Case Number: BC604231 Hearing Date: May 09, 2016 Dept: 78
Superior Court of California
County of Los Angeles
SHARONA YEHUDA, as the Trustee of the Keshet Intervivos Trust;
RS WEST HOLLYWOOD, LLC, et al.;
Defendants. Case No.: BC604231
(related to Cases BC606933, BC616128, BC616407)
Hearing Date: May 9, 2016
[TENTATIVE] RULING RE:
DEFENDANTS FAB ROCK INVESTMENTS, LLC, RS WEST HOLLYWOOD, LLC, AND ARTURO RUBINSTEIN’S DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT.
Defendants Fab Rock Investments, LLC, RS West Hollywood, LLC, and Arturo Rubinstein’s Demurrer to Plaintiffs’ First Amended Complaint is SUSTAINED with leave to amend as to the First, Second, and Fifth Causes of Action only for plaintiffs to join as defendants Yehuda Benezra, and Shabi Cohen, and either to amend the FAC to assert additional allegations as to guarantee of the note or to join Bofl Federal Bank. Plaintiffs have ten (10) days leave to amend from the date of this hearing.
The First Amended Complaint alleges as follows. Defendant RS West Hollywood, LLC (“RSWH”) was formed under an Original Operating Agreement dated November 17, 2004. (First Amended Complaint (“FAC”) ¶ 19.) Plaintiff Sharon Yehuda (“Yehuda”) as the trustee for Keshet Inter Vivos Trust (“Keshet”), Yehuda Benezra (“Benezra”) and Shabi Cohen (“Cohen”) each owned a one-third share in RSWH. (FAC ¶ 20.) In 2004, RSWH purchased a property for $850,000, and on January 26, 2005, obtained a $4.15 million construction loan from Far East National Bank to construct and develop a 10-unit condominium project on the property. (FAC ¶ 22.) However, due to the Great Recession, Far East was only able to fund $3.4 million, and Keshet, Cohen and Benezra together contributed $2.5 million of their own funds, with $1.25 million coming from Keshet. (Id. ¶ 22.)
In June 2007, The Red Sea Group became a member of RSWH, and it and Keshet, Cohen, and Benezra each held a 25% share. (FAC ¶ 24.) On July 2007, Keshet purchased The Red Sea Group’s 25% interest, and held a 50% interest in RSWH, while Cohen and Benezra maintained their 25% interest. (FAC ¶ 25.) The condominium project was completed in 2011 and RSWH rented out the units until the real estate market recovered enough to sell them as condo units. (FAC ¶ 28.)
In 2011, RSWH needed to refinance the existing construction loan, and applied for a loan with Bofl Federal Bank (the “Bank”). (FAC ¶ 29.) The Bank required personal guarantees from all three members of RSWH, but Keshet could not qualify to personally guarantee the loan due to prior bankruptcies by Yehuda. (FAC ¶ 30.)
To allow the refinancing to go forward, Yehuda asked her friend defendant Arturo Rubinstein (“Rubinstein”) to take over Keshet’s 50% stake in RSWH and personally guarantee the new loan with the understanding that the acquisition would be temporary, and Rubinstein would return the 50% stake to Keshet upon written demand. (FAC ¶ 31.) Rubinstein agreed and the parties entered into an Agreement Re: Sale of Membership Interest on August 1, 2011. (FAC ¶ 32, Ex. 3 to FAC.) In this agreement, Rubinstein’s company defendant Fab Rock Investments LLC (“Fab Rock”) agreed to purchase the 50% membership interest for $100, and agreed to pay Keshet 50% of any distributions. (FAC ¶ 33.) This low sales price is explained by Yehuda and Rubinstein’s longstanding professional relationship and personal friendship where Yehuda had undertaken similar transactions to help Rubinstein. (See FAC ¶¶ 9–18.)
On August 5, 2011, Keshet and Fab Rock signed a Modification to the August 1, 2011 agreement that provided that Fab Rock agreed that 100% of any distributions received by the sale of the Property would be the property of Keshet and that Fab Rock granted Keshet the option to take over 100% of the 50% interest within 24 hour written notice. (FAC ¶¶ 34, 35, Ex. 4.) In
According to the FAC, in April 2012, RSWH’s Operating Agreement was amended to show Fab Rock was a member of RSWH. (FAC ¶ 36.) The FAC alleges that although this Amended Operating Agreement was signed in April 2012, it was back-dated to January 5, 2011, and additionally named ICCMAC, Inc. as RSWH’s manager. (FAC ¶ 37, Ex. 6 to FAC [showing January 1, 2011 date].) Therefore, the FAC alleges that as of January 5, 2011, Keshet, not Fab Rock, was the owner of the 50% membership interest in RSWH. (FAC ¶ 38.)
After Keshet transferred its membership in RSWH to Fab Rock, Keshet continued to act and conduct business of RSWH as if it were still a member, and was active in the operation and management of RSWH and the property, and continued to pay expenses of RSWH. (FAC ¶¶ 40, 41.) Fab Rock made no capital contributions and did not take an active role in management. (FAC ¶ 42.)
On November 28, 2014, Keshet delivered written notice to Fab Rock that on December 31, 2014, it was exercising its rights under the Amendment to take over 100% of the 50% interest in RSWH. (FAC ¶ 43.) Yehuda personally delivered the Transfer Notice to Rubinstein, who read it and said “okay.” (FAC ¶ 44.)
In December 2014, RSWH began marketing the Property for sale and received several offers. Sale of the Proeprty requires the written consent of more than 50% of the membership interest of RSWH. (FAC ¶¶ 45, 46.) On February 17, 2015, ICCMAC dissolved and the new manager of RSWH became Kishkashta, LLC (“Kishkashta”). (FAC ¶ 48.) In November 2015, Fab Rock and Rubinstein began interfering with RSWH’s attempts to sell the property and began claiming that it, rather than Keshet, owned the 50% interest. (FAC ¶ 49.)
On November 24, 2015, Fab Rock’s attorney sent Benezra a proposed Resolution by the members of RSWH that would make Fab Rock the Manager and Rubinstein the President and Treasurer of RSWH, but Benezra did not sign the Resolution. (FAC ¶ 50.) On November 26, 2015, Fab Rock’s attorney sent Benezra a documents entitled “Minutes of Special Meeting of the Members of RSWH, LLC,” that purported to show that Fab Rock was elected as the new Manager Member of the LCC. Benerza was asked to sign the Minutes and a Waiver of Notice of Special Meeting, and refused. (FAC ¶ 51, 52.)
On December 1 and 4, 2015, Keshet sent Benezra written notices that he was not authorized to execute any documents for the sale of the Property without Keshet’s written consent. (FAC ¶¶ 53, 54.)
Keshet filed its original complaint on December 14, 2015, naming as defendants RSWH, Fab Rock and Rubinstein. Keshet filed its FAC on February 5, 2016, alleging five causes of action:
1. DECLARATORY RELIEF;
2. SPECIFIC PERFORMANCE;
3. CONSTRUCTIVE TRUST;
4. RESULTING TRUST; AND
5. PRELIMINARY AND PERMANENT INJUNCTION.
Since the filing of the complaint in this action, three other cases have been filed which this court has found to be related: BC606933, BC616128, and BC616407. The court summarizes each below.
In BC606933, Fab Rock v. RS West Hollywood, Fab Rock alleges that Benezra caused ICCMAC’s dissolution, which caused RSWH’s dissolution. (Case No. BC606933, First Amended Complaint (“FAC”) ¶ 12, 13.) Fab Rock alleges that Benezra wrongfully caused RSWH to be dissolved. (Id. ¶ 14.) Additionally, Fab Rock alleges that Benezra and Cohen are in breach of the Operating Agreement because they refuse to wind up RSHW. (Id. ¶ 25.) This complaint contains five causes of action for a decree of dissolution and winding up of RSWH designating Fab Rock to wind up RSHW’s affairs. (Id. ¶¶ 28–38.) The complaint also contains a cause of action for breach of fiduciary duty of loyalty against Benezra and Cohen (Id. ¶¶ 86–124.)
In BC616128, Arturo Rubinstein v. Rosh Investments, Rubinstein alleges that defendant Manny Yeyni (“Yeyni”), in conjunction with Yehuda (who is not a defendant), met with a potential buyer for property owned by nominal defendant Rosh Investments, LLC (“Rosh”), of which Rubinstein is a member, without his knowledge. (Case No. BC616128, Complaint ¶ 15.) Yeyni thereafter allegedly failed to recognize Rubinstein as a manager of Rosh and on April 1, 2016, threatened to beat up Rubinstein if he did not agree to a reduction in the sale price as negotiated by Yeyni and Yehuda. (Id. ¶ 20.) This Complaint also seeks a decree of dissolution and winding up of Rosh designating Rubinstein to wind up Rosh’s affairs, as well as for an accounting.
In BC616407, Yehuda v. Rosh Investments, Yehuda alleges that Keshet agreed to allow Rubinstein to state “on paper” that he own a 66% stake in Rosh in order to help improve his financials to obtain a bond for his waterproofing contracting business. (Case No. BC616407, Complaint ¶ 22.) Rosh was created on May 15, 2013, with a 66% ownership interest stated to be Rubinstein and a 33% interest stated to be owned by Yeyni, but Keshet was actually a 33% owner. (Id. ¶ 28.) Rosh purchased a property on May 30, 2013, and each of the three members contributed equal amount of $63,300 to the purchase price. (Id. ¶ 31.) Later, Yehuda alleges that in November 2015 Rubinstein attempted to take full control of the management of Rosh and take control of all negotiations for the sale of the simple property owned by Rosh. (Id. 36.) This case has five causes of action that are identical to those in the lead case, BC604231.
On March 17, 2006, Fab Rock, RSWH, and Rubinstein (collectively, “Fab Rock”) filed their Demurrer to the FAC. Yehuda and Keshet filed their Opposition on April 26, 2016. Fab Rock filed its Reply on May 2, 2016.
The court notes that Fab Rock has not filed a meet-and-confer declaration as required by Code Civ. Proc., 430.41, subd. (a)(3). However, because the court plans on overruling the substantive demurrers to the complaint, the court will consider the demurrer and make a ruling at this time. The parties are cautioned to meet and confer before any demurrers in any of the related cases are filed, or the court will not consider the demurrers until the meet and confer requirement is met.
I. REQUEST FOR JUDICIAL NOTICE
The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).)
Fab Rock requests that the court take judicial notice of the May 18, 2012 Deed of Trust recorded against RSWH’s property. The court GRANTS the request for judicial notice.
Fab Rock requests that the court take judicial notice of new documents in its Reply. This request is improper because it would not allow Keshet to respond to the new evidence and the arguments based thereon. The Reply Request for Judicial Notice is DENIED.
A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30.) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed. Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”) “ ‘[A] complaint otherwise good on its face is subject to demurrer when facts judicially noticed render it defective.’ [Citation.]” (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6 [quoting Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374].) “In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)
A. STANDING OF FAB ROCK TO DEMUR ON BEHALF OF RSWH
Keshet argues that Fab Rock lacks the ability to demur on behalf of RSWH because the FAC alleges RSWH has a manager (Kishkashta) to act on its behalf, which must be taken as true on a demurrer. (Opposition at pp. 14–15.) Fab Rock argues that Kishkashta is a cancelled corporation, and evidences this with a printout from the California Secretary of State website attached to its Reply Request for Judicial Notice. The court has denied the request for judicial notice. Regardless, as shown below, the court has denied the substantive issues raised by Fab Rock on behalf of RSWH, and sustain the demurrers only to allow additional parties to be joined as defendants. Therefore, the court need not decide at this point whether Fab Rock has standing to demur on behalf of RSWH, and makes no ruling on this argument.
B. FIRST CAUSE OF ACTION – DECLARATORY RELIEF
The FAC pleads for a declaratory that:
. . . (a) That the Agreement, the Amendment and the Transfer Notice are valid; (b) That Keshet owns 100% of the 50% membership interest in RS West Hollywood that was previously held by Fab Rock; (c) That RS West Hollywood must obtain the written consent of Keshet before the Property can be sold; (d) That Fab Rock is no longer a member of RS West Hollywood; (e) That Fab Rock has no right to participate in the management, operation, and business of RS West Hollywood; (f) That Fab Rock has no right to participate in any decision to sell or not sell the Property on behalf of the LLC; and (g) That Fab Rock has no right to receive any distributions from the LLC, including any distributions from the sale of the Property.
(FAC ¶ 65.)
1. Procedural Requirements in the Amended Operating Agreement Regarding Transfers.
Fab Rock argues generally that this cause of action fails because the FAC does not allege, nor could it, that Keshet was admitted as a substitute Member of RSWH in accordance with the requirement of the Amended Operating Agreement (“AOA”), which it argues was signed in January 2011, and requires that assignees of transfers of interest be admitted as substitute members in order to be entitled to vote, and that the consent of a majority of the interest-holder is required to admit new members. (Demurrer at pp. 2–7.)
Keshet argues that the AOA, although dated in January 2011 (See Ex. 6 to FAC), was actually signed in April 2012, and was not in effect at the time of the August 1, 2011 transfer of the 50% interest from Keshet to Fab Rock. (Opposition at p. 4, FAC ¶36.) However, the transaction at issue is the purported transfer of the interest from Fab Rock back to Keshet on December 31, 2014 triggered by Keshet’s demand for transfer to Fab Rock. (FAC ¶¶ 43, 44.) This transfer was after the AOA went into effect, whether it was in January 2011 or April 2012. Therefore, in order for the transfer of the interest from Fab Rock to Keshet to be valid, the procedural requirements as set forth in the AOA would need to be complied with.
Keshet argues that the FAC properly pleads that the members of RSWH consented to the transfer because Benezra and Cohen impliedly consented to Keshet being a member as reflected by their acquiescence to Keshet, even when it wasn’t a member, being an active participant in managing RSWH, and because Fab Rock itself was obligated to make Keshet a member. (Opposition at pp. 4–5.) However, the AOA requires that new members must agree “in writing to be bound by the terms of this Agreement.” (Demurrer at p. 3; FAC Ex. 6 ¶ 2.1.) Additionally, “prior written unanimous consent of the Members” is required for any member to assign or transfer their interest. (FAC Ex. 6 ¶ 7.1.)
Further, Keshet argues that Fab Rock is equitably estopped from relying on the provisions of the AOA because it agreed to transfer the 50% interest back to Keshet at its demand and then subsequently entered into an AOA that contained procedural requirements Fab Rock could use to escape liability for refusing to honor its agreement to return the 50% interest. (Opposition at p. 5.)
“As the name suggests, equitable estoppel is an equitable issue for court resolution. [Citations.] One aspect of equitable estoppel is codified in the Evidence Code: ‘Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it.’ (Evid.Code, § 623.) While the statutory formulation might suggest that equitable estoppel is limited to situations amounting to fraud (intentionally and deliberately misleading another), estoppel ‘has not been so narrowly applied.’ [Citation.] Equitable estoppel has been applied in a broader context, where the party to be estopped has engaged in inequitable conduct, induced another party to suffer a disadvantage, and then sought to exploit the disadvantage.” (Hoopes v. Dolan (2008) 168 Cal.App.4th 146, 161–62.)
The doctrine of equitable estoppel would prevent Fab Rock from using the newly-added procedural requirements relating to new members and transfers to escape liability for its failure to comply with its previous obligation to return the membership interest to Keshet at its demand. Fab Rock does not address the issue of equitable estoppel in its Reply. (Reply at pp. 8–9.) The court finds that based on the doctrine of equitable estoppel, the demurrer is overruled with respect to this basis.
2. Indispensable Parties and Misjoinder
Fab Rock argues that this matter cannot proceed without two separate groups of defendants; the Bank, and Benezra and Cohen. (Demurrer at pp. 7–9, 9–10.)
“A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party.” ( Code Civ. Proc., § 389, subd. (a).)
“Where the plaintiff seeks some type of affirmative relief which, if granted, would injure or affect the interest of a third person not joined, that third person is an indispensable party.” (Sierra Club, Inc. v. California Coastal Com. (1979) 95 Cal.App.3d 495, 501.)
“Whether a party is necessary and/or indispensable is a matter of trial court discretion in which the court weighs “factors of practical realities and other considerations.”’ [Citation.] ‘A court has the power to proceed with a case even if indispensable parties are not joined. Courts must be careful to avoid converting a discretionary power or rule of fairness into an arbitrary and burdensome requirement that may thwart rather than further justice.’ [Citation.] For example, where existing and absent parties’ interests are sufficiently aligned such that the absent party’s rights will not be affected or impaired by the judgment or proceeding, the absent party need not be joined.” (City of San Diego v. San Diego City Employees’ Retirement System (2010) 186 Cal.App.4th 69, 84.)
“If a person is determined to qualify as a ‘necessary’ party under one of the standards outlined above, courts then determine if the party is also ‘indispensable.’ Under this analysis ‘the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable.
The factors to be considered by the court include: (1) to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person’s absence will be adequate; (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.’ ( Code Civ. Proc., § 389, subd. (b).)” (City of San Diego v. San Diego City Employees’ Retirement System (2010) 186 Cal.App.4th 69, 83–84.)
Fab Rock argues that because the Deed of Trust provides that transfer of a Membership interest without its prior written consent that leaves the “Initial Owners” with less than 51% of all Membership Interests is an “Event of Default” (RJN Ex. 1 ¶ 21, subd. (e)(iv)), the Bank has an interest relating to this subject matter, and its absence may as a practical matter impairs or impedes its ability to protect its interest. (Demurrer at pp. 7–9.) The Deed of Trust defines “Initial Owners” as the owners of 100% of the member interests in RSWH as of the date of the Note. (RJN, DOT ¶ 1(s).)
Keshet argues that the Bank’s interest would not be impaired or impeded because its security interest would remain regardless of who the members of the RSWH are. (Opposition at pp. 7–8.) Keshet argues that Rubinstein signed a personal guarantee on behalf of RSWH that continues even without an interest in RSWH. (Opposition at p. 8, p.8 n.1.) Keshet also points to the FAC paragraph 31 to show that Rubinstein continues to guarantee RSWH, but this should be alleged specifically to avoid joining the Bank. While the FAC alleges that the Bank was willing to lend money to RSWH only upon satisfactory personal guarantees by its members, and was unwilling to accept the personal guarantees of Keshet’s owner Yehuda due to past bankruptcies, if Rubeinstein is still a guarantee of the Note, this would satisfy the Bank’s concerns. In addition, the Bank continues to hold the Note and the property serves as security for the note. Moreover, if the Bank finds that the transfer back to Keshet constitutes a default, it can either approve the transfer or declare a default under the agreement – this is separate from the question in this lawsuit, i.e., whether Keshet or Fab Rock owns a 50% share of RSWH. It may well be that other parties want to join the Bank, but the court finds that it is not a necessary party to Keshet’s claims.
As to Benezra and Cohen, Keshet argues that they do not have an interest in whether Keshet or Fab Rock hold the disputed 50% interest. (Opposition at pp. 8–9.) However, because the transfer of the interest from Fab Rock to Keshet could result in the Bank declaring the Note in default, they have a substantial interest in the outcome of this litigation. Moreover, it is clear that Benezra and Cohen can be joined to this lawsuit in that they are parties to the related cases. The court therefore SUSTAINs the demurrer to require Keshet to join Benezra and Cohen as party defendants.
The Demurrer to the First Cause of Action is SUSTAINED with leave to amend only for Keshet to join
Benezra and Cohen as defendants, and for Keshet to allege specifically that Rubinstein has remained as a personal guarantor of the Note. If Keshet does not allege that Rubsinstein remains a personal guarantor of the note, then this lawsuit could impact the Bank because it will lose a guarantee of the Note by the transfer of a Member interest from Fab Rock to Keshet, and then it too must be joined as a party defendant.
C. SECOND CAUSE OF ACTION – SPECIFIC PERFORMANCE
“‘A complaint for specific performance must allege the following: (1) A specifically enforceable type of contract, sufficiently certain in its terms [citation]. (2) Adequate consideration, and a just and reasonable contract [citation]. (3) The plaintiff’s performance, tender, or excuse for nonperformance [citation]. (4) The defendant’s breach [citation]. (5) Inadequacy of the remedy at law [citation]. In addition, the defense of the statute of frauds must be anticipated in the complaint. [Citation.]’ [Citation.]” (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409, fn. 5.)
Fab Rock argues that although real property is considered “unique,” what is at stake here is not the real property held by RSWH, but simply an ownership interest in the LLC itself, which is not sufficiently unique to compel specific performance. (Demurrer at pp. 10–12.)
“It is to be presumed that the breach of an agreement to transfer real property cannot be adequately relieved by pecuniary compensation. In the case of a single-family dwelling which the party seeking performance intends to occupy, this presumption is conclusive. In all other cases, this presumption is a presumption affecting the burden of proof.” (Civ. Code, § 3387.)
“‘A membership interest and an economic interest in a limited liability company constitute personal property of the member or assignee. A member or assignee has no interest in specific limited liability company property.’ [Citation.]” (Kwok v. Transnation Title Ins. Co. (“Kwok”) (2009) 170 Cal.App.4th 1562, 1570.) However, “[t]he propriety of specific enforcement of contracts to sell or convey unique items of personal property such as shares of stock in closely held corporations which are not traded in the market and which have no established market value has long been recognized.” (Capaldi v. Levy (“Capaldi”) (1969) 1 Cal.App.3d 274, 281.)
The court notes that Kwok does not involve claims of specific performance. Although Capaldi is an older case, its holding remains good law. The court therefore finds that a cause of action for specific performance may be pleaded regarding a contract for the transfer of shares of a closely-held, non-public LLC whose only purpose is to hold a single piece of real estate.
In its Reply, Fab Rock argues for the first time that RSWH is a dissolved LLC being continued only to wind up its affairs, and financial compensation would be adequate for Keshet. (Reply at pp. 9–10.) However, this argument is improperly made for the first time on Reply, and the court will not consider it or the underlying Request for Judicial Notice.
Fab Rock then argues that the underlying contract to transfer the interest back from Fab Rock to Keshet is unenforceable because it lacks consideration. (Demurrer at pp. 12–14.)
However, the FAC adequately alleges an enforceable bilateral contract. “A bilateral contract is one in which there are mutual promises given in consideration of each other. [Citations.] The promises of each party must be legally binding in order for them to be deemed consideration for each other.” (Bleecher v. Conte (1981) 29 Cal.3d 345, 350.) Here, Keshet promised to transfer the 50% interest to Fab Rock in exchange for Fab Rock’s promise that it would transfer the interest back to Keshet at its request. These are legally binding obligations that act as consideration for the contract. Whether the consideration was adequate need not be decided at the demurrer stage.
Even assuming this was not a bilateral contract, the FAC alleges that during the period Keshet was not the owner of the 50% stake in RSWH, it actively managed the LLC and paid expenses. Meanwhile, Fab Rock, although owner of the 50% interest, neither actively managed the LLC nor paid expenses, but was still entitled to half of the total disbursements to the 50% share, the other half going to Keshet. Therefore, Fab Rock essentially agreed to transfer the property back to Keshet at its request in exchange for half of disbursement owned to the 50% interest while not being required to manage the LLC or pay for any expenses. This would serve as an alternative form of consideration for the underlying contract.
Fab Rock does not address the consideration argument in its Reply. (Reply at pp. 9–10.)
The Demurrer to the Second Cause of Action is SUSTAINED with leave to amend only for Keshet to join Benezra, and Cohen as defendants, and to add allegations as to security for the note or to join the Bank.
D. FIFTH CAUSE OF ACTION – INJUNCTIVE RELIEF
Fab Rock demurs to the Fifth Cause of Action only as to the same arguments discussed above regarding compliance with the AOA. (Demurrer at pp. 14–15.) For the same reasons as above, the Demurrer to the Fifth Cause of Action is SUSTAINED with leave to amend only for Keshet to join the Bofl Federal Bank, Benezra, and Cohen, and to add allegations as to security for the note or to join the Bank.
Defendants to give notice.
DATED: May 9, 2016 ________________________________
Hon. Gail Ruderman Feuer
Judge of the Superior Court