raised on appeal. They move to strike that portion of plaintiffs' brief. However, as explained more fully below, plaintiffs' argument does not introduce a new theory and therefore is not precluded. We deny that portion of defendants' motion to strike.

Defendants also move to strike footnote 6 on page 21 of plaintiffs' opening brief. There, plaintiffs assert that, following the order granting the motion to quash, they learned defendants were directly involved in the decision of Suncreek-268 to sell Suncreek Apartments. This information was not before the trial court at the time of its ruling. Plaintiffs do not oppose this portion of defendants' motion to strike, and we grant the motion as to footnote 6.

Finally, defendants move to strike a portion of the joint appendix which, they assert, was not before the trial court and was inadvertently included in the appendix. The joint appendix contains two limited partnership agreements for Suncreek-268. The first was filed on November 15, 1984, and listed Robert D. Randall as the only partner. The second, dated December 20, 1985, is an amended and restated partnership agreement listing the predecessors of defendants as the only limited partners and Randall as the general partner. Defendants contend this second partnership agreement had not been filed in the trial court in connection with the motion to quash.

Although defendants may be correct that the amended partnership agreement was not filed in the trial court, it is clear the agreement was before the court for purposes of defendants' motion. Plaintiffs specifically referred to the amended agreement in their briefing below, and defendants did not object to that reference at the time. It is that document which, in fact, establishes defendants' ownership interest in Suncreek-268, which defendants do not dispute. Defendants have therefore forfeited any claim that the amended agreement is not properly part of the record on appeal, and we deny defendants' motion to strike as to the amended partnership agreement.

Defendants seek judicial notice of various Delaware and Oregon statutes (exhibits A through F). We grant the request as to those items. (Evid. Code, § 452, subd. (a).) Defendants also request judicial notice of portions of the record below that are not included in the joint appendix (exhibits G and H). We grant the request as to those items as well. (Evid. Code, § 452, subd. (d).)

II. Subject Matter Jurisdiction

Plaintiffs contend the trial court erred in concluding they must proceed against defendants in the Delaware Court of Chancery. In its ruling, the court explained an action to set aside a partnership dissolution cannot proceed in California, "because the law of the state where the limited partnership was formed governs its organization and internal affairs." Plaintiffs argue this conclusion was incorrect for two reasons: "First, the internal affairs doctrine does not apply to claims by ...

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