Filed 5/10/17 Bentley-Wing Property W v. West Development CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA



BENTLEY-WING PROPERTY W, LLC,

Plaintiff and Appellant,

v.

WEST DEVELOPMENT INC. et al.,

Defendants and Respondents.
D069032

(Super. Ct. No. 37-2014-00014240- CU-BC-CTL)

ORDER MODIFYING OPINION

NO CHANGE IN JUDGMENT


THE COURT:
The opinion filed on April 25, 2017 is modified as follows:
On page eight, the third full sentence is deleted and the following inserted: "BWPW claims all work had been completed and that Bent-West was in a holding pattern pending sale of Cantarini."
The first full paragraph on page 20 is deleted and the following inserted: "As a preliminary matter, the operating agreement provided that the singular purpose of Bent-West was to accomplish the three listed items. The trial court found that Bentley-Wing did not achieve a final recordable map, the second item. Although BWPW argues that by April 2009 all budgeted work had been completed and Cantarini was ready to be sold, BWPW did not challenge the sufficiency of the evidence supporting the court's factual finding that Bentley-Wing did not achieve a final recordable map. Accordingly, any challenge regarding this finding is forfeited on appeal. (Behr v. Redmond (2011) 193 Cal.App.4th 517, 538.) Assuming, without deciding, that the operating agreement is ambiguous with regard to whether completion of Item (b) must precede completion of Item (c), and that the operating agreement is reasonably susceptible to BWPW's interpretation, substantial evidence nevertheless supported the West entities' interpretation."
No change in judgment.



HUFFMAN, Acting P. J.

Copies to: All parties


Filed 4/25/17 Bentley-Wing Property W v. West Development CA4/1 (unmodified version)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA



BENTLEY-WING PROPERTY W, LLC,

Plaintiff and Appellant,

v.

WEST DEVELOPMENT INC. et al.,

Defendants and Respondents.
D069032

(Super. Ct. No. 37-2014-00014240- CU-BC-CTL)


APPEAL from a judgment of the Superior Court of San Diego County, John S. Meyer, Judge. Reversed and remanded for further proceedings.

Law Office of Christopher Workman, Christopher J. Workman, Aaron M. Sibley and Margarite M.B. Sullivan for Plaintiff and Appellant.
Klein & Wilson and Gerald A. Klein for Defendants and Respondents.
Bentley-Wing Property W, LLC (BWPW) appeals from a judgment under Code of Civil Procedure section 631.8 in favor of defendants West Development Inc. (Development) and West Partners, LLC (Partners) on its claims for breach of contract, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty. As we shall discuss, the trial court erred in interpreting portions of the parties' operating agreement. Accordingly, we reverse the judgment and remand the matter for further proceedings in accordance with this opinion.
GENERAL BACKGROUND
Factual Background
The growth management plan for the City of Carlsbad (the City) divided the City into multiple zones. Zone 15 is comprised of farms and raw land. This litigation pertains to Cantarini Ranch (Cantarini), a 150 acre parcel of farm land located near the center of zone 15. About 25 owners have an interest in properties located in zone 15. A road needed to be extended before any of the properties in zone 15 could be developed. In turn, the road extension required construction of a water retention basin and an environmental impact report, as well as wetland and upland mitigation.
In the late 1990's, David Bentley, through a company called Bentley Equities, Inc., entered into agreements with the owners of Cantarini, and other property owners, to work as a consultant to acquire tentative maps on their properties. Bentley received no compensation for his work in acquiring a tentative map on Cantarini; rather, his compensation was deferred and would be obtained through a profitable sale of Cantarini. Bentley obtained an option to purchase Cantarini. Bentley then entered into a joint venture with Monarch Communities, named Bentley-Monarch, to make option payments to the Cantarini family. Bentley transferred his option to purchase Cantarini to Bentley-Monarch. In 2004, the City approved a tentative map for Cantarini, subject to numerous conditions.
During the tentative map process, Taylor Woodrow took control of Monarch Communities and became the financial partner in Bentley-Monarch. Taylor Woodrow wanted to sell Cantarini, but Bentley did not agree. Ultimately Taylor Woodrow sued Bentley. To resolve the litigation, Bentley offered to buy out Taylor Woodrow's interest in Bentley-Monarch by paying $15.5 million for Cantarini.
Bentley and Marc Wing, Bentley's business associate, formed BWPW to purchase Cantarini. BWPW entered into a purchase agreement with Bentley-Monarch to purchase Cantarini at a purchase price of $15.5 million. An entity affiliated with Bentley received a $500,000 brokerage fee for the sale of Cantarini to BWPW. Bentley, however, needed a new financial partner to fund the Cantarini purchase.
Dennis O'Brien worked in capital investment, has a business degree in finance and a law degree. O'Brien worked for Gary West, through Development, managing and investing a large sum of West's money. Wing, a person that O'Brien trusted, referred him to Bentley.
O'Brien met with Bentley to discuss the development of zone 15 properties. Bentley told O'Brien about the Cantarini project, explaining that Cantarini had a tentative map, that in two years he could satisfy the tentative map conditions to get the property to final map status and then "have home builders lining up to buy this property for a big price." O'Brien had minimal real estate experience. Before meeting with Bentley, he had never heard of the terms " 'tentative map' or 'final map' or 'wetland mitigation' or 'affordable housing.' " O'Brien did not understand the process and relied on Bentley. Bentley discussed the complexities with O'Brien, with O'Brien relying on Bentley to understand the complexities and resolve them.
Development and BWPW formed a limited liability company, Bent-West, LLC (Bent-West). On April 16, 2007, Development (through O'Brien) and BWPW (through Bentley) entered into an operating agreement which provided that the "purpose of [Bent-West] is to acquire . . . Cantarini . . . pursuant to the Purchase Agreement, bring it to final map status, as set forth in the Investment Plan & Budget attached hereto as 'Schedule B', and sell it."
Schedule A to the operating agreement listed Development and BWPW as the sole members of Bent-West. Development provided $16 million as an initial capital contribution to Bent-West to purchase Cantarini, in exchange for an 80 percent interest in the limited liability company, as stated in Schedule A. BWPW assigned the Cantarini purchase agreement, valued at $100,000, to Bent-West as its initial capital contribution. In exchange, BWPW received a 20 percent interest in Bent-West, as stated in Schedule A. The operating agreement named Development as the manager of Bent-West. The operating agreement gave Development, as the manager of Bent-West, broad powers. Authority not granted to the manager remained "vested in the Members."
Schedule B to the operating agreement, is entitled "Bent-West, LLC 'Purpose' Investment Plan & Budget April 16, 2007" (hereinafter Schedule B) Section 3.2 of the operating agreement set forth scheduled capital contributions by Development to Bent-West for payment of Bent-West's obligations and business activities (the West Additional Funds). Section 3.3 of the operating agreement required that Development provide up to a maximum of $2 million to Bent-West, pursuant to a capital call by the manager, to accomplish the purposes for which Bent-West was formed (the Additional Capital Contribution). These important sections provided:
"3.2. West Scheduled Additional Capital Contribution. Pursuant to the Investment Plan & Budget attached hereto as Schedule "B", through the second (2nd) anniversary of this Agreement, [Development], as a Member, shall make additional Capital Contributions to [Bent-West] in the aggregate amount of Two Million Dollars ($2,000,000), at such times as [Bent-West] requires funds to pay its obligations and conduct its investment business activities (the 'West Additional Funds'). One Hundred Thousand Dollars ($100,000) of the West Additional Funds shall be made within thirty (30) days of the execution of this Agreement. The remaining West Additional Funds shall be made upon written notice by the Manager.

"3.3. Additional Capital Contributions. All additional capital, up to a maximum of Two Million Dollars ($2,000,000), required in order to accomplish the purpose for which [Bent-West] was formed shall be provided by West. When the Manager determines that [Bent-West] requires additional funds or capital ('Capital Call') the Manager will, by written notice from time to time ('Capital Call Notice'), call for any such Additional Capital Contributions to be made by [Development]. Within twenty (20) days following the issuance of a Capital Call Notice, [Development] must contribute, in cash, to the capital of [Bent-West] the total amount of the Capital Call (the 'Additional Capital Contribution'). Failure by West to pay all of an Additional Capital Contribution (the 'Unpaid Additional Capital Contribution') within twenty (20) days of the date of the Capital Call Notice, shall constitute a default under this Agreement."

Schedule B reiterated that the "purpose" of Bent-West could "more particularly [be] described as [a] land investment, which include[d] (a) purchase of the Cantarini [] real property . . . , (b) management of said property through the final map process pursuant to the conditions of approval for CT00-18 of the City of Carlsbad, and (c) sale of the property." Schedule B expressly provided:
"[Bent-West's] activities shall include those actions necessary to prepare a recordable final map for the property, including but not limited to, the management of consultants, land use and subdivision planning and engineering, landscape design, mitigation and monitoring plans, financing plan (i.e. a community facilities district, acquisition financing district or other municipal bond financed facilities district, or private developer financing), and wildlife agency permits.

"The estimated time required to prepare the final map for recording is two years from the date of this Agreement and the estimated costs that will be incurred to achieve [Bent-West's] purpose are anticipated to be not more than $2,000,000. The Members intend that these costs will be fully paid by West Additional Funds as needed through the second anniversary of this Agreement. To the extent any additional capital is required by [Bent-West], it shall be provided by [Development] pursuant to Section 3.3 of the Operating Agreement.

"The anticipated uses of the $2,000,000 West Additional Funds are estimated and presented in the following budget Summary, which may be modified through periodic review and updates by the Members (total amount is fixed, but categories may vary)." (Italics added.)

In another paragraph, Schedule B listed various categories of expenses, such as final engineering for Cantarini or bridge design. This paragraph also listed the consultant and cost estimate for the particular expense category.
Section 4.1(a) of the operating agreement provided that Development would receive "preferred distributions" on its capital contributions to Bent-West, comprised of all capital contributed by Development under sections 3.3, 3.2, and Schedule A of the operating agreement. O'Brien explained that the preferred return was a reward for providing the capital on the risky project. After the preferred distribution to Development, the operating agreement specified that Development would receive 80 percent of the profits of Bent-West, "but not less than nor more than the sum of the 15% Return plus the 10% Return." Thereafter, BWPW was entitled to its $100,000 initial capital contribution and a payment of $1.9 million. The operating agreement defined the 10 and 15 percent return rates and linked the return rates to a "bona fide offer" for Cantarini.
On April 26, 2007, Bent-West (through O'Brien) and, another Bentley entity, Bentley-Wing Properties, Inc. (Bentley-Wing, through Bentley) entered into a management agreement for the day-to-day operations of Cantarini (the management agreement) for a monthly fee of $16,666. Under the management agreement, Bentley-Wing had a duty to satisfy the conditions of the tentative map. The management agreement provided for a two-year term, which could be extended for an additional twelve months on a month-to-month basis. Under the management agreement, Bentley-Wing agreed to perform its duties with a $2 million budget, with any additional funds provided by Development under section 3.3 of the operating agreement. Bent-West and Bentley-Wing amended the management agreement to increase the budget to $2.5 million.
West transferred its Bent-West interest from Development to Partners; thus, Partners became the financial partner in Bent-West. (We refer to Development and Partners together as the West entities.) O'Brien testified that, to his knowledge, the substitution of Development to Partners was the only amendment to the operating agreement. On April 16, 2009, Bent-West and Bentley-Wing amended the management agreement to extend its term for an additional year, with Bentley-Wing to receive an additional $10 in compensation for its services. The parties dispute the reason for the extension to the management agreement. BWPW claims it had completed all work and that Bent-West was in a holding pattern pending sale of Cantarini. The West entities claim that the extension gave Bentley-Wing an additional year to complete the work required to accomplish the purpose for which Bent-West was formed.
On April 16, 2010, the management agreement expired and was not renewed. Bentley talked to O'Brien about the West entities buying out his interest in Bent-West, and then started to threaten litigation. In January 2011, the West entities hired Michael Howes, an urban planner, to review the conditions of approval for the Cantarini tentative map and determine which had been satisfied. At the time of trial, Howes had spent four years trying to achieve final map status.
In May 2011, Partners (through O'Brien) sent a letter to BWPW invoking the buy-sell provision contained in section 9.2 of the operating agreement. Section 9.2 provided:
"9.2. Buy-Sell Obligations. At any time after two (2) years from the date of this Agreement, any Member (the 'Offering Member') may provide written notice to the other Member (the 'Remaining Member') setting forth the fair market value of the Company. The value of the Interest of a Member to be sold or purchased pursuant to this Section 9.2 shall be based upon the remaining Distributions to be made pursuant to Section 4.1 (the 'Distribution Value'). The Remaining Member shall within thirty (30) days from the written notice, either elect to purchase the Offering Member's Interest or sell its Interest to the Offering Member for an equivalent and proportionate price based upon the Distribution Value and shall give written notice of such election to the Offering Member, In the event the Remaining Member elects to sell its Interest to the Offering Member, the Offering Member shall purchase the Interest according to this Agreement. In the event the Remaining Member fails to timely make its election to buy or sell, then the Offering Member shall elect to sell the Offering Member's Interest or purchase the Remaining Member's Interest. A Member who is purchasing an offered Interest may assign that right to a third party on the terms and conditions as the purchasing Member so determines. The closing of the purchase and sale will be at the Company's offices on the ninetieth (90th) day following the written notice of election or deemed election by the Remaining Member and the purchase price shall be paid in cash at closing."

In his letter, O'Brien set the "fair market value" of Cantarini at $25 million. Based on the capital contributions made by the West entities and application of the 10 and 15 percent preferred interest return rates, O'Brien valued the purchase price of BWPW's interest in Bent-West at $0. The parties never acted on the buy-out letter.
The Instant Action
In 2014, BWPW sued the West entities alleging that the West entities breached the operating agreement and that these breaches of the operating agreement breached the covenant of good faith and fair dealing. BWPW also alleged that the West entities breached their fiduciary duties to BWPW. Before trial, the West entities filed a motion for preference claiming that the entire action hinged on the proper interpretation of the operating agreement. BWPW agreed that the operating agreement required interpretation before a jury could be empaneled. The parties ultimately agreed to a bench trial, with the court hearing testimony from Bentley, O'Brien and Howes.
At the close of BWPW's case, the West entities moved for judgment under section 631.8. The trial court heard argument from counsel and considered the parties' briefing. The trial court granted the motion. In its statement of decision, the court concluded that the West entities did not breach the operating agreement; thus, BWPW's causes of action for breach of the covenant of good faith and breach of fiduciary duty failed. BWPW timely appealed from the judgment.
DISCUSSION
I. STANDARDS OF REVIEW
In a nonjury trial, a party may move for judgment in its favor after the opposing party has completed presentation of its evidence. The judge, sitting as trier of fact, may weigh the evidence and order judgment in favor of the moving party. (§ 631.8, subd. (a).) The purpose of section 631.8 is to dispense with the need for the defendant to produce evidence where the court is persuaded that BWPW has failed to sustain its burden of proof. (Roth v. Parker (1997) 57 Cal.App.4th 542, 549.) Because the trial court evaluates the evidence as a trier of fact, it may refuse to believe some witnesses while crediting the testimony of others. (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1255.) We apply the substantial evidence standard of review to a judgment entered under section 631.8, reviewing the record in the light most favorable to the judgment and making all reasonable inferences in favor of the prevailing party. (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) When, however, the court bases its decision on a legal question, that decision is subject to de novo review on appeal. (Ibid.)
The rules governing contract interpretation also apply to this action and are well established. The goal of contract interpretation is to ascertain the parties' mutual intent at the time of contracting. (Civ. Code, § 1636.) The mutual intent of the parties is determined by the words used in the agreement, which are to be understood in their ordinary and popular sense. (Civ. Code, § 1644.) Mutual intention is determined by objective manifestations of the parties' intent including the surrounding circumstances under which the parties entered into the contract, the object, nature and subject matter of the contract, and the subsequent conduct of the parties. (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912.)
When parties to a contract dispute the meaning of contract terms, "[t]he decision whether to admit parol evidence involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine 'ambiguity,' i.e., whether the language is 'reasonably susceptible' to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is 'reasonably susceptible' to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the contract." (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 (Winet).) "Courts must interpret contractual language in a manner which gives force and effect to every provision, and not in a way which renders some clauses nugatory, inoperative or meaningless." (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473 (City of Atascadero).) If the trial court determines there is no ambiguity, it applies the clear and explicit meaning to the facts of the case. (Scheenstra v. California Dairies, Inc. (2013) 213 Cal.App.4th 370, 389.)
We independently review the trial court's conclusion that a contract is unambiguous by looking "first to the language of the agreement itself to discern the parties' intent." (Ram's Gate Winery, LLC v. Roche (2015) 235 Cal.App.4th 1071, 1082.) Mutual intention is determined by objective manifestations of the parties' intent including the surrounding circumstances under which the parties entered into the contract, the object, nature and subject matter of the contract, and the subsequent conduct of the parties. (Morey v. Vannucci, supra, 64 Cal.App.4th at p. 912.) We enforce the outward expression of the agreement, rather than a party's unexpressed intention. (Winet, supra, 4 Cal.App.4th at p. 1166.) If an ambiguity exists, extrinsic evidence may be admitted to clarify those terms, where the contract language is " 'reasonably susceptible' " of the argued interpretation. (Id. at p. 1165.) Where the interpretation of an instrument depends on consideration of conflicting extrinsic evidence, we will uphold any reasonable construction adopted by the trial court supported by substantial evidence. (In re Marriage of Fonstein (1976) 17 Cal.3d 738, 746-747.)
II. BREACH OF CONTRACT
BWPW alleges that the West entities breached the operating agreement by: (1) not offering Cantarini for sale and selling Cantarini on or before April 16, 2009 (the two year anniversary of the operating agreement); (2) making unauthorized increases to the Bent-West budget and capital contributions; and (3) claiming interest on its capital investment accrued after April 16, 2009. We address each contention.
As a threshold matter, the trial court concluded that the key provisions of the operating agreement were unambiguous. Despite this finding, it admitted "voluminous" parol evidence on each parties' interpretation of the operating agreement. The trial court erred in admitting parol evidence, rather than provisionally receiving the evidence to determine whether the contract contained an ambiguity. (Winet, supra, 4 Cal.App.4th at p. 1165.) As we shall explain, with one exception, we agree with the trial court's conclusion that the operating agreement is unambiguous. Nonetheless, in conducting our de novo review we considered the testimony of Bentley and O'Brien in determining whether the operating agreement was reasonably susceptible to each parties' respective interpretation. We cite to conflicting parol evidence only where this evidence is necessary to further our analysis.
A. Sale of Cantarini
1. Additional Background
In its statement of decision, the trial court noted that it did not consider Howes's testimony. The court found that capable counsel represented both sides, that counsel exchanged drafts of the operating agreement, and that the parties were sophisticated businessmen with a great deal of experience negotiating deals of this sort. It concluded that the operating agreement was "fully integrated and unambiguous." Specifically, it found that "[p]aragraph 1.1 of the [operating agreement] could not be [anymore] clear or straightforward" in setting forth the purpose of Bent-West as: (1) buying Cantarini; (2) obtaining a final recordable map; and (3) selling Cantarini.
The trial court concluded that Bentley sought to "expunge" the second goal of obtaining a final recordable map by claiming that final map status was a meaningless term, despite the fact that the parties repeatedly used this term in the operating agreement, the contemporaneously signed management agreement, and parties' communications. To the extent any argument existed that the term "final map status" was ambiguous, the court found that parol evidence supported the West entities' interpretation of the contract and that BWPW's interpretation of the contract was unreasonable and unsupportable. The court noted that the parties' communications revealed that "they expected achievement of final map status to result in a property valuation that jumped from $15.5 million to $26 million or more, with Bentley telling O'Brien that he thought the sales price would be closer to $30 million once the venture achieved its goals." The court believed O'Brien's version of events and disbelieved Bentley's version. The court found it "preposterous to believe that parties as sophisticated as [Bentley] and O'Brien, represented by capable counsel, would have included a term like 'final map status' unless that term had meaning to the parties at the time the [operating agreement] was executed. If Bentley's interpretation were correct, the parties would have simply said the goal was to buy the property and then sell it at a profit. But that is not what the contract says." The court found "that the condition precedent to selling the property was achieving a final recordable map—something which both parties acknowledge never happened."
2. Analysis
BWPW asserts that we need to address three interpretation issues in relation to the West entities' alleged breach of the operating agreement by not offering Cantarini for sale and selling Cantarini on or before April 16, 2009. Namely, whether the trial court erred in finding that: (1) Bent-West had three separate purposes; (2) the actions to be completed under Schedule B, Item (b) included all actions necessary to satisfy the conditions of the Cantarini tentative map, such that the City would be willing to issue a recordable final map; and (3) completion of Item (b) of Schedule B was a condition precedent to performance of Item (c). As we shall explain, the trial court properly interpreted the operating agreement; thus, we reject BWPW's contention that the West entities breached the operating agreement by not offering Cantarini for sale or selling it on or before April 16, 2009.
Purpose of Bent-West
BWPW contends that the trial court erred in finding that Bent-West had three separate purposes, claiming this interpretation conflicts with the plain language of the operating agreement. As a preliminary matter, BWPW misrepresents the trial court's finding. The trial court did not find that Bent-West had three separate purposes; rather, it found that the singular "purpose" of Bent-West was to accomplish three things: "(1) buy Cantarini; (2) obtain a final recordable map; and (3) sell Cantarini." The trial court's finding comports with the unambiguous terms of the operating agreement. Section 1.1 of the operating agreement provided that the "purpose of [Bent-West] is to acquire . . . Cantarini . . . pursuant to the Purchase Agreement, bring it to final map status, as set forth in the Investment Plan & Budget attached hereto as 'Schedule B', and sell it."
Schedule B to the operating agreement reiterated that the "purpose" of Bent-West could "more particularly [be] described as [a] land investment, which include[d] (a) purchase of the Cantarini [] real property . . . , (b) management of said property through the final map process pursuant to the conditions of approval for CT00-18 of the City of Carlsbad, and (c) sale of the property." The land investment described in Schedule B included items (a), (b) and (c) as the singular purpose of Bent-West.
BWPW asserts that Bent-West had a singular purpose of a "land investment." This argument ignores that Schedule B defined the "land investment" as including items (a), (b) and (c). If the parties did not intend that the purpose of Bent-West included bringing Cantarini to final map status, they would not have included this provision and simply stated that the purpose of Bent-West was to purchase Cantarini and then sell it. BWPW's interpretation improperly renders as meaningless the requirement that Cantarini be brought to final map status. (City of Atascadero, supra, 68 Cal.App.4th at p. 473.) The trial court properly rejected this interpretation.
The operating agreement required that Cantarini be brought to "final map status," as set forth in Schedule B. The term "final map status" is not expressly defined in the operating agreement. Rather, Schedule B required that Bent-West manage Cantarini "through the final map process pursuant to the conditions of approval for CT00-18 of the City of Carlsbad." The conditions of approval for CT00-18 of the City of Carlsbad refer to the tentative map. Thus, "final map status" meant satisfying the conditions of the tentative map.
Because the operating agreement defined "final map status" the trial court did not need to refer to parol evidence regarding the meaning of this term. Nonetheless, we examined the testimony of Bentley and O'Brien on this point. We conclude that the operating agreement is not reasonably susceptible to Bentley's interpretation. Even assuming the operating agreement is ambiguous and reasonably susceptible to Bentley's interpretation, we conclude substantial evidence supported the trial court's interpretation.
Bentley testified that counsel represented him and the West entities, and that he relied on counsel to make sure the operating agreement contained everything he wanted. Bentley also testified that the purpose of the operating agreement was to bring the property to final map status and then sell it. Bentley, however, vacillated on the meaning of the term "final map status." He testified that "[f]inal map status, as used in the context of our LLC, was a catchall phrase to represent general things for us to do from the time that the property was acquired until we sold it." He also claimed that "final map status" did not mean "getting the tentative map conditions all approved such that there would be approval of final map status such that a builder would come in and start building."
After giving two additional definitions of "final map status," Bentley testified that he had achieved final map status, but could not give a date when this occurred. Rather, he claimed it was "not a bright line date" and that final map status "happened throughout the entire ownership of Cantarini." Ultimately, Bentley denied "final map status" was "a particular point in time or even a goal that you reach for the project."
In contrast, consistent with the trial court's finding, O'Brien testified that he discussed the goal of the Cantarini venture "a lot" with Bentley and that Bentley explained that "final map status" meant "satisfying the conditions of the tentative map, all of the conditions." O'Brien denied that the goal of the investment was to "flip" the property as soon as they could find a buyer. Thus, assuming the operating agreement contained an ambiguity on the meaning of final map status, substantial evidence supported the trial court's finding that Bentley's interpretation of the operating agreement was not reasonable.
Actions Under Schedule B, Item (b)
BWPW next contends that the trial court erred in finding that the actions to be completed under Schedule B, Item (b) included all actions necessary to satisfy the conditions of the Cantarini tentative map, such that the City would be willing to issue a recordable final map. BWPW argues this interpretation is incorrect because it conflicts with the plain language of Schedule B, other sections of the operating agreement and the objective intent of the parties when they entered into the operating agreement. Specifically, BWPW notes that Schedule B, Item (b) clearly and explicitly limited the actions Bent-West needed to undertake to preparation (not approval or recordation) of a final map that would ultimately be approved and recorded.
We fail to see how this argument advances BWPW's position. The trial court found that "the condition precedent to selling the property was achieving a final recordable map—something which both parties acknowledge never happened." "Achieving" a final recordable map is essentially equivalent to Bent-West having prepared a recordable final map, as required in Schedule B. The trial court expressly noted that recordation was not required.
Item (b) as Condition Precedent to Item (c)
Finally, BWPW asserts that the trial court erred in finding that completion of Item (b) of Schedule B (preparing a final recordable map), was a condition precedent to performance of Item (c) (selling the property). BWPW notes that the operating agreement contained no words indicating "that Item (b) is a condition precedent to Item (c). For example, the parties did not write '(b) management of said property through the final map process pursuant to the conditions of approval for CT00-18 of the City of Carlsbad, and (c) sale of the property after 'final recordable map if obtained' or 'sale of the property after a recordable map is approved by the City before recordation with the County.' "
As a preliminary matter, the operating agreement provided that the singular purpose of Bent-West was to accomplish the three listed items. The trial court found that BWPW did not achieve a final recordable map, the second item. Although BWPW argues that by April 2009 all budgeted work had been completed and Cantarini was ready to be sold, BWPW did not challenge the sufficiency of the evidence supporting the court's factual finding that BWPW did not achieve a final recordable map. Accordingly, any challenge regarding this finding is forfeited on appeal. (Behr v. Redmond (2011) 193 Cal.App.4th 517, 538.) Assuming, without deciding, that the operating agreement is ambiguous with regard to whether completion of Item (b) must precede completion of Item (c), and that the operating agreement is reasonably susceptible to BWPW's interpretation, substantial evidence nevertheless supported the West entities' interpretation.
"A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed." (Civ. Code, § 1436.) O'Brien testified that the goal of the venture was to obtain final map status by satisfying all of the conditions in the tentative map so that the property could be sold to a builder for a lot of money. Bentley admitted that the business investment purpose of the company was to buy Cantarini, get it to final map, and sell it. BWPW's interpretation that the West entities were required to sell Cantarini without achieving final map status defeats the entire goal of the venture. The operating agreement, and the parties, envisioned obtaining final map status prior to selling Cantarini as this would greatly increase the value of the property. Thus, the parol evidence supported the trial court's finding that completion of Item (b) (obtaining final map status) needed to precede completion of Item (c) (selling Cantarini).
In summary, the trial court properly interpreted the operating agreement and we reject BWPW's contention that the West entities breached the operating agreement by not offering Cantarini for sale or selling it on or before April 16, 2009.
B. Budget and Capital Contributions
1. Additional Background
The trial court rejected BWPW's argument that the operating agreement required that the West entities clear budgets with BWPW before the West entities contributed more than $2.5 million to the project. Instead, the court accepted the West entities' interpretation that the operating agreement did not require BWPW to approve any further capital contributions under sections 3.2 or 3.3 of the operating agreement or project budgets before the West entities could contribute to the project all money it deemed reasonable and necessary to accomplish the goals of the company.
The trial court noted that the undisputed evidence revealed that the West entities contributed all the money Bent-West needed to buy Cantarini and bring the project to final map status. Because the West entities contributed all the money and BWPW managed that money and wrote the checks, the court found it "not surprising [that] O'Brien wanted some degree of budget oversight." The trial court also noted that Bent-West was a manager-driven limited liability company and that section 6.3 of the operating agreement gave the manager (the West entities) sweeping powers and did not limit the powers of the manager in any way. The court found that section 6.5 of the operating agreement set forth the only two limitations on the powers of the manager. Based on the "the plain language of the [operating agreement] and the testimony of the parties" the trial court concluded that the West entities did not require BWPW's approval before increasing Bent-West's budget and making capital contributions beyond those provided for in section 3 of the operating agreement.
2. Analysis
BWPW contends that the trial court erred in concluding that the West entities did not breach the operating agreement when they increased Bent-West's budget and made capital contributions beyond those called for in section 3 of the operating agreement without BWPW's approval. BWPW asserts that the trial court's interpretation conflicts with the plain language of the operating agreement and the objective intent of the parties when they entered the agreement. As we will explain, we agree.
The West entities contend that section 6 of the operating agreement gave them the broad authority to change the budget and make any amount of capital contributions. Article 6 provided that the manager (the West entities) governed Bent-West. Authority not granted to the manager (the West entities) remained "vested in the Members." Section 6.3 stated that "[s]ubject to the limitations set forth in Section 6.5, the Manager shall have the right, power and authority from time to time to make such decisions and take such actions for and on behalf of the Company as the Manager deems necessary to carry out the business investment purpose of the Company and, not in limitation of the foregoing, to make the following decisions and direct the Company to take the following actions, all subject to any limitations set forth in this Agreement or in the [Beverly-Killea Limited Liability Company Act, CA. Stat. 17000 et. seq.] Act." (Italics added.)
Section 6.5 of the operating agreement prevented Bent-West from acquiring or selling any assets to or from a member or affiliate of a member unless the terms are at least as favorable as would be available from nonaffiliated third parties. Section 6.5(a) also provided:
"The Company, through the Manager, a Member, an officer, a Majority in Interest, or otherwise, shall not take any action required by any provision of this Agreement or by law to be approved or authorized by the Members unless such action has been so approved or authorized by the Members." (Italics added.)

Bent-West is a limited liability company comprised of two members, Development and BWPW. (Corp. Code, § 17701.04, subd. (a).) Section 6.5(a) specified that the members of Bent-West approve any action taken by Bent-West that required the approval or authorization of the members either (1) by law or (2) in the operating agreement. The operating agreement contained an integration clause that provided "[t]his Agreement (together with the Articles and any other agreements referenced in this Agreement) contains the entire agreement between the Members, in such capacity, relative to the formation, operation and continuation of the Company. This Agreement may not be altered, modified or changed except by a written document duly executed by all of the Members." The operating agreement referred to the 2007 purchase agreement for Cantarini and the management agreement.
BWPW did not argue that a particular law required Bent-West to obtain the approval of its members before a member could unilaterally increase Bent-West's budget and make capital contributions. Instead, BWPW relied exclusively on section 3 of the operating agreement as authority for its contention that Development needed its approval before unilaterally increasing Bent-West's budget and making capital contributions beyond the contributions specified in section 3 of the operating agreement. Accordingly, we turn to section 3 of the operating agreement to determine whether this section, when read together with the other sections of the operating agreement, required that the Bent-West members agree to any increase to Bent-West's budget, or capital contributions by the West entities.
Budget Increases
BWPW correctly argues that the trial court erred when it concluded that the operating agreement allowed the West entities to increase Bent-West's budget without BWPW's approval.
Section 3.2 of operating agreement required that Development contribute $2 million (the West Additional Funds) through the second anniversary of the agreement "at such times as the Company requires funds to pay its obligations and conduct its investment business activities." Schedule B of the operating agreement, Bent-West's budget, expressly provided that "the estimated costs that will be incurred to achieve [Bent-West's] purpose are anticipated to be not more than $2,000,000. The Members intend that these costs will be fully paid by West Additional Funds as needed through the second anniversary of this Agreement." (Italics added.) Schedule B further provided that "[t]he anticipated uses of the $2,000,000 West Additional Funds are estimated and presented in the following Budget Summary, which may be modified through periodic review and updates by the Members (total amount is fixed, but categories may vary)." (Italics added.)
Bent-West (through the West entities as the manager) and Bentley-Wing later amended the management agreement to change the budget to $2.5 million. Bentley and O'Brien both testified that the parties agreed to increase the budget in the management agreement to $2.5 million, with Bentley noting that this was the only agreed budget increase. Bentley testified that the parties did not amend the operating agreement to increase the budget to $2.5 million.
Read together, the integration clause, Schedule B and section 3 show that the parties agreed that the $2 million in West Additional Funds under section 3.2 was the "fixed" budget for Cantarini unless modified by the members of Bent-West. Bent-West exceeded the $2 million budget and the amended $2.5 million budget set forth in the management agreement. Although, section 3.3 of the operating agreement required that Development contribute "up to a maximum of" $2 million in Additional Capital Contributions if required to accomplish Bent-West's purpose, this could only be accomplished through the issuance of a capital call notice.
O'Brien testified that the West entities expended $9 million on Cantarini, well above the $2 million contribution under section 3.2, and the maximum of $2 million in Additional Capital Contributions available to Bent-West pursuant to a capital call notice under section 3.3. Accordingly, the West entities breached the operating agreement by exceeding the initial fixed $2 million budget without first obtaining BWPW's approval.
To avoid the conclusion that they breached the operating agreement by unilaterally increasing Cantarini's budget, the West entities cite section 6.3(j) of the operating agreement. Section 6.3 listed examples of the manager's authority. Among other things, section 6.3(j) allowed Development to "[e]xceed budgeted operating expenses in any calendar year by more than" 10 percent. Section 6.3(j) does not further the West entities' position.
Schedule B of the operating agreement provided that the agreed $2 million budget was for a stated term of two years, or $1 million per year. O'Brien admitted that after the $2 million budget and $2.5 million amended budget, "there was no budget after that." Accordingly, section 6.3(j), which allowed Development to exceed budgeted operating expenses by more than 10 percent in a particular calendar year, does not support the West entities' position.
In summary, the West entities breached Schedule B of the operating agreement by increasing the Cantarini budget without BWPW's approval. Because the unambiguous language of the operating agreement is not reasonably susceptible to the interpretation urged by the West entities, the trial court erred when it considered the parties' testimony to interpret the operating agreement on this issue.
Capital Contributions
BWPW next contends that the West entities breached the operating agreement by unilaterally making additional capital contributions to Bent-West beyond the $2 million additional capital specified in section 3.3 of the operating agreement. As addressed above, section 3.2 of the operating agreement required that Development contribute $2 million of West Additional Funds at such times as Bent-West required the funds to pay its obligations and conduct its investment business activities, with Schedule B specifying that this $2 million capital contribution was the "fixed" budget for Cantarini. Section 3.3 of the operating agreement limited any Additional Capital Contributions by Development pursuant to a capital call by the manager (the West entities) "up to a maximum" of $2 million.
The operating agreement prohibited the Development from modifying the agreement without written approval of all members. Without BWPW's approval, the West entities expended $9 million on Cantarini, well above the capital contribution limits set forth in sections 3.2 and 3.3 of the operating agreement. Thus, the unambiguous language of the operating agreement and Schedule B thereto established the West entities' breach. Because the unambiguous language of the operating agreement is not reasonably susceptible to the interpretation urged by the West entities, the trial court erred when it considered the testimony of the parties to interpret the operating agreement.
BWPW also argued that the West entities' unilateral increase in its capital contributions to Bent-West breached the covenant of good faith and fair dealing. The trial court found that "[t]o the extent the breach of the covenant of good faith and fair dealing constitutes a cause of action separate from the breach of contract cause of action, . . . that this claim fails for the same reason the breach of contract action fails." The trial court erred in finding no breach of contract; accordingly, its conclusion that the West entities did not breach the covenant of good faith and fair dealing must also be reversed. Because the trial court never reached the merits of BWPW's claim for breach of the covenant of good faith and fair dealing, we express no opinion on the merits of this claim.
C. Interest on Investment
1. Additional Background
The court concluded that the West entities provided the capital for the venture. Both parties agreed that as consideration for the West entities' investing in Bent-West, the West entities were entitled to a preferred return on money they invested. At trial, Bentley argued that the accrual of interest on the West entities' capital contribution ceased after two years because the West entities did not offer Cantarini for sale within two years of the operating agreement being signed. The trial court concluded that this interpretation was not reasonable. Based on the language of the operating agreement and common sense, the trial court concluded that "the sole purpose of the preferred return[] stop provision was to prevent [the West entities] from rejecting an offer for $26 million in the first two years of the venture, even though a bonafide offer would have resulted in a $10 million profit to Bent-West."
Based on the court's reading of the preferred return stop provisions and the evidence, the court found only one reasonable interpretation of these provisions; namely, that the preferred return stopped only if Bent-West received a bonafide offer for $26 million during the first two years of the venture and the West entities, in their capacity as the managing member, rejected that offer. The court found it undisputed that Bent-West received no such offers in the first two years. Accordingly, the court rejected BWPW's interpretation of the operating agreement, and accepted the West entities' interpretation.
2. Analysis
BWPW contends that the West entities breached the operating agreement by claiming interest on its capital investment accrued after April 16, 2009 (the second anniversary of the operating agreement). In making its argument, BWPW does not rely on any parol evidence. Rather, it relies on the definition of the term bona fide offer contained in the operating agreement. BWPW contends that the definition of a bona fide offer in the operating agreement required that the West entities offer Cantarini for sale before April 16, 2009, to continue to receive the 10 and 15 percent interest rates on its capital contributions after April 16, 2009.
Development made an initial capital contribution of $16 million and received an 80 percent interest in Bent-West. BWPW contributed their interest in the Cantarini purchase agreement, valued at $100,000, and received a 20 percent interest in Bent-West. Section 4 of the operating agreement, labeled "Allocations and Distributions," sets forth the agreed allocation of non-liquidation cash distributions from Bent-West to its members and liquidation distributions. Section 4.1(a) allowed Development to receive a "Preferred Distribution" of all capital contributed by them in the following order: any Additional Capital Contribution contributed section 3.3; the $2 million of West Additional Funds contributed under section 3.2; and the $16 million initial capital contribution in Schedule A of the operating agreement. After the preferred distribution, the operating agreement specified that Development would receive 80 percent of the profits of Bent-West, "but not less than nor more than the sum of the 15% Return plus the 10% Return." Thereafter, BWPW was entitled to its $100,000 initial capital contribution and a payment of $1.9 million.
The operating agreement defined the 10 and 15 percent return rates. Development was entitled to a 10 percent return on its $2 million West Additional Fund contribution used to operate Bent-West, and a 15 percent return rate on Additional Capital Contributions made pursuant to a capital call under section 3.3 in order to accomplish the purpose of Bent-West. The operating agreement linked the end of the return rates to a "bona fide offer," as follows:
" '10% Return' means a sum equal to ten percent (10%) per annum payable to West with respect to the initial Capital Contribution made by West, and the West Additional Funds, . . . , commencing on the date that West first makes its initial Capital Contribution. . . . The 10% Return shall cease to accrue at any time after two years after the date of this Agreement in the event that West does not agree to sell the Property under a Bona Fide Offer. In the event the Property is not sold pursuant to the written agreement entered into pursuant to the Bona Fide Offer due to the potential buyer's breach of the agreement or the potential buyer terminates the agreement during or pursuant to the feasibility period or investigation, then the 10% Return shall continue to accrue.

" '15% Return' means a sum equal to fifteen percent (15%) per annum payable to West in connection with any Additional Capital Contributions pursuant to Section 3.3 . . . commencing on the date that West first makes an Additional Capital Contribution. . . . The 15% Return shall cease to accrue at any time after West does not agree to sell the Property pursuant to a Bona Fide Offer. In the event the Property is not sold pursuant to the written agreement entered into pursuant to the Bona Fide Offer due to the potential buyer's breach of the agreement or the potential buyer terminates the agreement during or pursuant to the feasibility period or investigation, then the 15% Return shall continue to accrue."

We concluded that the West entities breached the operating agreement when they made capital contributions beyond those provided in section 3 of the operating agreement without BWPW's approval. (Ante, pt. II.B.2.) Accordingly, the West entities are not entitled to a 15 percent return on any Additional Capital Contributions to Bent-West exceeding $2 million because BWPW did not authorize these contributions. Thus, we focus on the 10 percent interest return rate.
At issue are the following sentences: "The 10% Return shall cease to accrue at any time after two years after the date of this Agreement in the event that West does not agree to sell the Property under a Bona Fide Offer. In the event the Property is not sold pursuant to the written agreement entered into pursuant to the Bona Fide Offer due to the potential buyer's breach of the agreement or the potential buyer terminates the agreement during or pursuant to the feasibility period or investigation, then the 10% Return shall continue to accrue." The operating agreement defined a "bona fide offer" as follows:
"[T]he offer to enter into a written definitive agreement prior to the second (2nd) anniversary of the date of this Agreement, to sell all the Property of [Bent-West] . . . providing that the entire purchase price in an amount equal or greater than Twenty-Six Million Dollars ($26,000,000) will be paid in cash at closing."

To paraphrase, the parties defined a "bona fide offer" as the offer to enter into a written agreement to sell Cantarini for at least $26 million before April 16, 2009. BWPW claims that a bona fide offer is one that the West entities must make to a potential buyer to sell Cantarini. BWPW reasons that because the West entities failed to offer Cantarini for sale before April 16, 2009, that the 10 percent return rate ended on April 16, 2009. The West entities claim, and the trial court agreed, that a bona fide offer is one that the West entities receive from a potential buyer for Cantarini. The trial court concluded that the 10 percent preferred rate return would stop only if Bent-West received a bona fide offer for $26 million during the first two years of the venture and the West entities rejected that offer.
We agree that the term "the offer" in the definition of "bona fide offer" is ambiguous as it is reasonably susceptible to either parties' interpretation. Thus, the trial court properly received parol evidence to clarify the ambiguous term. Specifically, O'Brien testified that Bentley expressed concern that even if the West entities got a good offer on Cantarini, the West entities might not sell the property to continue accruing the preferred return rate. In March 2007, about one month before executing the operating agreement, the parties exchanged emails with Bentley expressing the desire that the preferred return rate stop accruing if the West entities elected to hold Cantarini beyond final map approval. O'Brien responded, suggesting that the preferred return should stop, but only in the event that the West entities blocked a sale transaction occurring after the second anniversary of the operating agreement and having cash consideration greater than $26 million. Bentley agreed, stating " 'your preferred return stop conditions sounds [sic] fair.' "
Referring to the same email communications, Bentley agreed that he expressed concern that the preferred return rate could continue to accrue if the West entities unreasonably refused to accept a meaningful purchase agreement. Bentley testified that the parties ultimately agreed in the operating agreement that the preferred return rate would stop if the West entities blocked a sale occurring before (rather than after) the two year anniversary of the operating agreement. Accordingly, parol evidence supported the trial court's finding that the 10 percent preferred rate return would stop only if Bent-West received a bona fide offer for $26 million during the first two years of the venture and the West entities rejected that offer. Because Bent-West never rejected a bona fide offer for $26 million received during the first two years of the venture, the 10 percent interest return rate continues to accrue.
III. BREACH OF FIDUCIARY DUTY AND DAMAGES
The trial court found that BWPW failed to prove a breach of fiduciary duty because a breach of fiduciary duty cannot be based upon things permitted under the contract. The court also concluded that, based on its findings that the operating agreement allowed the West entities to unilaterally increase capital contributions and the West entities capital contributions continually accrued interest, BWPW failed to prove damages. Because we reversed the trial court on the breach of contract cause of action, its ruling on BWPW's claim for breach of fiduciary duty must be reversed. We express no opinion on the merits of this claim, nor do we express any opinion on whether the continued accrual of the 10 percent preferred interest return rate eventually eliminated BWPW's interest in the Cantarini venture.
DISPOSITION
The judgment is reversed and the matter is remanded for further proceedings in conformity with this opinion. BWPW is entitled to costs.




HUFFMAN, Acting P. J.

WE CONCUR:




NARES, J.




HALLER, J.