Wsi Highland Investments, LLC vs. Traigh Etiwanda associates LLC

Reply to Motion

Cal. Super. - 4th Dist.December 29, 2015

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law RUTAN & TUCKER, LLP Lisa N. Neal (State Bar No. 205465) Ineal@rutan.com Bradley A. Chapin (State Bar No. 232885) bchapin@rutan.com Allina M. Amuchie (State Bar No. 293460) amuchie@rutan.com 611 Anton Boulevard, Suite 1400 Costa Mesa, California 92626-1931 Telephone: 714-641-5100 Facsimile: 714-546-9035 Attorneys for Plaintiffs and Cross-Defendants WSI HIGHLAND INVESTMENTS, LLC and RICHLAND REAL ESTATE FUND, LLC SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE WSI HIGHLAND INVESTMENTS, LL.C, a Delaware limited liability company; and RICHLAND REAL ESTATE FUND, LLC, a Florida limited liability company, Plaintiffs, VS. TRAIGH ETIWANDA ASSOCIATES, LLC, a Delaware limited liability company; TRACY ETIWANDA ASSOCIATES, LLC, a Delaware limited liability company; PW ETIWANDA ASSOCIATES, LLC, a Delaware limited liability company; and DOES 1 through 20, inclusive, Defendants. TRAIGH ETIWANDA ASSOCIATES, LLC, a Delaware limited liability company; TRACY ETIWANDA ASSOCIATES, LLC, a Delaware limited liability company, Cross-Complainants, Vs. WSI HIGHLAND INVESTMENTS, LLC, a Delaware limited liability company; and RICHLAND REAL ESTATE FUND, LLC, a Florida limited liability company; and ROES 1 through 500, inclusive, Cross-Defendants. Case No. 30-2015-00827409-CU-CO-CJC ASSIGNED FOR ALL PURPOSES TO: Judge Sheila Fell Dept.: C25 WSI HIGHLAND INVESTMENTS, LLC AND RICHLAND REAL ESTATE FUND, LLCS REPLY IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY ADJUDICATION AS TO THE CROSS-COMPLAINT [Filed Concurrently with Evidentiary Objections] Hearing Date: April 5, 2017 Time: 10:00 a.m. Dept.: C25 Reservation Number: 72502102 Date Action Filed: December 29, 2015 Trial Date: April 24,2017 2609/032392-0001 10768368.4 a03/30/17 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law TABLE OF CONTENTS Page I. SUMMARY OF ARGUMENT .....coiiiitiiiieeeieeeeeeeeeeteeeeeeessere erases 4 II. THE UNDISPUTED MATERIAL FACTS SUPPORT GRANTING SUMMARY ADJUDICATION IN FAVOR OF RICHLAND ON THE FIRST, SECOND AND THIRD CAUSES OF ACTION FOR DECLARATORY RELIEF......ccoiiiiiieritciteeseein4 A. The CPA Imposed A Condition Precedent Requiring Tracy To Acquire The District PIOPEITY. ....ccoovivviiiiieriitiiececeeieeeeeeestoreevee 5 B. Richland Terminated The CPA On September 26, 2016. ......c.ccoceeveveeeeroirenn, 6 C. The Promissory Note Automatically Reduced $6,111,111 Upon Termination Of The CPA. ....cooiiiiiiiiicececeeeveeeee,6 D. The Partial Principal Reduction Is Not An Unenforceable Penalty. ....................... 7 The Obligation Of Good Faith And Fair Dealing Does Not Create Obligations That Do Not Exist In The Underlying Agreements. ..........ococorvvevn..... 8 F. The Cooperation Clause In The CPA Does Not Require Richland To Purchase The District Property Directly From The District. ...oovovevevieovovoeo 9 G. Tracy’s Sought-After Declarations Ignore The Terms of the PromiSSOTY NOTE. ....cocoviiiiiiieiiiietestessoeee eee eeesees, 10 H. There Is No Mistake or Accident That Supports Ignoring The Terms Of The Parties” Written AGIeCments..............cevvveveeeeeeereeeeeeeseeeeeeeeoes 11 L There Was No Mutual Agreement Requiring Richland To Purchase The DIStrict PIOPETLY. c..oviviiiiiiieieieisietceceeee,11 aI. TRACY FAILED TO ADDRESS ITS CLAIM FOR JUDICIAL FORECLOSURE.Locieestor12 IV. TRACY CONCEDES THAT THE REFORMATION CLAIM IS MOOT AND PROVIDES NO BASIS FOR WHICH TO REFORM THE CPA. c...oovovevovoe 13 V. CONCLUSION.Loctiteeestesso, 13 2609/032392-0001 10768368.4 a03/30/17 2. PLAINTIFFS' REPLY IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 1 TABLE OF AUTHORITIES 2 Page(s) 3 CALIFORNIA CASES 4 Brandwein v. Butler (2013) 5 218 Cal.APPA 1485Leorasreesbeebs ee eba esrb esaseeeneenes 11 6 Gafcon, Inc. v. Ponsor & Associates (2002) 08 CalADPDP.Ath 1388o.ooreretebe be sees tee sree abet tesaeaent ens 5 7 | Grand Prospect Partners, L.P. v. Ross Dressfor Less, Inc. (2015) 8 232 CallAPP.Ath 1332Leistereeesbeebs etter arrears heen eens 7 9 Guz v. Bechtel National, Inc. (2000) 24 CallBth 317coisasheet ete steer e esate aee erent enbens 8 10 i Racine & Larmie, Ltd., Inc. v. Department ofParks and Recreation (1992) 11 CalLAPP.Ath TO26eeveesreeste eres esas eean 8 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP -3- attorneys at law 2609/032392-0001 PLAINTIFFS' REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4203/30/17 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law I. SUMMARY OF ARGUMENT It is important to revisit the issues set forth in Richland’s! Motion because Tracy? largely ignores them in the Opposition. Richland’s Motion seeks summary adjudication of the five causes of action asserted in Tracy’s Cross-Complaint. The First, Second, and Third Causes of Action for Declaratory Relief fail as a matter of law because each of the 25 sought-after declarations seek relief directly contrary to the terms of the parties’ fully-integrated written agreements. Richland’s Motion specifically addresses each declaration and explains why each declaration is improper, legally incorrect, or not supported by the undisputed facts before the Court. Tracy's Opposition fails to specifically address any of the 25 sought-after declarations and avoids discussing the undisputed contractual provisions governing the parties’ rights and obligations. Tracy also entirely fails to address the Fourth Cause of Action for Judicial Foreclosure, which fails as a matter of law because both the law and undisputed facts demonstrate that Richland never defaulted under the Promissory Note. At all relevant times Richland has made the required payments on the Promissory Note in accordance the terms and conditions of the Note. Finally, Tracy concedes in the Opposition that the Fifth Cause of Action for Reformation is moot. Tracy’s reformation claim also fails as a matter of law because (1) there is no evidence of a mutual mistake; and (2) there is no evidence of a unilateral mistake by Tracy that Richland knew of or suspected at the time the CPA was executed. Accordingly, Richland respectfully requests that the Court grant this Motion in its entirety. IL. THE UNDISPUTED MATERIAL FACTS SUPPORT GRANTING SUMMARY ADJUDICATION IN FAVOR OF RICHLAND ON THE FIRST, SECOND AND THIRD CAUSES OF ACTION FOR DECLARATORY RELIEF. The undisputed facts establish that Tracy is not entitled to any ofthe judicial declarations sought byits First, Second, and Third Causes of Action because the undisputed evidence shows that the sought-after declarations are either (1) legally incorrect; (2) unsupported by the undisputed I Richland refers to Plaintiffs WSI Highland Investments, LLC and Richland Real Estate Fund, LLC. 2 Tracy refers to Defendants Tracy Etiwanda Associates, LLC, Traigh Etiwanda Associates, LLC, and PW Etiwanda Associates, LLC 4 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 2033017 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP aftorneys at law facts; or (3) otherwise not appropriate issues for declaratory relief. (Gafcon, Inc. v. Ponsor & Associates (“Gafcon”) (2002) 98 Cal.App.4th 1388, 1401-1402.) Instead of addressing each of the sought-after declarations, Tracy's Opposition argues that the entire case boils down to whether the principal amount of the Promissory Note should have been reduced by $6,111,111 upon Richland’s termination of the CPA.?> Tracy no doubt took this approach because a systematic review of each issue leads to the inescapable conclusion that the Parties’ fully-integrated and executed written agreements dictate the result ofthis case and unequivocally confirm that the Promissory Note automatically reduced $6,111,111.00 when the CPA was terminated. By ignoring the individualissues, Tracy avoids having to deal with the many contractual provisions that are on point and control the outcome of this case. A. The CPA Imposed A Condition Precedent Requiring Tracy To Acquire The District Property. The most significant fact Tracy ignores is the express “condition precedent” in the CPA, which provides that Tracy was obligated to acquire the District Property from the District* before Richland was required to perform its obligations under the CPA. (S.S. #2; Ex. 26 [CPA, §§ 1, 9.01(g)].) Section 1 of the CPA specifically addresses the condition precedent: [I]t shall be a condition precedent to [Richland’s] obligations hereunder that [Tracy] shall acquire fee title to the Property as set forth in Section 9.01(g) below. (S.S. #2; Ex. 26 [CPA, § 1][emphasis added].) Section 9.01(g) of the CPA provides: As a condition to [Richland’s] obligations hereunder, [Tracy] shall have acquired fee title to the Property prior to the Closing so that [Tracy] can transfer the Property to [Richland] as provided in this Agreement. (S.S. #2; Ex. 26 [CPA, § 9.01(g)][emphasis added].) Tracy had two years to satisfy this condition precedent. (S.S.# 1,35; Ex. 26 [CPA, § 2.06].) It is undisputed Tracy never satisfied this condition. [(S.S.# 35-36.) Section 9.02 of the CPA provides that the CPA shall terminate “[I]f any of the conditions set forth in Section 9.01 are not timely satisfied or waived.” (S.S. # 41-42.) It follows that 3 The CPA refers to the Conditional Purchase and Sale Agreement entered into by Richland Real Estate and Traigh on September 8, 2014. (S.S. # 1; Ex. 26). * District refers to the San Bernardino County Flood Control District. -5- 609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368 4 a03/30/17 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law Richland had no obligation whatsoever to perform under the CPA and Richland had the rightto terminate the CPA due to Tracy’s failure to satisfy the condition precedent. That was the deal. B. Richland Terminated The CPA On September 26, 2016. Tracy ignores the undisputed fact that Richland properly terminated the CPA on September 26, 2016. (S.S. # 41-42.) As set forth above, the CPA provided that Tracy had two years to acquire the District Property, which gave Tracy until September 24, 2016 to satisfy the condition precedent. (S.S. #1, 35; Ex. 26 [CPA, § 2.06].) The agreed upon two years expired on September 24, 2016 and Tracy still had not acquired the District Property. (S.S. # 35-36.) On September 26, 2016, Richland exercised its right to terminate the CPA pursuant to Sections 1, 2.06, 5.03, and 9.02 of the CPA. (S.S. # 41-42.) This uncontested issue is critical because the Promissory Note expressly provides that upon termination of the CPA, the principal amount of the Promissory Note is automatically reduced $6,111,111. (See S.S. # 69; Ex. 27 [Note, § 2].) C. The Promissory Note Automatically Reduced $6,111,111 Upon Termination Of The CPA. The undisputed evidence establishes that the parties’ written agreements dictate that the principal amount of the Promissory Note would automatically be reduced by $6,111,111 upon termination of the CPA. (/d.) To be clear, the $6,111,111 reduction (referred to in the Promissory Note as the “Partial Principal Reduction”) is precisely what the parties negotiated and is expressly provided for in the Promissory Note. (See S.S. # 67.) The $6,111,111 reflected an amount that the parties agreed Tracy would receive only if Tracy sold the District Property to Richland. (S.S. # 13, 18-20.) Indeed, Tracy expressly agreed that the $6,111,111 would be “conditional consideration dependent on [Richland’s] acquisition of the [District Property],” and Richland would pay an additional $3,888,889 in cash for the District Property if the transaction ever closed. (S.S. # 18-20.) > Because the CPA was terminated properly, the Partial Principal Reduction is a self-executing provision under the Promissory Note. (See S.S. #15-16; Ex. 27 [Note, § 2].) 5 At deposition, Tracy confirmed that the conditional consideration would not be earned until Richland acquired the District Property. (Neal Decl., § 2, Ex.2 [Luce 7/11 Tr., at pp. 233:21-234:20].) -6- 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 a03/30/17 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law D. The Partial Principal Reduction Is Not An Unenforceable Penalty. In an attemptto avoid the unambiguous contractual terms of the written agreements, Tracy asserts the Partial Principal Reduction is an unenforceable penalty under California law. However, unlike a penalty, the Partial Principal Reduction is directly related to the value ofthe District Property. (See Grand Prospect Partners, L.P. v. Ross Dressfor Less, Inc. (2015) 232 Cal.App.4th 1332, 1358 [characteristic feature of a penalty is the lack of a proportional relationship between the forfeiture compelled and the damages or harm that might actually flow from the failure to perform a covenant or satisfy a condition].) The negotiations leading up to the transaction confirm that the Parties agreed Richland would purchase the District Property for $10,000,000. (S.S.# 12-13.) The parties agreed $6,111,111 would be included in the Promissory Note as conditional consideration dependent on Tracy selling the District Property to Richland under the terms of the CPA, and Richland would pay the remaining $3,888,889 in cash for the District Property if the transaction closed. (S.S. # 18-20.) The Partial Principal Reduction (i.e., $6,111,111) is not an unenforceable penalty, but rather conditional consideration that needed to be earned by Tracy. (Neal Decl., § 5, Ex. 2 [Luce 7/11 Tr. at p. 234:3-17].) Notably, the CPA has an enforceable liquidated damage provision in the event of a breach. (8.5. #1 [CPA, § 12.02].) Section 12.02 of the CPA applies when the conditions to closing (including Tracy’s acquisition of the District Property) have been satisfied, but Richland fails or refuses to consummate the transaction. (/d.) In that circumstance, the CPA is clear (in all capital letters, bold print, separately initialed) that Tracy’s remedies would be limited to “an amount equal to the deposits theretofore paid by [Richland].” (/d.) The Partial Principal Reduction is thus neither an “unenforceable penalty” within the meaning of California law, nor a “liquidated damage” provision. Rather,it is an enforceable contractual provision agreed upon by sophisticated parties represented by top legal counsel during the arms-length transaction concerning what Richland would pay Tracy if Tracy could deliver the District Property. (Neal Decl., 9 18, Ex. 18 [emphasis added]; see also, Neal Decl., § 5, Ex. 2 [Luce 7/11 Tr. at p. 234:3-17].) Tracy erroneously suggests Richland would receive a windfall if the Promissory Note is -7- 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 2033017 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law reduced $6,111,111 in accordance with the terms ofthe parties’ agreement. First, the $6,111,111 represents conditional consideration for the District Property that Tracy did not earn. (S.S. # 18- 20.) Second, such a result would render the negotiated Partial Principal Reduction void and superfluous. Boiled down - Tracy is arguing that Tracy should be entitled to keep $6,111,111 regardless of whether it sold the District Property to Richland. If this is the case, why have a provision mandating a principal reduction if Tracy fails to deliver the District Property to Richland? If Tracy is allowed to keep the $6,111,111 it never earned, Tracy would receive a windfall contrary to the express contractual rights and obligations under fully integrated, and executed written agreements. Finally, Tracy’s claim that Richland may, at some point in the future, acquire the District Property is unfounded, speculative, and irrelevant. It is undisputed the parties’ written executed agreements required Tracy to acquire the District Property within 2 years and sell it to Richland. If Tracy could not satisfy this condition precedent in the agreed upon two-year time frame, Richland had the right to terminate the CPA and the principal amount of the Promissory Note would be reduced accordingly. This was the negotiated deal. What Richland may or may not do in the future is irrelevant. E. The Obligation Of Good Faith And Fair Dealing Does Not Create Obligations That Do Not Exist In The Underlying Agreements. Tracy erroneously contends that Richland’s good faith obligations under the CPA and Promissory Note preclude it from obtaining the Partial Principal Reduction. As the California Supreme Court explained: The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits ofthe agreement actually made. |. . .] It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms oftheir agreement. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350 [emphasis added]; Racine & Larmie, Lid., Inc. v. Department ofParks and Recreation (1992) 11 Cal.App.4th 1026, 1033 [“the implied covenantis limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated in the contract.”].) -8- 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 203/30/17 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law Richland’s good faith and fair dealing obligations cannot be extended to impose obligations that contradict the written agreement between the parties. Yet, this is precisely what Tracy argues. The CPA expressly provided that as a condition precedent to Richland having any obligations under the CPA, Tracy had to acquire feetitle to the District Property within two years. (S.S. # 1-2 [CPA,§§ 1,9.01(g)].) If Tracy failed to do so (or if the CPA was sooner terminated), the Promissory Note would be automatically reduced $6,111,111. (S.S. # 33-35.) Because Tracy never acquired the District Property, Richland’s obligations under the CPA were never triggered. (S.S.# 1-2 [CPA, §§ 1,9.01(g)].) Under no viable legal theory would Richland’s good faith and fair dealing obligations require it to do something (i.e., Purchase the District Property from the District) that expressly contradicts the condition precedent language it negotiated in the CPA. (S.S.# 1-2 [CPA, §§ 1,9.01(g)]; S.S. # 15 [Note, § 2].) None ofthe cases cited by Tracy remotely support such a proposition. Notably, even if Tracy satisfied the condition precedent by acquiring the District Property, the CPA gave Richland the right to conduct due diligence and determine whether to proceed with the purchase or terminate the CPA. (S.S. # 3; Ex. 26 [CPA, §§ 2.05, 5].) If Richland elected to terminate the CPA, the Promissory Note would automatically be reduced $6,111,111. (S.S. # 15; Ex. [Note, § 2].) This is critical because under the terms of the unambiguous written agreements, under no circumstance was Richland unequivocally obligated to purchase the District Property. Tracy’s attempt to impose such an obligation on Richland therefore fails as a matter of law. F. The Cooperation Clause In The CPA Does Not Require Richland To Purchase The District Property Directly From The District. Tracy next claims the cooperation provisions in the CPA required Richland to acquire the District Property directly from the District. This position misconstrues the unambiguous language of the CPA. Tracy claims Section 1 of the CPA requires Richland to cooperate with Tracy by doing the very thing that Tracy-not Richland-is supposed to do under the CPA (i.e., purchase the District Property from the District). Tracy’s claim is so disingenuous that a simple reading of the CPA refutes this position. Section 1 of the Conditional Purchase Agreement specifically states that Richland has to cooperate with “/Traigh’s] efforts to acquire the property.” (S.S. #1 [CPA, § 9. 7609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 107683634 2035017 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION ~ ~ 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law 1] [emphasis added].) This provision says nothing about Richland acquiring the District Property from the District. Tracy’s reliance on Section 13.11 is likewise unfounded. This provision states that the parties “shall execute such other and further documents and do such further acts as may be reasonably required to effectuate the intent of the parties and carry out the terms ofthis Agreement.” The clear intent of the parties was for Tracy-not Richland-to acquire the District Property from the District, which is clearly reflected in the written agreements.(S.S. # 1; Ex. 26 [CPA, § 1, 9.05].) Indeed, the CPA specifically precluded Richland from speaking directly with the District or doing any due diligence on the District Property until Tracy acquired the Property. S.S. #41; Ex. 26 [CPA, § 5.01(f)]; Neal Decl., q 8; Ex. 13.) There is not a single term in the CPA that embodies, or even remotely suggests, that Richland is obligated to purchase the District Property directly from the District. To make such a determination would render the entire purchase and sale agreement between Richland and Traigh meaningless. Indeed, there would be no point for any purchase and sale agreementif a seller could require the buyer to do that which the seller was contractually obligated to do. This position is simply untenable, G. Tracy’s Sought-After Declarations Ignore The Terms of the Promissory Note. Tracy also asks the Court to flat out ignore the express language in the Promissory Note. Tracy argues that the Promissory Note’s requirement that Richland must acquire the District Property “pursuant to the [CPA]” in order for Tracy to earn the $6,111,111 is immaterial and should be ignored. Tracy repeatedly argues that it was “immaterial” from whom Richland acquired the District Property. The argument strains credulity. It ignores the condition precedent requiring Tracy to acquire the Property. (S.S. # 1-2 [CPA, §§ 1, 9.01(g)].) It ignores the fact that Tracy insisted on provisions in the CPA that prevented Richland from even talking to the District about the District Property until after Tracy acquired the District Property from the District. (S.S. #41; Ex. 26 [CPA, § 5.01(f)]; Neal Decl., § 8; Ex. 13.) And it ignores the fact that the agreements negotiated and executed by the parties specifically addressed the possibility that Tracy may not be able to acquire the District Property and flip it to Richland under the CPA. (S.S. #1 [CPA § 1]; S.S. # 8 [Purchase Agreement §§ 2.01, 3.05]; S.S. # 15 [Note, § 21.) -10- 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 a03/30/17 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys at law The entire purpose of the “Note Reduction Contingency” and the “Partial Principal Reduction” was to address the situation where Tracy was unable to acquire the District Property within the two-year window provided for in the CPA. (See S.S. # 15 [Note, § 2].) In the face of these outcome determinative provisions, Tracy asks the Court to simply ignore all of these negotiated provisions and render them meaningless. Fundamental canons of contract interpretation militate against this result. (See, e.g., Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1507 [“when interpreting a contract, we strive to interpret the parties’ agreement to give effect to all of a contract’s terms, and to avoid interpretations that render any portion superfluous void or inexplicable.”].) H. There Is No Mistake or Accident That Supports Ienoring The Terms Of The Parties’ Written Agreements. Tracy further claims there was a “mistake/accident” that would require the Court to ignore the express terms of the parties” written contracts. There is simply no evidence to support such a claim. Tracy represented to Richland that it believed it could acquire the District Property. Richland had no reason to believe that Tracy would not be able to acquire the District Property, but of course this was always a possibility taken into consideration as evidenced by the “Note Reduction Contingency” and “Partial Principal Reduction” provisions. The parties thereafter negotiated and entered into the CPA, which obligated Tracy to acquire the District Property from the District as a condition precedent to Richland’s performing its obligations under the CPA. (S.S. #2; Ex. 26 [CPA, §§ 1, 9.01(g)].) The parties further contemplated and agreed to written agreements that specifically addressed the possibility that Tracy might not be able to acquire the District Property from the District, which is why the CPA allows for Richland to terminate and obtain a Partial Principal Reduction under the Promissory Note. (S.S. #1 [CPA § 1]; S.S. #8 [Purchase Agreement §§ 2.01, 3.05]; S.S. # 15 [Note, 2].) I. There Was No Mutual Agreement Requiring Richland To Purchase The District Property. Tracy claims the parties entered into a partially oral and partially written amorphous “mutual agreement” that completely contradicts the express terms of the CPA and Promissory -11- 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 2033017 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys af law Note. The purported “mutual agreement” articulates no terms of the purported amendment, makes no mention of the CPA or related documents, contains no signatures, and would eliminate Richland’s due diligence and termination rights without any consideration. Furthermore, Richland repeatedly made clear that there was no so-called “mutual agreement” and it did not agree to any amendment to the CPA. For example, on March 23, 2015, Tracy asked Richland for feedback on a Proposed Transfer Agreement between the District and Richland, in response to which the President and CEO of Richland stated that he did not know how to reconcile the CPA with the Proposed Transfer Agreement given the material differences in the terms of the agreements. (Bray Decl., § 20; Ex. 36.) In April 2015, Tracy emailed Richland proposed written amendments to the parties’ existing written agreements referencing a “mutual agreement.” (Neal Decl., 9 32; Ex. 37.) Richland immediately responded to Tracy making clear there was no “mutual agreement” and confirmed that the existing written agreements governed the parties’ respective rights and obligations. (Bray Decl., 22, Ex. 38.) Even after Richland expressly rejected the notion of the “mutual agreement” and refused to execute any amendments to the existing agreements, Tracy continued to claim that one had been reached despite never executing a single written document putting forth the terms of the alleged written agreement.’ Tracy’s claims of a “mutual agreement” also fail for several reasons outlined in the Motion including (1) statute of frauds, (2) no meeting of the minds, (3) no consideration given for the new “mutual agreement,” and (4) CPA is a fully integrated agreementthat requires all amendments be in writing and signed by all the parties which are not reasonably disputed by Tracy. III. TRACY FAILED TO ADDRESS ITS CLAIM FOR JUDICIAL FORECLOSURE. Oddly, Tracy’s Opposition fails to addressits claim for judicial foreclosure. Like the judicial declarations, Tracy no doubt took this approach to avoid having to deal with the many contractual provisions that demonstrably show, as set forth in the Motion, that Richland timely made all payments due and never defaulted on the Promissory Note. Tracy makes no argumentin 6 Significantly, as of the time Tracy contends the “mutual agreement” was entered into, the District had not agreed to sell the District Property to Richland and, of course, Richland had not agreed to buy the District Property from the District. In fact, the District did not provide a draft purchase agreement to Richland for the District Property until four months after Richland repudiated the idea of a mutual agreement. i. 2609/032392-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 2033017 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rutan & Tucker, LLP attorneys af law its Opposition memorandum that Richland is not entitled to summary adjudication of this issue. IV. TRACY CONCEDES THAT THE REFORMATION CLAIM IS MOOT AND PROVIDES NO BASIS FOR WHICH TO REFORM THE CPA. Tracy seeks to reform the CPA to remove Section 5.03 which provides in part: “Prior to the expiration of the Review Period, Buyer shall have the right to terminate this Agreementin its sole and absolute discretion for any reason or none at all.” (See S.S. # 1 [CPA, § 5.03].) This claim has no merit. Tracy concedes in the Opposition that its reformation claim is moot. (Opposition, p. 25:4- 8). Richland exercised its right to terminate the CPA pursuant to sections 1, 2.06, 5.03, and 9.02 of the CPA on September 24, 2016. (S.S. # 41-42.) Each of these provisions provides a separate and independent basis for termination of the CPA. Because Richland terminated the CPA pursuant to, inter alia, Section 2.06-which Tracy concedes Richland had the right to do-the question of whether Richland also had the right to terminate under Section 5.03 is moot. Furthermore, there is no clear and convincing evidence of a mutual mistake made by the parties in the drafting of the CPA; and there is no clear and convincing evidence of unilateral mistake by Tracy. All parties were represented by legal counsel and sophisticated representatives who were involved in reviewing and revising the agreements before execution by the parties. (Chapin Decl., § 2, Ex. 1 [Abel 8/5 Tr. at 52:12-16].) To the extent this provision was not acceptable to Tracy, it should have been addressed before the agreements were signed. V. CONCLUSION. Based on the foregoing, Richland respectfully requests that the Court grant the Motion. Dated: March 30, 2017 RUTAN & TUCKER, LLP 7) i / / Pre Byy/. Ang LV Lisa N. Neal Attorneys for Plaintiffs and Cross- Defendants WSI Highland Investments, LLL.C and Richland Real Estate Fund, LLC -13- 2609/032352-0001 PLAINTIFFS’ REPLY IN SUPPORT OF MOTION FOR SUMMARY 10768368.4 a03/30/17 JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF ORANGE I am employed by the law office of Rutan & Tucker, LLP in the County of Orange, State of California. Iam over the age of 18 and not a party to the within action. My business address is 611 Anton Boulevard, Suite 1400, Costa Mesa, California 92626-1931. On March 30, 2017, I served on the interested parties in said action the within: WSI HIGHLAND INVESTMENTS, LLC AND RICHLAND REAL ESTATE FUND, LLC’S REPLY IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, MOTIONS FOR SUMMARY ADJUDICATION AS TO THE CROSS- COMPLAINT as stated below: Thomas E. Gibbs, Esq. Brian R. Bauer, Esq. ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS, LLP 1900 Main Street, Fifth Floor Irvine, California 92614-7321 tgibbs@allenmatkins.com bbauer@allenmatkins.com Attorneys for Defendants and non-party Mission Pacific Land Company, LLC (BY FEDEX) by depositing in a box or otherfacility regularly maintained by FedEx, an express service carrier, or delivering to a courier or driver authorized by said express service carrier to receive documents, a true copy of the foregoing document in sealed envelopes or packages designated by the express service carrier, addressed as shown above, with fees for overnight delivery provided for or paid. Executed on March 30, 2017, at Costa Mesa, California. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Nancy Bush (Type or print name) « (Signature) 2054/032392-0001 10001140.1 a03/30/17