Filed 8/14/17 Kyle v. Gentner CA4/3






NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE


BRIAN KYLE et al.,

Plaintiffs, Cross-defendants and Respondents,

v.

ROCKY W. GENTNER et al.,

Defendants, Cross-complainants and Appellants.


G053039

(Super. Ct. No. 30-2013-00626727)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, John C. Gastelum, Judge. Affirmed in part and remanded in part with instructions.
Robert D. Feighner; Pumilia & Adamec, and Paul D. Rosenberger for Defendants, Cross-complainants and Appellants.
Jasper & Jasper and Catherine R. Jasper for Plaintiffs, Cross-defendants and Respondents.


INTRODUCTION
The parties to this appeal – appellants Rocky Gentner and James Parkhurst, and respondents Brian Kyle, Bobbie Griffith, and Cindy Atkinson – have been before us on a previous appeal, from an order granting respondents’ anti-SLAPP motion. We affirmed the order, which eliminated all but one cause of action – for declaratory relief – in appellants’ cross-complaint.
Respondents’ complaint and what remained of appellants’ cross-complaint were tried to the court in February 2015. The result was a victory for respondents Kyle, Griffith, and Atkinson. Gentner and Parkhurst have appealed, identifying four issues for review. These are (1) the nature of Atkinson’s interest in the limited liability company Bay Cities Partners, LLC; (2) whether a vote to sell Bay Cities’ real property required a majority of the members or a majority of membership interests; (3) whether the court properly entered an injunction against Gentner; and (4) the percentage interest of each Bay Cities member.
We affirm the judgment rendered by the trial court as it presently stands. The court found that Atkinson was a full member of Bay Cities with voting rights, having succeeded her late husband (a founding member). It found that three out of five members, a per capita majority, could approve the sale of Bay Cities’ real property and that the circumstances warranted an injunction against Gentner’s ability to vote on a property sale as to which he had a conflict of interest.
As to the fourth issue identified by appellants, the percentage interest of each member, the judgment is silent. We therefore remand the matter to the trial court to enter a modified judgment adjudicating this issue.


FACTS
Bay Cities was established as a limited liability company in 2000 with two managers. It became a member-managed company in 2005. Bay Cities had five members: Gentner, Parkhurst, Griffith, Kyle, and Thomas Atkinson. Gentner, Parkhurst, and Griffith each contributed 25 percent of the company’s capital. Kyle and Thomas Atkinson split the remaining 25 percent equally between themselves.
Bay Cities’ sole asset was a 10-acre shore-front parcel of land in Seal Beach. Originally commercial, the parcel’s zoning became residential as part of a deal with the City of Seal Beach (the City), whereby Bay Cities obtained the City’s approval to construct 32 homes. Because of the parcel’s proximity to the shore, however, Bay Cities also needed Coastal Commission approval before any construction could begin. As of the date of trial, Bay Cities’ application was scheduled for a hearing before the Coastal Commission.
Thomas Atkinson, one of the original members, died in 2006. His widow, Cindy Atkinson (Atkinson), asserted that she was entitled to succeed to his membership, as the executor of his estate and trustee of their trust. Gentner and Parkhurst disputed this, claiming that she was not a full member with voting rights. She had only economic rights, that is, rights to distribution of dividends.
Atkinson’s membership status was the subject of a motion for summary adjudication. The court held that as a matter of law and interpretation of the Bay Cities’ operating agreement, Atkinson was a substituted member and entitled to full rights, in particular the right to vote on membership issues. By this time, factions had developed within the company’s membership, with Kyle, Atkinson, and Griffith on one side and Gentner and Parkhurst on the other.
Bay Cities’ ultimate goal was to sell the property to a developer for as much money as possible. Bay Cities received numerous inquiries and offers on the property, which Gentner screened. As it turned out, Gentner was also trying to sell a much smaller piece of property adjacent to Bay Cities’ parcel, a property belonging to a limited liability company owned by Genter and his wife. Evidence developed at trial showed that Gentner tried to connect the sale of his property with that of Bay Cities and that he sought to “steer the deal to the buyer with the best consideration for [his] piece.” Although other Bay Cities members knew Gentner owned the property next door, he did not disclose to the other members that he was negotiating for the sale of his property along with that of Bay Cities or that the broker who was representing Bay Cities in marketing the property was also representing him.
Gentner and Parkhurst asserted that votes about selling the Bay Cities real property had to be on the basis of membership interests. That is, the people who had contributed more capital to the company (Gentner, Parkhurst, and Griffith) had a greater say than the people who had contributed less (Thomas Atkinson, succeeded by Atkinson, and Kyle). The other faction (Kyle, Atkinson, and Griffith) asserted that the voting on this subject was on the basis of membership alone. If three out of five members voted to accept an offer, the sale could go through.
The matter was tried to the court over three days in February 2015. The court issued a tentative ruling in May 2015, after posttrial briefing, and the final judgment was entered on November 25, 2015. As relevant to this appeal, the final judgment held: (1) Atkinson was a substituted member with full rights under the operating agreement; (2) the sale of Bay Cities’ real property required the approval of a majority of members (three out of five); and (3) Gentner was enjoined from (a) voting on the sale of the Bay Cities parcel if the prospective buyer was also making an offer on his adjacent property, (b) representing that his adjacent property was “affiliated” with that of Bay Cities, and (c) representing that the sale of Bay Cities’ parcel and the sale of his adjacent parcel are one project.
DISCUSSION
Gentner and Parkhurst have identified four issues on appeal. First, they dispute the court’s decision on summary adjudication that Atkinson is a substituted member with full voting rights. Their second and third issues are related: The court’s ruling that “member” rather than “membership interest” was the correct voting unit for the sale of real property was in error, and the court incorrectly calculated membership interests. Finally, Gentner disputes the injunction imposed on him.
I. Atkinson’s Membership Status
Whether Atkinson succeeded to her late husband’s Bay Cities’ membership is a matter of contract interpretation, which we review de novo. (See Ameron Internat. Corp. v. Insurance Co. of State of Pennsylvania (2010) 50 Cal.4th 1370, 1377; Pittsburg Unified School Dist. v. S.J. Amoroso Construction Co., Inc. (2014) 232 Cal.App.4th 808, 826.)
The operating agreement defines “member” as “(1) a person who has a membership interest in [Bay Cities] and (2) has not resigned, withdrawn, or been expelled as a member or, if other than an individual, been dissolved.”
The section “Transfer or Assignment of Membership Interest” in the operating agreement provides, “A Member’s interest in [Bay Cities] is personal property. Except as otherwise provided in this Agreement, a Member’s interest may be transferred or assigned. If all the other Members of [Bay Cities] other than the Member proposing to dispose of his/her interest do not approve of the proposed transfer or assignment by unanimous written consent, the transferee of the Member’s interest has no right to participate in the management of the business and affairs of [Bay Cities] or to become a member. The transferee is only entitled to receive the share of profits or other compensation by way of income, and the return of contributions, to which that Member would be otherwise entitled. [¶] A Substituted Member is a person admitted to all the rights of a Member who has died or has assigned his/her interest in [Bay Cities] with the approval of all Members of [Bay Cities] by unanimous written consent. The Substituted Member shall have all the rights and powers and is subject to all the restrictions and liabilities of his/her assignor, except that the substitution of the assignee does not release the assignor from liability to [Bay Cities] under this Agreement.” (Italics added.)
Atkinson asserted she was a substituted member because Thomas Atkinson died. Gentner and Parkhurst asserted that she was not entitled to full membership status, because she had not been approved as a member by unanimous written consent. She was therefore entitled only to receive a share of the profits (i.e., an economic interest), not to vote.
The interpretation hinges on the phrase “with the approval of all Members of [Bay Cities] by unanimous written consent.” Does this phrase modify “admitted” or “assigned”? In other words, does a substituted member always have to be admitted with unanimous written consent, regardless of whether the former member died or assigned his/her interest, or does the unanimous-consent condition apply only to an assignee?
Reading the agreement as a whole, as we are obliged to do (Civ. Code, § 1641), we agree with the trial court that the unanimous-consent condition applies only to an assignment. The first paragraph deals exclusively with assignment. It sets up the requirement of unanimous written consent and explains what happens if this consent is not obtained. The assignment is still effective, but the assignee cannot become a member or take part in the management of the business. The first paragraph does not mention dying.
The second paragraph reiterates the first paragraph in requiring unanimous approval of an assignment. It adds another possible method of becoming a substituted member: succeeding a member who has died. If the intention had been to apply the unanimous-consent condition to succeeding after a member’s death as well as to an assignment, it would not have been necessary to separate out the requirements and consequences of an assignment. The operating agreement would have dealt with both together, without distinction. The detailed application of conditions to succeeding after an assignment in the first paragraph and the omission of any reference to death establish the intention to distinguish between the two methods of becoming a substituted member.
Appellants argue it was not their intention when executing the operation agreement that a deceased member’s representative could become a full-fledged member of Bay Cities. But the objective intent derived from the words of the contract, not a party’s subjective intent, governs contract interpretation. (Market Ins. Corp. v. Integrity Ins. Co. (1987) 188 Cal.App.3d 1095, 1098.) That intent – as manifested by the chosen words – created two kinds of substituted members, in addition to the original members: assignees and transferees were one kind; members admitted due to death of an existing member were another. Only the former required unanimous consent for full membership status.
Finally, appellants argue that the trial court’s interpretation conflicts with Article X section 3(c) of the operating agreement, which provides, “The following events shall require dissolution and winding up the affairs of [Bay Cities]: [¶] . . .[¶] (c) Upon the death, retirement, resignation, expulsion, bankruptcy or dissertation [sic dissolution?] of a Member or occurrence of any other event which terminates a Member’s continued Membership in [Bay Cities], unless the business of [Bay Cities] is continued by the unanimous vote of all remaining Members within ninety (90) days of the happening of that event.” Appellants argue that the operating agreement requires the vote of all the remaining members to stay in business, yet the court’s interpretation allows the substituted member to assume voting rights without a unanimous vote.
There is no conflict. This provision gives appellants the “out” they claim they wanted to avoid being in business with a member’s widow. The business dissolves and winds up upon the death of a member, unless the remaining members vote unanimously to keep it going. The person substituting for the deceased member does not vote on this issue. If even one remaining member does not want to be in business with this person, the company winds up, and everyone goes his or her separate way. But until that happens, the person succeeding the deceased member can exercise the deceased member’s rights.
II. Member or Membership Interest Voting on Property Sale
The operating agreement provides, “Any sale of real property will require a majority vote of the members to approve the transaction.” Appellants argue that “majority vote of the members” really means “majority vote of the membership interests,” that is, the members with the majority of the capital invested in Bay Cities.
The trial court found, and we agree, that the operating agreement is unambiguous on this point. The operating agreement defines a member as “a person who has a membership interest in [Bay Cities] . . .” The agreement defines “membership interest” as “the percentage of ownership interest in [Bay Cities]” and bases the interest on a member’s capital contributions. All five of the “members” have a “membership interest,” but the membership interest varies depending on the member’s capital contribution.
When there is a distinction to be made between member and membership interest, the agreement clearly makes it. For example, a quorum for the transaction of business is a majority of members, but the company’s manager or managers are elected by a majority of membership interest. A manager may be removed by the unanimous vote of a quorum of members (not including the manager), but the written approval by a majority interest is one of the ways the company can be dissolved. A member can be indemnified upon authorization by vote of a majority of a quorum of disinterested members. The consent of a majority of membership interest is required to admit a new member, but the members vote on how much to demand as the new member’s capital contribution. As the trial court observed, the members could have required a majority interest vote for the sale of real property, but they did not.
Appellants argue that Article III section 12 is the only provision in the operating agreement that addresses the manner of voting. Given the examples we’ve just noted – by no means an exhaustive list – of the different kinds of voting specified in the operating agreement for different issues, appellants’ argument cannot be sustained. What section 12 addresses is how membership interest is to be determined when voting is by membership interest. It is based on current capital contributions, meaning that a membership interest may change depending on whether a member has contributed to or withdrawn from his or her original capital account. But the agreement is unambiguous in calling for a majority vote of members to approve the sale of Bay Cities’ real property.
III. Injunctive Relief
The final judgment enjoined Gentner from voting on the sale of Bay Cities’ real property if the prospective buyer is also making an offer for his adjoining property and from representing that his parcel is affiliated with Bay Cities’ parcel or that the two parcels are one project.
Civil Code section 3422 provides, “Except where otherwise provided by this title, a final injunction may be granted to prevent the breach of an obligation existing in favor of the applicant: [¶] 1. Where pecuniary compensation would not afford adequate relief; [¶] 2. Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief; [¶] 3. Where the restraint is necessary to prevent a multiplicity of judicial proceedings; or, [¶] 4. Where the obligation arises from a trust.” We review a trial court’s decision to grant a permanent injunction for abuse of discretion. We review factual findings supporting the injunction for substantial evidence. (Mendez v. Rancho Valencia Resort Partners, LLC (2016) 3 Cal.App.5th 248, 260-261; Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 390; Shapiro v. San Diego City Council (2002) 96 Cal.App.4th 904, 912.)
“‘A permanent injunction is an equitable remedy for certain torts or wrongful acts of a defendant where a damage remedy is inadequate. A permanent injunction is a determination on the merits that a plaintiff has prevailed on a cause of action for tort or other wrongful act against a defendant and that equitable relief is appropriate. . . .’ [Citation.]” (Benasra v. Mitchell Silberberg & Knupp (2002) 96 Cal.App.4th 96, 110; see Art Movers, Inc. v. Ni West, Inc. (1992) 3 Cal.App.4th 640, 646.)
The tort upon which the court based injunctive relief was Gentner’s breach of his fiduciary duty to the other members of Bay Cities, by his efforts to link the sale of his own property to that of Bay Cities, by failing to inform other Bay Cities members of his dealings with the real estate broker and the developer on his own behalf, and by trying to maximize the return on his property at Bay Cities’ expense. Gentner characterizes the trial court findings as “inconsequential on appeal.” On the contrary, they are highly significant.
Gentner now argues that injunctive relief was improper because respondents failed to prove damages. In other words, they failed to prove his schemes were successful. But the point of injunctive relief is to stop harmful conduct before the harm has happened. (See Ernst & Ernst v. Carlson (1966) 247 Cal.App.2d 125, 128 [defendant enjoined from attempting to disrupt business relations]; (People v. Paramount Citrus Assn. (1957) 147 Cal.App.2d 399, 413 [injunction lies to prevent injury].) An injunction is an equitable remedy that can serve as an alternative to damages.
Gentner also argues that respondents failed to show that monetary damages would be inadequate or difficult to ascertain. Once again, this is simply an argument that, having discovered his breach of fiduciary duty, Bay Cities must wait until Gentner has completed his disfavored transaction before it can do anything. “If a plaintiff can show that defendant’s conduct threatens him with unlawful injury, his inability to quantify the harm already suffered, or likely to be suffered, is not a ground for denying injunctive relief. On the contrary, ‘extreme[] difficult[y]’ in ascertaining damages is a factor favoring injunctive relief. [Citations.] Appellants’ argument assumes that all the elements of a damage claim are present except quantifiable harm. This is an argument for an injunction, not against it.” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 418.)
Finally Gentner characterizes the injunction as “vague, overbroad, and unworkable.” The injunction is narrowly drawn and very specific. It should be fairly easy for Gentner to refrain from misrepresenting to prospective buyers that his property and Bay Cities’ are a single project or are affiliated. As for voting on the sale of Bay Cities’ real property, he is enjoined only from voting on a sale that includes his property – a clear conflict of interest that any right-minded person would want to avoid without an injunction.
IV. Percentage of Membership Interests
Appellants identified a fourth issue, the calculation of membership interests in Bay Cities, based on capital contribution. This issue was discussed at length in the statement of decision, and it was mentioned as being tried in the preface to the judgment. The judgment itself, however, omits any ruling on the percentage of membership interests.
The judgment recites, “Cross-complainant Rocky W. Gentner take[s] nothing by way of his F[irst] A[mended] C[ross-] C[omplaint].” The first amended cross-complaint now consists of a cause of action for declaratory relief, asking in part for a determination of the “percentage interests that are held by each member of [Bay Cities].” The judgment, in effect, denied Gentner’s request for declaratory relief. It did not adjudicate the members’ percentages.
We cannot review a portion of a judgment that is not there. The statement of decision, while instructive, is not appealable. It is not a substitute for the judgment. (See Apple, Inc. v. Franchise Tax Bd. (2011) 199 Cal.App.4th 1, 13; 7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 10, p. 554 [judge’s written opinion helpful, but “it is not itself . . . a judgment”].) We may consult the statement of decision to resolve an ambiguity in the judgment (see e.g., Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 767 [use of term “easement” in judgment clarified by statement of decision]), but in this case there is no ambiguity to resolve. Accordingly, we will return the judgment to the trial court for modification, to enter a ruling on the members’ interest percentages.
DISPOSITION
The judgment in its present form is affirmed, but remanded, with an order to modify it with an explicit ruling on the percentage of membership interest of each member of Bay Cities Partners, LLC. The parties are to bear their own costs on appeal.





BEDSWORTH, ACTING P. J.

WE CONCUR:



MOORE, J.



THOMPSON, J.