Sean Ryan vs. Ry-Co, LLC

Demurrer to Amended Complaint

Cal. Super. - 4th Dist.September 15, 2017

Oo oo ~ aN wn + w nN - N O N N N N N N N N m e e d md e d md p d p d pe ed pe d 0 N N nn Ae W O N Y = O O N S N E W NY ~~ oO KERMIT D. MARSH (SBN 150745) EL ETHEREAL LF FILED JING TSANG (SBN 296427) Superior Court of California, THE LAW OFFICES OF KERMIT D. MARSH County of Orange Fountain Valley, California 92708 Tel (714) 593-2321 Fax (888) 396-6272 Clerk of the Superior Court By Wanique Ramirez, Deputy Clerk Attorneys for Defendants CHARLES TYLER and TYLER LIGHTING SERVICES, INC. SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE CENTRAL JUSTICE CENTER SEAN RYAN, an individual, Case No: 30-2017-00944024-CU-CO-CIC Plaintiff, Assigned for All Purposes to the Honorable Randall J. Sherman Vs. RY-CO, LLC, a California limited liability | DEFENDANTS CHARLES TYLER AND company; CHARLES TYLER, an TYLER LIGHTING SERVICES, INC.’S individual; TYLER LIGHTING DEMURRER TO PLAINTIFF’S FIRST SERVICES, INC., a California corporation; | AMENDED COMPLAINT; and DOES 1 through 10, inclusive, MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF Defendants. Date: February 8, 2018 Time: 1:30 p.m. Dept: C24 Date Filed: = September 15, 2017 Court Reservation No.: 72698712 TO ALL PARTIES AND THEIR RESPECTIVE ATTORNEYS OF RECORD: Defendants CHARLES TYLER (“Mr. Tyler”) and TYLER LIGHTING SERVICES, INC. (“Tyler Lighting”) (collectively, “Defendants™) demur to the first and third causes of action to Plaintiff SEAN RYAN’s (“Plaintiff”) First Amended Complaint on the following grounds: 1 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES OO 0 N N O N n n BR W N R O N O N MN RN O N N N N mm em em em em be d be e e t ee 0 J O N UL BA W N = O O N B R E W N N O DEMURRER TO THE FIRST CAUSE OF ACTION 1. The first cause of action for dissolution fails to set forth facts sufficient to constitute a cause of action. Code of Civil Procedure, Section 430.10(e). The Operating Agreement, attached as Exhibit 1 to the First Amended Complaint, expressly waives the right to bring an action for dissolution. Consequently, Plaintiff’s cause of action for dissolution must be dismissed with prejudice. 2. The first cause of action for dissolution is uncertain, ambiguous and unintelligible. Code of Civil Procedure, Section 430.10(f). The Operating Agreement, attached as Exhibit 1 to the First Amended Complaint, expressly waives the right to bring an action for dissolution, and the First Amended Complaint fails to address that prohibition. DEMURRER TO THE THIRD CAUSE OF ACTION 3. The third cause of action for breach of contract fails to set forth facts sufficient to constitute a cause of action. Code of Civil Procedure, Section 430.10(e). The Operating Agreement, attached as Exhibit 1 to the First Amended Complaint, expressly prohibits an action for dissolution. By bringing an action for dissolution, Plaintiff has breached the Operating Agreement. Because Plaintiff’s performance without breach is a condition to an action for breach of contract, Plaintiff cannot meet the elements necessary for a breach of contract cause of action. 4. The third cause of action for breach of contract is uncertain, ambiguous and unintelligible. Code of Civil Procedure, Section 430.10(f). The Operating Agreement, attached as Exhibit 1 to the First Amended Complaint, expressly prohibits an action for dissolution. Plaintiff fails to address this express prohibition, and indeed falsely represents that the prohibition only applies to partition, whereas the contract expressly prohibits dissolution. " nn 1 " 2 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES OO 0 ~~ O N wv h w N e N O N N N N N N N N m m e m e m e m e m p d ee e e e e 0 N A N nn lh W N = O O N N N N e W NY = O DATED: November 13, 2017 LAW OFFICES OF KERMIT D. MARSH Zn IMac KERMIT D. MARSH Attorneys for Defendant, CHARLES TYLER and TYLER LIGHTING SERVICES, INC. 3 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES Oo 0 NN O N nn Re W N N O N O N N N RN N O N O N mm mm mm em m t e e e a e d e m 0 0 ~~ O N Wn BA W N = O YW N N N R W N D = O MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION In 2016, Ry-Co, LLC’s (“Ry-Co”) loan became due to the lender. Despite his obligation to assist Ry-Co, plaintiff Sean Ryan (“Plaintiff”) did nothing to address the situation, even refusing to provide his financials to the lender, as he was obligated to do under the loan agreement. Unwilling to provide financial information to the lender or any potential replacement lenders, and unwilling to provide any money toward paying off the loan, Plaintiff left Ry-Co in danger of losing its principal asset, the real property that it operates, to foreclosure. Mr. Charles R. Tyler (“Mr. Tyler”) came to the rescue, selling a large portion of his personal stock portfolio in order to come up with the funds needed to pay off the loan, and then loaning the money to Ry- Co to prevent foreclosure. Plaintiff proposed that Mr. Tyler purchase Plaintiff’s membership interest in Ry-Co, and Mr. Tyler and Plaintiff agreed on a purchase price. Then, Plaintiff changed his mind and demanded a higher purchase price, to which Mr. Tyler agreed. Then, Plaintiff backed out of the agreement, once again demanding more money, despite Plaintiff’s failure to provide anything for Ry-Co other than trouble. When Mr. Tyler balked at Plaintiff’s demands, Plaintiff filed this lawsuit. When Ry-Co was created years ago, its Operating Agreement was drafted by Plaintiff’s then-counsel. Surprisingly, Plaintiff now breaches the terms that he and his then-counsel drafted, which prohibit an action for dissolution of Ry-Co. However, Plaintiff is bound by the terms of the Operating Agreement, and those terms preclude his first (dissolution) and third (breach of contract) causes of action. Consequently, the Demurrer should be sustained. II. STATEMENT OF FACTS In the First Amended Complaint, Plaintiff makes the following false representation: “Paragraph 14.14 of the Operating Agreement does not permit a partition [SIC] a legal action for partition of the assets and each member has waived such right. Therefore, plaintiff RYAN is required to seek a dissolution of RY-CO.” (First Amended Complaint, paragraph 24.) 4 : DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES No o e NN S Y nn p W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Contrary to Plaintiff’s representation, that is not what the Operating Agreement says. The relevant portion of the Operating Agreement is Paragraph 10.9, which states, in full: “10.9 NO ACTION FOR DISSOLUTION. The Members acknowledge that irreparable damage would be done to the goodwill and reputation of the Company if any Member should bring an action in Court to dissolve the Company under circumstances where dissolution is not required by Section 10.1 hereof. This Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Economic Interests. Accordingly, except where the Manager has failed to liquidate the Company as required by ARTICLE 10, each Member hereby waives and renounces its right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution pursuant to Section 17351 of the Act on the ground that (i) it is not reasonably practicable to carry on the business of the Company in conformity with the Articles or this Agreement, or (ii) dissolution is reasonably necessary for the protection of the rights or interests of the complaining Member. Damages for breach of this Section 10.9 may be offset against Distributions by the Company to which such Member would otherwise be entitled.” Plaintiff’s mischaracterization of this prohibition on dissolution actions as a mere restriction on “partition” is particularly egregious, as it was Plaintiff's former counsel who drafted the Operating Agreement. The two reasons given by Plaintiff for dissolution are “to protect the rights and interests of Plaintiff” (First Amended Complaint, paragraph 28) and “it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement” (First Amended Complaint, paragraph 29). Those are exactly the grounds expressly waived in Paragraph 10.9 of the Operating Agreement. III. LEGAL DISCUSSION A. Legal Standard on Demurrer A complaint which fails to state facts sufficient to constitute a cause of action or which discloses a defense that would bar recovery is subject to demurrer. California Code of Civil 3 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES OO 00 N y nn R W N D N O N RN O N N N R N N N em e m e m e d e d p d e t e d e e d 0 N O N Ln BRA W N = O O N N ND B W NN N = O Procedure, Section 430.10(c); Weil & Brown, California Practice Guide: Civil Procedure Before Trial, Section 7:9. For the purpose of demurrer, the court treats the demurrer as admitting the truth of all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. Aubry v. Tri-City Hospital District (1992) 2 Cal.4™ 962, 966-967; Weil & Brown, California Practice Guide: Civil Procedure Before Trial, Section 7:43. A demurrer challenges any defects that appear on the face of the complaint. Blank v. Kirwan (1985) 39 Cal.3d 311, 318. For purpose of demurrer, the face of the complaint includes matters set forth in any exhibits attached to the complaint. Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 95. B. Plaintiff’s First Cause of Action for Dissolution Fails to State a Cause of Action. As discussed above, Paragraph 10.9 of the Operating Agreement, attached as Exhibit 1 to Plaintiff's First Amended Complaint, prohibits an action for dissolution on the grounds offered by Plaintiff. “{E]ach Member hereby waives and renounces its right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution pursuant to Section 17351 of the Act on the ground that (i) it is not reasonably practicable to carry on the business of the Company in conformity with the Articles or this Agreement, or (ii) dissolution is reasonably necessary for the protection of the rights or interests of the complaining Member.” (First Amended Complaint, Paragraph 10.9.) Consequently, the cause of action for dissolution must be dismissed, with prejudice. Although the Operating Agreement does allow a dissolution action where a majority of the members vote to dissolve, or upon the failure of the Company to exercise its option to purchase a membership interest upon a third party offer to purchase, an involuntary transfer of a member’s interest, the death of a member, or the marital dissolution of a member, Plaintiff has not alleged facts which would satisfy any of the exceptions to the prohibition on dissolution actions. Consequently, Plaintiff’s first cause of action for dissolution must fail. Because the prohibition on dissolution cannot be cured by amendment, the Demurrer should be sustained without leave to amend. nn 6 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES OO 0 NN o N nn hh W N 0 ~~ A Ln hs W N = O V O R N N N E W N -- Oo C. Plaintiff’s Third Causes of Action for Breach of Contract Fails to State a Cause of Action. An essential element of a cause of action for breach of contract is that the Plaintiff has fully satisfied all of its obligations under the contract. Civil Code, Section 1439; McNulty v. New Richmond Land Co. (1919) 44 Cal. App. 744, 747. By filing its dissolution action in violation of the express terms of the Operating Agreement, Plaintiff has breached the Operating Agreement. Consequently, Plaintiff cannot satisfy the essential element of full satisfaction of the contract, and Plaintiff’s third cause of action for breach of contract must fail. Because Plaintiff cannot cure its breach by amending its pleadings, the Demurrer should be sustained without leave to amend. CONCLUSION For the above reasons, Defendants Charles Tyler and Tyler Lighting Services, Inc. respectfully request that this Honorable Court sustain the Demurrer without leave to amend, or, in the alternative, with leave to amend. Respectfully submitted. DATED: November 13,2017 LAW OFFICES OF KERMIT D. MARSH Lo FEM KERMIT D. MARSH Attorneys for Defendant, CHARLES TYLER and TYLER LIGHTING SERVICES, INC. 7 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.’S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES OO 0 N N nn A W N = N O N N N N N N N e e m e e m e m e m e d p t p m e s 00 J O N WU» h s W N = O vO 0 N N N B T R W N = O PROOF OF SERVICE I declare that I am over the age of eighteen (18) and not a party to this action. My business address is 9550 Warner Avenue, Suite 250, Fountain Valley, CA 92708. On November 13, 2017, I served the following document(s): DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.”S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF on the interested parties in this action by placing a true and correct copy of such document, enclosed in a sealed envelope, addressed as follows: Gino D. Serpe, Esq. Law Office of Gino D. Serpe 600 West Broadway, Suite 700 San Diego, CA 92101 (xx) () (xx) () I am readily familiar with the business’ practice for collection and processing of correspondence for mailing with the United States Postal Service. I know that the correspondence was deposited with the United States Postal Service on the same day this declaration was executed in the ordinary course of business. I know that the envelope was sealed and, with postage thereon fully prepaid, placed for collection and mailing on this date in the United States mail at Fountain Valley, California. By overnight courier, I caused the above-referenced document(s) to be deposited in a box or other facility regularly maintained by the overnight courier, or I delivered the above-referenced document(s) to an overnight courier service, for delivery to the above addressee(s). Executed on November 13, 2017, at Fountain Valley, California. (State) I declare under penalty of perjury under the laws of the State of California that the above is true and correct. (Federal) I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. GTS 8 DEFENDANTS CHARLES TYLER AND TYLER LIGHTING SERVICES, INC.”S DEMURRER TO PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES