CASE#: MSC13-00170
CASE NAME: LEWIS CA PARTNERSHIP VS. MOORE
HEARING ON MOTION FOR SUMMARY ADJUDICATION FILED BY LEWIS
CALIFORNIA PARTNERSHIP, HARRY BELLINGER LEWIS, WILLIAM R LEWIS
* TENTATIVE RULING: *
The Court rules as follows on the motion for summary adjudication brought by plaintiff Lewis California Partnership, and by all served cross-defendants. For convenience, these moving parties are referred to collectively as “plaintiff Lewis.” The motion is opposed by defendants Johnny Moore and Mary Moore, referred to collectively as “the Moore defendants.”
Plaintiff Lewis’s motion for summary adjudication is granted. However, plaintiff should be aware of the Court’s preliminary assessment that a ruling in plaintiff’s favor on the Complaint’s Fourth Cause of Action for specific performance may limit the relief that plaintiff can obtain in the Complaint’s First Cause of Action for the recovery of delinquent capital contributions. It would appear to the Court that, given the payment calculation set forth in section 8.4 of the LLC operating agreement, plaintiff will be limited to recovering the difference between the principal balance of the Bilich loan, approximately $ 345,000, and the full amount that plaintiff paid to satisfy the Bilich loan, approximately $ 380,000. (See, Lewis Dec., paragraph 6 and Exh. 5.) To find otherwise would appear to give plaintiff the windfall of receiving capital contributions from defendants for which plaintiff has no obligation to account. However, the issue is not presently before the Court, and the Court makes no binding ruling in that regard.
The basis for granting summary adjudication is as follows.
The Merits
Plaintiff Lewis has established that the Bilich loan came into default, that plaintiff paid off the Bilich loan, and that the Moore defendants’ capital account had a negative balance as of the time that plaintiff exercised its option to compel a sale of the Moore defendants’ interest in the LLC. (See, Fact Nos. 1-8, and evidence there cited.) Accordingly, plaintiff has established a prima facie case for granting summary adjudication in plaintiff’s favor on the Complaint’s Fourth and Fifth Causes of Action. The Moore defendants have not disputed plaintiff’s argument that such a ruling would also dispose of the causes of action in the Cross-Complaint that are the subject of plaintiff’s motion.
The Moore defendants have failed to intelligibly articulate any viable defense to this specific performance theory. (See generally, Oldcastle Precast, Inc. v. Lumbermens Mutual Casualty Co. (2009) 170 Cal.App.4th 554, 564-565 “[p]laintiff’s initial burden of proof in moving for summary judgment …did not include disproving any affirmative defenses asserted by defendants”].) To the extent that defendants’ opposition papers hint at possible defenses, those defenses clearly lack merit for the reasons stated in plaintiff Lewis’s reply memorandum and in this ruling below.
Enforceability. The Moore defendants are not in a position to argue now that the LLC operating agreement is unenforceable. First, defendants offer no legal argument on this point; they cite six Civil Code sections governing the interpretation of enforceable contracts, but no law of any kind holding that an operating agreement’s failure to address operational details, such as an opening date, renders the operating agreement unenforceable. Second, defendants conceded, in their responses to Form Interrogatory Nos. 50.5 and 50.6, that the LLC operating agreement is both enforceable and unambiguous. Third, defendants in their Cross-complaint sue plaintiff Lewis for breach of the same LLC operating agreement, and are bound by their judicial admission that the parties’ rights are governed by that operating agreement.
Waiver. The Moore defendants appear to be arguing that plaintiff Lewis somehow waived its right to compel a sale of defendants’ interest under section 8.4 of the LLC operating agreement. This argument lacks merit for several reasons. First, defendants have not pleaded waiver as an affirmative defense. Second, plaintiff already had a contractual right to pay off the BIlich loan and compel a sale if the Bilich loan went into default; plaintiff did not need defendants’ permission to exercise that right, and defendants had no authority to impose conditions on plaintiff’s exercise of that right. Third, the emails on which defendants rely do not support an implied waiver theory. (See, e.g., Defendants’ Exh. “D4,” email from Mr. Oliveri to Mr. O’Connor dated 7-19-12 [defendants agreed to plaintiff paying off Bilich loan “with a reservation that they can assert any claim or defense in this dispute”].)
Title. The Moore defendants affirmatively allege in their Cross-complaint that the subject LLC was formed to purchase and operate the Antioch Family Fun Center, “including land.” (Moore Cross-Complaint, p. 4:7-11, paragraph 16.) This is also recited in the LLC operating agreement that is attached as an exhibit to the Cross-Complaint. (See, Operating Agreement, page 1, section 1.1 [“to acquire that certain real property”].) Defendants are bound by these judicial admissions. If defendants contest this point, defendants’ counsel should be prepared to answer the following question: if the subject real property was not supposed to go into the LLC, what did defendants contribute to the LLC in exchange for their 49% interest? Defendants and their counsel are reminded of the obligations imposed by section 128.7 of the Code of Civil Procedure, subdivision (b).
Other Defenses. The Moore defendants’ other possible defenses also lack merit. First, defendants have not offered substantial evidence of any material breach by plaintiff Lewis; the mere fact that the parties were not able to reach agreement on certain operational issues, or that defendants disagreed with certain business judgments made by cross-defendant Harry Lewis, does not show a material breach on the part of plaintiff Lewis. Second, defendants fail to offer any reasoned analysis as to how the parties’ failure to agree on submitting their dispute to a special referee constitutes a defense to specific performance, and defendants’ own counsel repeatedly warned plaintiff of the likelihood that the parties’ dispute would have to be resolved in a Superior Court action. (See, e.g., Defendants’ Exh. “D(14)” [“[y]our clients need to stop stalling, or we should just file a civil action in contra costa county and skip the referee process”].) Third, defendants fail to offer any reasoned analysis as to how the purported conflict of interest on the part of plaintiff’s attorney constitutes a defense to specific performance, and it would appear to the Court that defendants have now waived the right to assert any such conflict of interest.
Additional Matters
Tabbing Exhibits. Plaintiff Lewis shall properly tab its exhibits in all future filings. (See, Cal. Rules of Court, rule 3.1110, subd. (f).) The exhibits attached to the declarations of Harry Lewis and Mark O’Connor were not tabbed.
RJN. The Moore defendants’ request for judicial notice is superfluous. In deciding the pending motion for summary adjudication, the Court must necessarily consider the pleadings, all papers filed in support of and in opposition to the motion, and pertinent law. The Court’s consideration of pertinent California case law has not been aided by defendants’ opposition memorandum, which fails to cite any.
Defendants’ Objections. The Court has exercised its discretion to rule on the Moore defendants’ evidentiary objections, filed on April 7, 2014, even though they are not in the proper form. The Court will refer to the un-numbered objections in sequential order, as if they had been numbered. No.1 (Lewis Dec., page 2, lines 8-10): sustained. No. 2 (Lewis Dec., page 2, lines 13-16): sustained as to the language “consistent with Sections 1.1 and 1.7 of the Operating Agreement.” No. 3 (Lewis Dec., paragraph 3): overruled. No. 4 (Lewis Dec., paragraph 4): overruled. No. 5: overruled, because defendants here object to “page 3, paragraph 3,” but there is no paragraph 3 on page 3 of the Lewis declaration. No. 6 (Lewis Dec., page 3, line 5): overruled. No. 7 (Lewis Dec., paragraph 7): overruled. No. 8 (Lewis dec., page 3, lines 26-18): sustained.
Plaintiff’s Objections. Plaintiff Lewis’s evidentiary objections, filed on April 18, 2014, are all sustained.