Judge Colin Leis, Case 20STCV49545 2023-03-21 Tentative Ruling

“In general, members of a limited liability company are not liable for the ‘debts, obligations, or other liabilities’ of the limited liability company.” (CB Richard Ellis, Inc. v. Terra Nostra Consultants (2014) 230 Cal.App.4th 405, 411 (citing Corp. Code § 17703.04(a)).) Corporations Code section 17703.04(b)-(c), (e) sets forth ways in which members can be held liable for the debts and obligations of the limited liability company, including alter ego liability, a member’s participation in tortious conduct, and a member explicitly agreeing to personal liability for particular obligations. (Corp. Code, § 17703.04(b)-(c), (e); CB Richard Ellis, Inc., supra, 230 Cal.App.4th at 411 (citing to Corporations Code § 17703.04(b)-(e) as identifying ways in which members can be held liable).)

Defendant contends that he cannot be held liable as a manager of the LLC because Plaintiff does not have evidence to show that he was a party to the credit application entered into between the Corporation and Plaintiff in 2011. (Def. UMF No. 1.) In support, Defendant provides evidence that the did not sign a guarantee on the credit application. (Def. UMF No. 6.) It was not until the Corporation sold its assets and certain liabilities to the LLC in 2018 that Defendant joined the LLC. (Def. UMF No. 7.) Defendant further contends that Plaintiff has failed to provide any evidence that Defendant sought to bind himself to the credit application, or was an alter ego of the other defendants.[1] Defendant also points the Court to Plaintiff’s discovery responses, where Defendant asked Plaintiff to state all of the facts that it based its causes of action against Defendant, and Plaintiff’s responses were that the Corporation and the LLC merged. (Def. UMF No. 16.) Plaintiff’s responses are devoid of any facts that Defendant was a party to the credit application, a guarantor of the credit application, or that he had expressly agreed to accept obligations for the credit application. (Id.) In response to a request for admission, Plaintiff also admitted that Defendant was not a signatory to the credit application. (Def. UMF No. 19.) When Plaintiff was asked to admit that Defendant was not a guarantor of any debt incurred by the Corporation or the LLC, Plaintiff stated that it did not have sufficient information to respond. (Id. at No. 20.)

Accordingly, Defendant has provided sufficient evidence to show that as a manager of the LLC, he cannot be held liable for its debts, obligations, or other liabilities because he was not a party to the credit application or personally guaranteed the credit application. This shifts the burden to Plaintiff to offer evidence that Defendant was a party to the credit application or personally guaranteed the credit application.

In opposition, Plaintiff points the Court to the deposition testimony of Jack Goldberg, who was part owner of the Corporation, and had guaranteed the credit application. (Def. UMF Nos. 1-2.) Specifically, Plaintiff points the Court to the following testimony:

Q: “Is it your position that Howard Brand is responsible to pay those bills to Brown Strauss?”

Q: “Is it your position that he incurred the invoices that are outstanding with Brown Strauss?”

Q: “When you sold your business, the corporation, did you have an understanding as to who owned Acme Metals, LLC?”

A: “Howard Brand was buying the corporation.” (Apanian Decl., Exh. A 83:15–85:4.)

Plaintiff has failed to provide evidence that Defendant was a party to the credit application or that he personally guaranteed the credit application. As set forth above, members of an LLC cannot be held liable for the debts, obligations, or other liabilities unless a member explicitly agrees to be personal liable for particular obligations. Plaintiff offers no evidence that Defendant explicitly agreed to guarantee the credit application or that he was a party to that credit application. In addition, while Plaintiff contends that Defendant personally purchased the Corporation, and is personally responsible for its debts and liabilities, it fails to offer any evidence that Defendant, as an individual, purchased the Corporation. Furthermore, Plaintiff’s contention is undermined by the “Asset Purchase and Contribution Agreement” where the Corporation and the LLC entered into an agreement, wherein the LLC agreed to purchase certain rights, properties, and assets from the Corporation, and assume certain liabilities from the Corporation. (Def. Exh. 6.) Defendant signed the purchase agreement, as a manager of the LLC, and not as an individual. (See Id.)

Accordingly, Plaintiff’s causes of action for breach of contract, quantum meruit, account stated, open book, and personal guaranty, which are all based on Defendant either being a party to or guaranteeing the credit application cannot survive, and Summary Judgment is Appropriate.

Thus, Defendant’s Motion for Summary Judgment as to Plaintiff’s Complaint is granted.

“To qualify for declaratory relief under section 1060, plaintiff [is] required to show their action [presents] two essential elements: ‘(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party.’ [Citation.]” (Lee v. Silveria (2016) 6 Cal.App.5th 527, 546.)

Defendant’s Cross-Complaint is a proper subject for declaratory relief because it relates to Defendant’s obligations arising from the credit application. Defendant filed the Cross-Complaint asking the court to declare Defendant’s right and obligations as to the credit application, since Plaintiff sought to hold Defendant liable for the obligations and debts arising from the credit application.

As discussed above in detail, Defendant was not a party to the credit application or personally guaranteed the credit application. Accordingly, the Court declares that Defendant was not liable for any of debts, obligations, or other liabilities arising from the credit application.

Plaintiff asks the Court for a continuance of the Motion pursuant to Code of Civil Procedure section 437c(h).

“If it appears from the affidavits submitted in opposition to a motion for summary judgment or summary adjudication,¿or both,¿that facts essential to justify opposition may exist but cannot, for reasons stated,¿be presented, the court shall deny the motion, order a continuance to permit affidavits to be obtained or discovery to be had, or make any other order as may be just. The application to continue the motion to obtain necessary discovery may also be made by ex¿parte¿motion at any time on or before the date the opposition response to the motion is due.”¿ (Code of Civil Procedure, § 437c, subd. (h).)¿¿¿¿¿

“The nonmoving party seeking a continuance must show: (1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts.”¿¿(Frazee v. Seely¿(2002) 95 Cal.App.4th 627, 633.)¿ The party requesting the continuance must be specific and detail the specific facts that may exist, why such facts would show the existence of controverting evidence, and why the facts could not have been presented.¿¿(Lerma v. County of Orange¿(2004) 120 Cal.App.4th 709, 715-16.)¿ “To be entitled to a continuance, the party opposing the motion for summary judgment must show that its proposed discovery would have led to facts essential to justify opposition.”¿¿(People ex rel. Dept. of Transportation v. Outdoor Media Group¿(1993) 13 Cal.App.4th 1067, 1077.)¿ Whether to grant a continuance is within the discretion of the trial court.¿¿(Scott v. CIBA Vision Corp.¿(1995) 38 Cal.App.4th 307, 313-14.)¿

The Court finds that Plaintiff has failed to meet its burden to show that a continuance is necessary. Plaintiff requests a continuance of the Motion so that it can depose the Corporation’s former employees, who are currently employed by the LLC. (Apanian Decl, ¶ 4.) Plaintiff represents their depositions are necessary to obtain testimony that materials were purchased from Plaintiff at Defendant’s direction and/or for the benefit of Defendant. As set forth above, Plaintiff has failed to provide any evidence to show that Defendant, as a manager of the LLC, is personally liable to Plaintiff for any debts or obligations arising from the credit application. Plaintiff is not seeking to conduct discovery as to evidence that could hold Defendant liable, as a manger, for the LLC’s debts and obligations. Accordingly, the discovery that Plaintiff seeks to undertake will not assist it in opposing the Motion.

The court defers to a properly noticed separate motion any findings regarding attorney’s fees.

The court grants Defendant’s Motion for Summary Judgment as to Plaintiff’s complaint.

The court grants Defendant’s Motion for Summary Judgment as to Defendant’s cross-complaint.

[1] The Court notes that while Defendant included an analysis regarding Plaintiff’s failure to provide evidence to support an alter ego theory, that analysis was unnecessary. Plaintiff’s Compliant does not allege that Defendant was an alter ego of the other defendants in the Complaint, and any analysis as to an alter ego theory is outside of the scope of Plaintiff’s Complaint. (See Hutton v. Fidelity National Title Company (2013) 213 Cal.App.4th 486, 493 [“[T]he burden of a defendant moving for summary judgment only requires that he or she negate plaintiff’s theories of liability as alleged in the complaint; that is, a moving party need not refute liability on some theoretical possibility not included in the pleadings.”] (emphasis in original).)