(Alameda County Super. Ct. Nos. RG05-247811, RG06-252359, RG06-252362) Trial Judge: Hon. Jon S. Tigar
The opinion of the court was delivered by: Reardon, Acting P.J.
CERTIFIED FOR PARTIAL PUBLICATION*fn1
In this fraud in the inducement action against the general partners of a limited partnership, a jury found in favor of respondent George J. Miske, as assignee of a limited partner's fraud claim, and the court entered judgment for $1,408,212.07, including compound prejudgment interest. Following the denial of posttrial motions, the court awarded Miske substantial attorney fees, based on the attorney fee provision in the underlying limited partnership agreement (LPA). Now appellant*fn2 Coxeter challenges the judgment against him because the jury found that he did not participate in or ratify the fraud perpetrated on a limited partner by his co-general partner, appellant Bisno. He relies principally on Kazanjian v. Rancho Estates, Ltd. (1991) 235 Cal.App.3d 1621 (Kazanjian), in which the reviewing court held that an innocent general partner is not personally liable to a limited partner for the wrongdoing of a co-general partner. We affirm the judgment against Coxeter, concluding that for purposes of ascertaining his liability for Bisno's wrongdoing under the rule of Kazanjian, we treat the defrauded limited partner in question as an innocent third party.
All appellants challenge the award of attorney fees to Miske and the compounding of prejudgment interest. We reverse the attorney fee award because the limited partner's assignment to Miske of its fraud claim did not pass to him any rights under the LPA. And finally, we affirm the compound prejudgment interest award on grounds of estoppel.
A. Formation of and Investment in Limited Partnerships
In 1985, appellants James Coxeter, Robert Bisno and TAFC formed two California limited partnerships for the purpose of redeveloping certain property in downtown Berkeley: appellant TACI and Trans-Action Commercial Mortgage Investors, Ltd. (TACMI). Both companies were private placement limited partnerships. Coxeter, Bisno and TAFC were the general partners of the two limited partnerships.
Bisno was responsible for managing the Berkeley project; Coxeter managed projects in Southern California and other parts of the state. Bisno approved the promotional work for the Berkeley project, handled the advertising, flyers and brochures on behalf of the partnerships, and approved and oversaw distribution of a private placement memorandum. As well, Bisno solicited potential investors, took them to the site, gave tours of the property, and made presentations encouraging them to invest.
In early 1986, Bisno transferred $470,000 from TACMI for his personal use to purchase a personal residence, without the knowledge or consent of the other partners.
Then in February and April 1987, Bisno met with Makoto Moriwaki, the president and owner of the Hong Kong company Haldir, Ltd. (Haldir) to discuss the partnerships. Moriwaki traveled each time to Berkeley, and visited the property. Haldir ultimately purchased 44 TACMI limited partnership units for $1,924,560. On April 11, 1987, its managing director executed a subscription agreement. Thereafter, Moriwaki tendered the purchase money. And finally, on April 13, 1987, Bisno, on behalf of the partnership, countersigned the subscription agreement accepting Haldir's subscription and making the company a limited partner.
For a short period of time thereafter, Haldir received distributions totaling $183,389.37 from TACMI, and then the payments stopped. Haldir received new cash flow projections from TACMI that were significantly less than the original projections.
In March 1998, Haldir sold its TACMI limited partnership interest for $198,000 to Berkeley Commercial Center, LLC (Berkeley Center).
In 1996, Dolores Staudenraus, another TACMI limited partner, sued TACMI, Bisno, Coxeter and others for fraud. The general partners of TACMI cross-complained.
Respondent Miske, another TACMI investor, had been instrumental in introducing Moriwaki to the Berkeley project. In 2005 he traveled to Japan to meet with Moriwaki. Miske discussed the misconduct and "bad things that had happened" in the partnership before Haldir invested in the company. After learning of the wrongdoing, Moriwaki, on behalf of Haldir, assigned to Miske all of Haldir's "right, title, and interest in any and all of our claims and causes of action for the monetary losses sustained as a result of the fraud and deceit" of Bisno, Coxeter, TACMI, TACI and TAFC "that induced Haldir . . . to purchase and me to facilitate the purchase by Haldir" of the limited partnerships units in TACMI. According to the terms of the assignment, Haldir would receive 75 percent of any net recovery Miske obtained on the assigned claims.
Prior to investing in TACMI, Moriwaki had not been advised of multiple material facts concerning the project, including that (1) the purchase price of a key asset was $1.7 million above its appraised value; (2) contrary to a statement in the promotional materials that the property was acquired with no markup, in fact a $900,000 markup had been added to the price of the property ...