Opinion
NOT TO BE PUBLISHED
Super. Ct. No. SCV0021504
BLEASE Acting P. J.
This case involves the standing requirements of the limited liability company law. (Corp. Code, § 17501, subd. (a).)
An undesignated reference to a section is to the Corporations Code.
Plaintiff Stu Chang brought this derivative action on behalf of Synergy Sports Placer County (Synergy), a limited liability company (LLC), against defendants Daniel Johnson, Jr. and Johnson’s company Big Ranch Properties, LLC (Big Ranch). Plaintiff inter alia seeks a declaration that Synergy is the rightful owner of certain real property, namely a large industrial building located in Rocklin, California, and an injunction compelling Big Ranch to convey its interest in that building to Synergy.
Plaintiff initially sought to bring this action on behalf of Synergy and Granite Bay Sports, LLC (Granite Bay). In seeking leave to file a first amended complaint, however, he indicated that he no longer seeks to bring the action on behalf of Granite Bay. His appeal refers only to claims he seeks to bring on behalf of Synergy.
Daniel Johnson, Jr. was erroneously sued as Daniel Johnson.
Big Ranch Properties, LLC was erroneously sued as Big Ranch, LLC.
Defendants moved for summary judgment claiming inter alia that plaintiff lacked standing to pursue a derivative action on behalf of Synergy. The trial court granted the motion, ruling that plaintiff was barred from pursuing the action on Synergy’s behalf by the LLC law that prohibits a member of an LLC from instituting or maintaining any action in right of the LLC unless the member sets forth in the complaint his “efforts to secure from the managers the action [he] desires or the reasons for not making that effort....” (§ 17501, subd. (a)(2).) Plaintiff asserts that it would have been futile to make a demand on Synergy or its managers because Johnson, who he contends had become the majority owner and managing member of Synergy, never would have agreed to bring an action against himself or his company Big Ranch.
The underlying dispute concerns the ownership of the building. Synergy was formed for the purpose of exercising an option to purchase the building and convert it to condominium units. Plaintiff contends that “[u]pon exercising the option, Synergy was to own the property and lease or sell [it] for profit.” He further asserts that Synergy is the building’s rightful owner and that he has an interest in Synergy. Defendants contend “Synergy’s members intended to divide the Property into three individual condominium units when they exercised the Option, and then convey the condominiums to the members who funded the exercise of the Option.”
The present ownership of the property is the product of an operating agreement signed by plaintiff, Scott Paulhus and Susan Jacobson. It specified that Synergy was formed “solely to execute [an] option for the purchase of the building,” which was to be “divided into individual condominium[] units.” It further provided that Paulhus “controls 99% ownership” of the west end of the building (now Unit 100), plaintiff “controls 1% ownership” of that same space, and Jacobson “controls 100% ownership” of the east end and center of the building (now Units 200 and 300.) Jacobson was listed as the managing member of Synergy. The common areas were to be governed by “CCR’s.”
The agreement refers to and is signed by Scott Palhaus. However, the assignment of his interest to Johnson refers to and is signed by Scott Paulhus. We will refer to Paulhus.
The operating agreement was carried out in several transactions, which became effective on the close of escrow on the purchase of the building. They included the assignment of Paulhus’ 99 percent interest in Unit 100 to Johnson in return for money to reimburse Paulhus for tenant improvements, and the sale of Unit 100 by Synergy to Big Ranch in return for money to pay for the portion of the option price attributable to Unit 100.
Plaintiff tenders a convoluted theory that the assignment of Paulhus’ interest in the building to Johnson and the exercise of the option and purchase of Unit 100 by Johnson’s company Big Ranch left title in the building in Synergy and made Johnson the majority owner and managing member of Synergy.
However, plaintiff cannot explain the conversion of the building into individual condominium units. Synergy was simply the vehicle by which the building was acquired and the individual condominium units created and conveyed to its members. It was not intended that Synergy would hold title to the property except to convert it to individual condominium units. When that was accomplished Synergy had no interest in or title to the building and no further role to fulfill.
While plaintiff claims in his declaration that “Synergy was to own the property and lease or sell [it] for profit,” the complaint alleges that the property was to be conveyed to Granite Bay (another entity formed by plaintiff and Paulhus) after Synergy exercised the option. As defendants point out, plaintiff is bound by the judicial admission in his complaint. (Heater v. Southwood Psychiatric Ctr. (1996) 42 Cal.App.4th 1068, 1079, fn. 10.)
“A condominium consists of an undivided interest in common in a portion of real property coupled with a separate interestin space called a unit....” (Civ. Code, § 1351, subd. (f); italics added.)
Because plaintiff brings this action solely in a derivative capacity, he does not personally seek damages for whatever interest he had under the operating agreement. Thus, whatever standing he might have had to bring an action to vindicate a contractual right to “control” a 1 percent interest in the west end of the building (now Unit 100), it did not involve a derivative right on behalf of Synergy. However, plaintiff did not sue in his individual capacity and neither Jacobson nor Synergy are defendants in this action and that action has merged with the judgment in this case. (Sutphin v. Speik (1940) 15 Cal.2d 195, 202; see ante, fn. 2.)
We will conclude that Johnson did not become a managing member of Synergy because he was not selected pursuant to the voting provisions of the LLC law (§ 17152, subd. (a)), and, because the building was converted to condominium units, Synergy had nothing to manage.
Plaintiff appeals from the summary judgment entered in defendants’ favor, which includes the denial of his motion for leave to file a first amended complaint. We shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2005, Granite Bay, an entity formed by plaintiff and Paulhus, entered into a lease agreement with “Tcherkoyan Family Trust Dated January 1, 1981, a Revocable Trust,” for 60,000 square feet of space (now Unit 100) in an approximately 114,198 square foot multi-tenant industrial building in Rocklin. Beginning in approximately January 2007, plaintiff and Paulhus operated a sports and basketball business in Unit 100 through Granite Bay and Center Court Sports, LLC (Center Court), another entity formed by plaintiff and Paulhus.
Pursuant to Granite Bay’s lease agreement, Synergy was granted an option to purchase the entire building for $7,537,000. Plaintiff, Paulhus, and Jacobson formed Synergy “solely to execute the option....” In November 2006, they signed an operating agreement containing the following provisions: (1) the building would be subdivided into “individual condominium[] units”; (2) Paulhus would “control[] 99% ownership of” what on purchase would be designated Unit 100; (3) plaintiff would “control[] 1% ownership of” what on purchase would be designated Unit 100; (4) Jacobson or her assignee would “control[] 100% ownership of” what on purchase would be designated Units 200 and 300; and (5) Jacobson “will be the managing member and has authority to open bank accounts.” Escrow on the building had to close by June 15, 2007, or Synergy would lose its right to purchase it.
Jacobson owned a business that was located in the remaining portion of the building -- now Units 200 and 300.
“‘Operating agreement’ means any agreement, written or oral, between all of the members as to the affairs of a limited liability company and the conduct of its business in any manner not inconsistent with law or the articles of organization....” (§ 17001, subd. (ab).) While the agreement specified that “[t]hese terms shall be used to form the [Synergy] operating agreement,” it is properly deemed an operating agreement insofar as it constitutes an agreement between all of the members as to the affairs of the LLC and the conduct of its business.
The operating agreement, signed by plaintiff, Paulhus and Jacobson, provided in full, as follows:
Plaintiff and Paulhus did not have sufficient funds to pay for the portion of the option price related to Unit 100, and in early 2007, Paulhus began negotiating with Johnson and his brother Kevin Johnson to obtain sufficient funds to pay for the portion of the option price related to Unit 100 and to cover the costs of the tenant improvements for which Paulhus had either advanced funds or committed Center Court to undertake.
In April 2007, the Johnsons tendered written “[p]urchase [a]greement [t]erms” to Paulhus in which they offered to pay Paulhus a “purchase price” of $6,684,723, including a $150,000 “non-refundable good faith deposit.” The purchase price was comprised of the portion of the option price related to Unit 100 ($3,966,723) and the cost of all tenant improvements ($2,718,000). The Johnsons also agreed to assume the lease agreement for Unit 100 and $19,500 in interest payments until the “close of escrow/transfer of title.” Paulhus accepted the offer.
On or about May 21, 2007, Paulhus, Johnson, Synergy and Center Court entered into a written assignment of interests pursuant to which Paulhus agreed to assign his interest in Synergy, with the approval of plaintiff and Jacobson, to Johnson and Center Court agreed to assign “its interest in the operation of Granite Bay’s interest” in Unit 100 to Johnson. In turn, Johnson agreed, “as an express condition to Synergy’s purchase of the [building] pursuant to the Option,” to pay Paulhus a $2,418,000 “[t]ransfer [f]ee” on or before the closing date. The amount of the transfer fee was “equal to the cost of the improvements to [Unit 100] for which [Paulhus] ha[d] advanced the funds in the amount of [$2,718,000],” less deposits made and promotion fees earned by Kevin Johnson in the amount of $300,000. Johnson also agreed to pay the interest on loans Paulhus had obtained to pay for improvements to Unit 100 through the expiration of Granite Bay’s lease, as well as “all expenses required to be paid by Granite Bay under the Lease, including without limitation, the rent, common area expenses, utilities, etc. related to the operation of [Unit 100]....”
Plaintiff signed the assignment of interest on behalf of Synergy (with Paulhus and Jacobson) and on behalf of Center Court (with Paulhus and Kevin Johnson, who had acquired an interest in Center Court). The assignment of interest identified plaintiff, Paulhus, and Jacobson as managers and members of Synergy.
On May 21, 2007, Jacobson, on behalf of Synergy, entered into a real estate purchase contract agreement with Big Ranch for the sale of Unit 100 to Big Ranch for $3,960,000. The sale was made effective on the close of escrow on or before June 16, 2007, a date that was coincident with the transactions by which the condominium units were created.
Jacobson’s declaration avers: “At the escrow there was a simultaneous transaction in which the option was funded by Big Ranch, the property was converted into condominiums, and Synergy conveyed title to Unit 100 to Big Ranch.” (Italics added.)
On June 15, 2007, the date escrow closed, Johnson paid Paulhus the transfer fee. That same day, Big Ranch paid Synergy $3,960,000, which Synergy used to fund the portion of the option price related to Unit 100. Synergy then conveyed Unit 100 to Big Ranch through a written purchase agreement executed by Jacobson in her capacity as Synergy’s manager. Plaintiff did not contribute any money to Johnson’s company, the transfer fee, or the exercise price of the option.
In August 2007, plaintiff filed a complaint alleging seven derivative causes of action against Johnson and Big Ranch: usurpation of limited liability company opportunity, conversion, declaratory relief, and injunctive relief against Johnson and Big Ranch; and breach of fiduciary duty, oppression of a minority member, and an accounting against Johnson. In addition to damages, plaintiff requested an order requiring Johnson and Big Ranch to convey Unit 100 to Synergy.
Plaintiff asserts in his opening brief that “On August 7, 2007, [plaintiff] filed a Complaint alleging seven derivative causes of action on behalf of Synergy....”
DISCUSSION
I
Standard of Review
Summary judgment is properly granted when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142.) A defendant seeking summary judgment bears the initial burden of proving the cause of “action has no merit” by showing that one or more elements of the plaintiff’s cause of action cannot be established or there is a complete defense. (Code Civ. Proc., § 437c, subds. (a), (o)(1)-(2), (p)(2); Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 213.) Once the defendant’s burden is met, the burden shifts to the plaintiff to show that a triable issue of fact exists as to that cause of action. (Code Civ. Proc. § 437c, subd. (p)(2); Addy v. Bliss & Glennon, supra, 44 Cal.App.4th at p. 213.)
We independently review the trial court’s decision, viewing the evidence in the light most favorable to plaintiff as the losing party. (Wiener v. Southcoast Childcare Centers, Inc., supra, 32 Cal.4th at p. 1142.) In resolving any evidentiary doubts or ambiguities, we liberally construe plaintiff’s evidence and strictly construe defendants’ evidence. (Ibid.)
II
Resolution of the Dispute Involves Construction of the Operating Agreement
In his complaint, plaintiff alleged that Synergy is “the rightful owner” of the building and that he has an 11 percent interest in Synergy. He claims on appeal that there is a triable issue of fact as to whether Synergy had a right to possess the building, and that Johnson and/or Big Ranch took the property without compensating Synergy resulting in damage to it and its minority shareholders. We disagree.
The substance of the dispute is set forth in the parties’ statements of disputed and undisputed facts concerning the meaning and effect of the operating agreement. Defendants assert that “[a]s laid out in the [operating] Agreement, Synergy’s members intended to divide the Property into three individual condominium units when they exercised the Option.” Plaintiff disputes the claim, asserting that “[t]he [operating] Agreement does not speak to when Synergy would distribute its property or to the number of condominium units. It was agreed and understood that Synergy would own the Property after exercise of the Option.” In support of his claim, plaintiff cites to paragraph 4 of his declaration, which provides in pertinent part that “[u]pon exercising the option, Synergy was to own the property and lease or sell the Property for profit.” As previously discussed, plaintiff is bound by the judicial admission in his complaint that the property was to be conveyed once the option was exercised. (Ante, fn. 7.) Plaintiff also cites to Exhibit D to his declaration -- the operating agreement. However, that agreement provided that the building was to be “divided into individual condominium[] units.” Thus, plaintiff’s apparent theory that Big Ranch merely provided money for the purchase of the building and that Synergy was to retain title thereto is not supported in the record.
The point of the dispute has to do with the nature of the interests held in the building. The operating agreement gave plaintiff a contractual right to “control” a 1 percent interest in the west end of the building. It is not entirely clear how that right was to be exercised, but the agreement ties it to the creation of the individual condominium units and, necessarily, to the funding of the option. Since plaintiff did not fund his share of the option price for the west end of the building, Paulhus had assigned all of his interest in Synergy to Johnson, and Synergy sold Unit 100 to Big Ranch, there is a serious question whether plaintiff had an interest to vindicate. However, we need not decide that question in this case.
The dispositive fact is that the actions taken pursuant to the operating agreement resulted in the creation and conveyance of condominium units. Although plaintiff raises the question of the timing by which the condominium units were to be created, there is no doubt that under the agreement they were to be created when the option was exercised. When that was accomplished Synergy had no interest in and no authority to take title to the building and no further role to fulfill. As a consequence, when this action was filed there was no manager of Synergy because there was nothing to manage and Synergy, if anything, was an empty shell. It had converted all that it owned into individual condominium units and common property shared by the units.
III
In Any Event Johnson Never Became Managing Member of Synergy
Section 17501, subdivision (a) sets forth the procedure by which a derivative action can be maintained on behalf of a limited liability company. (Paclink Communications Int’l, Inc. v. Superior Court (2001) 90 Cal.App.4th 958, 963, fn. 2.) It provides in pertinent part: “No action shall be instituted or maintained in right of any domestic or foreign limited liability company by any member of the limited liability company unless... [¶]... [¶]... [t]he plaintiff alleges in the complaint with particularity plaintiff’s efforts to secure from the managers the action plaintiff desires or the reasons for not making that effort, and alleges further that plaintiff has either informed the limited liability company or the managers in writing of the ultimate facts of each cause of action against each defendant or delivered to the limited liability company or the managers a true copy of the complaint that plaintiff proposes to file.” (§ 17501, subd. (a)(2).)
In his complaint, plaintiff alleged that “[n]o demand has been made upon Synergy... prior to the filing of this derivative action to take action against... Johnson... because... Johnson has indicated to [plaintiff], through his legal counsel, that he will not respond to any further correspondence on this matter and it would have been fruitless to the extent that the demand would have requested... Johnson as the majority member, to have Synergy... take action to sue himself. However, a copy of this Complaint was served upon... Johnson prior to the filing hereof.”
In moving for summary judgment, defendants argued that “Johnson has never been the managing member of Synergy, [and] Big Ranch has never even been a member of Synergy.... Thus, the undisputed facts establish that [plaintiff] cannot succeed on any of his derivative claims.” Plaintiff responded that “as the majority member and manager of Synergy, it is abundantly clear that... Johnson would not vote to bring an action against himself on behalf of Synergy, nor would [he] vote to bring an action against Big Ranch, a limited liability company in which he holds a 100% interest,” thus, “any demand by [plaintiff] would be futile.” Plaintiff also sought leave to file a proposed first amended complaint to, among other things, “clarify contentions which support the bringing of a derivative action on behalf of Synergy.”
The trial court ruled that “because... Johnson did not become a manager by virtue of the assignment from... Paulhus, the allegations of the complaint as to demand, or futility thereof... are insufficient to show compliance with” section 17501, subdivision (a)(2) and entered summary judgment in defendants’ favor. The court found plaintiff’s proposed first amended complaint did not cure those defects, and denied his motion for leave to file it as moot.
On appeal, plaintiff contends that “ample evidence” was presented that “Johnson held the majority interest in Synergy and would not vote to bring an action against himself on behalf of Synergy, nor would [he] vote to bring an action against Big Ranch, a limited liability company in which he holds [a] 100% interest.” Alternatively, he contends a triable issue of material fact exists as to whether Johnson was a manager, and that the trial court erred in denying his request for leave to file a first amended complaint. None of his contentions have merit.
1. Johnson’s status as a “majority interest” holder did not entitle him to vote on whether to bring an action on behalf of Synergy.
Plaintiff cites section 17103, subdivision (a)(3) in support of his assertion that as a member of Synergy Johnson was entitled to vote on whether to bring an action against himself or Big Ranch in response to a member’s demand. Section 17103, subdivision (a) provides in pertinent part that where, as here, “no voting provision is contained in the articles of organization or written operating agreement: [¶]... [¶] (2) Any amendment of the articles of organization or operating agreement shall require the unanimous vote of all members. [¶] (3) In all other matters in which a vote is required, a vote of a majority in interest of the members shall be sufficient.” (Italics added.) As relevant here, section 17103, subdivision (a)(3) establishes only that Johnson had a right to vote on amendments to the articles of organization and “[i]n all other matters in which a vote is required....”
Thus, the question remains whether a decision on how to respond to a member’s demand to commence a lawsuit is a matter in which a vote is required. For the reasons that follow, we conclude that where, as here, the management of the limited liability company is vested in a manager and there is no voting provision in the articles of incorporation or written operating agreement, the decision on how to respond to a member’s demand to commence a lawsuit is vested in the manager and a vote of the membership is not required.
By requiring that a member of a limited liability company make a demand upon “the managers” or set forth reasons for not doing so before filing suit, section 17501, subdivision (a) plainly contemplates that the manager (as opposed to the entire membership) will decide how to respond to the member’s demand. Indeed, “‘[t]he purpose of [the demand] requirement is to encourage intra[company] resolution of disputes and to protect the managerial freedom of those to whom the responsibility of running the business is delegated.’” (See Shields v. Singleton (1993) 15 Cal.App.4th 1611, 1619.) Our conclusion that the decision making power is vested in the manager is consistent with section 17157, subdivision (b) which provides in pertinent part that where, as here, the management of the limited liability company is vested in a manager, “[n]o member, acting solely in the capacity of a member, is an agent of the limited liability company nor can any member bind, nor execute any instrument on behalf of, the limited liability company,” and “[e]very manager is an agent of the limited liability company for the purpose of its business or affairs, and the act of any manager... binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom the manager is dealing has actual knowledge of the fact that the manager has no such authority.”
Shields v. Singleton, supra, 15 Cal.App.4th at page 1618 concerns section 800, which sets forth the procedure by which a derivative action can be maintained on behalf of a corporation. Section 800, subdivision (b)(2) is identical to section 17501, subdivision (b)(2) in all relevant respects. It provides in pertinent part: “No action may be instituted or maintained in right of any domestic or foreign corporation by any holder of shares or of voting trust certificates of the corporation unless... [¶]... [¶] (2) The plaintiff alleges in the complaint with particularity plaintiff’s efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort....” Thus, we find the court’s interpretation of section 800 instructive here.
Each of the provisions discussed above support the conclusion that where the management of the limited liability company is vested in a manager and there is no voting provision in the articles of incorporation or written operating agreement, the decision on how to respond to a member’s demand to commence a lawsuit is vested in the manager. Accordingly, plaintiff’s allegations based on Johnson’s status as a “majority member” are insufficient as a matter of law to establish plaintiff has standing to pursue this action on behalf of Synergy.
2. Plaintiff failed to raise a triable issue of material fact as to whether Johnson was a manager of Synergy.
In the alternative, plaintiff contends that “a question of fact was raised as to whether... Johnson was a manager and it is undisputed that a copy of the Complaint was served upon... Johnson prior to filing.”
In their motion for summary judgment, defendants asserted that it was undisputed that Jacobson was the managing member of Synergy and that at no time was Johnson a manager of Synergy. In support of their assertion, defendants cited the operating agreement executed by plaintiff, Paulhus, and Jacobson, which states that Jacobson “will be the managing member and has authority to open bank accounts.” They also pointed to Johnson’s statement in his declaration that he was never a managing member of Synergy, and the absence of any evidence to the contrary. Plaintiff responded that Johnson became a managing member “[u]pon assignment of Paulhus’ interest.” The trial court ruled that section “17152 requires the affirmative vote of a majority in interest of the members in order to elect a person as a manager,” and that “Johnson’s mere acquisition of... Paulhus’ interest could not render... Johnson a manager without some affirmative act of election.”
On appeal, plaintiff asserts that he presented “[a]mple evidence in support of... Johnson’s status as manager,” citing to his declaration, Jacobson’s deposition testimony, and the assignment of interest. As we shall explain, none of the evidence relied on by plaintiff creates a triable issue of material fact concerning Johnson’s status vis a vis Synergy.
Section 17152, subdivision (a) provides that where, as here, “management of the limited liability company is vested in one or more managers pursuant to a statement in the articles of organization: [¶] (a) Election of managers to fill initial positions or vacancies shall be by the affirmative vote of a majority in interest of the members.”
Synergy’s articles of organization states that it will be managed by “MORE THAN ONE MANAGER.”
Plaintiff’s statement in his declaration that Johnson was Synergy’s “majority Managing Member” was stricken by the trial court, and plaintiff does not challenge that ruling on appeal. Jacobson’s statement during her deposition that it was her “understanding... that... Johnson was the manager” does not create a triable issue of material fact as to whether Johnson was actually elected to that position as required by section 17152. In any event, Jacobson immediately clarified that it was her understanding that Johnson “would become the majority person that would be purchasing the unit....”
In questioning Jacobson about the purchase agreement, plaintiff’s counsel asked her whether she had “any understanding as to why [plaintiff’s] signature is not on this document?” Jacobson responded: “Because at that point my understanding is that Mr. Johnson was the manager and the majority -- would become the majority person that would be purchasing the unit based on the Assignment of Interest and the instructions I had been given by Mr. Paulhus.” Plaintiff’s counsel then asked: “Maybe I didn’t ask the question clearly. Is there any reason, as best you understand, why [plaintiff’s] signature is not provided on behalf of Synergy....” Jacobson responded: “Because I didn’t think that he was a managing member.”
In his reply brief, plaintiff asserts that “the evidence referenced by [defendants in their respondents’ brief]... create[ed] a conflict of evidence, and thus, a triable issue of fact.” In addition to Johnson’s statement in his declaration and Jacobson’s deposition testimony, defendants refer to the assignment of interest upon which plaintiff relied in the trial court. Plaintiff does not, however, offer any argument based upon the assignment of interest in his reply. Rather, he leaves us to search the record below for his arguments. Thus, we need not consider this contention. (See In re Marriage of Nichols (1994) 27 Cal.App.4th 661, 672-673, fn. 3; Garrick Development Co. v. Hayward Unified School Dist. (1992) 3 Cal.App.4th 320, 334.) In any event, the contention lacks merit.
The assignment of interest identifies plaintiff, Paulhus, and Jacobson as members and managers of Synergy. In opposing defendants’ motion for summary judgment in the trial court, plaintiff cited the assignment as evidence that Paulhus was a manager of Synergy and asserted that Johnson became a managing member “[u]pon [a]ssignment of Paulhus’ interest.” Even assuming for argument’s sake that Paulhus was a manager, for Johnson to become a manager, he had to be elected “by the affirmative vote of a majority in interest of the members.” (§ 17152, subd. (a).) The assignment says nothing about Johnson becoming a manager, and plaintiff failed to introduce any evidence that an election ever took place.
Thus, there is no triable issue of material fact as to whether Johnson was ever a manager of Synergy -- he was not. Accordingly, plaintiff’s service of the complaint on Johnson prior to the filing of this action did not satisfy section 17501, subdivision (a)(2), and plaintiff lacks standing to pursue this action on Synergy’s behalf.
3. The trial court did not err in denying plaintiff’s motion for leave to file a first amended complaint.
Finally, plaintiff contends the trial court erred in denying his motion for leave to file a first amended complaint. He is mistaken.
“[I]f summary judgment is granted on the ground that the complaint is legally insufficient, but it appears from the materials submitted in opposition to the motion that the plaintiff could state a cause of action, the trial court should give the plaintiff an opportunity to amend the complaint before entry of judgment.” (Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663; College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 719, fn. 5.)
Plaintiff sought leave to file a first amended complaint to, among other things, “clarify contentions which support the bringing of a derivative claim on behalf of Synergy.” In particular, his proposed first amended complaint included the following allegations: “[Plaintiff] did not make a demand upon Synergy before filing the instant derivative action because any such demand would have been futile. Subsequent to the closing, [plaintiff] and... Johnson exchanged several email correspondences wherein... Johnson discredited [plaintiff’s] membership interest throughout the course of their correspondence.... [¶] As the majority managing member of Synergy,... Johnson would have to consent to Synergy bringing the instant action. Any such demand upon Synergy would be fruitless, given that... Johnson would not consent to bring an action against himself or his limited liability company Big Ranch.” The trial court found that the motion for leave to file a first amended complaint was moot “[b]ecause the proposed [first amended complaint] does not address the dispositive issues....” We agree.
The first amended complaint does not allege that plaintiff made a demand on Jacobson, Synergy’s managing member, or that such a demand would have been futile. As previously discussed, Johnson was not a manager of Synergy; nor would he have been entitled to vote on how to respond to a member’s demand to commence a lawsuit.
Because our finding that plaintiff lacks standing to pursue this action on behalf of Synergy is dispositive, we do not address plaintiffs’ remaining contentions on appeal.
DISPOSITION
The judgment is affirmed. Defendants are awarded their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1),(2).)
We concur: RAYE, J., HULL, J.
Plaintiff treats Synergy as an unwilling plaintiff. Synergy is named as a defendant under the provisions of Code of Civil Procedure section 382. It provides in pertinent part: “If the consent of any one who should have been joined as plaintiff cannot be obtained, he may be made a defendant, the reason thereof being stated in the complaint....” (See Hurlbutt v. Butenop (1864) 27 Cal. 50; Romero v. Pacific Gas & Electric Co. (2007) 156 Cal.App.4th 211.)
“The LLC has been formed solely to execute the option for the purchase of the building at 1091 Tinker Road, Rocklin, CA.
“The 114,000 sq. ft. warehouse shall be divided into individual condominium[] units. These units will be identified in a pending parcel map.
“Scott [Paulhus] controls 99% ownership of the 60,000 sq ft unit at the west end of the building.
“Stu Chang controls 1% ownership of the 60,000 sq ft unit at the west end of the building.
“Susan Jacobson or assignee controls 100% ownership of the 26,713 sq ft at the East end of the building AND 27,000+/- sq ft unit in the center of the East and West units.
“Susan Jacobson will be the managing member and has authority to open bank accounts.
“A set of CCR’s shall be developed to cover the common areas.
“Only recreation based businesses shall occupy the building.
“The owners shall on a pro rata of occupied space share the expenses to any future improvements made on the building and the common grounds as a whole.
“Scott [Paulhus] has chosen to exercise the option at the first option date and will which [sic] is earlier than originally intended and shall put forth the required $50,000 deposit required in the purchase agreement to open escrow.
“These terms shall be used to form the Synergy Sports Placer County, LLC operating agreement.”