2016-00191220-CU-CO

Suzanne M. Jones vs. Howard Jones Investments, LLC

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Moenig, Christopher J.

*** If oral argument is requested, the parties are directed to notify the clerk and opposing counsel at the time of the request which of the Issues identified in the Notice of Motion and which of the Undisputed Material Facts offered by the moving defendant and/or the Additional Material Facts offered by plaintiff will be addressed at the hearing and the parties should be prepared to point to specific evidence which is claimed to show the existence or non-existence of a triable issue of material fact. ***

Defendants Paul Howard (“Howard”), Christopher Boley (“Boley”), and Howard Jones Investments, LLC’s (“LLC”) motion for summary judgment, or in the alternative, summary adjudication is ruled upon as follows.

Overview

Plaintiff Suzanne M. Jones (“Suzanne”) brings this action individually and derivatively on behalf of the LLC. She alleges her late husband, Anthony Jones (“Anthony”), was a 50 percent member and manager of the LLC until he died in January 2012. Suzanne claims she succeeded to Anthony’s former interests. Howard allegedly possesses the other 50 percent membership and management interest. Suzanne describes the LLC as a property holding and management company.

According to Suzanne, Howard shut her out of ownership and management of the LLC shortly after Anthony died. She alleges Howard has ignored her requests for information about the LLC’s members and managers as well as her requests for copies of the LLC’s books and records. She also alleges she has not received any distribution of profits. Suzanne attributes these events to Howard’s wrongful appropriation of control over the LLC and its books, records and other property.

Among Suzanne’s accusations is that Howard unilaterally and wrongfully purported to grant Boley a minority interest in the LLC and a position managing one of the LLC’s properties. She also accuses Howard of misappropriating substantial LLC funds and other assets.

Finally, Suzanne alleges that some of the tenants occupying LLC properties are Howard’s family members. She thus alleges Howard has a conflict of interest that has led him not to collect rents his family members owe the LLC.

The complaint is verified and contains nine causes of action for breach of fiduciary duty, involuntary dissolution and appointment of receiver, refusal to make distribution, inspection of books and records, conversion, breach of covenant of good faith and fair dealing, accounting, partition of real property, and declaratory and injunctive relief.

Trial is scheduled for April 16, 2018.

The Court declines to rule on Suzanne’s objections included in her response to Defendants’ separate statement as she fails to comply with CRC Rule 3.1354.

Undisputed Facts

Howard and Anthony were equal 50/50 owners in Foremost Superior Marble Co., Inc. (“Foremost”). (UMF 1.) Howard and Anthony were also 50/50 owners in the LLC. (UMF 2.) The LLC is a property holding company. (UMF 3.) Unbeknownst to Suzanne, in the middle of 2011, the LLC held 4 properties, commonly referred to as Alpine, Butterworth, Las Palmas, and Western. (UMF 4.) Butterworth, Las Palmas, and Western were residential properties that generated rental income. (UMF 5.) Alpine is a commercial warehouse property. (UMF 6.) Foremost was the sole occupant of Alpine and paid rent to the LLC. (UMF 7.) Alpine’s income was completely dependent on rent received from Foremost. (UMF 8.) Foremost and Alpine were referenced on occasion as collectively being one in the same as “the Shop.” (UMF 9.) Anthony and Howard wanted out of Foremost. (UMF 12.) Without Foremost’s rent, Alpine generated no income but continued to incur expenses. (UMF 13.) Foremost ceased business in mid-late July 2011. (UMF 14 and Plaintiff’s response to UMF 14.)

Anthony communicated he wanted out of Alpine and wanted to pursue residential income properties. (UMF 15.) On July 29, 2011, Howard and Anthony entered into “Business Purchase Agreement” in which Anthony agreed to sell Foremost to Howard for $350,000 with a $50,000 deposit upon signing. (UMF 16.)

On August 13, 2011, Howard and Anthony signed the “Paul & Tony Shop

Deal.” (Plaintiff’s Table of Exhibits, Ex. E.) Howard agreed to sign over his interest in the Butterworth, Las Palmas, and Western properties, as well as his interest in 1525/1527 Orlando. The agreement further states “Paul to cut check – $50k (up front), Paul gets any/all receivables – Foremost.” (Id.)

On August 31, 2011, Howard and Anthony executed a “Partnership Dissolution” (“2011 Partnership Dissolution”). (UMF 16.) The Partnership Dissolution has two columns. The first column is titled “Anthony Jones” and lists beneath his name: 1525 Orlando, $50,000 USD, 139 Butterworth, 636 Las Palmas, and 3300 Western. (Declaration of Paul Howard, Ex. 1.) The second column is titled “Paul Howard” and lists beneath his name: 8251 Alpine, Shop vehicles & equipment, all outstanding receivables, bank account balance (after paid debts).

Analysis

Defendants move for summary judgment/adjudication of 15 issues. The Court GRANTS Defendants’ motion for summary judgment/adjudication of Issue No. 2.

Issue No. 2 states “[t]here is no issue of material fact with respect to Plaintiff’s claim for declaratory relief and her ancillary causes of action, because Plaintiff is bound to the 2011 Separation Agreement her predecessor-in-interest executed. Being subject to her predecessor’s divestment and without standing to make a claim, plaintiffs claim for declaratory relief and her ancillary causes of action cannot be established.”

According to Defendants, the 2011 Partnership Dissolution shows that Anthony divested his interest in the LLC and Alpine, in exchange for the residential properties and a $50,000 cash disbursement. The 2011 Partnership Dissolution, therefore, enforces the deal that provides for the separation and cessation of the LLC. Howard avers that the Partnership Dissolution evidences Anthony’s and Howard’s intent that Anthony divest himself from Alpine and the LLC for the consideration exchanged so they could ceases their business ventures together. (UMF 18.) Anthony received a $50,000 check in August 2011. (UMF 27.) Anthony took exclusive ownership of Butterworth, Western, Las Palmas and Orlando. (UMF 29.) Anthony exclusively received rent from the four properties in September of 2011. (UMF 30.) Paul immediately took Alpine. (UMF 31.) Defendants have satisfied their initial burden to show that no triable issue of material fact exists.

The burden now shifts to Suzanne to demonstrate a triable issue of material fact. Suzanne fails to satisfy her burden. Suzanne claims that the 2011 Partnership Dissolution is “contradicted” by the Business Purchase Agreement because it “does not mention Howard Jones Investment, LLC.” (Plaintiff’s response to UMFs 16-18, AMF 5.) Suzanne’s attorney, Samuel Swenson, further insists that the 2011 Partnership Dissolution is also contradicted by the Paul & Tony Shop Deal, and Boley’s Verified Complaint in Boley v. Jones, Sacramento Superior Court, Case No. 34 -2013-0014936. (Declaration of Samuel Swenson (“Swenson”), ¶ 9.) According to Swenson, the documents appear to involve the same real property as consideration for different transactions. (Id.) There is no analysis, however, regarding why the “contradiction” supports Suzanne’s argument that the 2011 Partnership Dissolution did not divest Anthony of his interest in the LLC. Additionally, the Court SUSTAINS Defendants’ objection no.7 and 17 to Swenson’s declaration and Exhibit F.

Suzanne fails to substantively dispute Defendants’ undisputed material facts offered in support of Issue No. 2. With respect to UMFs 16-18, Suzanne fails to state “the nature of the dispute.” (CRC Rule 3.1350(f)(2).) Suzanne merely states that the UMF is disputed because the Partnership Dissolution is “contradicted” by the Business Purchase Agreement. This provides no assistance to the Court regarding the nature of the dispute. Suzanne fails to substantively dispute UMFs 29 and 30. These UMFs states Anthony took exclusive ownership of Butterworth, Western, Las Palmas and Orlando (UMF 29) and exclusively received rent from the four properties in September of 2011. (UMF 30.) Suzanne attempts to dispute these UMFs by arguing that the properties were not “deeded to Anthony while he was alive. They were deeded to Suzanne nearly 3 months after the death of Anthony.” (Plaintiff’s response to UMFs

29-30.) When the properties were actually deeded to Suzanne does not dispute that Anthony took ownership and received rents for the properties. Indeed, Anthony could have obtained ownership and received rents without the deed having yet been transferred. Suzanne further claims in her response to Form Interrogatories that Anthony told her that he had no intention of selling his interest in the LLC and Alpine, and that he continued using the office space at Alpine after the 2011 Partnership Dissolution. (Plaintiff’s response to UMF 31.) The Court, however, SUSTAINS Defendants’ objection nos. 3 and 6 to Swenson’s declaration and Exhibit G.

Suzanne does not oppose Defendants’ argument that “all causes of action derive from Suzanne having some sort of interest in the LLC and for all the aforementioned reasons should be summarily denied or barred.” (Motion, 20:23-24.) The Court agrees with Defendants.

Having failed to dispute Defendants’ undisputed material facts offer for Issue No. 2, Suzanne fails to satisfy her burden. Accordingly, the motion for summary judgment is GRANTED.