2014-00160123-CU-PT

In Re: The Matter of Simple Traditions, Inc.

Nature of Proceeding: Petition for Judicial Supervision of Winding Up of Corporation

Filed By: Ho’okano, Thomas E.

Petitioner Nancy Linn’s Petition for Judicial Supervision of Winding Up of Simple
Traditions Inc., a California corporation is DENIED, without prejudice .

The Court has received, but will not consider Petitioner Linn’s documents filed on April
16, 2014 (Memorandum of Points and Authorities, Declaration of Donald Pach,
Declaration of Nancy Linn, Notice of Lodging Compact Audio Disc.)Insufficient notice
and opportunity to respond has been provided to opposing party.

Petitioner Linn has failed to file a Memorandum of Points and Authorities in support of
her petition. C.R.C., Rule 3.1112. The court may construe the absence of a
memorandum as an admission that the motion or special demurrer is not meritorious
and cause for its denial and, in the case of a demurrer, as a waiver of all grounds not
supported. C.R.C., Rule 3.1113. The Petition does not fall within the exceptions of
C.R.C., Rule 3.1114(a).

The Notice of Motion fails to comply with C.R.C., Rule 3.1110 which requires that “A
notice of motion must state in the opening paragraph the nature of the order being
sought and the grounds for issuance of the order.” Luri v. Greenwald (2003) 107 Cal.
App. 4th 1119, 1125. No grounds have been set forth by Petitioner Linn in her Notice.

Counter-petitioner Maria Paluch asserts that Linn has failed to follow the proper
procedure in this motion, and should instead have requested that the Court issue an
Order to Show Cause.

Corp Code § 1904 provides in pertinent part that “ If a corporation is in the process of
voluntary winding up, the superior court of the proper county, upon the petition of (a)
the corporation, or (b) a shareholder or shareholders who hold shares representing 5
percent or more of the total number of any class of outstanding shares, . . . , and upon
such notice to the corporation and to other persons interested in the corporation as
shareholders and creditors as the court may order, may take jurisdiction over such
voluntary winding up proceeding if that appears necessary for the protection of any
parties in interest.”

Here, no Order to Show Cause has been requested or issued. The corporation has
not appeared in this action, but was served with the Linn’s Petition by US Mail.

Linn’s Petition requests that the Court order that Paluch be removed as a Board
member of the Corporation “due to neglect of corporate responsibilities, abuse of trust
in conducting corporate affairs, breach of fiduciary duty to the corporation in placing
her own financial interests over and above the interests of the corporation and its
creditors, for her dishonesty and due to her inability to act due to her mental incapacity
occasioned by constant alcohol and substance abuse.” citing Corp. Code, secs. 1806
(g), 304. (Petition, para. 17)

Linn’s Declaration as to the Special Board Meeting on February 25, 2014 reflects that
the only two shareholders and members of the Board were unable to agree on whether
or how to wind up the corporation. (Linn Dec., paras. 3-13.)

Counter-petitioner Maria Paluch represents in her Opposition papers that she agrees
with Linn that the Corporation should be wound up and dissolved. As a 50%
shareholder and also Vice President and Secretary of the corporation, Paluch
executed a resolution electing to wind up and dissolve the corporation on Feb. 21,
2014. She also filed a Certificate of Election to Wind Up and Dissolve the corporation
with the California Secretary of State. (Paluch Dec., para. 2)

In opposition, Paluch asserts that Linn has unclean hands due to her use of the
Corporation’s funds to support her drug use and her refusal to comply with her
fiduciary responsibilities to work with Paluch to effect the winding up and dissolution of
the Corporation. (Paluch Dec., para. 6.)

The Corporation’s Bylaws provide for the Board of Directors to consist of only two
directors. Linn and Paluch are the two directors. They each declare that they have
been consistently unable to agree on any matters relating to the Corporation’s winding
up and dissolution. (Paluch Dec., para. 5; Linn Dec., paras. 2-13.)

On the record before it, the Court must deny this procedurally defective motion. The
deadlocked shareholders here may make the appointment of a receiver appropriate.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.