2014-00158797-CU-BC
Antelope Industrial Park vs. Richard TaylorAntelope Industrial Park vs. Richard Taylor
Nature of Proceeding:
Filed By:
Motion for Preliminary Injunction
Finnerty, Kathleen E.

Plaintiff’s Motion for Preliminary Injunction is GRANTED.

On March 18, 2014, Plaintiff Antelope Industrial Park (“AIP”) filed its Verified First
Amended Complaint setting forth 10 causes of action: the 1st for Members’ Expulsion
[Corp. Code, sec. §17706.01(e)], the 2nd for Breach of Covenant of Good Faith and
Fair Dealing; the 3rd for Conversion; the 4th for Breach of Operating Agreement; the 5th
for Breach of Contract; the 6th for Open Book Account; the 7th for Account Stated; the 8
th for Money Had and Received; the 9th for Fraud/ Concealment; and the 10th for
Nuisance.

On March 20, 2014, this Court granted plaintiff’s TRO and Order to Show Cause Re
Preliminary Injunction, as amended, set for today’s date. The Court ordered that:
Pending the hearing on the Order to Show Cause, Defendants, their agents, officers,
employees and representatives, and all persons acting in concert or participating with
them, were temporarily enjoined from engaging in or performing the following: “(a)
Collecting or attempting to collect rents or other monies derived from the rental or
operation of the LLC property; (b) Entering into or attempting to enter into any contract
or agreement regarding the LLC property; (c) Operating or attempting in any way to act
as Manger(s) of the LLC; and (d) Dumping, disposing or otherwise placing any
hazardous substances, as defined under the Comprehensive Environmental
Response, Compensation and Liability Act 42 U.S.C. §§ 9601, et seq. (“CERCLA”) or
the Resource Conservation and Recovery Act 42 U.S.C. §§ 690, et seq., (“RCRA”) or
any other substance defined in federal, state or local laws, statutes, regulations, orders
or rules for the protection of health or the environment on or about the Property.”

Facts

AIP is a California limited liability company formed by James G. Taylor in 2006 for the
purpose of owning, developing, and leasing the real property located at 8620 Antelope
Road North, Antelope, California (the “Property”), (Operating Agreement (“OA”) § 2.05,
FAC, Exhibit A.). AIP derives most of its income from renting the Property to
businesses, stores, truck drivers, and trucking companies.(Terry Taylor Dec, para. 4).
The original members of AIP were James G. Taylor, and his three (3) children: Terry
Taylor (hereinafter “Terry”), Richard Taylor (“Richard”) and Vickie Talley (hereinafter
“Vickie”). The siblings each hold a thirty percent (30%) interest in AIP; the remaining
ten percent (10%) belonged to James G. Taylor. (OA, Sched. A.).

The OA reflects AlP’s clear intent and confidence in Terry by mandating that
management of AIP be vested exclusively in Terry as its sole Manager. The OA further
provides that Terry “shall serve until he resigns, dies, or becomes incapacitated as
determined by his personal physician.” (OA, 5.01, 5.03). Only upon occurrence of such
an event can another Manager be elected. (OA, 5.04).

None of these events has occurred and yet, contrary to the terms of the OA, Richard
and Vickie in January 2014 purport to have recently “voted” Terry out as Manager of AIP. (Terry Taylor Decl., paras. 2 and 19).
Additionally, only the Manager, Terry, has to power to conduct business for AIP. The
other members, Richard and Vickie, “shall not have the power to transact business
with the LLC, without the written consent of the Manager.” (OA, 8.02) Moreover, the
members of AIP are expressly prohibited from leasing or subleasing any property
owned by AIP or entering into any transactions on behalf of AIP. (OA, 5.01, 5.02, 5.06,
5.07). “All leases and sub-leases must be executed with the LLC, be fully assignable
to the LLC and must have Manager approval.” (OA, 8.02).

Despite these clear provisions in the Operating Agreement, plaintiff AIP alleges that
Richard and Vickie have entered into leases and subleases, without the knowledge or
consent of Manager Terry. Between 2006 and Dec. 2013, Richard and Vickie
misrepresented to third parties that they were the landlord, creating separate financial
records to conceal the rental payments and have misappropriated rents due to AIP in
excess of $330,870. (T. Taylor Dec., paras. 5-13, Exh. E.)

Additionally, in or about April 2006, Richard entered into an oral agreement with AIP by
which he agreed to rent designated space on the property for his own business,
Specialized Transport, Inc., for $3,600 month rent. In April 2007, Specialized agreed
to an increase of its rent to $3,900 month. (FAC, para. 52) Specialized paid rent until
Sept 2009, when it stopped making payments. However, it continued to occupy space
on the property, which it did not vacate until Dec. 2013, pursuant to unlawful detainer
proceedings. Specialized and/or Richard are asserted to owe rent to AIP in the
amount of $205,000. (T. Taylor Dec., para. 15)

Preliminary Injunction

In deciding whether to issue a preliminary injunction, a court must weigh two
“interrelated” factors: (1) the likelihood that the moving party will ultimately prevail on
the merits and (2) the relative interim harm to the parties from issuance of the
injunction. The greater the plaintiff’s showing on one, the less must be shown on the
other to support an injunction. Butt v. State of California (1992) 4 Cal.4th 668, 677-
678. A preliminary injunction may not be granted, regardless of the balance of interim
harm, unless it is reasonably probable that the moving party will prevail on the merits.
San Francisco Newspaper Printing Co. v. Superior Court (1985) 170 Cal. App. 3d 438,
442.

Plaintiff’s opposition contends that Terry Taylor has no standing to bring this suit on
behalf of AIP, as he was removed as Manager by a vote of Richard and Vickie on Jan.
27, 2014. The governing law set forth in the California Revised Uniform Limited
Liability Company Act, governs relations between members of the LLC, where the
Operating Agreement is silent. Corp. Code, sec. 17701.10.

Opposing parties assert that as the Operating Agreement makes no provision for the
removal of the manager, the default provision set forth in Corp. Code, sec. 17704.07(c)
(5) applies: “A manager may be removed at any time by the consent of a majority of
the members without notice or cause.”

The Operating Agreement expressly provides that: “Manager’s Term. The Manager
shall serve until he resigns, dies, or becomes incapacitated as determined by his
personal physician.” (OA, 5.03.) “Election of Manager. In the event that the Manager resigns, dies, or is determined by his physician to be incapacitated, a majority of the
Membership Interests shall select a new Manager.” (OA, 5.04.)

The Court does not concur that the word “removal” is required, and rather finds that
the language of the Operating Agreement controls, and that no additional terms or
conditions should be implied from the Corp. Code, where such terms would be clearly
inconsistent with the Operating Agreement.

When an instrument is susceptible to two interpretations, the court should give the
construction that will make the instrument lawful, operative, definite, reasonable and
capable of being carried into effect and avoid an interpretation which will make the
instrument extraordinary, harsh, unjust, inequitable or which would result in absurdity.
City of El Cajon v. El Cajon Police Officers’ Assn. (1996) 49 Cal. App. 4th 64, 71.
As the Operating Agreement provides that the “Manager shall serve until he resigns,
dies, or becomes incapacitated as determined by his personal physician” and none of
those events has been shown to occur, the Court finds that the removal of Terry Taylor
as Manager by vote of the defendants is in violation of the terms of the Operating
Agreement. (OA, 5.03, 5.04.)

Defendants further contend that at the same Jan. 2014 meeting they voted to dissolve
the LLC, due to the death of their father.

However, the Operating Agreement provides: “Mandatory Purchase of Membership
Interest – In the event of James Taylor’s death,. . . James Taylor’s personal
representative shall sell, and each remaining Member shall buy, a portion of James
Taylor’s interest in the Company. The portion of the interest that an individual
remaining Member shall be obligated to buy under this Agreement shall be that
proportion which the individual remaining Member’s net worth in the Company bears to
the total net worth in the Company of all remaining Members.” (OA, 3.14.)

Further, Events Causing Dissolution are provided in the Operating Agreement as
follows: “The Company shall be dissolved, its assets shall be disposed of and its
affairs shall be wound up on the first to occur of the following events: (a) On
determination by members owning more than 75 percent of the interests in the
Company that the Company should be dissolved. (b) On the death, insanity,
bankruptcy, retirement, resignation, or expulsion of any Member, unless at least 50
percent of the remaining Members consent to continue the Company within 90 days of
the dissolution event. (c) Upon the determination of the Manager, in his sole discretion.
(d) At any earlier time at which dissolution may be required under any applicable
law.” (OA, 10.01.)

However, pursuant to the OA, only the Manager may conduct the dissolution and
winding up of AlP. (OA 10.02). Allowing either of the defendant members to oversee
the dissolution is contrary to the intent of the OA and is highly likely to irreparably harm
the interests of AlP.

The Court finds on the record before it that the plaintiff is likely to ultimately prevail on
the merits and the relative interim harm to the parties from issuance of the injunction
weighs in favor of granting the preliminary injunction.

Terry Taylor is ordered restored as Manager, to restore the status quo, as the vote to remove him was in violation of the Operating Agreement. That finding, and the
remainder of the preliminary injunction, is specifically to preserve the status quo
pending trial.

The Court does not rule at this time on plaintiff’s request to expel Richard and Vickie
as members of the AIP, as it was not part of the Order to Show Cause.
The injunction is condition upon the posting of an undertaking in the amount of
$10,000. C.C.P. section 529.

The prevailing party shall prepare a formal order for the Court’s signature pursuant to
C.R.C. 3.1312.