Nnn Capital Fund I, LLC vs. Todd A. Mikles

Demurrer to Amended Complaint

Cal. Super. - 4th Dist.March 24, 2017

F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 oO 00 ~ ~ ] hy t h BA W N M O R O N N N R O R E m e m e m e m E e e m e s p e p m FREEMAN MATHIS & GARY, LLP CHAD WEAVER (CA Bar No. 191984) cweaver@fmglaw.com YOUNIIN (JENNIFER) LEE (CA Bar No. 310198) jlee@fmglaw.com 3030 Old Ranch Parkway, Suite 280 Seal Beach, California 90740 Tel: (562) 583-2124 | eFax: (562) 252-1110 Attorneys for Defendant Jeff Hanson Co un ty of Or an ge 08 /2 8/ 20 17 at 05 :5 9: 00 PM Cl er k of th e Su pe ri or Co ur t By No mi La u, De pu ty Cl er k E L E C T R O N I C A L L Y FI LE D Su pe ri or Co ur t of Ca li fo mi a SUPERIOR COURT FOR THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE NNN CAPITAL FUND I, LLC, a Delaware limited liability company; TYRONE WYNFIELD, an individual, its liquidating trustee, Plaintiffs, V. TODD A. MIKLES, an individual; NNN REALTY INVESTORS, LLC, a Virginia limited liability company; DAYMARK REALTY ADVISORS, INC., a Delaware corporation; DAYMARK PROPERTIES REALTY, INC, a California corporation; SOVEREIGN STRATEGIC MORTGAGE FUND, LLC, a California limited liability company; SOVEREIGN CAPITAL MANAGEMENT GROUP, INC., a California corporation; SOVEREIGN CAPITAL MANAGEMENT COMPANY GP, INC, a Delaware corporation; MARKET TOWER PARTNERS, LLC, a Delaware limited liability company; GCL, LLC, a Delaware limited liability company; GCL MANAGER, LLC, a Delaware limited liability company; SCOTT CAPTION CONTINUED Case No. 30-2017-00910991-CU-MC-CJC DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT [Filed concurrently with Declaration of Chad Weaver; Request for Judicial Notice; Appendix of Non-California Authorities; and [Proposed] Order] Honorable Randall J. Sherman Hearing Date: October 26, 2017 Time: 1:30 p.m. Dept: C24 RESERVATION ID: 72651779 Complaint Filed: March 24, 2017 Trial Date: Not Set DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Sc al Be ac h, CA 90 74 0 Oo D o ~~ nN t h B W BN BM N O R R N Y R N R R N R e m e e e m e m em e m e m em je 0 ~~ O N b h Rk W N = QO o e s y t h R w NN — OD PETERS, an individual; JEFF HANSON, an individual; ANDREA BILLER, an individual; FRANCENE LAPOINT, an individual; KEVIN HULL, an individual; COTTONWOQQOD RESIDENTIAL, 0.P., LP, a Delaware limited partnership; COTTONWOOD CAPITAL MANAGEMENT, INC., a Delaware corporation; DANIEL SHAEFFER, an individual; ERIC R. MARLIN, an individual; and DOES 1-40, Defendants. ii DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 e e d y t h B w NN — N O R M N N N N N mm E m o e e m e m e m o e a m e t p m E 8 3 8 8 E E E E E E E S S E C E E S 2 = TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on October 26, 2017 at 1:30 p.m., or as soon thereafter as counsel may be heard, in Department C24 of the above-captioned Court, located at 700 Civic Center Drive West, Santa Ana, CA 92701, before the Honorable Randall J. Sherman, Defendant Jeff Hanson will, and hereby do, demur to the First Amended Complaint filed by Plaintiffs NNN Capital Fund I, LLC and Tyrone Wynfield. This Demurrer is made pursuant to Code of Civil Procedure section 430.10(e) on the grounds that the First Amended Complaint does not state facts sufficient to constitute a cause of action. The Demurrer is based on this Notice of Demurrer and Demurrer, the accompanying Memorandum of Points and Authorities, the Declaration of Chad Weaver and the exhibits attached thereto, the Request for Judicial Notice, the pleadings, records, and papers on file in this action, and on such other and further evidence and argument as may be presenting at the hearing on this Demurrer. Respectfully Submitted, Dated: August 28,2017 FREEMAN MXTHIS & GARY, LLP By: /] 7 Chad r, Esq/ Younjig (Jennifer) Lee, Esq. Attorizeys for Defendant Jeff Hanson iil DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h. CA 90 74 0 O 0 0 s l O y b h B W N e DEMURRER Pursuant to California Code of Civil Procedure § 430.10(e), Defendant Jeff Hanson demurs to Plaintiff's Complaint on the grounds that the Complaint does not state facts sufficient to constitute a cause of action. Dated: August 28, 2017 Respectfully Submitted, FREEMAN MATHIS & GARY, LLP By: J Chad Wi aver Esq. . Younjin|(Jeghifer) Lee, Esq. Attorney$ Tor Defendant Jeff Hanson iv DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 F R E E M A N M A T H I S & G A R Y , LL P Se al Be ac h, CA 90 74 0 OO 00 3 A N Wn BA W N = N O N N N RN N O N O N O N m m m a p m e m p d p d e s em 00 N N d N = C Y R N N N R N W N me D IL. IIL IV. V. TABLE OF CONTENTS Page INTRODUCTION uonssasussasssasmons usouwsie sins ssnessaseesssasons vansqrasnessnsrsssnsmsesspsssssasssnsssssess 1,2 BOSC ROUND: cosmsmessnsasesimsss om sins mmo as sees Se Ress Saas Th STR beng ems 2 A. The Relationship Between NNN Capital Fund, the Investment Committee, NNNRI, NNNRA, Daymark Realty Advisors, and GEC..........cccoevervevrnrnennnee 2,3 B. Allegations against Defendant Jeff Hanson.........cecvveeeereirervsvnnnerineioninenseenns 3,4 LEGAL STANDARD FOR DEMURRER ......ccccecevsmmireirrmmreninnninsensesssssessseessssssesons 4 LEGAL ARGUMENT otitis sisesssssissesessessssnsssessssssssssssosssesssenensosons 5 A. Plaintiffs’ Do Not Have Standing to Bring Claims Against Hanson ................... 5 B. The Claims Asserted in This Action Have Already Been Resolved in the Weiss JA EROEY ovat es ot A A ESS VEER S83 5,6 C. The Complaint Fails to State a Claim Against Hanson for Breach of Fiduciary UY. tet erate ae 6 1. Hanson Did Not Owe a Fiduciary Duty to NNN Cap Fund.................. 6 2. The First Amended Complaint Does Not Plead Facts to Overcome the Business Judgment Presumption. ..osmees s ss ssnsamiss s 5s ssmemsssns 155 iis 6,7,8 D. Plaintiffs’ Claim Against Hanson for Fiduciary Duty Is Time-Barred........... 8,9 1. The Applicable Statute of Limitations in this Case is Three Years......... 9 2. Plaintiff’s Claim Accrued and the Statute of Limitations Started Running by BEBIEET 2011: occ iiennmanss o gioimnmg pa yee so s sovommmsys oo 9,10 3. The Delayed Discovery Rule and Other Equitable Tolling Principles, such as the Adverse Dominations Doctrine, Cannot Save Plaintiffs’ Clam. cocci ree 10, 11 CONCLUSION... cutters eat rs atest e ate e sean e eae re eaten es brea 12 Vv DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 F R E E M A N M A T H I S & G A R Y , LL P Se al Be ac h, CA 90 74 0 Oo 0 3 YN in B W ND ) N O N ND N N N N O N O N r t b m be m be m e a e e e m e d Ke N N L n B W N = O O N Y R W N N R , TABLE OF AUTHORITIES Page California Cases Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.dth 1185, 1191 c.ueiiiicriciee criticises sects see esse eese senses essessense seers ese sees 8 Aubry v. Tri-City Hospital Dist. (1992) 2 CAlA® 962, 967 ..ueveeeireereeescesieeisereessesresesssssessessssessssssssessess esses sssessosssssesessessons 4 Barnes v. State Farm Mut. Auto Ins. Co. (1993) 16 Cal. APPAth 365,65,79 ..uievevireiriciirisieerisrenseristisessessereesseseesessessessassessssesessensensenes 7 Barnette v. Fireman's Fund Ins. : (2001) 90 Cal. App4th 500, S05 ....cueiiiiierirrieereniisrireese se s essesee esessseeseessessssesssnssssessss ss snes 4 Bennett v. Hibernia Bank (1956) 47 Cal. APPAth S40, 550 .....uiveiivivirierirtiticrreeee eres seersstsseeseseeseeeneseesssssessese sessssnes 8 Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal. APP.A™ 1020, 1045 ...oviveirisrercrresreeesereeessessessseseesseesssssssssesassssessssenes 6,7 Cantu v. Resolution Trust Corp. (1992) 4 Cal. APD-A™ 857 cuvvueveriereisiesiece essere sesssssss assesses tases ss sen es sas ass assess snssnenns 1 Chaves v. Times-Mirror Co. (1921) 185 Cal. 20, 23 ..uiiiveirirreiieeeeeieereestesresree ss c re sressassesesssessessesss ssesssn nsesssssseessssasesnens 1 City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1992) 68 Cal. APD.AM 445, 483 ....ovvevieeireieiseiseiste s es seeseese s ess s e as ses essesssssa essessssans 6 Donadebian v. Mercury Ins. Co. (2004) 116 CALAPP.AT 968, O44 o.oo eeereeieeieeseseseeseesseseesseseesssssesssssessessssessessesses 4 E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal. APP.A™ 1308, 1316 ur evvereererreeieeeeerererseesssssaeseseessesssssessssesssessessssssssessesssnns 8 Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.dth 955, 963 ...ccovveeierieiciiiiri erties eee sress eestor eesseaseneaseenessessessessassnsssesnene 8 Fuller v. First Franklin Financial Corp. (2013) 216 Cal. APP.Ath 955 ....iiiiieiieiitereeeee reser bs rests esses eers esse sae saessessens sse neenes 9 Grell v. Laci Le Beau Corp. (1999) 73 Cal. App.4th 1300, 1306....ccccciierivriirieeiicivsseresresresr es tertsest ses esrersesesss sssssaenes Ss vi DEFENDANT JEFF HANSON’S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, C A 90 74 0 OO 00 ~~ O N Wn bh WwW ND BN N D N N N N N r e e e b e e e e d e a e d 0 I O N Bs W N P , O O N Y A W N = o Hoffman v. Smithwoods RV Park, LLC. (2009) 179 CALAPDAT 390 ......uiuieirrrerisieissessisesssneesesssesseseserssssessesseessessesasssssessessesssssssnes 1 Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1108; 1110 cuumsmsssmmssmnvssisissmsinint i is iiiomeprmpmsmemasmmssmss 8 Pacific Gas & Elec Co. | (1975) 51 Cal.App.3d 313, 324........o....... ESA eRe HRT SE RRA ARABS PRESB SREB AASHS 7 Rakestraw v. California Physicians’ Service. (2000 81 Cal ppl B83) ummm oso os om ms mms sms ms a ag 4 Ritter & Ritter, Inc. Pension and Profit Plan v. Churchill Condominium Assn. (2008) 166 Cal. Appdth 103, 123 ....c.crierreereiirnereiinrss snore sree s sesss sesssessssesessassenes 7 Smith v. Superior Court (1980) 217 Cal App 3d DOD, D8, suomi mmm sss sms mss ams sss 11 State Farm Mut. Auto. Ins. Co. v. Superior Court (2003) 114 Cal. APP.4th 434, 442......ccvviieirericreerrnsresee ies sess ess eas seers sss ses sesr ss bens 9 Weiss v. NNN Capital Fund I, LLC, (Orange County Superior Court, Case No. 30-2015-00818459)....c..ccvvirernevenrnerennenn. 5 Federal Cases Weiss v. NNN Capital Fund I, LLC, (U.S. District Court for the Southern District of California Case No. 3:14-cv-02689).....5 Non-California Cases Auriga Capital Corp. v. Gatz Properties, LLC (Del. Ch. 2012) 40 A.3d 839, 850 ...ccocivvrirrrrrrcrirenninseeesssenissesessniessssssessessessssessssesensnes 6 Eugenia VI Venture Holdings, Ltd. v. Maplewood Holdings, LLC (In re AMC Investors, LLC) (D. Del. 2016) S51 BR. 148....ciiiiiiirirriirnnrnneeesinrnsnnssensssessssssessessessssesessessonens 10, 11 In re Marvel Entertainment Group, Inc. (D. Del 2002), 273 B.R. S8..cnnusunsunmmssnssssssvssisssssrsssmnssponismsuinssasssesssssasssrensssiniss 10 In re Tyson Foods, Inc. Consol. S holding Litig. (Del. Chi: 2007) 919 Ac2d 563 icinisiisisissismiensssiomssmanesesnsarsarassasossasssntssasassasssassarsssnsssensassoss 9 vii DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 F R E E M A N M A T H I S & G A R Y , LL P — BN N O N N N RN O N N N H m e m p m p d a p m e m p m ®R NJ A t h BA W N = O YW 0 YN R W = o O e AN Wn A W N California Statutes Code Of Civ. Proc. § 430.1008) ..cvvivvivviriereierenrerenissisiesssesseseseseesssssesssessssereessessessssssssssssssenssnss Non-California Statutes GO DEL COE § 18-402. .ccuiiiririeiiriricrieririsioiiseoresserastessessesssessssessessessssessssessessessssessessessssesesssesessons 6 DEL COE § 18-1101 uuiiiiiriiriinriiireiiiisisreesteeisessesseseeseessesssessessesnsesessesssessssonsssssssssssessssssesseesses Del. Code Ann, tit, 10, § 8106.....c.civiiiriieierciriieinceinrneininss ess s ressessssessssessersssessess s ons viii DEFENDANT JEFF HANSON’S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 00 ~~ h R W N — Lo A TO = A _— e t mm j m p m p e et E R E H R E R B E E Z I I T E D = B MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiffs NNN Capital Fund I, LLC (“NNN Cap Fund”) and Tyrone Wynfield (“Wynfield”) (collectively, “Plaintiffs”) filed their Complaint on March 24, 2017 alleging a single cause of action against Defendant Jeff Hanson for breach of fiduciary duty. The Complaint was deficient in several respects. To that end, Hanson notified Plaintiffs’ counsel of such defects and requested to meet and confer with him in an attempt to address such issues without motion practice. Unfortunately, Hanson's efforts went ignored, and Hanson was forced to file a Demurrer. In his Demurrer, Hanson argued that Plaintiffs’ Complaint is flawed because the Complaint does not plead specific facts showing fraud, bad faith, or gross overreaching necessary to overcome the business judgment presumption and that Plaintiffs’ sole cause of action against Hanson is time-barred as the statute of limitations period for a claim of breach of fiduciary duty in this case has expired. In support of his Demurrer, Hanson filed a Request for Judicial Notice of publicly available documents which confirmed that Hanson and all Committee Defendants had left Grub & Ellis Co. (“GEC”) and NNN Realty Advisors, Inc. (*NNNRA?”), the owners of NNN Cap Fund’s manager, NNN Reality Investors, LL.C (“NNNRT") by November 7, 2011. Instead of filing an opposition, on July 21, 2017, Plaintiffs filed their First Amended Complaint. However, the First Amended Complaint does not address the deficiencies previously mentioned by Hanson. Specifically, the First Amended Complaint still fails to allege specific ! Although the Complaint states that Hanson served as one of the five members of the NNN Capital Fund Investment Committee, judicially noticeable facts show that this is an impossibility. “The complaint should be read as containing the judicially noticeable facts ‘even when the pleading contains and express allegation to the contrary.’ Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877 (quoting Chavez v. Times-Mirror Co. (1921) 185 Cal. 20, 23); see also Hoffinan v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390 (“Under the doctrine of truthful pleading, the courts “will not close their eyes to situations where a complaint contains allegations . . . contrary to facts that are judicially noticed.”). Thus, the Court should take November 7, 201 1—not sometime in March 2013—as the date on which Hanson relinquished his role as a member of the investment committee. 1 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Sc al Be ac h, CA 90 74 0 CO 0 ~~ Oh th BR W R ) M O R N N O N N R O R O N O mm e m e m e m e m m m mm e a ee pe facts showing fraud, bad faith, or gross overreaching necessary to overcome the business Judgment presumption and maintains that Hanson served as a member of the Investment Committee until March 2013, despite acknowledging that he and other Committee Defendants left GEC before or shortly after the Daymark Acquisition in August 2011. Accordingly, the Court should sustain Defendant Jeff Hanson's Demurrer to Plaintiffs’ First Amended Complaint without leave to amend. II. BACKGROUND A. The Relationship Between NNN Capital Fund, the Investment Committee, NNNRI, NNNRA, Daymark Realty Advisors, and GEC NNN Capital Fund I, LLC, formerly known as Grubb & Ellis Capital Fund I, LLC, was organized under the laws of the state of Delaware. (FAC 45.) It was formed to provide mezzanine financing to entities that owned direct or indirect interests in real estate. (/d. 46.) Mezzanine loans are loans not secured by the underlying real property, but by a pledge of the ownership interests of an entity that directly or indirectly owns the real property. NNN Capital Fund offered its limited liability company membership interests pursuant to a private placement security offering. (/d. 1 45.) According to the First Amended Complaint, such interests were sold to approximately 330 individuals and entities, all of whom became members of the fund. (Ibid) The manager of the NNN Capital Fund was NNNRI. Separate from the management function of NNNRI, NNNRI established a limited-purpose Investment Committee. Plaintiff alleges that all investments and potential conflicts of interest were required to be approved by the Investment Committee. (FAC q 47.) The Investment Committee was (at inception of the fund) comprised of five members, four out of five of whom are named as Committee Defendants in this case: Scott Peters, Hanson, Andrea Biller, Francene LaPoint, and Jay Leupp. (FAC, Ex. A § 6.11.1.) Jay Leupp, for whatever reason, is not named as a Committee Defendant in this case. Kevin Hull, who is named as a Committee Defendant, is not listed in the Operating Agreement as a member of the Investment Committee. Hanson was the President and Chief Investment Officer of NNNRI until that business was sold by GEC on August 10, 2011 to 2 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & GA RY , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 M 0 a N i h B W N e Defendant Sovereign Strategic Mortgage Fund, LLC (“SSMF”) and its president, Defendant Todd Mikles (“Mikles™). (/d. 44 20.) Plaintiffs still blindly still allege that all Committee Defendants continuously served as Investment Committee members until March 2013, (FAC q 19-23, 25, 49, 68), despite being notified numerous times that this is untrue. Moreover, judicially noticeable evidence contradicts these allegations. Committee Defendants all left the GEC group of companies well prior or shortly after the sale of Daymark Realty Advisors (the parent of NNNRA and NNNRI) to Sovereign on August 10, 2011. (See RIN, Exs. 1-5.) Scott Peters resigned from GEC on July 10, 2008 and relinquished his position as a member of the Investment Committee. (See id., Ex. 1.) Francene LaPoint resigned effective October 3, 2008. (See id., Ex. 2.) Kevin Hull was let go from the broker-dealer affiliate on August 13, 2010. (See id., Ex. 3.) Andrea Biller departed on October 22, 2010. (See id., Ex. 4.) Hanson left GEC as of November 7, 2011, which is reflected on the 10-Q Form filed on November 14, 2011. (See id., Ex. 5.) The Employment Agreements between NNNRA and Peters, Biller, LaPoint, and Hanson state, “Upon the expiration or the Employment Terms or any termination of employment under Section 5 above, the Executive shall resign, effective upon the Date of Termination from all offices and director ships then held with the Company [referring to NNN Realty Advisors, Inc.] or any of its subsidiaries and affiliates.” (RIN, Exs. 6-9 § 6(b).) This is because membership in the Investment Committee is covered by the Employment Agreement as an office. NNN Cap Fund is covered as an affiliate of NNNRA because NNNRA'’s subsidiary, NNNRI is the NNN Cap Fund’s manager. Therefore, Committee Defendants could not have served on the Investment Committee until March 2013 as the First Amended Complaint falsely alleges. B. Allegations against Defendant Jeff Hanson The First Amended Complaint alleges a single cause of action against the Committee Defendants, including Hanson. Specifically, Plaintiffs allege that the Committee Defendants are liable for breach of fiduciary duty for failure to bring suit to collect on defaulted loans to secure judgment liens against equity in real property and/or respective membership interests and inadequate guaranty agreement in connection with their alleged actions (and inactions) as 3 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT 30 30 01 d Ra nc h Pa rk wa y, Su it e 28 0 F R E E M A N M A T H I S & G A R Y , LL P Se al Be ac h, CA 90 74 0 o e ~~ h n B W RN N O R R N R N R R N e m e m e m b m p m ew e mm mm pm G 0 =~ Oh t h BR W N = O O 0 ] h t h B W N = OD members of the Investment Committee. Plaintiffs allege that the terms of the Plantations, Barberry, and Oak Park loans were more favorable than what the companies could obtain in the market and were unsecured. In addition, Plaintiffs allege that the Addison loan was not adequately secured by guarantees. Based on this, Plaintiffs allege that the Committee Defendants’ approval of each of the four loans were not commercially reasonable and by approving the loans, the Committee Defendants breached their fiduciary duties. As to the claim for breach of fiduciary duty based on their purported failure to failure to take action on defaulted loans, the First Amended Complaint falsely alleges that all Committee Defendants continuously served on the Investment Committee until March 2013. However, Plaintiffs and Plaintiffs’ counsel have actual notice that such allegations are untrue. Nonetheless, based on such factual falsities, Plaintiffs allege that the Committee Defendants, by February 201 1, should have known that each of the Plantations, Barberry, Oak Park, and Addison notes were in material default, and thus, they should have acted to pursue collection on the loans and by failing to do so, the Committee Defendants breached their fiduciary duties. III. LEGAL STANDARD FOR A DEMURRER A party against whom a complaint has been filed may file a demurrer to the complaint on grounds that the complaint fails to state facts sufficient to state a cause of action Code Civ. Pro. § 430.10(¢). The sole issue of a demurrer is whether the facts pleaded state a valid cause of action. In reviewing the complaint, the court accepts the well-pleaded facts as true but “does not, however, assume the truth of contentions, deductions or conclusions of law.” Aubry v. Tri- City Hospital Dist. (1992) 2 Cal.4th 962, 967. As such, the demurrer challenges only defects that appear on the face of the complaint, including defects shown in exhibits attached to the complaint or from matters that are judicially noticeable. Donadebian v. Mercury Ins. Co. (2004) 116 Cal. App.4th 968, 944; Barnette v. Fireman's Fund Ins. Co. (2001) 90 Cal. App.4th 500, 505. Where defects in the complaint are such that no further amendment could cure them, leave to amend should not be granted. Rakestraw v. California Physicians’ Service (2000) 81 Cal. App.4th 39, 43. I 4 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT © ~~ A th BA W N ) — — e k pe e n e k e s f e fe ~~ o N t h RA W N = D Se al Be ac h, C A 90 74 0 oo 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 F R E E M A N M A T H I S & G A R Y , LL P N N R N N N N N N ND = 0 0 =~ O n t h RB WwW N = © WY IV. LEGAL ARUGMENT A. Plaintiffs Do Not Have Standing te Bring Claims Against Hanson Wynfield purports to bring this action on behalf of NNN Cap Fund as NNN Cap Fund's liquidating trustee or in the alternative, as a derivative action. Regardless of Wynfield's theory, Wynfield cannot bring an action on behalf of NNN Cap Fund because it has been suspended in California by the Franchise Tax Board for failure to pay taxes. (RIN, Ex. 10.) Under California law, “during the period that a corporation is suspended for failure to pay taxes, it may not prosecute or defend an action, appeal from an adverse judgment, seek a writ of mandate, or renew a judgment obtained prior to suspension.” Grell v. Laci Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1306. As NNN Cap Fund is suspended from doing business in California, it has no right to file this suit. As a corollary, Wynfield cannot maintain this action on NNN Cap Fund’s behalf. As such, Plaintiffs lack the standing to bring this action, and the Court should sustain Hanson's Demurrer and dismiss the action with prejudice. B. The Claims Asserted in This Action Have Already Been Resolved in the Weiss Action This is not the first action that Plaintiffs’ attorneys have initiated regard the events, allegations, and claims contained in the First Amended Complaint. Plaintiffs’ Counsel previously brought similar claims against Hanson in Weiss v. NNN Capital Fund I, LLC, No. 3:14-¢v-02689, in the U.S. District Court for the Southern District of California (* Weiss Action”) and in Weiss v. NNN Capital Fund I, LLC, No. 30-2015-00818459, in Orange County Superior Court. Both actions were ordered to arbitration and then voluntarily dismissed. This is important because documents filed in the Weiss Action unequivocally supports the position that the claims in this case have already resolved as early as February 29, 2016, before Plaintiffs initiated this action. For example, the Declaration of John Weiss in Support of Plaintiffs’ Motion to Dismiss Without Prejudice expressly states, “the loans on the books of Company due from the Todd Mikles controlled Sovereign Strategic Mortgage Fund, LLC (“SSMF”) at 8% interest were repaid in full by an amount in excess of $5 million, those proceeds distributed pro- rata to the members and there are alleged to be no further assets due to the members.” (RIN, Ex. 5 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , L L P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 Oo 0 0 ~~ O h th R W W NN — N O N N O R R N R ) e m mm mm m p m ee t mm mm pe a w t 0 ~~ O n L h BE W N = O O 0 N h D R E W Na = O 119 2.) This statement was made under the penalty of perjury under the laws of the State of California. (See id.) Accordingly, there is no existing controversy that the Court can adjudicate in this action. C. The Complaint Fails to State a Claim Against Hanson for Breach of Fiduciary Duty 1. Hanson Did Not Owe a Fiduciary Duty to NNN Cap Fund The first count for breach of fiduciary duty—the only cause of action against Hanson— is subject to demurrer because Hanson did not owe Plaintiffs a fiduciary duty. The elements of a cause of action for breach of fiduciary are: (1) the existence of a fiduciary duty; (2) a breach of that duty; and (3) resulting damages. City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1992) 68 Cal. App.4th 445, 483. To the extent that fiduciary duties are owed in an LLC, under Delaware law, they will be owed by all members if the LLC is member-managed or by the manager, if, as here, the LLC is manager-managed. See 6 Del. Code § 18-402 (LLCs are managed by members unless the operating agreement provides for management by a manager); § 18-1101 (providing for fiduciary duties of managers unless otherwise agreed in operating agreement); see also Auriga Capital Corp. v. Gatz Properties, LLC (Del. Ch. 2012) 40 A.3d 839, 850 & n.34. Here, the manager of NNN Cap Fund was NNNRI. (See FAC, Ex. A.) Thus, if a fiduciary duty is owed, it is by NNNRI, the NNN Cap Fund's sole manager and not by a member of its Investment Committee, such as Hanson, 2. The First Amended Complaint Does Not Plead Facts to Overcome the Business Judgment Presumption In addition, a viable claim for breach of fiduciary duty brought against corporate directors must plead facts to rebut the business judgment rule. Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal. App.4th 1020, 1045. The First Amended Complaint alleges that: Plantations, Barberry, Oak Park, and Addison COMPANY loans along with the Addison Guaranty were made and approved by PETERS, HANSON, BILLER, LAPOINT and HULL in a manner not justified by the business judgment rule, was not commercially reasonable, were far more favorable than each of the borrowers 6 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 o e ~~ Nn b h Re W N could obtain in the market, were unsecured, made without conflicts of interest being resolved which were unresolvable, were made at rates and terms not justified by the risk undertaken in the marketplace, and adverse to the interest of COMPANY, made in breach of fiduciary duties and for the purpose of advancing the hostile and adverse interests of PETERS, HANSON, BILLER, LAPOINT and HULL, individually, collectively and as officers, directors and control persons of NNNRI, DPR, and affiliates in order to . . . advance their conflicted interests . . . (FAC 60.) The First Amended Complaint also alleges that the Committee Defendants declined to pursue each of the loans once they became in default because “doing so would be adverse to the borrowers who they simultaneously controlled as fiduciaries through management agreements or officer, director, and control person roles.” (FAC 1 65.) Even at the pleading stage, these allegations are not sufficient to overcome the business judgment rule and to allow Plaintiffs to hold Hanson personally liable for the actions he performed (or did not perform) in his capacity as a member of the Investment Committee. Such allegations are not specific enough to apprise Hanson of his alleged involvement in any asserted wrongdoing. The business judgment rule sets up a presumption that corporate directors’ decisions are made in good faith and are based upon sound and informed business judgment. Marsili v. Pacific Gas & Elec. Co. (1975) 51 Cal.App.3d 313, 324. To overcome the business judgment rule at the pleading stage, “more is needed than conclusory allegations of improper motives and conflict of interest.” Berg & Berg Enterprises, LLC, supra, 178 Cal. App.4th at p. 1046. A plaintiff must allege facts demonstrating fraud—*‘a showing of facts that would set forth, and not just in a conclusory way, that there has been fraud or oppression . . . or that their work has resulted in a breach of law or mistake or other wrongful act.” Barnes v. State Farm Mut. Auto. Ins. Co. (1993) 16 Cal. App.4th 365, 379 n.14; see also Ritter & Ritter, Inc. Pension and Profit Plan v. Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 123 (“The business judgment rule sets up a presumption that directors’ decisions are based on sound business judgment. This presumption can be rebutted only by a factual showing of fraud, bad faith or gross overreaching.”). 7 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 O e d y b h ls Ww BN — M O R O N R N R R N D R m e m e m mm mm mm mm mm pe pe 0 0 ~ J O n t h pb W M = DD YO 0 0 = O N L h da w R = OD Here, Plaintiffs breach of fiduciary duty claim fails because the pleadings as to Hanson do not allege any actual facts from which one can infer that his judgment has been compromised. Plaintiff do not specify the entities over which Hanson supposedly had control or with which he enjoyed an affiliate relationship or how such a relationship impacted his ability to act in good faith as a member of the Investment Committee. These allegations—which fail to even specify the entities that Hanson allegedly had control over—are wholly conclusory and therefore, are insufficient to support a claim for breach of fiduciary duty. Accordingly, Plaintiffs’ First Amended Complaint fails to state a valid claim for breach of fiduciary duty and Hanson's Demurrer should be sustained. D. Plaintiffs’ Claim Against Hanson for Fiduciary Duty Is Time-Barred The defense of statute of limitations may be asserted by general demurrer if the complaint shows on its face that the statute bars the action. See Bennett v. Hibernia Bank (1956) 47 Cal.2d 540, 550. In determining whether plaintiff’s claims against defendant are time-barred, Courts ask two basic questions: (a) What statutes of limitations govern the plaintiff's claims? and (b) When did the plaintiff's causes of action accrue? E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1316. A claim accrues “when it is complete with all of its elements—those elements being wrongdoing [or breach], harm, and causation.” Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191. An exception to the general rule of accrual is the delayed discovery rule, “which postpones accrual of a cause of action until the plaintiff discovers, or has the reason to discover the cases of action.” Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807. “Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that [the] injury was caused by wrongdoing, that someone has done something wrong to [him or] her.” Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, [the plaintiff] must decide whether to file suit or sit on [his or] her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; [the plaintiff] cannot wait for the facts to find [him or] her.” Id. 8 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 O1 d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 = = =. T E a at p. 1111. As was stated in Hanson’s Demurrer to the Complaint, Plaintiffs’ cause of action against Hanson is time-barred. 1. The Applicable Statute of Limitations in this Case is Three Years The internal affairs doctrine mandates the application of Delaware law given that this dispute concerns a claim by the company against its purported fiduciaries. See, e.g., State Farm Mutual Automobile Ins. Co. v. Superior Court (2003) 114 Cal. App.4th 434, 442-43. Under Delaware law, the statute of limitations for claims of breach of fiduciary duty is three years. See, e.g., In re Tyson Foods, Inc. Consol. §'holding Litig. (Del. Ch. 2007) 919 A.2d 563, 584 n.44 (citing Del. Code Ann. tit. 10 § 8106). Even if assuming arguendo that California law applies, Plaintiffs claim against Hanson is still stale. Under California law, as the statute of limitations for breach of fiduciary duty is three or four years, depending on whether the breach arises out of fraud. See Fuller v. First Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 963 (“[L.Jimitations period is three years . . . for a cause of action for breach of fiduciary duty where the gravamen of the claim is deceit, rather than the catchall four-years limitations period that would otherwise apply . . .."). Here, Plaintiffs allege that Hanson and Committee Defendants concealed the status of the loans and other purported material information to NNN Cap Fund's members. (FAC | 66.) Thus, regardless of which law applies, the statute of limitations period that applies here is three-years, and time for Plaintiffs to bring their claim expired before March 24, 2017, the date Plaintiffs filed their Complaint. 2s Plaintiffs’ Claim Accrued and the Statute of Limitations Started Running by February 2011 Plaintiffs allege the breach of purported fiduciary duty occurred as to Committee Defendants when they set unfair loan terms, failed to bring suit to collect and/or convert loans to membership interests in borrower entities, and had inadequate guaranty agreements. According to the pleadings in the Weiss Action, the Plantations loan was made and approved between July 3, 2008 and August 18, 2008, the Barberry and Oak Park loans were made and approved between August 29, 2008 and September 25, 2008, and the Addison loan was made on March 14, 2009. (RIN, Ex. A q] 44, 53, 57, Ex. C, at 127, 133.) Therefore, the statute of limitations as 9 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, C A 90 74 0 M o De ~~ O h t h Ra B Y B O B OH RE SU S N83 R B 3%5 = 3 a a Fr 0 0 = 3 to any alleged breach of fiduciary duty based on unfair loan terms and inadequate guarantee agreements expired three years after each loan’s approval date. As for failure to bring suit to collect and/or convert the loans to membership interests in borrow entities, the First Amended Complaint alleges that as of February 2011, each of the Plantations, Barberry, Oak Park, and Addison notes were in material default. (FAC 63.) Assuming that their failure to act constitutes a breach of fiduciary duty, this would mean that the statute of limitations period to bring a claim against Hanson commenced in February 2011. Thus, the claim based on Hanson’s alleged failure to act on the defaulted loans is also stale, 3. The Delayed Discovery Rule and Other Equitable Tolling Principles, such as the Adverse Domination Doctrine, Cannot Save Plaintiffs’ Claim Plaintiffs attempt to save the claim against Hanson by alleging Wynfield’s purported delayed discovery of material facts regarding the breach of fiduciary duty claim. (FAC Tf 70(3), 113.) Such allegations fail, as a matter of law, to trigger the delayed discovery rule and equitable tolling principles given that NNN Capital Fund I, LLC necessarily had knowledge of the facts. Plaintiffs’ argument that the statute of limitations for the claim against Mr. Hanson was tolled during the Committee Defendants’ alleged adverse domination of the Company and even after their departure from GEC (and as an extension, their departure from the Investment Committee) due to Mikles’ alleged adverse domination of the NNN Cap Fund also has no basis in law or fact. Under the adverse domination doctrine, the statute of limitations on a corporation’s claim against its officers and/or directors is equitably tolled while the corporation’s board of directors is controlled by the culpable directors. In re Marvel Entertainment Group, Inc. (D. Del. 2002), 273 B.R. 58, 74. However, adverse domination is not a tolling doctrine recognized by Delaware law. Id. at 75-77 (“Marvel cites no Delaware authority on point in support of its request to toll the statute of limitations based on the defendants ‘adverse domination’ of the plaintiff's board. Nor can the court find any Delaware case that recognizes the adverse domination doctrine as a tolling mechanism . . . the court declines to recognize adverse domination as a viable tolling mechanism in Delaware.”); Eugenia VI Venture Holdings, Ltd. v. Maplewood Holdings, LLC (In 10 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT 30 30 O M Ra nc h Pa rk wa y, Su it e 28 0 F R E E M A N M A T H I S & G A R Y , LL P Se al Be ac h, CA 90 74 0 o O ~~ O y b n Bs W N N O N RN N O R E s E m Em m Em m e m me e t = re AMC Investors, LLC) (D. Del. 2016) 551 B.R. 148, 154 (“[A]dverse domination is not a tolling doctrine recognized by Delaware.”). Furthermore, even if it were recognized by Delaware law, it would only apply to toll the statute of limitations for the claims against Hanson until his departure from the Investment Committee, which necessarily occurred by November 7, 2011 due to his resignation from GEC. Even if assuming arguendo that the failure to take action as to the default status of the loans in February 2011 constituted a breach, it means that Hanson left the board over two years and nine months before the statute of limitations period expired. This is does not justify the application of the doctrine of adverse domination. Smith v. Superior Court (1990) 217 Cal.App.3d 950, 954 (finding no basis for equitable tolling under the doctrine of adverse domination when the defendant left the board over 15 months before the limitation period expired). Thus, the claim for breach of fiduciary duty against Hanson is time-barred as a matter of law. Moreover, regardless of whether Plaintiffs get another chance to amend the pleadings, Plaintiffs will not be able to show that the delayed discovery rule should apply due to the judicially noticeable facts in this case. Judicially noticeable facts prove that all of the Committee Defendants had left GEC prior to or shortly after it came under Mikles and SSMF’s management on August 10, 2011. (See RIN, Exs. 1-5.) Hanson was the last one to leave GEC, and he left on November 7, 2011. (id., Ex. 5) As of November 8, 2011, Hanson did not have any power to take action on behalf of the company regarding the notes allegedly in default. Even if Plaintiff argues that the statute of limitations was tolled during the Committee Defendants’ control of the company, judicially noticeable facts show that all Committee Defendants had left the GEC companies and the Investment Committee by November 7, 2011. Thus, assuming generously that the statute of limitations was tolled until his departure, the claim for breach of fiduciary duty against Hanson is time-barred as the time to bring the claim expired three years after his departure from GEC. Because Plaintiffs have not and cannot state a proper claim against Hanson, this Demurrer should be sustained without leave to amend. i 1 11 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 D e o y Bs W N t N RN R R R R N R e m e m e m e m e m be s mm be m p m 0 0 = ) o n t h B= WL ND = O O 0 =~ N h BR W N —= OD Vv. CONCLUSION As demonstrated herein, Plaintiffs’ First Amended Complaint fails to state facts sufficient to constitute a cause of action against Hanson for breach of fiduciary duty. Moreover a second amendment would be futile as the facts show that the statute of limitations for Plaintiffs’ claim has expired. Therefore, Defendant Jeff Hanson respectfully requests that the Court sustain his Demurrer to Plaintiffs’ First Amended Complaint without leave to amend. DATED: August 28, 2017 Respectfully submitted, FREEMAN MATHIS & GARY, LLP Chad Weaver Esq. <= Younjin (Jghhifer) Lee, Esq. Attorneys for Defendant Jeff Hanson 12 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 O O ©0 0 NN OO Un B W O N ND N N N N N N N N m e m e a md p d p d p d e m NX NN A nn B A L D = O L V N O Y N E E W I N D =, oo PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF ORANGE I'am employed in the County of Los Angeles. I declare that I am over the age of eighteen (18) and not a party to this action. My business address is 2615 Pacific Coast Highway, Suite 300, Hermosa Beach, CA 90254. On August 28, 2017, I served the following document described as: DEFENDANT JEFF HANSON’S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT on the parties in the attached service list as follows: () By U.S. Mail: I placed the true copies of the above-referenced document in envelopes addressed to the individuals at the addresses listed below and deposited such envelopes in a United States Postal Service Collection Box in Hermosa Beach, California. () By Personal Service: I caused such envelope to be delivered by hand to the individuals at the addresses listed below. () By Overnight Courier: I caused the above-referenced document(s) to be delivered to an overnight courier service (FedEx), for delivery to the above addressees). () By Facsimile Machine: I caused the above-referenced document(s) to be transmitted to the individuals at the telephone numbers listed below. (X) By Electronic Mail: I caused the above-referenced document(s) to be served by transmitting a true and correct copy electronically via One Legal to the attorny(s) of record listed as eService Recipients and those attorneys listed in the attached service list below. I declare under penalty of perjury under the laws of the State of California that the above is true and correct. EXECUTED on August 28, 2017, at Hermosa Beach, California. 1.0 © TINA BRITO 13 DEFENDANT JEFF HANSON’S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 W 0 0 0 1 O n L h B W N e N O R N N N N R = e s p m m a E m E m E m m m e m 0 0 ~~ ] O N L h R W N = D O 0 8 = BRE W N — OD SERVICE LIST NNN Capital Fund I, LLC, et al. v. Todd A. Mikles, et al. OCSC Case No. 30-2017-00910991 Attorney Party Representing Kenneth J. Catanzarite, Esq. Eric V. Anderton, Esq. Tim James O'Keefe, Esq. CATANZARITE LAW CORPORATION 2331 West Lincoln Avenue Anaheim, CA 92801 Tel: (714) 520-5544 Fax: (714) 520-0680 Email: kcatanzarite @catanzarite.com Email: eanderton @catanzarite.com Email: tokeefe @catanzarite.com Plaintiffs NNN Capital Fund I, LLC and Tyrone Wynfield David N. Ferri, Esq. WEST LEGAL Group, P.C. 9107 Wilshire Blvd., Suite 450 Beverly Hills, CA 90210 Tel: (424) 302-6715 Fax: (407) 650-2879 Email: westlegalcounsel @ gmail.com Plaintiffs NNN Capital Fund I, LLC and Tyrone Wynfield Adam T. Kent, Esq. PROFESSIONAL PARTNERS GROUP, LL.C 895 Dove Street, Suite 300 Newport Beach, CA 92663 Tel: (818) 298-5614 Email: adam @ propartnersgroup.com Defendants Todd A. Mikles, Daymark Realty Advisors, Inc., and Daymark Properties Realty, Inc. Betty M. Shumener, Esq. Henry H. Oh, Esq. Adam Doupé SHUMENER, ODSON & OH LLP 550 South Hope Street, Suite 1050 Los Angeles, CA 90071-2678 Tel: (213) 344-4201 Fax: (213) 344-4190 hoh@soollp.com ispurling @soollp.com adoupe @soollp.com Defendants Eric R. Marlin, Daniel Shaeffer, Cottonwood Residential, O.P., LP, and Cottonwood Capital Management, Inc. 14 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT F R E E M A N M A T H I S & G A R Y , LL P 30 30 Ol d Ra nc h Pa rk wa y, Su it e 28 0 Se al Be ac h, CA 90 74 0 O 0 8 = O y bt h dl a W N Paul A. Reynolds, Esq. SHUSTAK REYNOLDS & PARTNERS, P.C. 401 West “A” Street, Suite 2250 San Diego, CA 92101 Tel: (619) 696-9500 Fax: (619) 615-5290 Email: preynolds @shufirm.com Defendant Scott Peters Stephen F. McAndrew, Esq. KAUFMAN MILLER & MCANDREW 16633 Ventura Boulevard, Suite 500 Encino, CA 91436 Tel: (818) 788- 5767 Fax: (818) 788-2992 Email: steve @kmmllp.com Defendants GCL Manager, LLC, GCL, LLC, and Market Towers Partners, LLC 15 DEFENDANT JEFF HANSON'S NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT