Motion for Summary Judgment and/or SAI
Tentative Ruling: Cross-Defendants’ Motion for Summary Judgment is DENIED; however, the Court GRANTS Summary Adjudication of Issues Nos. 1 and 3. Adjudication of the remaining Issues is DENIED.
Additionally, the Court GRANTS Cross-Defendants’ RFJN and rules as follows, on the submitted evidentiary objections:
The Court OVERRULES Objections Nos. 1-3 to the Declaration of Mrs. Atkinson. The Court OVERRULES Objections Nos. 1-2 and 4-7 and SUSTAINS Objection No. 3, to the Declaration of Mr. Kyle. The Court OVERRULES Objection No. 1 and SUSTAINS Objection No. 2 to the Declaration of Mr. Griffith.
Similarly, the Court OVERRULES Objections Nos. 2-9 and 11-22 and SUSTAINS Objections Nos. 1 and 10, to the Declaration of Mr. Gentner. Finally, the Court OVERRULES Objections Nos. 23-27 and SUSTAINS Objection No. 28, to the Declaration of Mr. Cordova.
Issue No. 1: Voting Rights: Pursuant to City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, “[a]ny contract must be construed as a whole, with the various individual provisions interpreted together so as to give effect to all, if reasonably possible or practicable.” (Id. at 474.) “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.” (Id.)
Here, significantly, the parties clearly and separately articulated that unanimous consent is necessary, to transfer voting rights through assignment. (Article VI, §3 of Exhibit “A” of Exhibits in Support of Motion.)
In contrast, no provision is provided, which specifically and separatelylimits the transfer of voting rights upon death; rather, the only reference to death is included within the definition of “Substituted Member.” (Id.)
Given that the parties chose not to separately limit the transfer of voting rights upon death (despite a clear decision to limit such transfer upon assignment), the provision defining “Substituted Member” applies to: (1) A person admitted to the rights of a Member who has died; and (2) (As specifically identified in the prior paragraph) A party who, with the unanimous consent of the remaining Members, obtained the right to vote upon Assignment.
This interpretation is supported by Corporations Code section 17304(a), which provides that, where an individual dies, their executor “may exercise all of the member’s rights for the purposes of settling the member’s estate or administering the member’s property, including any power the member had under the articles of organization or an operating agreement to give an assignee the right to become a member.”
Further, the Court finds that the Operating Agreement is not “reasonably susceptible” to the interpretation put forth in Cross-Complainants’ parol evidence. “Trial courts are required to receive provisionally any proffered parol evidence that is relevant to show whether the contractual language is reasonably susceptible to a particular meaning.” (Adams v. MHC Colony Park Limited Partnership (2014) 224 Cal.App.4th 601, 620.) “Such parol evidence might expose a latent ambiguity when the contract appears unambiguous on its fact.” (Id.) “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.” (Pacific State Bank v. Greene (2003) 110 Cal.App.4th 375, 386.) “Parol evidence that does not vary or contradict the written terms of the contract is admissible to explain the ambiguities or give meaning and content to the words used, provided it does not vary or contradict the terms of the contract.” (Blackburn v. Charnley (2004) 117 Cal.App.4th 758, 766, emphasis added)
Here, Mr. Gentner declares he relevant clause “was inserted into the Operating Agreement because Bob Griffith stated that he did not want to be in business with anyone’s spouse should a member pass away.” (¶5 of Gentner Dec., emphasis added.) Thus, this evidence suggests the solepurpose of the disputed provision was to prevent the transfer of voting rights upon death, absent unanimous consent. This evidence, however, conflicts with the plain terms of the Agreement, most specifically, that the Members failed to include a separate provision expressly limiting such transfers. As the Members clearly chose to separately limit the transfer of voting rights upon Assignment, the evidence offered by Cross-Complainants (suggesting the priority was transfers upon death) is conflicting. Thus, this evidence is insufficient to demonstrate the Operating Agreement is “reasonably susceptible” to the second interpretation. Based on all of the above, as it is undisputed Mrs. Atkinson was the executor of Mr. Atkinson’s estate, (See ¶9 of Atkinson Dec.) and the Court determines this issue in favor of Cross-Defendants.
Issue No. 2: Membership Interests: The Court finds a triable issue asnone of the Declarations offered by the parties provide sufficient foundation to demonstrate the basis for their conclusions. Additionally, the Court considers only admissible evidence.
Initially, the Declarations of Mr. Kyle, Mr. Griffith and Mr. Parkhurst each declare, only, the interests upon formation. Pursuant to Article III, §12 of Exhibit “A”, the relevant question is current interests.
Further, although it is undisputed no additional contributions or withdrawals have been made (See SSUF Nos. 61 and 62), the moving parties failed to provide either the existing or initial capital numbers.
Also, none of the Declarations offered explain: (1) which books or records were reviewed and/or the basis for their conclusions; or (2) the manner in which the figures were determined.
As the moving party bears the initial burden, adjudication of this issue must be DENIED. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849-850).
The Court finds, however, that adjudication of Issue No. 1 is appropriate, separate from Issue No. 2, pursuant to Lilienthal & Fowler v. Superior Court(1993) 12 Cal.App.4th 1848, as the Issues are separate and distinct. (Id.at 1854-1855.)
Fifth COA (Breach of Operating Agreement – Issues Nos. 3 and 4): The Fifth COA alleges Cross-Defendants breached Article VI, Section 4(c) of the Operating Agreement on April 11, 2013 when Cross-Defendants failed to accept an offer of purchase by Trumark and/or failed to purchase Gentner and Parkhurt’s interests in the LLC. (¶37-¶39 of the FACC.)
Article VI, Section 4(c) of the Operating Agreement provides the following:
“In the event that the LLC receives a bonafide offer to purchase the entire property and some of the members elect not to accept that offer, a member may then elect to accept that offer as the basis of establishing the value of his shares and force the purchase of his interest by the remaining members for the proportionate amount of the offered price.”
(Exhibit “A” of Moving Exhibits.) Significantly, there is no dispute that Bay City Partners, LLC entered into a Disposition and Development Agreement (DDA) with the City of Seal Beach on July 9, 2012, whereby the LLC agreed to donate 60 percent of its property to the City. (SSUF No. 74.) The DDA was in place prior to the offer made by Trumark. (See SSUF No. 73.)
Based on the above, Cross-Complainants argue the Trumark Offer sought to purchase all sell-able property and, thus, Complainants urge the Court to interpret the Trumark Offer as invoking Article VI, Section 4(c) of the Operating Agreement.
Importantly, however, it is undisputed Bay City Partners, LLC has not yetdonated property to the City. Complainants concede within their response to Separate Statement No. 73, that the “LLC owns 10.69 acres of Property…” Additionally, Complainants have failed to provide any argument, analysis or discussion, demonstrating the phrase “entire property,” as included in the Operating Agreement, applies to any portion less than the full amount owned by the LLC.
Given the plain meaning of the phrase “entire property,” adjudication of the Fifth COA is GRANTED. The Offer provided by Trumark did not seek to purchase all 10.69 acres held by the LLC and, thus, did not invoke Article VI, Section 4(c) of the Operating Agreement. As a result, Complainants claim for Breach of Contract fails.
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