Facts

Coliseo Housing Partnership, L.P., sued its former managing general partner, POZ Village Development Inc. (POZ), for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty.

The partnership owns an apartment building in Los Angeles known as Gilbert Lindsey Manor. Because POZ was supposedly a valid non-profit corporation and the managing general partner, the partnership was entitled to the "welfare exemption" under the Revenue and Taxation Code, which results in significant savings on property taxes. However, POZ allowed itself to be repeatedly suspended by the Franchise Tax Board, never obtained the necessary organization clearance certificate required for an entity claiming the welfare exemption, and never provided any evidence that it was a valid non-profit corporation to the partnership.

As a result, the partnership was unable to obtain the welfare exemption for the tax years 2005-2006 and 2006-2007 and was forced to pay property taxes in their entirety. The applications were due on Feb. 15, 2005, and Feb. 15, 2006, respectively. On June 1, 2006, POZ was removed as managing general partner.

PLAINTIFF'S CONTENTIONS:
The partnership contended that it lost these welfare exemptions because of POZ's failure to submit applications, to maintain its status as a valid non-profit corporation, to remain in good standing with the Franchise Tax Board, and to obtain an organizational clearance certificate. The partnership further contended that POZ withheld information from the partnership about its corporate standing and breached its obligations under the agreement among the partners and the implied covenant of good faith and fair dealing. Furthermore, the partnership contended that POZ owed the partnership a fiduciary duty, which was also breached.

DEFENDANT'S CONTENTIONS:
POZ contended that it had no duty to submit the necessary applications or to maintain its status as a valid, non-profit corporation. POZ also contended that the partnership could still receive the welfare exemptions and that its damages were minimal.

Injuries

The partnership claimed lost welfare exemptions for 2005-2006 and 2006-2007 plus interest.

Result

The court found in favor of Coliseo Housing Partnership, L.P., on its causes for action for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. The court awarded plaintiff $456,850.

Other Information

Plaintiff's motions for attorney fees and to charge POZ's interest in the partnership are currently pending. FILING DATE: April 10, 2008.