Preview
ELECTRONICALLY FILED
Superior Court of California
County of Santa Barbara
Robert B. Forouzandeh, State Bar No. 247177 Darrel E. Parker, Executive Officer
rforol com 6/9/2020 2:31 PM
Meghan K. Woodsome, State Bar No. 272459 By: Terri Chavez, Deputy
REICKER, PFAU, PYLE & McROY LLP
1421 State Street, Suite B
Santa Barbara, CA 93101
Tel (805) 966-2440
Fax (805) 966-3320
Attol for Cross-Complainant in Intervention
MORONGO EQUITY PARTNERS I, LLC
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SANTA BARBARA—ANACAPA DIVISION
10
11 ECO PROPERTY GROUP, LLC, a limited Case No. 19CV04971
liability company, Judge Thomas Andere
12
Plaintiff, CROSS-COMPLAINT IN
13 Vv. INTERVENTION
14 SNIDER INVESTMENTS, LLC, a limited
liabili company, DAVID SNIDER, an.
15 indivi , and DOES 1-50 inclusive,
16 Defendants.
17
SNIDER INVESTMENTS, LLC, a Califomia
18 limited liability company,
19 Cross-Complainants
20 Vv.
21 ECO PROPERTY GROUP, LLC, a Delaware
limited liabili ; ELI OWENS, an.
individual; ROGER MACFARLANE, an
individual; and ROES 1 through 10 inclusive,
Cross- Defendants.
24
25 MORONGO EQUITY PARTNERS I, LLC,
26 Cross-Complainant in
Intervention,
27
CROSS-COMPLAINT IN INTERVENTION: Page 1
BRENT BUHRMAN, SCOTT EDWIN NEWBY,
ELI OWENS, ROGER MACFARLANE, GARY
WILLIAM WALKER, JR., and ROES 11 through
20, inclusive,
Cross- Defendants.
Cross-Complainant in Intervention MORONGO EQUITY PARTNERS I, LLC, by its
attomeys Reicker, Pfau, Pyle & McRoy LLP, hereby cross-complains against Cross-Defendants
BRENT BUHRMAN, SCOTT EDWIN NEWBY, ELI OWENS, ROGER MACFARLANE,
GARY WILLIAM WALKER, JR., and ROES 11 through 20, inclusive (collectively, the "Cross-
10 Defendants") and alleges against
them as follows.
11 PARTIES TO PENDING ACTION AND COMPLAINT IN INTERVENTION
12 1 Cross-Complainant in Intervention MORONGO EQUITY PARTNERS I,
13 LLC ("MEPI"), previously known as Southem Califomia Cultivation Partners, LLC ("SCCP") is
14 a Califomia limited liability company which is in good standing with the Califomia Secretary of
15 State. To avoid confusion, both SCCP and MEPI are referred to herein as MEPI.
16 2. Defendant and Cross-Complainant SNIDER INVESTMENTS, LLC ("SIL") isa
17 Califomia limited liability company which is in good standing with the Califomia Secretary of
18 State. Defendant DAVID SNIDER ("Snider") is a manager of SIL. Neither SIL nor Snider are
19 patties to this Cross-Complaint.
20 3, MEPI is informed and believes, and thereon alleges, that Cross-Defendant ECO
21 PROPERTY GROUP, LLC ("ECO") purports to be a Delaware limited liability company,
though it has never been organized
in any jurisdiction and is not registered with the Califomia
Secretary
of State. ECO is not a party
to this Cross-Complaint.
24 4. MEPI is informed and believes, and thereon alleges, that Cross-Defendant ELIT
25 OWENS ("Owens") is an individual who is a resident of Los Angeles County, Califomia.
26 5, MEPI is informed and believes, and thereon alleges, that Cross-Defendant
27 ROGER MACFARLANE ("MacFarlane") is an individual who is a resident of Los Angeles
County, Califomia.
CROSS-COMPLAINT IN INTERVENTION: Page 2
6. MEPI is informed and believes, and thereon alleges, that Cross-Defendant
BRENT BUHRMAN ("Buhrman") is an individual who is a resident of Riverside County,
Califomia.
7, MEPI is informed and believes, and thereon alleges, that Cross-Defendant
SCOTT EDWIN NEWBY ('"Newby’) is an individual who is a resident of Riverside County,
Califomia.
8. MEP! is informed and believes, and thereon alleges, that Cross- Defendant GARY
WILLIAM WALKER, JR. ("Walker") is an individual who is a resident of Riverside County,
Califomia.
10 9, The true and correct names and capacities of ROES 11 through 20, inclusive,
11 whether individual, corporate, or otherwise, are not known to MEPI, and such cross-defendants
12 are therefore sued by fictitious names. MEPI will amend this Cross-Complaint in Intervention to
13 allege their true names and capacities
when they are ascertained. MEPI is informed and
14 believes, and thereon alleges, that each of the fictitiously named cross-defendants is responsible
15 in some manner for the occurrences and acts alleged herein, and is responsible
to MEPI for the
16 damages and other relief as herein alleged. All references herein to Cross- Defendants include a
17 reference to the fictitiously named cross-defendants.
18 10. MEPI is informed and believes, and thereon alleges, that at all times relevant
19 herein, each of the Cross-Defendants
was the agent, employee, partner, joint venturer or alter ego
20 of each of the remaining Cross-Defendants, and in doing the things alleged herein was acting
21 within
the scope of such agency, employment, partnership,
joint venture or alter ego status.
MEPI is further informed
and believes, and thereon alleges, that the conduct
of each Cross-
Defendant as alleged herein was known to and ratified
by each of the other Cross- Defendants,
24 and the benefits thereof were accepted by each of the Cross-Defendants.
25 GENERAL ALLEGATIONS
26 11. In February 2015, SIL purchased the property located at 13310 Little Morongo
27 Road, Desert
Hot Springs, CA (the "Property"). SIL's plan was to subdivide the Property into
three separate phases, with
a commercial condominium plan for each and obtain land use
CROSS-COMPLAINT IN INTERVENTION: Page 3
entitlements for all three phases to serve as cannabis cultivation facilities. Within each phase,
there would be one building comprised of 12 to 13 condominium units which would be occupied
by two tenants, with each utilizing
half of the condominium
units for the building.
12. When SIL succeeded in receiving approval to subdivide the Property and obtained
entitlements for cannabis cultivation for the Property, it was approached by numerous parties
who wanted to become tenants in the various buildings that would be subsequently built.
13. SIL initially caused SCCP to be organized
and was its sole member
with the
intention of placing the 12 condominium units of "Phase I" into that entity. SCCP, now known
as MEPI, has owned the Property since February 2018.
10 14. One of the many parties that approached SIL was Buhrman who claimed that he
11 ‘was part of a company purportedly
known as Seed to Soul Management, LLC ("Seed to Soul").
12 Buhrman expressed
interest on behalf of Seed to Soul in leasing half of the condominium
units of|
13 PhaseI comprising 46,425 square feet. Buhrman indicated
to Snider
that his partners and
14 members in Seed to Soul included four other individuals as well as himself: Owens, MacFarlane,
15 Newby, and Walker.
16 15. Snider, acting as the manager
of MEPI, and the purported
Seed to Soul members
17 and promoters negotiated
the terms of a lease. During
those negotiations it was determined that
18 as consideration for entering into the Lease and providing a long term tenant in Phase I, the
19 tenant would be entitled to invest $1,100,000 in MEPI and obtain
an ownership interest therein
20 to ensure that the tenant would have "skin
in the game." Among Seed to Soul's purported
21 members, it was agreed that only Owens and MacFarlane would provide such an investment, and.
that they would hold such investment in the name of ECO, which Cross- Defendants represented.
was a limited liability company managed by Owens.
24 16. The Cross- Defendants represented to Snider, who was acting on behalf of MEPI,
25 that MacFarlane
would invest an additional $1,000,000 directly into Seed to Soul in order
to
26 ensure its financial viability. Additionally, Cross- Defendants all represented to Snider that Seed
27 to Soul was
a valid entity, that it was adequately capitalized, that it was capable of commencing
operations, and would have the necessary licensing in place to cultivate cannabis at the Property.
CROSS-COMPLAINT IN INTERVENTION: Page 4
17. Based on all of these representations, on or around June 3, 2016, MEPI entered
into a lease with Seed to Soul. A true and correct copy of the Lease is attached hereto as Exhibit
1 and incorporated
herein (the "Lease").
18. Unbeknownst
to MEPI, Seed to Soul did not exist as an entity and has in fact
never existed in any jurisdiction—it has never been organized orformed. Additionally, Seed to
Soul never had any bank accounts and never applied for any licenses
to cultivate or do anything
with cannabis. In fact, Seed to Soul did not have the capability at any time to perform any
business anywhere in Califomia, or elsewhere. In email communications between the partners of
Seed to Soul, MacFarlane specifically told other Seed to Soul partners to intentionally conceal
10 each of these facts from Snider, which they did.
11 19. MacFarlane and Owens' investment in MEPI was evidenced in Section 1(M)(i)(a)
12 of the Lease which stated that one of the landlord's deliverables
under the Lease would be to
13 provide MacFarlane and Owens an ownership interest in MEPI. SIL and MEPI were
14 subsequently informed that MacFarlane and Owens would take their membership interest in
15 MEPI via ECO and that Owens would act as ECO's manager.
16 20. Snider indicated to MacFarlane, Buhrman
and Owens prior to entering into the
17 Lease, that SIL, which at the time was the sole member of SCCP, was only agreeing
to grant the
18 membership interest in SCCP to ECO because Seed to Soul would
be a tenant of SCCP and SIL
19 ‘wanted Seed to Soul to have "skin
in the game."
20 21. The connection between the Lease and the investment by ECO in MEPI was also
21 confirmed intemally among Seed to Soul's promoters ina Memorandum of Understanding
("MOU") between and amongst the five promoters of Seedto Soul. A true
and correct copy of
the MOU is attached hereto as Exhibit 2 and incorporated herein.
24 22. At the time the Lease was entered into, in addition
to the fact that Seed to Soul
25 ‘was not a valid entity and did not have capacity to enter into a contract, Seed to Soul did not
26 have the capability, either financially or otherwise, to perform the obligations set forth in the
27 Lease and did not have the necessary licenses to perform any cannabis related activities. After
all it was not formed and it did not have any bank accounts.
CROSS-COMPLAINT IN INTERVENTION: Page 5
23. Thereafter, as required
in the Lease, SIL executed a First Amended and Restated
Operating Agreement for MEPI (the "Operating Agreement") which admitted ECO as a 20%
member
of MEPI. A true and correct
copy of the Operating Agreement is attached hereto as
Exhibit 3 and incorporated herein.
24. The only reason MEPI and SIL even considered admitting ECO to MEPI was
because Cross-Defendants represented that Seed to Soul was financially
viable and could carry
out its Lease obligations and would be a tenant at the Property for
at least 10 years. MEPI
wanted Seed to Soul to have "skin
in the game" with respect
to the success of the building.
Without the tenancy relationship, MEPI and SIL would never have agreed to admit ECO into
10 MEPI.
11 25. Thereafter, Seed to Soul breached the Lease, because it demanded
that MEPI pay
12 for an upgraded HVAC system at the Property that differed from the system called for in the
13 plans included
in the Lease. Seed to Soul contended that it could not operate at the property
14 without
the upgraded system. Seed to Soul's counsel (who is also counsel for ECO in this
15 action) said that if MEPI did not pay for the upgraded HVAC system it would unilaterally
16 terminate the Lease. Based upon information obtained from Buhrman, due tothe lack of
17 sufficient capitalization from its promoters, Seed to Soul did not have sufficient funds to pay for
18 the upgraded HVAC system which is why it tried to pass this obligation on to MEPI.
19 26. In response, MEPI terminated the Lease, and Seed to Soul entered into a
20 settlement agreement with MEPI on or about April 17, 2018 (the "Settlement Agreement")
21 regarding the termination and retum of the security deposit. As part
of that Settlement
Agreement, MEPI agreed to pay and did in fact pay, Seed to Soul $345,000, which represented
the retum of Seed to Soul's $300,000 and other minor consideration. In negotiating the
24 Settlement Agreement, the promoters of Seed to Soul again purported to be signing on behalf of
25 "Seed to Soul Management, LLC, a Califomia limited liability company." No such entity has
26 ever existed
and Seed to Soul lacked capacity to enter into the Settlement Agreement. The
27 payment of the settlement funds was laundered through counsel for Seed to Soul's client trust
account.
CROSS-COMPLAINT IN INTERVENTION: Page 6
27. Subsequent
to the termination of the Lease and the execution of the Settlement
Agreement, MEPI and SIL began investigating
the background of Seed to Soul and the
circumstances giving rise to its failure to abide by the Lease.
28. Based on that investigation and information obtained from Buhrman, it was then
discovered
for the first time that Seed to Soul had never existed
as an entity and never had
capacity to enter into any contract, that it never had a bank account, never
even began the
application process for any of the licenses required to cultivate cannabis and that as a result it
never had the ability to carry out its obligations under the Lease. Additionally, MEPI and SIL
leamed that MacFarlane had never invested the promised $1,000,000 into Seed to Soul to ensure
10 its viability and ability to comply with the Lease obligations.
11 29. After leaming that the entire Lease and by extension the Operating Agreement
12 had been entered into under false pretenses, Snider contacted MacFarlane by telephone to notify
13 him of SIL's rescission of the Operating Agreement and the offer to immediately retum the
14 $1,100,000
that had been paid by ECO to MEPI. MacFarlane initially agreed but the next day
15 refused to accept
the funds. Thereafter, counsel for MEPI again offered to retum
the entirety of
16 the funds paid by ECO to MEPI, but counsel for ECO refused.
17 30. | MEPT has also notified Seed to Soul's promoters of its rescission of the Lease and
18 Settlement Agreement as a result
of Seed to Soul's lack of capacity
to enter into those agreements
19 along with the fraudulent conduct described above in inducing MEPI to sign both documents.
20 FIRST CAUSE OF ACTION
21 (Fraudulent Inducement of Lease By MEPI as against All Cross-Defendants)
31. MEPI incorporates herein by this reference each
of the allegations contained in
Paragraphs 1 through 30 above as if set forth in full herein.
24 32. At all material times, Cross- Defendants, as promoters of Seed to Soul
25 Management, LLC, and with respect to MacFarlane and Owens, on behalf of ECO, represented.
26 to Snider, acting
on behalf of SIL and MEPI, that Seed to Soul, was
a valid entity—by signing
27 the Lease and Settlement Agreement under the name "Seed to Soul Management, LLC, a
Califomia limited liability company" and that it had the ability to carry out the obligations called
CROSS-COMPLAINT IN INTERVENTION: Page 7
upon it in the Lease, including
but not limited to, the representation
that it would lease a portion
of PhaseI of the Property, pay rent for at least 10 years, and that it had the ability to carry out
camnabis related activities.
33. Cross- Defendants, as promoters of Seed to Soul, are liable for all obligations
taken
in Seed to Soul's name since that entity was never formed.
3A. Cross-Defendants' representations
were false in that Seed to Soul was never
formed and lacked capacity
to enter into any contracts and it never had the financial capability or
the legal capability to carry out its obligations under the Lease. At all times, Cross-Defendants
knew that these representations were false. In fact, MacFarlane specifically told Owens and
10 other Seed to Soul partners
in writing to not tell Snider the truth about these issues.
11 35. Cross- Defendants all intended
for MEPI to rely upon these representations
in
12 order to induce MEPI to execute the Lease with Seed to Soul, which in tum obligated
MEPI and
13 SIL to grant ECO a 20% membership interest.
14 36. | MEPI justifiably relied upon these false representations to its detriment when it
15 executed
the Lease.
16 37. Had MEPI known that Seed to Soul was not a valid entity and lacked capacity to
17 enter into a contract, that it did not have any bank accounts, did not have sufficient funding, that
18 it had not even begun the application process to obtain any cannabis licensed, and that by
19 extension it was incapable of performing its obligations under the Lease, it never would have
20 entered
into the Lease, which then created the obligation
to enter into the First Amended
and
21 Restated Operating Agreement granting MacFarlane and Owens a 20% membership interest in it.
38. | MEPI's consent to enter into the Lease was therefore induced by Cross-
Defendants’ fraudulent representations.
24 39. To the extent not already effectuated, the filing
of this action shall serve as
25 MEPI's Notice of Rescission of the Lease.
26 40. | MEPI seeks rescission
of the Lease and to be put back into the position it would
27 have been had the Lease never been executed.
///
CROSS-COMPLAINT IN INTERVENTION: Page 8
SECOND CAUSE OF ACTION
(Fraudulent Inducement of Settlement Agreement
by MEPI as Against All Cross-Defendants)
41. MEPI incorporates herein by this reference each of the allegations contained in
Paragraphs 1 through
40 above as if set forth in full herein.
42. At all relevant times, Cross-Defendants intentionally and knowingly
misrepresented to SIL that Seed to Soul was a validly formed entity by signing various
documents under the guise of "Seed to Soul Management, LLC, a Califomia limited liability
company" and that it had the capability of executing a binding release on behalf of all of its
10 members, affiliates, and partners under the Settlement Agreement.
11 43. Cross- Defendants, as promoters of Seed to Soul, are liable for all obligations
12 taken in Seed to Soul's name since that entity was never formed.
13 4A, At all relevant times, MEPI justifiably relied on Cross-Defendants' intentional
14 misrepresentations and omissions of material facts, all to MEPI's detriment in that MEPI would
15 never have entered
into the Settlement Agreement and paid Seed to Soul $345,000, which was
16 laundered through Seed to Soul's counsel's office, had it known that Seed to Soul had
17 fraudulently
entered into the Lease, lacked capacity
to enter into or enforce
the Lease, that
it was
18 not a valid entity, and that as a result any claims Seed to Soul was purportedly releasing in the
19 Settlement Agreement were not claims because there was no Seed to Soul to which those claims
20 belonged.
21 45. | MEPI's consent to enter into the Settlement Agreement was therefore induced by
Cross-Defendants' fraudulent representations.
46. To the extent not already effectuated, the filing of this action shall serve as
24 MEPI's Notice of Rescission of the Settlement Agreement.
25 47. MEPI seeks retum of the $345,000 it paidto Cross-Defendants as consideration
26 under that Settlement Agreement.
27 //1
//1
CROSS-COMPLAINT IN INTERVENTION: Page 9
THIRD CAUSE OF ACTION
(Declaratory Relief by MEPI as Against All Cross-Defendants Regarding Lease)
48. | MEPI incorporates herein by this reference each of the allegations contained in
Paragraphs 1 through 30 above as if set forth in full herein.
49, When a party lacks capacity
to enter into a contract, that contract
is unenforceable.
A purported limited liability company that enters into a contract prior to its organization can only
enforce
that contract, if it is subsequently formed and proceeds to ratify said contract.
50. When MEPI and the promoters of Seed to Soul signed the Lease, Seed to Soul
had not been formed as an entity. Seed to Soul was not subsequently formed and therefore
could
10 not ratify the Lease. As such, MEPI contends that the Lease is unenforceable
as a matter of law.
11 MEPI further contends that since the Lease is unenforceahle, all obligations set forth therein,
12 including the requirement
that MEPI provide
ECO with a 20% interest
in MEPI are also
13 voidable.
14 51. Seed to Soul's promoters dispute that the Lease is void and claim that ECO's
15 membership interest in MEPI is not linked
to the Lease, even though it is one of the expressly
16 stated deliverables in the Lease.
17 52. MEPI desires a judicial determination of its rights and duties and a declaration as
18 to whether the Lease is void and/or unenforceable and whether
any of the obligations set forth in
19 the Lease are also voidable and unenforceable.
20 53. A judicial declaration is necessary and appropriate at this time so that MEPI may
21 ascertain its rights and duties because Seed to Soul's promoters’ actions have caused
an unsettled
state of affairs which has affected the operations of MEPI.
FOURTH CAUSE OF ACTION
24 (Declaratory Relief by MEPI as Against All
25 Cross-Defendants Regarding Settlement A greement)
26 54. MEPI incorporates herein by this reference each of the allegations contained in
27 Paragraphs 1 through 30 and 48 through 53 above as if set forth in full herein.
CROSS-COMPLAINT IN INTERVENTION: Page 10
55. When
a party lacks capacity
to enter into a contract, that contract
is unenforceable.
A limited liability company that enters into a contract prior to its organization can only enforce
that contract, if itis subsequently formed and proceeds to ratify said contract.
56. | When MEPI and the promoters of Seed to Soul signed the Settlement Agreement,
Seed to Soul had not been formed as an entity. Seed to Soul was not subsequently
formed and.
therefore could not and has not ratified the Settlement Agreement. Furthermore, in order to
conceal the fact that Seed to Soul had no way of accepting
funds, the settlement payment called
for in the Settlement Agreement was laundered through counsel for Seed to Soul's promoters,
who is also ECO's counsel in this action. As such, MEPI contends that the Settlement
10 Agreement is unenforceable
as a matter of law. MEPI further contends that since the Settlement
11 Agreement is unenforceable, all obligations set forth therein, including the general mutual
12 release, are also voidable.
13 57. Seed to Soul's promoters dispute that the Settlement Agreement is void and claim.
14 that even though they represented in that document that Seed to Soul was a validly formed
15 Califomia limited liability company, when it was not, it somehow had the capacity to enter into
16 the Settlement Agreement.
17 58. MEPI desires ajudicial determination of its rights and duties and a declaration as
18 to whether the Settlement Agreement is void and whether any of the obligations set forth
in the
19 Settlement Agreement are also void and unenforceable.
20 59. A judicial declaration is necessary and appropriate at this time so that MEPI may
21 ascertain its rights and duties because Seed to Soul's promoters’ actions have caused
an unsettled
state of affairs which has affected the operations of MEPI.
PRAYER
24 WHEREFORE, Cross-Complainant prays as follows:
25 (On the First Cause of Action)
26 1 Foran order rescinding the Lease and all obligations set forth therein;
27 2. For damages that would put MEPI back into the position it would have been had
28 the Lease never been entered into;
CROSS-COMPLAINT IN INTERVENTION: Page 11
(On the Second Cause of Action)
3, For and order rescinding the Settlement Agreement; and
4. Forretum of the $345,000 MEPI paid as consideration under the Settlement
Agreement; and
(On the Third Cause of Action)
5, For ajudicial determination that the Lease is void and unenforceable and that all
obligations set forth therein, including but not limited to, the obligation to provide a 20%
membership interest in MEPI to Owens and MacFarlane's entity, are also void and unenforceable;
(On the Fourth Cause of Action)
10 6. For ajudicial determination that the Settlement Agreement is void and
11 unenforceable and that all obligations set forth therein are also void and unenforceable;
12 (On All Causes of Action)
13 7, For prejudgment interest;
14 8. For costs of suit incurred
herein; and
15 9, For such other and further relief as the Court deems just and proper.
16
DATED: June 9, 2020 REICKER, PFAU, PYLE & McROY LLP
17
18
27 ZZ
By
19 Robert B. Forouzandeh
Attomeys for Defendants and
20 Cross-Complainant
21
24
25
26
27
CROSS-COMPLAINT IN INTERVENTION: Page 12
EXHIBIT 1
LEASE
BETWEEN
SOUTHERN CALIFORNIA CULTIVATION PARTNERS, LLC
LANDLORD
AND
SEED TO SOUL MANAGEMENT, LLC
TENANT
FOR
14.6 Acre, Little Morongo Road
Desert Hot Springs, CA
DATED: June 3, 2016
LEASE
This LEASE dated as of June 3, 2016 is made by and between SOUTHERN
CALIFORNIA CULTIVATION PARTNERS, LLC ("Landlord"), and SEED TO SOUL
MANAGEMENT, LLC ("Tenant"). Landlord and Tenant are sometimes referred to individually
as "Party" or together as "Parties".
WITNESSETH:
JINESSELH
Section 1. DEFINITIONS AND EXHIBITS TO LEASE.
In this Lease, the words in bold print in Section 1 shall have the meaning set forth
thereafter.
A LANDLORD: SOUTHERN CALIFORNIA CULTIVATION
PARTNERS, LLC
730 Arcady Rd.
Santa Barbara, CA 93108
Phone: (216) 785-0011
B TENANT: SEED TO SOUL MANAGEMENT, LLC
7900 Limonite Avenue, Suite G number I 11
Riverside Ca, 92509
Cc PREMISES: The Premises shall consist of 46,425 square feet of the greenhouse
and head house known as Phase 1. Tenant shall occupy all of the headhouse of phase | as part
of their Lease. The property encompassed in this Lease is further described in Exhibit A, which
shall be mutually agreed to between the parties in good faith pursuant to Section 1(M) of this
Lease.
D PERMITTED USE OF PREMISES BY SEED TO SOUL MANAGEMENT,
LLC: Tenant shall use the Premises only for the following purpose: Cultivation and processing
of medical marijuana and additional uses provided through the Conditional Use Permit. Any
changes to said use or the format of Tenant's business shall require the prior written consent of
Landlord which consent shall not be unreasonably withheld.
E COMMON AREAS: (Common Areas are never defined in the lease).
F TENANT'S SHARE: Prorata share of the existing building at the development.
Tenant's prorata share shall be a fraction, the numerator of which shall be the gross leasable area
leased to Tenant and the denominator of which shall be the total gross leasable area of the
building. Landlord shall notify Tenant’s share prior to Tenant's first rental payment.
2
G. LEASE TERM: 10 Years. Three (3) 5 Year Options
@ Original Term: Ten (10) Years
Option: Tenant shall have three (3) successive options to extend the Lease
Term for periods of five (5) years (“Option Term(s)”) at the then fair
market rent exercisable in writing no less than 180 calendar days prior to
the expiration of the original Lease term. Option rent shall not be less than
the rent paid in the preceding period.
(b) Expiration Date: 25 Years from time rent commences.
@ Rent Commencement Date: Rental charges shall
commence on the later of (i) the first day after the City of
Desert Hot Springs issues a Certificate of Occupancy, or (ii)
completion of the Deliverables set forth in Section 1(M) of
this Lease.
(ii) Lease Year:
(a) First Lease Year:
(b) Months | through 3 are no charge
Minimum Rent: The annual minimum Rent shall be $45.00/square foot triple net,
which equates to $174,094.00 per month, and is subject to yearly escalations for
the duration of the term, per SECTION 5. The yearly minimum rent will be
$2,089,125.00.
@ City Tax Rate: Tenant shall pay all City medical marijuana taxes due for
Tenant's Premises. The current effective rate is an annual tax of twenty-five dollars ($25) per
square foot for the first 3,000 square feet and then ten dollars ($10) per square foot for the
remaining space utilized in connection with the cultivation of marijuana. Tenant is solely
responsible for the payment of these taxes. Non-payment of any taxes due for the Premises is a
default under this Lease. Landlord agrees that tenant shall only be responsible for taxes due on
its space as determined by the City of Desert Hot Springs
(ii) Additional Charges: Tenant shall pay Tenant's Share of Tax Charges,
Insurance Charges and Maintenance Fees more fully described in subsection (e) of section ii of
this Lease.
(b) Tax Charges: Tenant shall reimburse Landlord for all taxes
assessed for any reason and levied on the Premises and the realty underlying the Premises and
3
the cost to Landlord of Property and Liability insurance maintained by Landlord on the building.
Tenant shall pay the City medical marijuana tax assessed as a result of this Lease, due upon
execution thereof, directly to the taxing authority.
(©) Insurance Charges: Tenant shall be responsible for maintaining its
own policy of commercial general liability insurance for the Premises and a policy of property
insurance (ISO Special Form) for all property, furniture, fixtures, inventory and other
improvements made by Tenant within the Land Area, together with business interruption, with
Landlord being named as an additional insured there under, all in accordance with the
requirements to be set forth in the Lease agreement.
(d) Management Fees: 5 (five) percent of Base Rent
(e) Operating Charges/Maintenance Expenses: Tenant shall be
responsible for its prorata share of operating charges/maintenance expenses at the property.
They are defined as: Landlord's reasonable total annual costs and expenses of operating,
maintaining, repairing, replacing, upgrading, enlarging and supervising the Common Areas
(together "Operation(s)"), which includes, but is not limited to, the following: removing trash,
refuse, rubbish and garbage; cleaning, gardening and landscaping; sanitary control; providing
security or traffic control forces or equipment; repairs, additions to, and replacements of the
paving, curbs, walkways, drives, electric lines, light poles, bulbs, drainage, sewers, and the
equipment used in or constituting the Common Areas; line painting; attending the parking areas;
any governmental charges, surcharges, fees, or taxes on the parking areas, parking spaces or on
cars parking therein; cost of all utilities used or consumed in the Common Areas; repair and/or
replacement of on-site gas lines, water lines, sanitary sewer lines, storm sewer lines, and any
other common utility lines, pipes, wires, facilities and related appurtenances serving the
property; inspection and depreciation of facilities; management fees; costs of signs, sign
maintenance and sound systems; all personal property and similar taxes; the cost of all non-
capital Common Area equipment, machinery, tools, supplies other personal property and
facilities; the amortized cost amortization of all capital expenditures to and/or for the Common
Areas over their useful life or 5 years, whichever is less; the cost of personnel to implement such
services and similar services and functions; cost of any contracts entered into for the
performance of any such Operations;
I Security Deposit: The Security Deposit is $300,000.00 the first $100,000.00 with
the signing of this Lease, $100,000.00 on July 1, 2016, and 100,000.00 on August
Ist 2016. For any reason the Certificate of Occupancy isn’t issued by April 1,
2017, or the Deliverables not being completed pursuant to Section 1(M) of this
Lease, Landlord shall provide a full refund of the Security Deposit without
penalty and immediately upon written request.
Use: Per the Conditional Use Permit and the Development Agreement issued by
the City of Desert Hot Springs.
Applicable Laws: All codes, laws, orders, ordinances, requirements, regulations,
rules and/or statutes of governmental bodies (federal, state, county, local and/or
otherwise) and/or agencies, whether building, disability, environmental, fire,
4
handicapped (including without limitation The Americans With Disabilities Act
[42 U.S.C. 12101 et. seq.]), health, insurance, police, safety or otherwise, and
whether now in force or hereafter enacted or adopted and including final decisions
of courts of competent jurisdiction.
Exhibits:
(i) Exhibit A Legal description of the Cultivation Park.
(ii) Exhibit B Current Site Plan of the Cultivation Park.
(iii) Exhibit C Condition of the Premises (Landlord’s Work and Tenant’s
Work).
Conditions Precedent & Deliverables / Due Diligence Period / Escrow:
(i)Upon execution of this Lease, the parties will work together in good
faith to complete the following (“Deliverables”):
(a) An agreement between David Snider and Landlord on the one hand and
Roger MacFarlane and Eli Owens on the other for the contemplated membership interest in
Southern California Cultivation Partners LLC;
(b) An agreement between David Snider and Seed to Soul Management
LLC for the financing of cultivation operations on the Premises;
(c) Receipt and acceptance of the Exhibits, permits (including without
limitation the Conditional Use Permit and Development Agreement) and any other material and
relevant documents referenced in this Lease
(ii) The parties intent to complete the Deliverables within sixty (60) days
following execution of this Lease (“Due Diligence Period”). In the event the parties do not
complete the Deliverables within the Due Diligence Period, Tenants shall have the option (upon
written notice to Landlord) to: (i) reasonably extend the Due Diligence Period to permit
completion of the Deliverables, or (ii) terminate this Lease. In the event of termination by Tenant
pursuant to this Section 1(M), Landlord shall refund the full amount of the Security Deposit paid
by Tenant immediately upon notice and without penalty. Accordingly, David Snider hereby
agrees to personally hold the Security Deposit in escrow during the Due Diligence Period until
completion of the Deliverables or termination by Tenants pursuant to this subsection.
Section 2. GRANT OF LEASE - INTENTIONALLY DELETED
Section 3. TERM.
This Lease shall commence on the Commencement Date and end on the Expiration Date.
Section 4. OPTION TO EXTEND TERM.
Tenant is hereby granted the right to extend this Lease for the Extended Term(s) upon the
agreements, conditions and covenant herein set forth, provided that (i)Tenant notifies Landlord,
in writing, of Tenant's election to extend the Lease at least six (6) months prior to the date of
commencement of an Extended Term, (ii) this Lease shall then be in full force and effect and (iii)
Tenant shall not be in default hereunder at any time between the exercise of such extension right
and the commencement of the Extended Term being exercised.
Section 5, FIXED MINIMUM RENT. Tenant shall, without demand and without
any deduction or set-off except to the extent otherwise set forth herein, pay to Landlord at
Landlord's office or such place as Landlord may from time to time designate Fixed Minimum
Rent for each Lease Year of the Term commencing upon the Rent Commencement Date payable
in monthly installments, each in advance on the first day of each month. If the Rent
Commencement Date occurs on a day other than the first day of a month, Tenant shall pay on the
Rent Commencement Date, in advance, the prorated monthly amount due for such partial
calendar month plus the full monthly installment due for the next succeeding full calendar
month.
Upon the first day of each Succeeding Lease Year, including any Extended Term, the
Fixed Minimum Rent shall be adjusted upward, by the lesser of (i) one percent (1%), or (ii) the
increase in the consumer price index.
Section 6. INTENTIONALLY DELETED
Section 7. INTENTIONALLY DELETED
Section 8, INTENTIONALLY DELETED
Section 9. ADDITIONAL CHARGES:
A Commencing upon the Rent Commencement Date, Tenant shall pay to Landlord,
at the times hereinafter set forth, without deduction, set-off or abatement except to the extent
otherwise set forth herein, the Additional Charges, deemed to be rent for all purposes of this
Lease, the nonpayment of which shall be subject to all provisions of this Lease and of law as to
default in the payment of rent or other sums of money.
B The annual amounts of the Additional Charges shall be estimated by Landlord on
or about the beginning of each calendar year during the Term and Tenant shall pay one-twelfth
(1/12) of each such estimate, monthly, in advance, on the first day of each and every calendar
month commencing upon the Rent Commencement Date. Within 90 days after the end of each
calendar year during the Term, when Landlord has calculated the exact amount actually payable
by Tenant, Landlord shall notify Tenant. Any deficiency in payment by Tenant shall be paid by
Tenant to Landlord upon receipt of notice. Any surplus in respect thereto shall be credited
against the next ensuing Additional Charges due. The amounts payable by Tenant for the first
year and last calendar years of this Lease shall be prorated for the parts of such first and last
calendar years that Tenant is obligated to pay Fixed Minimum Rent under this Lease including
any fraction of a month. Annual Additional Charges shall be final and not subject to adjustment
by Tenant from and after two years following Landlord’s submission of Landlord’s calculation
thereof to Tenant.
B @) Any payment due from Tenant to Landlord not paid upon the date herein
specified to be paid shall bear Interest after day (5) from the date such payment was due to the
date of actual payment. For the purposes hereof, “Interest” shall mean the rate of one and a half
percent (1.5%) per month or the highest lawful rate of interest permitted in California, whichever
rate of interest is lower,
Gi) In addition to Interest, Tenant shall pay to Landlord a late payment charge
equal to five percent (5%) of any amount due to Landlord if not paid within seven (7) days from
the date required to be paid hereunder. In the event Tenant has not paid rent or any other
amounts owed to Landlord for any reason within thirty (30) days from the date required,
Landlord may cancel this Lease at La
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ELECTRONICALLY FILED Superior Court of California County of Santa Barbara Robert B. Forouzandeh, State Bar No. 247177 Darrel E. Parker, Executive Officer rforol com 6/9/2020 2:31 PM Meghan K. Woodsome, State Bar No. 272459 By: Terri Chavez, Deputy REICKER, PFAU, PYLE & McROY LLP 1421 State Street, Suite B Santa Barbara, CA 93101 Tel (805) 966-2440 Fax (805) 966-3320 Attol for Cross-Complainant in Intervention MORONGO EQUITY PARTNERS I, LLC SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA BARBARA—ANACAPA DIVISION 10 11 ECO PROPERTY GROUP, LLC, a limited Case No. 19CV04971 liability company, Judge Thomas Andere 12 Plaintiff, CROSS-COMPLAINT IN 13 Vv. INTERVENTION 14 SNIDER INVESTMENTS, LLC, a limited liabili company, DAVID SNIDER, an. 15 indivi , and DOES 1-50 inclusive, 16 Defendants. 17 SNIDER INVESTMENTS, LLC, a Califomia 18 limited liability company, 19 Cross-Complainants 20 Vv. 21 ECO PROPERTY GROUP, LLC, a Delaware limited liabili ; ELI OWENS, an. individual; ROGER MACFARLANE, an individual; and ROES 1 through 10 inclusive, Cross- Defendants. 24 25 MORONGO EQUITY PARTNERS I, LLC, 26 Cross-Complainant in Intervention, 27 CROSS-COMPLAINT IN INTERVENTION: Page 1 BRENT BUHRMAN, SCOTT EDWIN NEWBY, ELI OWENS, ROGER MACFARLANE, GARY WILLIAM WALKER, JR., and ROES 11 through 20, inclusive, Cross- Defendants. Cross-Complainant in Intervention MORONGO EQUITY PARTNERS I, LLC, by its attomeys Reicker, Pfau, Pyle & McRoy LLP, hereby cross-complains against Cross-Defendants BRENT BUHRMAN, SCOTT EDWIN NEWBY, ELI OWENS, ROGER MACFARLANE, GARY WILLIAM WALKER, JR., and ROES 11 through 20, inclusive (collectively, the "Cross- 10 Defendants") and alleges against them as follows. 11 PARTIES TO PENDING ACTION AND COMPLAINT IN INTERVENTION 12 1 Cross-Complainant in Intervention MORONGO EQUITY PARTNERS I, 13 LLC ("MEPI"), previously known as Southem Califomia Cultivation Partners, LLC ("SCCP") is 14 a Califomia limited liability company which is in good standing with the Califomia Secretary of 15 State. To avoid confusion, both SCCP and MEPI are referred to herein as MEPI. 16 2. Defendant and Cross-Complainant SNIDER INVESTMENTS, LLC ("SIL") isa 17 Califomia limited liability company which is in good standing with the Califomia Secretary of 18 State. Defendant DAVID SNIDER ("Snider") is a manager of SIL. Neither SIL nor Snider are 19 patties to this Cross-Complaint. 20 3, MEPI is informed and believes, and thereon alleges, that Cross-Defendant ECO 21 PROPERTY GROUP, LLC ("ECO") purports to be a Delaware limited liability company, though it has never been organized in any jurisdiction and is not registered with the Califomia Secretary of State. ECO is not a party to this Cross-Complaint. 24 4. MEPI is informed and believes, and thereon alleges, that Cross-Defendant ELIT 25 OWENS ("Owens") is an individual who is a resident of Los Angeles County, Califomia. 26 5, MEPI is informed and believes, and thereon alleges, that Cross-Defendant 27 ROGER MACFARLANE ("MacFarlane") is an individual who is a resident of Los Angeles County, Califomia. CROSS-COMPLAINT IN INTERVENTION: Page 2 6. MEPI is informed and believes, and thereon alleges, that Cross-Defendant BRENT BUHRMAN ("Buhrman") is an individual who is a resident of Riverside County, Califomia. 7, MEPI is informed and believes, and thereon alleges, that Cross-Defendant SCOTT EDWIN NEWBY ('"Newby’) is an individual who is a resident of Riverside County, Califomia. 8. MEP! is informed and believes, and thereon alleges, that Cross- Defendant GARY WILLIAM WALKER, JR. ("Walker") is an individual who is a resident of Riverside County, Califomia. 10 9, The true and correct names and capacities of ROES 11 through 20, inclusive, 11 whether individual, corporate, or otherwise, are not known to MEPI, and such cross-defendants 12 are therefore sued by fictitious names. MEPI will amend this Cross-Complaint in Intervention to 13 allege their true names and capacities when they are ascertained. MEPI is informed and 14 believes, and thereon alleges, that each of the fictitiously named cross-defendants is responsible 15 in some manner for the occurrences and acts alleged herein, and is responsible to MEPI for the 16 damages and other relief as herein alleged. All references herein to Cross- Defendants include a 17 reference to the fictitiously named cross-defendants. 18 10. MEPI is informed and believes, and thereon alleges, that at all times relevant 19 herein, each of the Cross-Defendants was the agent, employee, partner, joint venturer or alter ego 20 of each of the remaining Cross-Defendants, and in doing the things alleged herein was acting 21 within the scope of such agency, employment, partnership, joint venture or alter ego status. MEPI is further informed and believes, and thereon alleges, that the conduct of each Cross- Defendant as alleged herein was known to and ratified by each of the other Cross- Defendants, 24 and the benefits thereof were accepted by each of the Cross-Defendants. 25 GENERAL ALLEGATIONS 26 11. In February 2015, SIL purchased the property located at 13310 Little Morongo 27 Road, Desert Hot Springs, CA (the "Property"). SIL's plan was to subdivide the Property into three separate phases, with a commercial condominium plan for each and obtain land use CROSS-COMPLAINT IN INTERVENTION: Page 3 entitlements for all three phases to serve as cannabis cultivation facilities. Within each phase, there would be one building comprised of 12 to 13 condominium units which would be occupied by two tenants, with each utilizing half of the condominium units for the building. 12. When SIL succeeded in receiving approval to subdivide the Property and obtained entitlements for cannabis cultivation for the Property, it was approached by numerous parties who wanted to become tenants in the various buildings that would be subsequently built. 13. SIL initially caused SCCP to be organized and was its sole member with the intention of placing the 12 condominium units of "Phase I" into that entity. SCCP, now known as MEPI, has owned the Property since February 2018. 10 14. One of the many parties that approached SIL was Buhrman who claimed that he 11 ‘was part of a company purportedly known as Seed to Soul Management, LLC ("Seed to Soul"). 12 Buhrman expressed interest on behalf of Seed to Soul in leasing half of the condominium units of| 13 PhaseI comprising 46,425 square feet. Buhrman indicated to Snider that his partners and 14 members in Seed to Soul included four other individuals as well as himself: Owens, MacFarlane, 15 Newby, and Walker. 16 15. Snider, acting as the manager of MEPI, and the purported Seed to Soul members 17 and promoters negotiated the terms of a lease. During those negotiations it was determined that 18 as consideration for entering into the Lease and providing a long term tenant in Phase I, the 19 tenant would be entitled to invest $1,100,000 in MEPI and obtain an ownership interest therein 20 to ensure that the tenant would have "skin in the game." Among Seed to Soul's purported 21 members, it was agreed that only Owens and MacFarlane would provide such an investment, and. that they would hold such investment in the name of ECO, which Cross- Defendants represented. was a limited liability company managed by Owens. 24 16. The Cross- Defendants represented to Snider, who was acting on behalf of MEPI, 25 that MacFarlane would invest an additional $1,000,000 directly into Seed to Soul in order to 26 ensure its financial viability. Additionally, Cross- Defendants all represented to Snider that Seed 27 to Soul was a valid entity, that it was adequately capitalized, that it was capable of commencing operations, and would have the necessary licensing in place to cultivate cannabis at the Property. CROSS-COMPLAINT IN INTERVENTION: Page 4 17. Based on all of these representations, on or around June 3, 2016, MEPI entered into a lease with Seed to Soul. A true and correct copy of the Lease is attached hereto as Exhibit 1 and incorporated herein (the "Lease"). 18. Unbeknownst to MEPI, Seed to Soul did not exist as an entity and has in fact never existed in any jurisdiction—it has never been organized orformed. Additionally, Seed to Soul never had any bank accounts and never applied for any licenses to cultivate or do anything with cannabis. In fact, Seed to Soul did not have the capability at any time to perform any business anywhere in Califomia, or elsewhere. In email communications between the partners of Seed to Soul, MacFarlane specifically told other Seed to Soul partners to intentionally conceal 10 each of these facts from Snider, which they did. 11 19. MacFarlane and Owens' investment in MEPI was evidenced in Section 1(M)(i)(a) 12 of the Lease which stated that one of the landlord's deliverables under the Lease would be to 13 provide MacFarlane and Owens an ownership interest in MEPI. SIL and MEPI were 14 subsequently informed that MacFarlane and Owens would take their membership interest in 15 MEPI via ECO and that Owens would act as ECO's manager. 16 20. Snider indicated to MacFarlane, Buhrman and Owens prior to entering into the 17 Lease, that SIL, which at the time was the sole member of SCCP, was only agreeing to grant the 18 membership interest in SCCP to ECO because Seed to Soul would be a tenant of SCCP and SIL 19 ‘wanted Seed to Soul to have "skin in the game." 20 21. The connection between the Lease and the investment by ECO in MEPI was also 21 confirmed intemally among Seed to Soul's promoters ina Memorandum of Understanding ("MOU") between and amongst the five promoters of Seedto Soul. A true and correct copy of the MOU is attached hereto as Exhibit 2 and incorporated herein. 24 22. At the time the Lease was entered into, in addition to the fact that Seed to Soul 25 ‘was not a valid entity and did not have capacity to enter into a contract, Seed to Soul did not 26 have the capability, either financially or otherwise, to perform the obligations set forth in the 27 Lease and did not have the necessary licenses to perform any cannabis related activities. After all it was not formed and it did not have any bank accounts. CROSS-COMPLAINT IN INTERVENTION: Page 5 23. Thereafter, as required in the Lease, SIL executed a First Amended and Restated Operating Agreement for MEPI (the "Operating Agreement") which admitted ECO as a 20% member of MEPI. A true and correct copy of the Operating Agreement is attached hereto as Exhibit 3 and incorporated herein. 24. The only reason MEPI and SIL even considered admitting ECO to MEPI was because Cross-Defendants represented that Seed to Soul was financially viable and could carry out its Lease obligations and would be a tenant at the Property for at least 10 years. MEPI wanted Seed to Soul to have "skin in the game" with respect to the success of the building. Without the tenancy relationship, MEPI and SIL would never have agreed to admit ECO into 10 MEPI. 11 25. Thereafter, Seed to Soul breached the Lease, because it demanded that MEPI pay 12 for an upgraded HVAC system at the Property that differed from the system called for in the 13 plans included in the Lease. Seed to Soul contended that it could not operate at the property 14 without the upgraded system. Seed to Soul's counsel (who is also counsel for ECO in this 15 action) said that if MEPI did not pay for the upgraded HVAC system it would unilaterally 16 terminate the Lease. Based upon information obtained from Buhrman, due tothe lack of 17 sufficient capitalization from its promoters, Seed to Soul did not have sufficient funds to pay for 18 the upgraded HVAC system which is why it tried to pass this obligation on to MEPI. 19 26. In response, MEPI terminated the Lease, and Seed to Soul entered into a 20 settlement agreement with MEPI on or about April 17, 2018 (the "Settlement Agreement") 21 regarding the termination and retum of the security deposit. As part of that Settlement Agreement, MEPI agreed to pay and did in fact pay, Seed to Soul $345,000, which represented the retum of Seed to Soul's $300,000 and other minor consideration. In negotiating the 24 Settlement Agreement, the promoters of Seed to Soul again purported to be signing on behalf of 25 "Seed to Soul Management, LLC, a Califomia limited liability company." No such entity has 26 ever existed and Seed to Soul lacked capacity to enter into the Settlement Agreement. The 27 payment of the settlement funds was laundered through counsel for Seed to Soul's client trust account. CROSS-COMPLAINT IN INTERVENTION: Page 6 27. Subsequent to the termination of the Lease and the execution of the Settlement Agreement, MEPI and SIL began investigating the background of Seed to Soul and the circumstances giving rise to its failure to abide by the Lease. 28. Based on that investigation and information obtained from Buhrman, it was then discovered for the first time that Seed to Soul had never existed as an entity and never had capacity to enter into any contract, that it never had a bank account, never even began the application process for any of the licenses required to cultivate cannabis and that as a result it never had the ability to carry out its obligations under the Lease. Additionally, MEPI and SIL leamed that MacFarlane had never invested the promised $1,000,000 into Seed to Soul to ensure 10 its viability and ability to comply with the Lease obligations. 11 29. After leaming that the entire Lease and by extension the Operating Agreement 12 had been entered into under false pretenses, Snider contacted MacFarlane by telephone to notify 13 him of SIL's rescission of the Operating Agreement and the offer to immediately retum the 14 $1,100,000 that had been paid by ECO to MEPI. MacFarlane initially agreed but the next day 15 refused to accept the funds. Thereafter, counsel for MEPI again offered to retum the entirety of 16 the funds paid by ECO to MEPI, but counsel for ECO refused. 17 30. | MEPT has also notified Seed to Soul's promoters of its rescission of the Lease and 18 Settlement Agreement as a result of Seed to Soul's lack of capacity to enter into those agreements 19 along with the fraudulent conduct described above in inducing MEPI to sign both documents. 20 FIRST CAUSE OF ACTION 21 (Fraudulent Inducement of Lease By MEPI as against All Cross-Defendants) 31. MEPI incorporates herein by this reference each of the allegations contained in Paragraphs 1 through 30 above as if set forth in full herein. 24 32. At all material times, Cross- Defendants, as promoters of Seed to Soul 25 Management, LLC, and with respect to MacFarlane and Owens, on behalf of ECO, represented. 26 to Snider, acting on behalf of SIL and MEPI, that Seed to Soul, was a valid entity—by signing 27 the Lease and Settlement Agreement under the name "Seed to Soul Management, LLC, a Califomia limited liability company" and that it had the ability to carry out the obligations called CROSS-COMPLAINT IN INTERVENTION: Page 7 upon it in the Lease, including but not limited to, the representation that it would lease a portion of PhaseI of the Property, pay rent for at least 10 years, and that it had the ability to carry out camnabis related activities. 33. Cross- Defendants, as promoters of Seed to Soul, are liable for all obligations taken in Seed to Soul's name since that entity was never formed. 3A. Cross-Defendants' representations were false in that Seed to Soul was never formed and lacked capacity to enter into any contracts and it never had the financial capability or the legal capability to carry out its obligations under the Lease. At all times, Cross-Defendants knew that these representations were false. In fact, MacFarlane specifically told Owens and 10 other Seed to Soul partners in writing to not tell Snider the truth about these issues. 11 35. Cross- Defendants all intended for MEPI to rely upon these representations in 12 order to induce MEPI to execute the Lease with Seed to Soul, which in tum obligated MEPI and 13 SIL to grant ECO a 20% membership interest. 14 36. | MEPI justifiably relied upon these false representations to its detriment when it 15 executed the Lease. 16 37. Had MEPI known that Seed to Soul was not a valid entity and lacked capacity to 17 enter into a contract, that it did not have any bank accounts, did not have sufficient funding, that 18 it had not even begun the application process to obtain any cannabis licensed, and that by 19 extension it was incapable of performing its obligations under the Lease, it never would have 20 entered into the Lease, which then created the obligation to enter into the First Amended and 21 Restated Operating Agreement granting MacFarlane and Owens a 20% membership interest in it. 38. | MEPI's consent to enter into the Lease was therefore induced by Cross- Defendants’ fraudulent representations. 24 39. To the extent not already effectuated, the filing of this action shall serve as 25 MEPI's Notice of Rescission of the Lease. 26 40. | MEPI seeks rescission of the Lease and to be put back into the position it would 27 have been had the Lease never been executed. /// CROSS-COMPLAINT IN INTERVENTION: Page 8 SECOND CAUSE OF ACTION (Fraudulent Inducement of Settlement Agreement by MEPI as Against All Cross-Defendants) 41. MEPI incorporates herein by this reference each of the allegations contained in Paragraphs 1 through 40 above as if set forth in full herein. 42. At all relevant times, Cross-Defendants intentionally and knowingly misrepresented to SIL that Seed to Soul was a validly formed entity by signing various documents under the guise of "Seed to Soul Management, LLC, a Califomia limited liability company" and that it had the capability of executing a binding release on behalf of all of its 10 members, affiliates, and partners under the Settlement Agreement. 11 43. Cross- Defendants, as promoters of Seed to Soul, are liable for all obligations 12 taken in Seed to Soul's name since that entity was never formed. 13 4A, At all relevant times, MEPI justifiably relied on Cross-Defendants' intentional 14 misrepresentations and omissions of material facts, all to MEPI's detriment in that MEPI would 15 never have entered into the Settlement Agreement and paid Seed to Soul $345,000, which was 16 laundered through Seed to Soul's counsel's office, had it known that Seed to Soul had 17 fraudulently entered into the Lease, lacked capacity to enter into or enforce the Lease, that it was 18 not a valid entity, and that as a result any claims Seed to Soul was purportedly releasing in the 19 Settlement Agreement were not claims because there was no Seed to Soul to which those claims 20 belonged. 21 45. | MEPI's consent to enter into the Settlement Agreement was therefore induced by Cross-Defendants' fraudulent representations. 46. To the extent not already effectuated, the filing of this action shall serve as 24 MEPI's Notice of Rescission of the Settlement Agreement. 25 47. MEPI seeks retum of the $345,000 it paidto Cross-Defendants as consideration 26 under that Settlement Agreement. 27 //1 //1 CROSS-COMPLAINT IN INTERVENTION: Page 9 THIRD CAUSE OF ACTION (Declaratory Relief by MEPI as Against All Cross-Defendants Regarding Lease) 48. | MEPI incorporates herein by this reference each of the allegations contained in Paragraphs 1 through 30 above as if set forth in full herein. 49, When a party lacks capacity to enter into a contract, that contract is unenforceable. A purported limited liability company that enters into a contract prior to its organization can only enforce that contract, if it is subsequently formed and proceeds to ratify said contract. 50. When MEPI and the promoters of Seed to Soul signed the Lease, Seed to Soul had not been formed as an entity. Seed to Soul was not subsequently formed and therefore could 10 not ratify the Lease. As such, MEPI contends that the Lease is unenforceable as a matter of law. 11 MEPI further contends that since the Lease is unenforceahle, all obligations set forth therein, 12 including the requirement that MEPI provide ECO with a 20% interest in MEPI are also 13 voidable. 14 51. Seed to Soul's promoters dispute that the Lease is void and claim that ECO's 15 membership interest in MEPI is not linked to the Lease, even though it is one of the expressly 16 stated deliverables in the Lease. 17 52. MEPI desires a judicial determination of its rights and duties and a declaration as 18 to whether the Lease is void and/or unenforceable and whether any of the obligations set forth in 19 the Lease are also voidable and unenforceable. 20 53. A judicial declaration is necessary and appropriate at this time so that MEPI may 21 ascertain its rights and duties because Seed to Soul's promoters’ actions have caused an unsettled state of affairs which has affected the operations of MEPI. FOURTH CAUSE OF ACTION 24 (Declaratory Relief by MEPI as Against All 25 Cross-Defendants Regarding Settlement A greement) 26 54. MEPI incorporates herein by this reference each of the allegations contained in 27 Paragraphs 1 through 30 and 48 through 53 above as if set forth in full herein. CROSS-COMPLAINT IN INTERVENTION: Page 10 55. When a party lacks capacity to enter into a contract, that contract is unenforceable. A limited liability company that enters into a contract prior to its organization can only enforce that contract, if itis subsequently formed and proceeds to ratify said contract. 56. | When MEPI and the promoters of Seed to Soul signed the Settlement Agreement, Seed to Soul had not been formed as an entity. Seed to Soul was not subsequently formed and. therefore could not and has not ratified the Settlement Agreement. Furthermore, in order to conceal the fact that Seed to Soul had no way of accepting funds, the settlement payment called for in the Settlement Agreement was laundered through counsel for Seed to Soul's promoters, who is also ECO's counsel in this action. As such, MEPI contends that the Settlement 10 Agreement is unenforceable as a matter of law. MEPI further contends that since the Settlement 11 Agreement is unenforceable, all obligations set forth therein, including the general mutual 12 release, are also voidable. 13 57. Seed to Soul's promoters dispute that the Settlement Agreement is void and claim. 14 that even though they represented in that document that Seed to Soul was a validly formed 15 Califomia limited liability company, when it was not, it somehow had the capacity to enter into 16 the Settlement Agreement. 17 58. MEPI desires ajudicial determination of its rights and duties and a declaration as 18 to whether the Settlement Agreement is void and whether any of the obligations set forth in the 19 Settlement Agreement are also void and unenforceable. 20 59. A judicial declaration is necessary and appropriate at this time so that MEPI may 21 ascertain its rights and duties because Seed to Soul's promoters’ actions have caused an unsettled state of affairs which has affected the operations of MEPI. PRAYER 24 WHEREFORE, Cross-Complainant prays as follows: 25 (On the First Cause of Action) 26 1 Foran order rescinding the Lease and all obligations set forth therein; 27 2. For damages that would put MEPI back into the position it would have been had 28 the Lease never been entered into; CROSS-COMPLAINT IN INTERVENTION: Page 11 (On the Second Cause of Action) 3, For and order rescinding the Settlement Agreement; and 4. Forretum of the $345,000 MEPI paid as consideration under the Settlement Agreement; and (On the Third Cause of Action) 5, For ajudicial determination that the Lease is void and unenforceable and that all obligations set forth therein, including but not limited to, the obligation to provide a 20% membership interest in MEPI to Owens and MacFarlane's entity, are also void and unenforceable; (On the Fourth Cause of Action) 10 6. For ajudicial determination that the Settlement Agreement is void and 11 unenforceable and that all obligations set forth therein are also void and unenforceable; 12 (On All Causes of Action) 13 7, For prejudgment interest; 14 8. For costs of suit incurred herein; and 15 9, For such other and further relief as the Court deems just and proper. 16 DATED: June 9, 2020 REICKER, PFAU, PYLE & McROY LLP 17 18 27 ZZ By 19 Robert B. Forouzandeh Attomeys for Defendants and 20 Cross-Complainant 21 24 25 26 27 CROSS-COMPLAINT IN INTERVENTION: Page 12 EXHIBIT 1 LEASE BETWEEN SOUTHERN CALIFORNIA CULTIVATION PARTNERS, LLC LANDLORD AND SEED TO SOUL MANAGEMENT, LLC TENANT FOR 14.6 Acre, Little Morongo Road Desert Hot Springs, CA DATED: June 3, 2016 LEASE This LEASE dated as of June 3, 2016 is made by and between SOUTHERN CALIFORNIA CULTIVATION PARTNERS, LLC ("Landlord"), and SEED TO SOUL MANAGEMENT, LLC ("Tenant"). Landlord and Tenant are sometimes referred to individually as "Party" or together as "Parties". WITNESSETH: JINESSELH Section 1. DEFINITIONS AND EXHIBITS TO LEASE. In this Lease, the words in bold print in Section 1 shall have the meaning set forth thereafter. A LANDLORD: SOUTHERN CALIFORNIA CULTIVATION PARTNERS, LLC 730 Arcady Rd. Santa Barbara, CA 93108 Phone: (216) 785-0011 B TENANT: SEED TO SOUL MANAGEMENT, LLC 7900 Limonite Avenue, Suite G number I 11 Riverside Ca, 92509 Cc PREMISES: The Premises shall consist of 46,425 square feet of the greenhouse and head house known as Phase 1. Tenant shall occupy all of the headhouse of phase | as part of their Lease. The property encompassed in this Lease is further described in Exhibit A, which shall be mutually agreed to between the parties in good faith pursuant to Section 1(M) of this Lease. D PERMITTED USE OF PREMISES BY SEED TO SOUL MANAGEMENT, LLC: Tenant shall use the Premises only for the following purpose: Cultivation and processing of medical marijuana and additional uses provided through the Conditional Use Permit. Any changes to said use or the format of Tenant's business shall require the prior written consent of Landlord which consent shall not be unreasonably withheld. E COMMON AREAS: (Common Areas are never defined in the lease). F TENANT'S SHARE: Prorata share of the existing building at the development. Tenant's prorata share shall be a fraction, the numerator of which shall be the gross leasable area leased to Tenant and the denominator of which shall be the total gross leasable area of the building. Landlord shall notify Tenant’s share prior to Tenant's first rental payment. 2 G. LEASE TERM: 10 Years. Three (3) 5 Year Options @ Original Term: Ten (10) Years Option: Tenant shall have three (3) successive options to extend the Lease Term for periods of five (5) years (“Option Term(s)”) at the then fair market rent exercisable in writing no less than 180 calendar days prior to the expiration of the original Lease term. Option rent shall not be less than the rent paid in the preceding period. (b) Expiration Date: 25 Years from time rent commences. @ Rent Commencement Date: Rental charges shall commence on the later of (i) the first day after the City of Desert Hot Springs issues a Certificate of Occupancy, or (ii) completion of the Deliverables set forth in Section 1(M) of this Lease. (ii) Lease Year: (a) First Lease Year: (b) Months | through 3 are no charge Minimum Rent: The annual minimum Rent shall be $45.00/square foot triple net, which equates to $174,094.00 per month, and is subject to yearly escalations for the duration of the term, per SECTION 5. The yearly minimum rent will be $2,089,125.00. @ City Tax Rate: Tenant shall pay all City medical marijuana taxes due for Tenant's Premises. The current effective rate is an annual tax of twenty-five dollars ($25) per square foot for the first 3,000 square feet and then ten dollars ($10) per square foot for the remaining space utilized in connection with the cultivation of marijuana. Tenant is solely responsible for the payment of these taxes. Non-payment of any taxes due for the Premises is a default under this Lease. Landlord agrees that tenant shall only be responsible for taxes due on its space as determined by the City of Desert Hot Springs (ii) Additional Charges: Tenant shall pay Tenant's Share of Tax Charges, Insurance Charges and Maintenance Fees more fully described in subsection (e) of section ii of this Lease. (b) Tax Charges: Tenant shall reimburse Landlord for all taxes assessed for any reason and levied on the Premises and the realty underlying the Premises and 3 the cost to Landlord of Property and Liability insurance maintained by Landlord on the building. Tenant shall pay the City medical marijuana tax assessed as a result of this Lease, due upon execution thereof, directly to the taxing authority. (©) Insurance Charges: Tenant shall be responsible for maintaining its own policy of commercial general liability insurance for the Premises and a policy of property insurance (ISO Special Form) for all property, furniture, fixtures, inventory and other improvements made by Tenant within the Land Area, together with business interruption, with Landlord being named as an additional insured there under, all in accordance with the requirements to be set forth in the Lease agreement. (d) Management Fees: 5 (five) percent of Base Rent (e) Operating Charges/Maintenance Expenses: Tenant shall be responsible for its prorata share of operating charges/maintenance expenses at the property. They are defined as: Landlord's reasonable total annual costs and expenses of operating, maintaining, repairing, replacing, upgrading, enlarging and supervising the Common Areas (together "Operation(s)"), which includes, but is not limited to, the following: removing trash, refuse, rubbish and garbage; cleaning, gardening and landscaping; sanitary control; providing security or traffic control forces or equipment; repairs, additions to, and replacements of the paving, curbs, walkways, drives, electric lines, light poles, bulbs, drainage, sewers, and the equipment used in or constituting the Common Areas; line painting; attending the parking areas; any governmental charges, surcharges, fees, or taxes on the parking areas, parking spaces or on cars parking therein; cost of all utilities used or consumed in the Common Areas; repair and/or replacement of on-site gas lines, water lines, sanitary sewer lines, storm sewer lines, and any other common utility lines, pipes, wires, facilities and related appurtenances serving the property; inspection and depreciation of facilities; management fees; costs of signs, sign maintenance and sound systems; all personal property and similar taxes; the cost of all non- capital Common Area equipment, machinery, tools, supplies other personal property and facilities; the amortized cost amortization of all capital expenditures to and/or for the Common Areas over their useful life or 5 years, whichever is less; the cost of personnel to implement such services and similar services and functions; cost of any contracts entered into for the performance of any such Operations; I Security Deposit: The Security Deposit is $300,000.00 the first $100,000.00 with the signing of this Lease, $100,000.00 on July 1, 2016, and 100,000.00 on August Ist 2016. For any reason the Certificate of Occupancy isn’t issued by April 1, 2017, or the Deliverables not being completed pursuant to Section 1(M) of this Lease, Landlord shall provide a full refund of the Security Deposit without penalty and immediately upon written request. Use: Per the Conditional Use Permit and the Development Agreement issued by the City of Desert Hot Springs. Applicable Laws: All codes, laws, orders, ordinances, requirements, regulations, rules and/or statutes of governmental bodies (federal, state, county, local and/or otherwise) and/or agencies, whether building, disability, environmental, fire, 4 handicapped (including without limitation The Americans With Disabilities Act [42 U.S.C. 12101 et. seq.]), health, insurance, police, safety or otherwise, and whether now in force or hereafter enacted or adopted and including final decisions of courts of competent jurisdiction. Exhibits: (i) Exhibit A Legal description of the Cultivation Park. (ii) Exhibit B Current Site Plan of the Cultivation Park. (iii) Exhibit C Condition of the Premises (Landlord’s Work and Tenant’s Work). Conditions Precedent & Deliverables / Due Diligence Period / Escrow: (i)Upon execution of this Lease, the parties will work together in good faith to complete the following (“Deliverables”): (a) An agreement between David Snider and Landlord on the one hand and Roger MacFarlane and Eli Owens on the other for the contemplated membership interest in Southern California Cultivation Partners LLC; (b) An agreement between David Snider and Seed to Soul Management LLC for the financing of cultivation operations on the Premises; (c) Receipt and acceptance of the Exhibits, permits (including without limitation the Conditional Use Permit and Development Agreement) and any other material and relevant documents referenced in this Lease (ii) The parties intent to complete the Deliverables within sixty (60) days following execution of this Lease (“Due Diligence Period”). In the event the parties do not complete the Deliverables within the Due Diligence Period, Tenants shall have the option (upon written notice to Landlord) to: (i) reasonably extend the Due Diligence Period to permit completion of the Deliverables, or (ii) terminate this Lease. In the event of termination by Tenant pursuant to this Section 1(M), Landlord shall refund the full amount of the Security Deposit paid by Tenant immediately upon notice and without penalty. Accordingly, David Snider hereby agrees to personally hold the Security Deposit in escrow during the Due Diligence Period until completion of the Deliverables or termination by Tenants pursuant to this subsection. Section 2. GRANT OF LEASE - INTENTIONALLY DELETED Section 3. TERM. This Lease shall commence on the Commencement Date and end on the Expiration Date. Section 4. OPTION TO EXTEND TERM. Tenant is hereby granted the right to extend this Lease for the Extended Term(s) upon the agreements, conditions and covenant herein set forth, provided that (i)Tenant notifies Landlord, in writing, of Tenant's election to extend the Lease at least six (6) months prior to the date of commencement of an Extended Term, (ii) this Lease shall then be in full force and effect and (iii) Tenant shall not be in default hereunder at any time between the exercise of such extension right and the commencement of the Extended Term being exercised. Section 5, FIXED MINIMUM RENT. Tenant shall, without demand and without any deduction or set-off except to the extent otherwise set forth herein, pay to Landlord at Landlord's office or such place as Landlord may from time to time designate Fixed Minimum Rent for each Lease Year of the Term commencing upon the Rent Commencement Date payable in monthly installments, each in advance on the first day of each month. If the Rent Commencement Date occurs on a day other than the first day of a month, Tenant shall pay on the Rent Commencement Date, in advance, the prorated monthly amount due for such partial calendar month plus the full monthly installment due for the next succeeding full calendar month. Upon the first day of each Succeeding Lease Year, including any Extended Term, the Fixed Minimum Rent shall be adjusted upward, by the lesser of (i) one percent (1%), or (ii) the increase in the consumer price index. Section 6. INTENTIONALLY DELETED Section 7. INTENTIONALLY DELETED Section 8, INTENTIONALLY DELETED Section 9. ADDITIONAL CHARGES: A Commencing upon the Rent Commencement Date, Tenant shall pay to Landlord, at the times hereinafter set forth, without deduction, set-off or abatement except to the extent otherwise set forth herein, the Additional Charges, deemed to be rent for all purposes of this Lease, the nonpayment of which shall be subject to all provisions of this Lease and of law as to default in the payment of rent or other sums of money. B The annual amounts of the Additional Charges shall be estimated by Landlord on or about the beginning of each calendar year during the Term and Tenant shall pay one-twelfth (1/12) of each such estimate, monthly, in advance, on the first day of each and every calendar month commencing upon the Rent Commencement Date. Within 90 days after the end of each calendar year during the Term, when Landlord has calculated the exact amount actually payable by Tenant, Landlord shall notify Tenant. Any deficiency in payment by Tenant shall be paid by Tenant to Landlord upon receipt of notice. Any surplus in respect thereto shall be credited against the next ensuing Additional Charges due. The amounts payable by Tenant for the first year and last calendar years of this Lease shall be prorated for the parts of such first and last calendar years that Tenant is obligated to pay Fixed Minimum Rent under this Lease including any fraction of a month. Annual Additional Charges shall be final and not subject to adjustment by Tenant from and after two years following Landlord’s submission of Landlord’s calculation thereof to Tenant. B @) Any payment due from Tenant to Landlord not paid upon the date herein specified to be paid shall bear Interest after day (5) from the date such payment was due to the date of actual payment. For the purposes hereof, “Interest” shall mean the rate of one and a half percent (1.5%) per month or the highest lawful rate of interest permitted in California, whichever rate of interest is lower, Gi) In addition to Interest, Tenant shall pay to Landlord a late payment charge equal to five percent (5%) of any amount due to Landlord if not paid within seven (7) days from the date required to be paid hereunder. In the event Tenant has not paid rent or any other amounts owed to Landlord for any reason within thirty (30) days from the date required, Landlord may cancel this Lease at La