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1 || EHLERS LAW CORPORATION
WESLEY C.J. EHLERS (SBN 181537)
2 || BRIDGET C. BEATER (SBN 204041)
3 || 2600 Capitol Avenue, Suite 320
Sacramento, CA 95816-5930
4 ||Telephone: (916) 442-0300
Facsimile: (916) 650-1039
> 1 e-mail: wes@ehlerslawcorp.com
¢ || e-mail: bridget@ehlerslawcorp.com-
7
3 Attorneys for Plaintiffs Golden Global Enterprises, Inc.
and Golden Global Investment Trust
9
10
Mt SUPERIOR COURT OF THE STATE OF CALIFORNIA
12
FOR THE COUNTY OF SAN MATEO
13
ua (UNLIMITED JURISDICTION) "
15
Golden Global Enterprises Inc., a ) Case No. 22-CIV-02099
16 || California Corporation, Golden Global _)
17 || Investment Trust — 2017, by and ) PLAINTIFFS’ DECLARATORY
through its’ Trustee, Donald A. Wilson, ) RELIEF TRIAL BRIEF
18 || and 8880 ELDER CREEK ) .
HOLDINGS, a California Limited )
13 || Liability Corporation )
°o Plaintiffs
antl Trial Date: August 9, 2023
Time: 9:00 AM
a2 || Dept.: 2
** ll TIM ONDERKO, an Individual, and as Complaint Filed: May 24, 2022
24 || owner of a 49% interest in 8880 Elder +)
Creek Holdings, LLC, a California ) . .
25 | Fimited Liabili ty Corporation, and ) Honorable Marie S. Weiner
26 || Does 1-10, inclusive, )
)
27 Defendants )
28 || —_—_—_——— )
00016643.1
| 1
2
; INTRODUCTION
4 Pursuant to stipulation of the parties, confirmed by the Court, on April 18, 2023
5 || this matter was set for trial on August 9, 2023 and the Court reserved one-half day for the
6 || hearing. Defendant who has escalated a simple offer-acceptance contract question easily
7 || decided by this Court in the time reserved for Trial at the “last minute” has sought a delay
g || claiming “mistake.” If this was a “mistake” it should have been brought to the Court’s
9 || attention later that day or at the latest the following day. This Declaratory Relief suit was
10 || filed because Defendant initiated and has continued a deliberate course of legal
11 || maneuvering in an attempt to transform a perceived ambiguity into a windfall Defendant.
12 || This has included causing Plaintiff to incur over $75,000 in legal fees defending a second
13 || lawsuit which is presently before this Court as a related matter in which the issue of
14 || arbitration has not been pursued.
15 Plaintiffs and Defendant are respectively the majority and the minority owners of
16 || 8880 Elder Creek Holdings, an LLC that has an option to purchase an 80% tenancy in
17 || common (“TIC”) interest in a building licensed as a marijuana grow facility located in
1g || Sacramento, CA. (the LLC). The other 20% TIC interest was to be retained by
19 || Plaintiffs. The documents and complete interrelations of the parties are set out below.
20 Respondent wanted to cash out his position in the LLC but lacked financing to
21 || make a real buy-sell offer as he would not be able to buy Plaintiff's interest if Plaintiff
22 || chose to sell.
23 Instead of using the agreed-to procedure and format as clearly set forth in the
24 |{Memorandum of Understanding (MOU) Plaintiff's Exhibit 1, he had his then attorney
25 || send Plaintiff a “Notice of Advisement of Receipt of Offer to Purchase.” It included an
26 || unsolicited 3rd Party offer to purchase the entire property (not just the 80% TIC that the
27 || LLC could sell), and treated it as though it was a compliant buy-sell offer in accordance
28
00016643. 1 A
Plaintiff's Declaratory Relief Trial Brief
1 || with the terms set forth in the MOU, telling Plaintiff that he had 10 days to accept or that
2 || he would be deemed to have agreed to sell 100% of the property to the 3rd party.
3 Plaintiff responded that the submission of a 3rd party offer did not trigger the
4 || buy-sell provisions in the MOU, but that he would agree to buy Defendant’s interest if
5 || they could agree on the fair market value of Defendant’s minority share, and proposed
6 || three values to Defendant, being $393,838, $255,995 or $127,998, depending upon
7 || various factors to be determined (all well below the nearly $2,000,000 Defendant claimed
8 || and claims to be entitled to). .
9 Defendant immediately took the position that Plaintiffs statement that he would
10 || be willing to buy out Respondent at the fair market value of Defendant’s mterest as an
11 |} acceptance of the terms of the 3rd party offer and distributions Defendant had
12 ||proposed. As Plaintiff had rejected Defendant’s proposal and had merely begun to .
13 || negotiate a price acceptable to both, he filed this Declaratory Relief suit to determine the
14 ||rights and duties of the parties and whether a contract had been formed. Although the
15 || MOU called for arbitration this was waived by Defendant by subsequently filing a
16 || separate and related action in this Court also arising out of the MOU, and stipulating to
17 || the Trial in this matter.
18 THE BUY SELL PROVISION AT ISSUE HEREIN
19 The buy-sell provision in the MOU reads as follows:
20
c. The goal is to mutually maximize total return while preserving
21 the right of each member to make an individual decision to “sell” if
32 mutual agreement cannot be reached. Accordingly, at any time after
June 30, 2020, if one of the members wants to sell and the other
23 does not, the member wanting to sell shall deliver a written
notice to the other member indicating the price and terms on
24 which they are willing to sell their interest and the other
25 member shall have 10 days after receipt to respond whether
they will buy or sell that interest on those terms, conditions and
26 price (adjusted for each member - ie. the net proceeds based on a
stated sales price each respective member would receive in
27 accordance with this agreement) and if they do not respond within
28 the 10 days, they will be deemed to have agreed to sell. The parties
understand that this may, but is not required, to be effected through
ones.
Plaintiff's Declaratory Relief Trial Brief
1 a sale to a third party. Any such sale must close in not more than 60
days after the buy or sell decision is made. (emphasis added)
The provision clearly refers to sale of the party’s interest in the LLC only.
‘ BACKGROUND AND SUMMARY OF RELEVANT FACTS
° A. The Property, the Parties’ LLC Interests, and the Difference Between Them —
6 How this Dispute Arose.
7 In 2017, Defendant Onderko and his then business partner, Sacramento cannabis
8 || attorney Tom Sheridan, approached Donald A. Wilson (Wilson) about leasing the |
9 || Property, which includes an approximately 44,000 square-foot industrial building. The
10 || Property was (and still is) owned by Plaintiffs Golden Global Enterprises, Inc. (“GGE”)
11 || and Golden Global Investment Trust-2017 (‘GGIT”). Wilson was and is the sole
12 || shareholder of GGE and Trustee of GGIT.
13 Onderko and Sheridan’s plan was to obtain a conditional use permit allowing for
14 || cannabis-related uses at the Property, and to improve the Property such that it could be
15 || subleased to cannabis-related entities. In addition to entering into a Master Lease for the
16 || Property, the LLC simultaneously entered into an Option to purchase the Property
17 || (Plaintiff's Exhibit 4), After expending approximately $350,000 on entitlements, the
18 || LLC ran out of investor money and was without a viable option to complete the tenant
19 ||improvements. Recognizing that they were going to lose their “investment” and would
20 || be in breach of their subleases by not being able to deliver the Property to subtenants as
21 || promised, Onderko and Sheridan approached Wilson to solicit additional funds to save
22 || the project. Ultimately, Wilson purchased Sheridan’s interest in the LLC for $100,000,
23 || became the holder of a 51% interest in the LLC and its Managing Member, while
24 || Onderko ended up with a 49% interest in the LLC. MOU Plaintiff's Exhibit P-1 (see
25 || blue and orange highlights). As part of the agreement reflected by the MOU, Wilson
26 || agreed to loan up to $1,500,000 from his Pension Plan to the LLC to complete the
27 || construction so that the LLC would not be in breach of its subleases with the cannabis-
28 |) relatedsubtenants to whom Onderko had pre-leased portions of the Property. Exhibit P-1
00016643.1 4
Plaintiff's Declaratory Relief Trial Brief
1 || at p.1, 94 (green highlighting). As part of the same MOU, the LLC agreed to first repay
2 1] Wilson & Wilson Pension Plan, and Onderko’s investor (his mother-in-law), prior to any
3 distributions of profit to the LLC members. Exhibit P-1 at p.2, 4" (immediately
4 || following fc in green highlights).
5 After the construction was completed, at a cost of approximately $1,250,000
6 || loaned by Wilson & Wilson Pension Plan, Onderko sought to market the Property for
7 || sale because he knew he would not receive any distribution from the LLC until the
8 || roughly $1.5 million in loans were repaid to the investors (being voluntarily and without
9 ||a legal agreement paid on an 80/20 basis between Wilson and Onderko’s
10 || investor). Later, when Onderko sought to distribute 49% of a $100,000 payment the
11 || LLC received as part of a buyout of a sublease, Wilson reminded him that the $100,000
12 || was additional rent that needed to be paid toward the loans pursuant to the MOU rather
13 || than distributed 49/51 as profit in the manner Onderko wanted. This did not sit well
14 || with Onderko.
15 Now that Onderko had obtained what he wanted from Wilson—completion of the
16 || tenant improvements by way of Wilson’s finances, and thus protection of his sweat
17 || equity investment—and recognizing that his “cash cow” had dried up, Onderko retained
18 |} a lawyer and sought to force Wilson to sell the Property in an attempt to generate cash
19 || for himself out of the project. Onderko relayed a “Notice of Advisement of Receipt of
20 || Offer to Purchase” to Wilson by way of his lawyer Mark Ellis’ March 3, 2022 letter,
21 || which included an offer to purchase 100% of the Property from a third party. Plaintiff's
22 || Exhibit P-2 (specifically, see pp. R-000095-97, and R-000096 at 4 at yellow and orange
23 || highlights “....If you do not respond in 10 days, you will be deemed to have agreed
24 || to sell the property.”) (emphasis added). Wilson rejected the purported “Third Party
25 |] offer to Purchase,” and in his response (Plaintiff's Exhibit P-3) explained his position
26 || that the MOU buy-sell provisions “relate only to the buy or sale of our individual
27 |{membership interests in the LLC,” and made a counter-proposal to buy Onderko’s
28 ||membership interest in the LLC on vastly different terms than Onderko had
00016643.1 a
Plaintiff's Declaratory Relief Trial Brief
1 |} requested. Plaintiff's Exhibit P-3 (highlighted version attached; see especially p. R-
2 |/000099 at 2-3 and p. R-000100 at 5 in orange highlighting).
3 Wilson’s position is that
4 (1) Onderko’s March 3, 2022 Notice of Advisement of Receipt of Offer to
5 || Purchase from Mr. Onderko’s attorney (Plaintiff's Exhibit P-2) was not an offer
6 || pursuant to the MOU’s buy-sell provisions as it was not an offer to sell his interest in the
7 || LLC but was an offer to sell 100% of the Property to a third party (a right that neither
a |] Onderko nor the LLC had, nor could they compel),
9 (2) Wilson rejected Onderko’s purported “offer” and responded with a counter-
10 || offer to purchase Onderko’s membership interest in the LLC based on the valuation
11 || Wilson calculated that the proposed Property sale would ultimately represent as far as
12 || Onderko’s 49% LLC interest (a range between $127,998 and $393,838 after taxes and
13 || appropriate discounts) (Plaintiff’s Exhibit P-3), and ‘
14 (3) Onderko did not, after receiving and not accepting Wilson’s counter-offer, take
15 || the necessary action and agree to purchase Wilson’s 51% in the LLC upon the same
16 || terms and conditions offered by Wilson (i.e., the inverse of the value assigned to Tim’s
17 || 49% interest) or tender performance to carry out such a purchase of Don’s 51% interest
18 || as required by the MOU.
19 B. Wilson Owns the Property, and Leases it to the LLC with An Option to
20 Purchase 80%.
21 As set forth above, Wilson owns the property through GGE and GGIT. One of the
22 || critical facts to understand as part of this dispute is that the Option (Plaintiff's Exhibit P- .
23 |} 4) only allows the LLC to purchase an undivided 80% share of the Property. Under the
24 || Option, Wilson retained the right, at his sole discretion, to retain a 20% share of the
2s || Property if the LLC exercised the option. Thus, without Wilson’s agreement (which he
26 || never gave), it was impossible for the LLC to sell 100% of the property. The Option
27 || expressly provides:
28
00016643.1 6
Plaintiff's Declaratory Relief Trial Brief
1 “Seller shall retain the right to keep twenty percent (20%) of the Property at
2 his sole election meaning simply that Buyer will only have the right to
3 purchase eighty percent (80%) of the Property.”
4 || Plaintiff's Exhibit P-4 at {5 (orange highlights).
> In addition, nothing in the MOU, the Option or any other agreement gives Mr.
® |] Onderko the right to solely determine whether the LLC will exercise the option and
7 purchase 80% of the Property, or to unilaterally cause the Option to be exercised. That
8 || is a decision to be made by the LLC, which Wilson owns 51% of and is the managing
? || member, meaning the decision to exercise the Option requires Wilson’s
10 || vote/consent. Plaintiff's Exhibit P-1 at 93 (light purple highlights). Wilson never gave
11 || that vote or consent.
. THE LAW OF OFFER AND ACCEPTANCE
14 Even if the Court determines that there was an offer pursuant to the buy-sell
15 || provision of the MOU, Plaintiff did not accept that offer. Thus, the court should
16 || declare that there is no contract to buy Defendant’s interest because there was no
. agreement on the price.
~ Here is the language that Defendant claims is Plaintiff's acceptance of the terms
19 proposed:
°° “I accept his offer to sell; the dispute is the value of his interest.”
7 This is like a grower telling ConAgra “I'll sell you all my wheat for $10 per
23 || bushel, and ConAgra replying that it would be happy to buy it, except at $8.00 per
24 || bushel. There is no contract formed.
2s Defendant claims there was a contract which Plaintiff denies. Given Plaintiffs’
. denial of the contract, Defendant has the burden of establishing all the elements of a
oq || Contract. This is something the Defendant cannot do.
00016643.1 ee
Plaintiff's Declaratory Relief Trial Brief |
1 The Supreme Court recently set out the essentials of contract formation in
2 || Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, at 789
, .
F Consent is not mutual, unless the parties all agree upon the same thing
-in the same sense.’ ( Civ. Code, § 1580 ; see also Civ. Code, §
5 1636....)" ( Weddington Productions, Inc. v. Flick(1998) 60
Cal.App.4th 793, 810-811, 71 Cal.Rptr.2d 265 ; see Civ. Code, §
6 _ 1550[essential elements of a contract].) " ‘The existence of mutual
7 consent is determined by objective rather than subjective criteria, the
test being what the outward manifestations of consent would lead a
a| reasonable person to believe. [Citation.] Accordingly, the primary
focus in determining the existence of mutual consent 1s upon the acts
/9 _ of the parties involved.’ " ( T.M. Cobb Co. v. Superior Court(1984)
10 36 Cal.3d 273, 282, 204 Cal.Rptr. 143, 682 P.2d 338 ; see Civ. Code,
§ 1565 [essentials of consent].) Monster Energy Co. v. Schechter
11 supra, at 789.
12
Plaintiffs suggested methods of valuation and amounts that would reflect the
13
value of Defendant’s 49% interest in the LLC that were far differ wildly from the
14
numbers suggested by Onderko, and began by disputing whether the provision of a 3
15
party offer to purchase would constitute a valid “buy-sell” under the parties’ MOU. There
16
was no meeting of the minds, no mutual consent, and no contract formed.
17
Moreover, there clearly was a counter-offer presented which is a rejection of the
18
purported offer. Civil Code 1585.
19
20 “[T]erms proposed in an offer must be met exactly, precisely .
21 and unequivocally for its acceptance to result in the formation
of a binding contract; and a qualified acceptance amounts to a
22 new proposal or counteroffer putting an end to the original
* offer.” (Panagotacos v. Bank of America (1998) 60 Cal.App.4th
23 . 851, 855~856 [70 Cal.Rptr.2d 595].)
24 « “TI]t is not necessarily true that any communication other than
an unequivocal acceptance is a rejection. Thus, an acceptance is
25 not invalidated by the fact that it is ‘grumbling,’ or that the
offeree makes some simultaneous ‘request.’ Nevertheless, it
26 must appear that the ‘grumble’ does not go so far as to make it
27 doubtful that the expression is really one of assent. Similarly,
the ‘request’ must not add additional or different terms from
28 those offered. Otherwise, the ‘acceptance’ becomes a
60016643.1 8
Plaintiff's Declaratory Relief Trial Brief
j counteroffer.” (Guzman v. Visalia Community Bank (1999) 71
Cal.App.4th 1370, 1376 [84 Cal.Rptr.2d 581].)
2
3 PROPOSAL OF DIFFERENT TERMS IS A REJECTION OF THE OFFER.
4 ,
5 California cases provide that “a qualified acceptance amounts to a new proposal
6 I counter-offer putting an end to the original offer. ... A counter-offer containing a
; condition different from that in the original offer is a new proposal and, if not accepted
¢ by the original offeror, amounts to nothing.” (Apablasa v. Merritt and Co. (1959) 176
4 Cal.App.2d 719, 726 [1 Cal.Rptr. 500], internal citations omitted.) More succinctly: “The
10 rejection of an offer kills the offer.” (Stanley v. Robert S. Odell and Co. (1950) 97
WW Cal.App.2d 521, 534 [218 P.2d 162].)
t2 “[T]erms proposed in an offer must be met exactly, precisely and
13 unequivocally for its acceptance to result in the formation of a binding
contract; and a qualified acceptance amounts to a new proposal or
14 counteroffer putting an end to the original offer.” (Panagotacos v. Bank of
1s America (1998) 60 Cal.App.4th 851, 855-856 [70 Cal-Rptr.2d 595].)
16 |! The original offer terminates as soon as the rejection is communicated to the offeror: “It
*7 His hornbook law that an unequivocal rejection by an offeree, communicated to the offeror,
+8 terminates the offer; even if the offeror does no further act, the offeree cannot later
19
purport to accept the offer and thereby create enforceable contractual rights against the
20
offeror.” (Beverly Way Associates, supra, 226 Cal.App.3d at p. 55.)
21
Here, Plaintiff (1) disputed that the offer constituted a “buy-sell” offer for
22
Defendant’s 49% share of the LLC, and (2. proposed three different amounts for
23
oA payments to Defendant, depending upon their agreement to certain discounts to be
35 applied to the value of that minority share: $393,838, $255,995 or $127,998. That clearly
26 could not be construed by a reasonable person as agreement to pay $1,670,114.
27 Plaintiffs and Defendant have a major disagreement over the nature and scope of
2g || this Declaratory Relief Action, and what is truly at issue. Plaintiffs have consistently
00016643.1 9
Plaintiff's Declaratory Relief Trial Brief
1 || maintained that this is a simple matter of legally interpreting the three documents offered
2 || respectively as Plaintiff's Exhibits 1, 2 and 3, which Plaintiff sought to do by way of this
3 || first filing this declaratory relief action. ,
4 | The touchstone of this litigation is a straightforward legal issue of offer and
° | acceptance, which boils down to the following two questions:
6 1. Was the “Notice of Advisement of Receipt of Offer to Purchase” an offer to
’ buy or sell Tim Onderko’s interest in the LLC that complied with the requirements set
° || forth in the MOU?
: 2. If the “Notice of Advisement of Receipt of Offer to Purchase” was an offer that
7 complied with the buy-sell terms in the MOU, was it accepted by Respondent?
. | The MOU is not ambiguous and refers only to the buy-sell of an “interest” in the .
3 LLC owned by one of the parties. Accordingly, the only documents appropriate or
14 || Becessary to answer those questions: are: .
is 1. The MOU — Plaintiff's Exhibit P-1.
16 2. Notice of Advisement of Receipt of Offer to Purchase - Plaintiff's Exhibit P-2 ;
17 3. Plaintiff's response - Plaintiff's P-3 and P-3a which contains the actual email
18 through which Plaintiff's response was communicated; and
19 4. The Option Agreement - Plaintiff P-4
20 || Other communications are not relevant to answering the seminal questions in this dispute:
21 > The MOU was dated July 3, 2019.
220 > The Notice of Advisement of Receipt of Offer to Purchase was sent and
23 received on March 3, 2022.
24 > Respondent’s rejection and counter proposal was sent and received on
25 March 13, 2022, 10 days later. |
*8 All communications prior to the date the MOU was signed relating to the terms of
” the MOU were “negotiations” and thus not relevant and violate the parole evidence rule
© {CCP 81856). sors: ‘
Plaintiff's Declaratory Relief Trial Brief
1 Likewise, communications after the July 3, 2019 signing of the MOU (other than
2 || the March 3, 2022 Notice of Advisement of Receipt of Offer to Purchase and the March
3 || 13, 2022 response thereto) and communications after the March 13, 2022 response,
4 || reflecting negotiations concerning the sale of Claimant’s interest in the LLC were
> 1] settlement communications and negotiations privileged under Evidence Code §1152 as
© || “settlement discussions in an attempt to
” IIresolve a disputed matter.”
° Defendants cannot show, merely by selecting part of a sentence out of context,
° that Plaintiffs ever agreed to buy Defendant’s share of the LLC for $1,670,1 14.57, or for
_ any other specified amount. In their Complaint, Plaintiffs prayed for the following
| relief, and it should be granted: |
B ‘ 1. A determination that the provisions of the MOU relating to venue require
1 actions to be filed in San Mateo County Superior Courts; *
15 2. That the provisions of the MOU require that if one party wishes to sell his
16 || interest in the LLC and the other does not, any written notice sent to the other party not
17 || wishing to sell, must contain an offer of the terms on and price on which that party is
ig || willing to sell his interest in the LLC, rather than providing an offer to purchase a
19 || greater percentage of the Property than the LLC had/has the right to sell;
20 3. That the provisions of the MOU require that if one party wishes to sell his
21 || interest in the LLC and the other does not, any written notice sent to the other party not
22 || wishing to sell must contain an offer based upon the right of GGE and GGIT to retain a
23 |120% ownership in the underlying building;
24 4. That the presentation of an offer by a third party to purchase the entire
28 underlying real Property does not constitute an offer of the price and terms on which a
78 party wishes to sell his interest in the LLC; eo
27 ;
28 . :
000ie643.1_
Plaintiff's Declaratory Relief Trial Brief
: 1 5... That GGE and GGIT did not accept any offer to sell Onderko’s interest for
2 |} $1,670,114.57 or other sum or sums, but instead submitted a counter-offer to purchase
3 || Onderko’s interest at various other sums, to be agreed upon;
4 6. That no enforceable contract for the purchase or sale of an interest in the
> |/LLC pursuant to the MOU exists between the parties;
6 7. That failing to perform a contract where none has been formed is not a bad
’ faith breach of duties owed by a majority owner of an LLC owes to the minority owner of
8
that LLC; and
9
8. Such other and further relief as the Court determines appropriate.
10
11 || Dated: August 7, 2023 EHLERS LAW CORPORATION
2600 Capitol Avenue, Suite 320
12 Sacramento, CA 95816 |.
= ALG E—
14
Wesley C.J. Ehlers
15 Attomeys for Plaintiffs Golden Global
Enterprises Inc. and Golden Global
16 Investment Trust — 2017, by and though
: its Trustee, Donald A. Wilson
17 .
18 .
19
20
21
22
23
24
25 ,
26
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oooies43.1—“—‘“—s~i~i
Plaintiff's Declaratory Relief Trial Brief
Preview
: o . , ae : no So: “EXHIBIT EBAPRIBOLE AZ K+2. - - a . . - - ‘ oes " _ . ae . . : y .. . ~ . 7 Loo . ' : . : ~ : . Loe - : - oF : Ly . oo. to. -. ; - oe | no oe “ - : . : at . : Lt - ot . at Poli ~ Fe 7 *. . : ot Cy OE a Mo . me . we . a ; . a ooo - a . . L nO fe ee : re of eo: woe 2 ot vate , woe .- C nr) sss > ny . Lote . fo : / mo - : . w . . . . : oo . : at ned tote ts ae a . .: cone ~ . a eo. : i : 2 mo : . . - . . pegs . ' _ . : . a . . . \ : - cle . ‘ee ., us - oe note S . + wyvs “ . ‘ . ~ ‘ , :- : : so oe . ‘ - Fee 2 wot a! . . me 1 || EHLERS LAW CORPORATION WESLEY C.J. EHLERS (SBN 181537) 2 || BRIDGET C. BEATER (SBN 204041) 3 || 2600 Capitol Avenue, Suite 320 Sacramento, CA 95816-5930 4 ||Telephone: (916) 442-0300 Facsimile: (916) 650-1039 > 1 e-mail: wes@ehlerslawcorp.com ¢ || e-mail: bridget@ehlerslawcorp.com- 7 3 Attorneys for Plaintiffs Golden Global Enterprises, Inc. and Golden Global Investment Trust 9 10 Mt SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 FOR THE COUNTY OF SAN MATEO 13 ua (UNLIMITED JURISDICTION) " 15 Golden Global Enterprises Inc., a ) Case No. 22-CIV-02099 16 || California Corporation, Golden Global _) 17 || Investment Trust — 2017, by and ) PLAINTIFFS’ DECLARATORY through its’ Trustee, Donald A. Wilson, ) RELIEF TRIAL BRIEF 18 || and 8880 ELDER CREEK ) . HOLDINGS, a California Limited ) 13 || Liability Corporation ) °o Plaintiffs antl Trial Date: August 9, 2023 Time: 9:00 AM a2 || Dept.: 2 ** ll TIM ONDERKO, an Individual, and as Complaint Filed: May 24, 2022 24 || owner of a 49% interest in 8880 Elder +) Creek Holdings, LLC, a California ) . . 25 | Fimited Liabili ty Corporation, and ) Honorable Marie S. Weiner 26 || Does 1-10, inclusive, ) ) 27 Defendants ) 28 || —_—_—_——— ) 00016643.1 | 1 2 ; INTRODUCTION 4 Pursuant to stipulation of the parties, confirmed by the Court, on April 18, 2023 5 || this matter was set for trial on August 9, 2023 and the Court reserved one-half day for the 6 || hearing. Defendant who has escalated a simple offer-acceptance contract question easily 7 || decided by this Court in the time reserved for Trial at the “last minute” has sought a delay g || claiming “mistake.” If this was a “mistake” it should have been brought to the Court’s 9 || attention later that day or at the latest the following day. This Declaratory Relief suit was 10 || filed because Defendant initiated and has continued a deliberate course of legal 11 || maneuvering in an attempt to transform a perceived ambiguity into a windfall Defendant. 12 || This has included causing Plaintiff to incur over $75,000 in legal fees defending a second 13 || lawsuit which is presently before this Court as a related matter in which the issue of 14 || arbitration has not been pursued. 15 Plaintiffs and Defendant are respectively the majority and the minority owners of 16 || 8880 Elder Creek Holdings, an LLC that has an option to purchase an 80% tenancy in 17 || common (“TIC”) interest in a building licensed as a marijuana grow facility located in 1g || Sacramento, CA. (the LLC). The other 20% TIC interest was to be retained by 19 || Plaintiffs. The documents and complete interrelations of the parties are set out below. 20 Respondent wanted to cash out his position in the LLC but lacked financing to 21 || make a real buy-sell offer as he would not be able to buy Plaintiff's interest if Plaintiff 22 || chose to sell. 23 Instead of using the agreed-to procedure and format as clearly set forth in the 24 |{Memorandum of Understanding (MOU) Plaintiff's Exhibit 1, he had his then attorney 25 || send Plaintiff a “Notice of Advisement of Receipt of Offer to Purchase.” It included an 26 || unsolicited 3rd Party offer to purchase the entire property (not just the 80% TIC that the 27 || LLC could sell), and treated it as though it was a compliant buy-sell offer in accordance 28 00016643. 1 A Plaintiff's Declaratory Relief Trial Brief 1 || with the terms set forth in the MOU, telling Plaintiff that he had 10 days to accept or that 2 || he would be deemed to have agreed to sell 100% of the property to the 3rd party. 3 Plaintiff responded that the submission of a 3rd party offer did not trigger the 4 || buy-sell provisions in the MOU, but that he would agree to buy Defendant’s interest if 5 || they could agree on the fair market value of Defendant’s minority share, and proposed 6 || three values to Defendant, being $393,838, $255,995 or $127,998, depending upon 7 || various factors to be determined (all well below the nearly $2,000,000 Defendant claimed 8 || and claims to be entitled to). . 9 Defendant immediately took the position that Plaintiffs statement that he would 10 || be willing to buy out Respondent at the fair market value of Defendant’s mterest as an 11 |} acceptance of the terms of the 3rd party offer and distributions Defendant had 12 ||proposed. As Plaintiff had rejected Defendant’s proposal and had merely begun to . 13 || negotiate a price acceptable to both, he filed this Declaratory Relief suit to determine the 14 ||rights and duties of the parties and whether a contract had been formed. Although the 15 || MOU called for arbitration this was waived by Defendant by subsequently filing a 16 || separate and related action in this Court also arising out of the MOU, and stipulating to 17 || the Trial in this matter. 18 THE BUY SELL PROVISION AT ISSUE HEREIN 19 The buy-sell provision in the MOU reads as follows: 20 c. The goal is to mutually maximize total return while preserving 21 the right of each member to make an individual decision to “sell” if 32 mutual agreement cannot be reached. Accordingly, at any time after June 30, 2020, if one of the members wants to sell and the other 23 does not, the member wanting to sell shall deliver a written notice to the other member indicating the price and terms on 24 which they are willing to sell their interest and the other 25 member shall have 10 days after receipt to respond whether they will buy or sell that interest on those terms, conditions and 26 price (adjusted for each member - ie. the net proceeds based on a stated sales price each respective member would receive in 27 accordance with this agreement) and if they do not respond within 28 the 10 days, they will be deemed to have agreed to sell. The parties understand that this may, but is not required, to be effected through ones. Plaintiff's Declaratory Relief Trial Brief 1 a sale to a third party. Any such sale must close in not more than 60 days after the buy or sell decision is made. (emphasis added) The provision clearly refers to sale of the party’s interest in the LLC only. ‘ BACKGROUND AND SUMMARY OF RELEVANT FACTS ° A. The Property, the Parties’ LLC Interests, and the Difference Between Them — 6 How this Dispute Arose. 7 In 2017, Defendant Onderko and his then business partner, Sacramento cannabis 8 || attorney Tom Sheridan, approached Donald A. Wilson (Wilson) about leasing the | 9 || Property, which includes an approximately 44,000 square-foot industrial building. The 10 || Property was (and still is) owned by Plaintiffs Golden Global Enterprises, Inc. (“GGE”) 11 || and Golden Global Investment Trust-2017 (‘GGIT”). Wilson was and is the sole 12 || shareholder of GGE and Trustee of GGIT. 13 Onderko and Sheridan’s plan was to obtain a conditional use permit allowing for 14 || cannabis-related uses at the Property, and to improve the Property such that it could be 15 || subleased to cannabis-related entities. In addition to entering into a Master Lease for the 16 || Property, the LLC simultaneously entered into an Option to purchase the Property 17 || (Plaintiff's Exhibit 4), After expending approximately $350,000 on entitlements, the 18 || LLC ran out of investor money and was without a viable option to complete the tenant 19 ||improvements. Recognizing that they were going to lose their “investment” and would 20 || be in breach of their subleases by not being able to deliver the Property to subtenants as 21 || promised, Onderko and Sheridan approached Wilson to solicit additional funds to save 22 || the project. Ultimately, Wilson purchased Sheridan’s interest in the LLC for $100,000, 23 || became the holder of a 51% interest in the LLC and its Managing Member, while 24 || Onderko ended up with a 49% interest in the LLC. MOU Plaintiff's Exhibit P-1 (see 25 || blue and orange highlights). As part of the agreement reflected by the MOU, Wilson 26 || agreed to loan up to $1,500,000 from his Pension Plan to the LLC to complete the 27 || construction so that the LLC would not be in breach of its subleases with the cannabis- 28 |) relatedsubtenants to whom Onderko had pre-leased portions of the Property. Exhibit P-1 00016643.1 4 Plaintiff's Declaratory Relief Trial Brief 1 || at p.1, 94 (green highlighting). As part of the same MOU, the LLC agreed to first repay 2 1] Wilson & Wilson Pension Plan, and Onderko’s investor (his mother-in-law), prior to any 3 distributions of profit to the LLC members. Exhibit P-1 at p.2, 4" (immediately 4 || following fc in green highlights). 5 After the construction was completed, at a cost of approximately $1,250,000 6 || loaned by Wilson & Wilson Pension Plan, Onderko sought to market the Property for 7 || sale because he knew he would not receive any distribution from the LLC until the 8 || roughly $1.5 million in loans were repaid to the investors (being voluntarily and without 9 ||a legal agreement paid on an 80/20 basis between Wilson and Onderko’s 10 || investor). Later, when Onderko sought to distribute 49% of a $100,000 payment the 11 || LLC received as part of a buyout of a sublease, Wilson reminded him that the $100,000 12 || was additional rent that needed to be paid toward the loans pursuant to the MOU rather 13 || than distributed 49/51 as profit in the manner Onderko wanted. This did not sit well 14 || with Onderko. 15 Now that Onderko had obtained what he wanted from Wilson—completion of the 16 || tenant improvements by way of Wilson’s finances, and thus protection of his sweat 17 || equity investment—and recognizing that his “cash cow” had dried up, Onderko retained 18 |} a lawyer and sought to force Wilson to sell the Property in an attempt to generate cash 19 || for himself out of the project. Onderko relayed a “Notice of Advisement of Receipt of 20 || Offer to Purchase” to Wilson by way of his lawyer Mark Ellis’ March 3, 2022 letter, 21 || which included an offer to purchase 100% of the Property from a third party. Plaintiff's 22 || Exhibit P-2 (specifically, see pp. R-000095-97, and R-000096 at 4 at yellow and orange 23 || highlights “....If you do not respond in 10 days, you will be deemed to have agreed 24 || to sell the property.”) (emphasis added). Wilson rejected the purported “Third Party 25 |] offer to Purchase,” and in his response (Plaintiff's Exhibit P-3) explained his position 26 || that the MOU buy-sell provisions “relate only to the buy or sale of our individual 27 |{membership interests in the LLC,” and made a counter-proposal to buy Onderko’s 28 ||membership interest in the LLC on vastly different terms than Onderko had 00016643.1 a Plaintiff's Declaratory Relief Trial Brief 1 |} requested. Plaintiff's Exhibit P-3 (highlighted version attached; see especially p. R- 2 |/000099 at 2-3 and p. R-000100 at 5 in orange highlighting). 3 Wilson’s position is that 4 (1) Onderko’s March 3, 2022 Notice of Advisement of Receipt of Offer to 5 || Purchase from Mr. Onderko’s attorney (Plaintiff's Exhibit P-2) was not an offer 6 || pursuant to the MOU’s buy-sell provisions as it was not an offer to sell his interest in the 7 || LLC but was an offer to sell 100% of the Property to a third party (a right that neither a |] Onderko nor the LLC had, nor could they compel), 9 (2) Wilson rejected Onderko’s purported “offer” and responded with a counter- 10 || offer to purchase Onderko’s membership interest in the LLC based on the valuation 11 || Wilson calculated that the proposed Property sale would ultimately represent as far as 12 || Onderko’s 49% LLC interest (a range between $127,998 and $393,838 after taxes and 13 || appropriate discounts) (Plaintiff’s Exhibit P-3), and ‘ 14 (3) Onderko did not, after receiving and not accepting Wilson’s counter-offer, take 15 || the necessary action and agree to purchase Wilson’s 51% in the LLC upon the same 16 || terms and conditions offered by Wilson (i.e., the inverse of the value assigned to Tim’s 17 || 49% interest) or tender performance to carry out such a purchase of Don’s 51% interest 18 || as required by the MOU. 19 B. Wilson Owns the Property, and Leases it to the LLC with An Option to 20 Purchase 80%. 21 As set forth above, Wilson owns the property through GGE and GGIT. One of the 22 || critical facts to understand as part of this dispute is that the Option (Plaintiff's Exhibit P- . 23 |} 4) only allows the LLC to purchase an undivided 80% share of the Property. Under the 24 || Option, Wilson retained the right, at his sole discretion, to retain a 20% share of the 2s || Property if the LLC exercised the option. Thus, without Wilson’s agreement (which he 26 || never gave), it was impossible for the LLC to sell 100% of the property. The Option 27 || expressly provides: 28 00016643.1 6 Plaintiff's Declaratory Relief Trial Brief 1 “Seller shall retain the right to keep twenty percent (20%) of the Property at 2 his sole election meaning simply that Buyer will only have the right to 3 purchase eighty percent (80%) of the Property.” 4 || Plaintiff's Exhibit P-4 at {5 (orange highlights). > In addition, nothing in the MOU, the Option or any other agreement gives Mr. ® |] Onderko the right to solely determine whether the LLC will exercise the option and 7 purchase 80% of the Property, or to unilaterally cause the Option to be exercised. That 8 || is a decision to be made by the LLC, which Wilson owns 51% of and is the managing ? || member, meaning the decision to exercise the Option requires Wilson’s 10 || vote/consent. Plaintiff's Exhibit P-1 at 93 (light purple highlights). Wilson never gave 11 || that vote or consent. . THE LAW OF OFFER AND ACCEPTANCE 14 Even if the Court determines that there was an offer pursuant to the buy-sell 15 || provision of the MOU, Plaintiff did not accept that offer. Thus, the court should 16 || declare that there is no contract to buy Defendant’s interest because there was no . agreement on the price. ~ Here is the language that Defendant claims is Plaintiff's acceptance of the terms 19 proposed: °° “I accept his offer to sell; the dispute is the value of his interest.” 7 This is like a grower telling ConAgra “I'll sell you all my wheat for $10 per 23 || bushel, and ConAgra replying that it would be happy to buy it, except at $8.00 per 24 || bushel. There is no contract formed. 2s Defendant claims there was a contract which Plaintiff denies. Given Plaintiffs’ . denial of the contract, Defendant has the burden of establishing all the elements of a oq || Contract. This is something the Defendant cannot do. 00016643.1 ee Plaintiff's Declaratory Relief Trial Brief | 1 The Supreme Court recently set out the essentials of contract formation in 2 || Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, at 789 , . F Consent is not mutual, unless the parties all agree upon the same thing -in the same sense.’ ( Civ. Code, § 1580 ; see also Civ. Code, § 5 1636....)" ( Weddington Productions, Inc. v. Flick(1998) 60 Cal.App.4th 793, 810-811, 71 Cal.Rptr.2d 265 ; see Civ. Code, § 6 _ 1550[essential elements of a contract].) " ‘The existence of mutual 7 consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a a| reasonable person to believe. [Citation.] Accordingly, the primary focus in determining the existence of mutual consent 1s upon the acts /9 _ of the parties involved.’ " ( T.M. Cobb Co. v. Superior Court(1984) 10 36 Cal.3d 273, 282, 204 Cal.Rptr. 143, 682 P.2d 338 ; see Civ. Code, § 1565 [essentials of consent].) Monster Energy Co. v. Schechter 11 supra, at 789. 12 Plaintiffs suggested methods of valuation and amounts that would reflect the 13 value of Defendant’s 49% interest in the LLC that were far differ wildly from the 14 numbers suggested by Onderko, and began by disputing whether the provision of a 3 15 party offer to purchase would constitute a valid “buy-sell” under the parties’ MOU. There 16 was no meeting of the minds, no mutual consent, and no contract formed. 17 Moreover, there clearly was a counter-offer presented which is a rejection of the 18 purported offer. Civil Code 1585. 19 20 “[T]erms proposed in an offer must be met exactly, precisely . 21 and unequivocally for its acceptance to result in the formation of a binding contract; and a qualified acceptance amounts to a 22 new proposal or counteroffer putting an end to the original * offer.” (Panagotacos v. Bank of America (1998) 60 Cal.App.4th 23 . 851, 855~856 [70 Cal.Rptr.2d 595].) 24 « “TI]t is not necessarily true that any communication other than an unequivocal acceptance is a rejection. Thus, an acceptance is 25 not invalidated by the fact that it is ‘grumbling,’ or that the offeree makes some simultaneous ‘request.’ Nevertheless, it 26 must appear that the ‘grumble’ does not go so far as to make it 27 doubtful that the expression is really one of assent. Similarly, the ‘request’ must not add additional or different terms from 28 those offered. Otherwise, the ‘acceptance’ becomes a 60016643.1 8 Plaintiff's Declaratory Relief Trial Brief j counteroffer.” (Guzman v. Visalia Community Bank (1999) 71 Cal.App.4th 1370, 1376 [84 Cal.Rptr.2d 581].) 2 3 PROPOSAL OF DIFFERENT TERMS IS A REJECTION OF THE OFFER. 4 , 5 California cases provide that “a qualified acceptance amounts to a new proposal 6 I counter-offer putting an end to the original offer. ... A counter-offer containing a ; condition different from that in the original offer is a new proposal and, if not accepted ¢ by the original offeror, amounts to nothing.” (Apablasa v. Merritt and Co. (1959) 176 4 Cal.App.2d 719, 726 [1 Cal.Rptr. 500], internal citations omitted.) More succinctly: “The 10 rejection of an offer kills the offer.” (Stanley v. Robert S. Odell and Co. (1950) 97 WW Cal.App.2d 521, 534 [218 P.2d 162].) t2 “[T]erms proposed in an offer must be met exactly, precisely and 13 unequivocally for its acceptance to result in the formation of a binding contract; and a qualified acceptance amounts to a new proposal or 14 counteroffer putting an end to the original offer.” (Panagotacos v. Bank of 1s America (1998) 60 Cal.App.4th 851, 855-856 [70 Cal-Rptr.2d 595].) 16 |! The original offer terminates as soon as the rejection is communicated to the offeror: “It *7 His hornbook law that an unequivocal rejection by an offeree, communicated to the offeror, +8 terminates the offer; even if the offeror does no further act, the offeree cannot later 19 purport to accept the offer and thereby create enforceable contractual rights against the 20 offeror.” (Beverly Way Associates, supra, 226 Cal.App.3d at p. 55.) 21 Here, Plaintiff (1) disputed that the offer constituted a “buy-sell” offer for 22 Defendant’s 49% share of the LLC, and (2. proposed three different amounts for 23 oA payments to Defendant, depending upon their agreement to certain discounts to be 35 applied to the value of that minority share: $393,838, $255,995 or $127,998. That clearly 26 could not be construed by a reasonable person as agreement to pay $1,670,114. 27 Plaintiffs and Defendant have a major disagreement over the nature and scope of 2g || this Declaratory Relief Action, and what is truly at issue. Plaintiffs have consistently 00016643.1 9 Plaintiff's Declaratory Relief Trial Brief 1 || maintained that this is a simple matter of legally interpreting the three documents offered 2 || respectively as Plaintiff's Exhibits 1, 2 and 3, which Plaintiff sought to do by way of this 3 || first filing this declaratory relief action. , 4 | The touchstone of this litigation is a straightforward legal issue of offer and ° | acceptance, which boils down to the following two questions: 6 1. Was the “Notice of Advisement of Receipt of Offer to Purchase” an offer to ’ buy or sell Tim Onderko’s interest in the LLC that complied with the requirements set ° || forth in the MOU? : 2. If the “Notice of Advisement of Receipt of Offer to Purchase” was an offer that 7 complied with the buy-sell terms in the MOU, was it accepted by Respondent? . | The MOU is not ambiguous and refers only to the buy-sell of an “interest” in the . 3 LLC owned by one of the parties. Accordingly, the only documents appropriate or 14 || Becessary to answer those questions: are: . is 1. The MOU — Plaintiff's Exhibit P-1. 16 2. Notice of Advisement of Receipt of Offer to Purchase - Plaintiff's Exhibit P-2 ; 17 3. Plaintiff's response - Plaintiff's P-3 and P-3a which contains the actual email 18 through which Plaintiff's response was communicated; and 19 4. The Option Agreement - Plaintiff P-4 20 || Other communications are not relevant to answering the seminal questions in this dispute: 21 > The MOU was dated July 3, 2019. 220 > The Notice of Advisement of Receipt of Offer to Purchase was sent and 23 received on March 3, 2022. 24 > Respondent’s rejection and counter proposal was sent and received on 25 March 13, 2022, 10 days later. | *8 All communications prior to the date the MOU was signed relating to the terms of ” the MOU were “negotiations” and thus not relevant and violate the parole evidence rule © {CCP 81856). sors: ‘ Plaintiff's Declaratory Relief Trial Brief 1 Likewise, communications after the July 3, 2019 signing of the MOU (other than 2 || the March 3, 2022 Notice of Advisement of Receipt of Offer to Purchase and the March 3 || 13, 2022 response thereto) and communications after the March 13, 2022 response, 4 || reflecting negotiations concerning the sale of Claimant’s interest in the LLC were > 1] settlement communications and negotiations privileged under Evidence Code §1152 as © || “settlement discussions in an attempt to ” IIresolve a disputed matter.” ° Defendants cannot show, merely by selecting part of a sentence out of context, ° that Plaintiffs ever agreed to buy Defendant’s share of the LLC for $1,670,1 14.57, or for _ any other specified amount. In their Complaint, Plaintiffs prayed for the following | relief, and it should be granted: | B ‘ 1. A determination that the provisions of the MOU relating to venue require 1 actions to be filed in San Mateo County Superior Courts; * 15 2. That the provisions of the MOU require that if one party wishes to sell his 16 || interest in the LLC and the other does not, any written notice sent to the other party not 17 || wishing to sell, must contain an offer of the terms on and price on which that party is ig || willing to sell his interest in the LLC, rather than providing an offer to purchase a 19 || greater percentage of the Property than the LLC had/has the right to sell; 20 3. That the provisions of the MOU require that if one party wishes to sell his 21 || interest in the LLC and the other does not, any written notice sent to the other party not 22 || wishing to sell must contain an offer based upon the right of GGE and GGIT to retain a 23 |120% ownership in the underlying building; 24 4. That the presentation of an offer by a third party to purchase the entire 28 underlying real Property does not constitute an offer of the price and terms on which a 78 party wishes to sell his interest in the LLC; eo 27 ; 28 . : 000ie643.1_ Plaintiff's Declaratory Relief Trial Brief : 1 5... That GGE and GGIT did not accept any offer to sell Onderko’s interest for 2 |} $1,670,114.57 or other sum or sums, but instead submitted a counter-offer to purchase 3 || Onderko’s interest at various other sums, to be agreed upon; 4 6. That no enforceable contract for the purchase or sale of an interest in the > |/LLC pursuant to the MOU exists between the parties; 6 7. That failing to perform a contract where none has been formed is not a bad ’ faith breach of duties owed by a majority owner of an LLC owes to the minority owner of 8 that LLC; and 9 8. Such other and further relief as the Court determines appropriate. 10 11 || Dated: August 7, 2023 EHLERS LAW CORPORATION 2600 Capitol Avenue, Suite 320 12 Sacramento, CA 95816 |. = ALG E— 14 Wesley C.J. Ehlers 15 Attomeys for Plaintiffs Golden Global Enterprises Inc. and Golden Global 16 Investment Trust — 2017, by and though : its Trustee, Donald A. Wilson 17 . 18 . 19 20 21 22 23 24 25 , 26 27 28 oooies43.1—“—‘“—s~i~i Plaintiff's Declaratory Relief Trial Brief