Court Opinion

ID: 9910516
Source: CourtListenerOpinion
Date Created: 2023-12-15 19:02:34.989486+00
Date Added: 2024-06-11T12:53:07.785003
License: Public Domain

Filed 12/15/23 Blalock v. Halt Gold Group CA2/4
            NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication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

         IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                  SECOND APPELLATE DISTRICT

                                                DIVISION FOUR

 JACOB BLALOCK and                                                      B324196
 BENJAMIN NOVAK,
                                                                        (Los Angeles County
           Plaintiffs and Appellants,                                    Super. Ct. No. 19STCV35566)

           v.

 HALT GOLD GROUP, LLC (dba
 PATRIOT GOLD GROUP LLC et al.,

           Defendants and Respondents.

         APPEAL from a judgment of the Superior Court of Los Angeles County,
Lia R. Martin, Judge. Affirmed in part, reversed in part and remanded.
         Fernald & Zaffos, Brandon C. Fernald, Clay R. Wilkinson and Adam P.
Zaffos for Plaintiffs and Appellants.
         Sheppard Mullin Richter & Hampton, Tracey A. Kennedy, Brianna S.
Wilson, Emily A. Papania and Y. Douglas Yang for Defendants and
Respondents.
                              INTRODUCTION
      Plaintiffs Jacob Blalock and Benjamin Novak (collectively, plaintiffs)
were two of six founding members as well as employees of Halt Gold Group,
doing business as Patriot Gold Group, LLC (Patriot). After a year, Patriot
terminated plaintiffs’ employment and later removed them as members for
“cause.” Plaintiffs filed the instant lawsuit against Patriot and its remaining
four members for breach of contract, breach of the implied covenant of good
faith and fair dealing, conversion, and declaratory judgment. The gravamen
of the complaint was that plaintiffs’ removal as members for “cause” violated
Patriot’s operating agreement that was entered into by the founding
members. The trial court granted Patriot and the remaining members’
motion for summary judgment.
      On appeal, plaintiffs challenge the court’s order granting summary
judgment and resulting judgment as to Patriot only, not as to the individual
members. We reverse the judgment, and the order granting summary
judgment as to Patriot. We affirm the grant of summary adjudication on the
issues of (1) whether Patriot was required to permit plaintiffs to vote on each
other’s removal as members of Patriot and (2) whether Patriot was required
to give plaintiffs advance notice of their removal for “cause” as members of
Patriot. We also affirm summary adjudication on the conversion and
declaratory judgment claims. We reverse the grant of summary adjudication
on the issue of whether plaintiffs were removed as members for “cause.” We
remand the matter for further proceedings.

                                       2
              FACTUAL AND PROCEDURAL BACKGROUND
   I.     Membership Interest
        In March 2016, Patriot was founded by members Jacob Blalock,
Benjamin Novak, Mike Celano, Charley Chartoff, John “Jack” Hanney, and
Brothers Investment, LLC (by Alexander Orbison). On April 4, 2016, the
members entered into the amended and restated operating agreement
(operating agreement), effective March 15, 2016. The purpose of the
operating agreement was for the “marketing and sales of precious metals and
facilitation services related to the same.” The operating agreement set forth
the duties and obligations of Patriot and its members and governed Patriot’s
operations and the actions of its members. A member’s ownership stake in
Patriot was referred to as the “membership interest.” The “membership
interest” was measured by “identifiable units of measurement issued to the
[m]embers” and known as “membership units.”
        The operating agreement was comprised of twelve distinct articles,
each of which contained its own numbered sections. As relevant here, section
6.4.1 of article VI, titled “Members,” of the operating agreement permitted
Patriot to “act to remove a [m]ember’s [m]embership [u]nits and all
associated rights at any time for ‘[c]ause’ by unanimous vote of all [m]embers
other than the [m]ember whose actions had precipitated the vote for removal
and providing notice to the [m]ember wherein ‘[c]ause’ means [m]ember’s
conviction of a felony . . . ; commission of fraud, embezzlement, or other
misappropriation on [m]ember’s part which has/is a detrimental impact on
[Patriot’s] finances, reputation, business, or goodwill; [m]ember’s willful
failure to perform his material duties, which failure is not cured within ten
(10) business days after the date on which [Patriot] gives notice to the
[m]ember of such failure; or [m]ember’s willful material breach of [m]ember’s

                                        3
obligations with respect to [Patriot’s] conflicts of interest policy or any other
rules or regulations of engagement which may be adopted or amended from
time to time by [Patriot] of which [Patriot] has given written notice to the
[m]ember.” (Italics added.) Section 6.4.2 of the operating agreement
provided when a member was removed, his or her membership units would
“be surrendered, redeemed and valued on the date of such [r]emoval.”

   II.     Employment
         In addition to being members, plaintiffs were also employed by Patriot
as gold brokers. Plaintiffs entered into identical employment agreements,
effective April 1, 2016. The agreements specified that any membership
interest held in Patriot and any rights related to that membership were
defined in the operating agreement and “shall have no bearing or effect on
this [employment] [a]greement or any terms found herein.”

   III.    Termination of Employment
         On May 8, 2017, plaintiffs were both terminated from their
employment with Patriot. Plaintiffs received termination letters informing
them that their “employment with Patriot [was] terminated, effective
immediately” but stated their membership interests held in Patriot were “not
directly impacted by this decision.” The letters reminded plaintiffs they were
“bound by [Patriot’s] confidentiality policy.” Plaintiffs’ computer access was
terminated that morning, and their parking and building access cards were
deactivated that day.

                                         4
    IV.     Post-Termination Office Visit
      Plaintiffs sent separate text messages to Celano1 and informed him
that they would be returning to the office on May 9, 2017 to retrieve some
personal items. Celano did not respond to the text messages.
      On May 9, 2017, Novak “briefly” entered the office and “noticed it ha[d]
been rifled through and [his] items had been moved.” In addition, “[n]othing
of any commercially sensitive nature relating to Patriot was left.” Similarly,
Blalock entered the office “but was too embarrassed and distraught to go any
further” and decided to wait outside for Novak. Celano and Chartoff watched
plaintiffs as they left the office. Hanney was also in the office, but not within
eyesight.
      Celano was later informed by two Patriot employees, Andrew Clay and
William Moore,2 that they saw plaintiffs enter the office on May 9, 2017 and
remove documents from their workstations. In his deposition, Clay admitted
he did not actually know what items Novak was carrying out of his office.
Celano launched an internal review to determine what plaintiffs removed
from the office that day. He discovered that lead sheets3 and a hard copy of
Patriot’s customer list “went missing immediately after” plaintiffs left the

1     Section 5.9.1 of article V, titled “Management of Day to Day
Operations,” of the operating agreement provided that members “shall elect,
from time to time, a [m]ember who shall be named and act as [Patriot’s] ‘Lead
Member’ until relieved of [his or her] duties.” A lead member would be
responsible for the day-to-day management of Patriot’s business and affairs.
Celano had been serving as the lead member since Patriot’s formation.

2   No sworn testimony was filed from William Moore in support of the
summary judgment motion.

3     Patriot employees maintained documents called “lead sheets” for each
Patriot customer. The lead sheets included information about sales to
customers, among other customer details.

                                            5
office. Novak maintained hard copies of lead sheets containing customer
information at his workstation and those documents “went missing.” Celano
opined plaintiffs took lead sheets and “other Patriot company documents.”
        However, plaintiffs denied they took “any customer list or anything else
that would be considered commercially sensitive to Patriot.”

   V.      Formation of Orion Precious Metals, Inc.
        On May 16, 2017, plaintiffs filed articles of incorporation with the State
to form a new company called, Orion Precious Metals, Inc. (Orion). Plaintiffs
had not planned on going “into business at that point,” and Orion was a
“backup” plan. Plaintiffs reached out to clients that “were already [their]
clients or known to [them] before joining Patriot or those that were [their]
clients while at Patriot.” Plaintiffs informed those clients that they were no
longer with Patriot and were now at Orion.
        On May 17, 2017, Patriot sent a letter to plaintiffs stating that it was
aware plaintiffs planned to form a competitive business. The letter reminded
plaintiffs of their post-termination confidentiality obligations concerning
their duty not to disclose any confidential information belonging to Patriot.
        On July 27, 2017, plaintiffs entered into a shareholder agreement with
Orion investors. Plaintiffs stated that Orion began its operations in
September 2017. Patriot members first learned plaintiffs were soliciting
customers in September 2017.

   VI.     Removal as Members
        On August 1, 2017, plaintiffs filed a wrongful termination lawsuit
against Patriot. (Jacob Blalock, et al. v. Halt Gold Group, LLC, et al. (LA
Super. Ct. case No. BC670702.)

                                         6
      On August 2, 2017, Patriot members Chartoff, Hanney, Orbison, and
Celano met and voted to remove plaintiffs as members of Patriot for “cause”
and to reacquire their membership units. The members adopted and issued a
written resolution, dated August 3, 2017. The resolution stated the members
“other than Jacob Blalock and Benjamin Novak (the ‘[m]ember’)” met and
discussed on August 2, 2017 plaintiffs’ termination of employment. The
resolution also stated members were informed the day before the vote that
plaintiffs filed a wrongful termination lawsuit against Patriot. The resolution
then stated the “[m]embers waive any [n]otice requirements for Members
Meeting and have together discussed and unanimously agree that the
membership units of Jacob Blalock and Benjamin Novak representing their
[m]embership [i]nterests in [Patriot], should be reacquired by [Patriot]
because of their prior and continuing actions and conflicts created by such
actions.”
      In a letter dated August 3, 2017, Patriot notified plaintiffs that it
exercised its right to purchase their membership interests in Patriot. Several
days later, each plaintiff received a check for their membership interests in
Patriot.
      In a letter dated October 16, 2017, Patriot addressed “the ongoing
misappropriation of trade secrets belonging to [Patriot] by [Orion], a business
that is owned and operated by [plaintiffs].” Patriot noted that Orion is a
direct competitor of Patriot. The letter stated that plaintiffs entered the
Patriot office on May 9, 2017 “without authorization and removed several
proprietary, commercially-sensitive documents belonging to [Patriot],
including but not limited to a customer list belonging to Patriot . . . . They
did so at a time when they were members of [Patriot] in breach of the
fiduciary duty owed to [Patriot].” Plaintiffs “then formed and opened Orion

                                        7
several weeks later and began using the customer list they misappropriated
from [Patriot] to solicit its clients to transfer their business to Orion.” The
letter concluded these actions constituted “unlawful misappropriation of
[Patriot’s] trade secrets.”
      Plaintiffs sent a letter in response, denying Patriot’s allegations.
Specifically, plaintiffs denied that they took anything of a confidential or
proprietary nature from the office on May 9, 2017 and that they did not
compete with Patriot’s business until September 2017, after they were
removed as members.

    VII. Complaint and Motion for Summary Judgment
      On October 4, 2019, plaintiffs filed the operative complaint alleging
four causes of action: breach of contract; breach of the implied covenant of
good faith and fair dealing; conversion; and declaratory judgment. The
gravamen of the complaint was that Patriot improperly removed plaintiffs as
members and seized their membership units.
      On May 23, 2022, Patriot moved for summary judgment or,
alternatively, summary adjudication on the following three issues related
to plaintiffs’ breach of contract claim: (1) section 6.4 of the operating
agreement did not require Patriot to provide plaintiffs with advance notice
of their removal for “cause;” (2) section 6.4 of the operating agreement did
not require Patriot to permit plaintiffs to vote on each other’s expulsion as
members of Patriot when Patriot removed them simultaneously for
“cause;” (3) plaintiffs were removed as members for “cause” under section
6.4 of the operating agreement.4 Patriot also moved for summary

4    This issue was more broadly worded in Patriot’s summary judgment
motion, stating that the breach of contract claim fails because plaintiffs

                                        8
adjudication on the conversion and declaratory judgment claims. In
support of the motion, Patriot attached: the operating agreement;
declarations of the remaining four members; deposition testimony of
Chartoff and Orbison;5 the declaration of Patriot employee, Clay;
deposition testimony of Blalock as the person most knowledgeable of
Orion; the May 8, 2017 termination of employment letters; the August 3,
2017 resolution along with Patriot’s letter to plaintiffs; and the August 7,
2017 letter to plaintiffs about the acquisition of membership units.
      In opposition, plaintiffs contended the operating agreement
unambiguously required (1) Patriot to give notice to plaintiffs prior to
removal and (2) a unanimous vote of all members other than the member
whose membership units were being reacquired. Also, plaintiffs argued
there was a triable issue of material fact concerning whether their
membership interests were reacquired for “cause” under the terms of the
operating agreement. In support of the opposition, plaintiffs attached:
their declarations; Patriot’s discovery responses; and the October 16, 2017
letter from Patriot and plaintiffs’ response.
      In reply, Patriot argued plaintiffs were removed as members for
“cause” under the operating agreement and in any event, Patriot is
insulated from judicial scrutiny under the business judgment rule. Patriot
attached, among other documents, Orion’s shareholder agreement.

cannot establish that Patriot breached the material terms of the operating
agreement (and the buy-sell agreement). However on appeal, both parties
narrow their focus on whether Patriot removed plaintiffs for “cause.”

5     The trial court sustained plaintiffs’ evidentiary objections to the
entirety of Celano’s and Hanney’s deposition testimony (Exhibits G and J).

                                      9
      After a hearing, the trial court granted the motion for summary
judgment and entered judgment in Patriot’s favor.6
      Plaintiffs timely appealed the judgment.

                                 DISCUSSION
      On appeal, plaintiffs argue there is a triable issue of material fact on
the breach of contract claim as to the following: (1) whether section 6.4 of the
operating agreement required Patriot to permit plaintiffs to vote on each
other’s removal as members of Patriot; (2) whether Patriot was required to
provide plaintiffs with advance notice of their removal for “cause” under
section 6.4 of the operating agreement; and (3) whether plaintiffs were
removed as members for “cause” under the terms of the operating agreement.
In addition, plaintiffs contend there are triable issues of material fact as to
the conversion and declaratory judgment claims.7

6      Plaintiffs filed a motion for summary adjudication as to their breach of
contract and conversion claims prior to Patriot (and its remaining members)
filing the motion for summary judgment. The trial court denied the motion.
Plaintiffs subsequently filed a writ of mandate, which this court denied. In
its opening brief, Patriot refers numerous times to plaintiffs’ failed motion for
summary adjudication and subsequent writ of mandate. Those rulings are
not relevant to the issues on appeal. An order denying a motion for summary
adjudication “simply establishes the existence of a triable issue of fact. It
does not decide the issue.” (Transport Ins. Co. v. TIG Ins. Co. (2012) 202
Cal.App.4th 984, 1009; see also Emerald Bay Community Assn. v. Golden
Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1086 [“[d]enial of a motion for
summary judgment does not establish any fact or resolve any issue; it merely
determines that the issues will be decided later, at the time of trial”].)

7     Defendants assert, and we agree, plaintiffs forfeited the other issues
adjudicated by the trial court on the breach of contract claim, the breach of
implied covenant of good faith and fair dealing claim, and punitive damages.
(Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1345–1346, fn. 6

                                       10
   I.       Governing Principles and Standard of Review
         A party is entitled to summary judgment only if there is no triable
issue of material fact and the party is entitled to judgment as a matter of law.
(Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary
judgment must show that one or more elements of the plaintiff’s cause of
action cannot be established or that there is a complete defense. (Id., subd.
(p)(2).) If the defendant meets this burden, the burden shifts to the plaintiff
to present evidence creating a triable issue of material fact. (Ibid.) A triable
issue of fact exists if the evidence would allow a reasonable trier of fact to
find the fact in favor of the party opposing summary judgment. (Aguilar v.
Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)
         We review the trial court’s ruling on a summary judgment motion de
novo, liberally construe the evidence in favor of the party opposing the motion
and resolve all doubts concerning the evidence in favor of the opponent.
(Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.) “While we
must liberally construe plaintiff’s showing and resolve any doubts about the
propriety of a summary judgment in plaintiff’s favor, plaintiff’s evidence
remains subject to careful scrutiny. [Citation.]” (King v. United Parcel
Service, Inc. (2007) 152 Cal.App.4th 426, 433.)

   II.      Breach of Contract
         The standard elements of a breach of contract claim are (1) the
existence of a contract, (2) the plaintiff’s performance or excuse for
nonperformance, (3) the defendant’s breach, and (4) resulting damage to the

[“an appellant’s failure to raise an issue in its opening brief [forfeits] it on
appeal”].)

                                         11
plaintiff. (Abdelhamid v. Fire Ins. Exchange (2010) 182 Cal.App.4th 990,
999.)

        A. Voting for Removal
        Plaintiffs contend the trial court erred in concluding that section 6.4 of
the operating agreement was not reasonably susceptible to their proposed
interpretation of the unanimous vote required for the removal of a member.
Plaintiffs assert that the operating agreement as a whole demonstrates that
their proposed interpretation is not only reasonable but also the correct
interpretation of the provision.
        “The rules governing the role of the court in interpreting a written
instrument are well established. The interpretation of a contract is a judicial
function. [Citation.] In engaging in this function, the trial court ‘give[s]
effect to the mutual intention of the parties as it existed’ at the time the
contract was executed. [Citation.] Ordinarily, the objective intent of the
contracting parties is a legal question determined solely by reference to the
contract’s terms. [Citation.]” (Wolf v. Walt Disney Pictures & Television
(2008) 162 Cal.App.4th 1107, 1125–1126.) “On appeal from a summary
judgment based on a trial court’s interpretation of a contract, we are not
bound by that interpretation . . . if there is no extrinsic evidence concerning
its interpretation.” (Department of Forestry & Fire Protection v. Lawrence
Livermore National Security, LLC (2015) 239 Cal.App.4th 1060, 1066; see
also, Winet v. Price (1992) 4 Cal.App.4th 1159, 1166 [where no extrinsic
evidence was admitted, “the appellate court will independently construe the
writing”].) Here, no extrinsic evidence was submitted by either party.
Rather, both parties relied on the plain language of the operating agreement.

                                         12
      As noted, section 6.4.1 permits Patriot to remove a member “by
unanimous vote of all [m]embers other than the [m]ember whose actions had
precipitated the vote for removal.” Because “other than the [m]ember” refers
to a single member, plaintiffs argue that the operating agreement only
allowed for the removal of one member at a time. In addition, if the parties
intended to remove more than one member at a time, they would have
drafted the operating agreement consistent with that intention. In response,
Patriot contends, as the trial court found, that interpretation would be
absurd because each member could act as a holdout and prevent removal
even where there is “cause.” In their appellate brief and at oral argument,
Patriot supports its position by pointing to plaintiffs’ declarations in which
both individuals admit they would have “oppose[d] the vote to remove [each
other’s] units and would have voted against any such resolution.” We are
persuaded that plaintiffs’ interpretation is not a reasonable one. (West
Pueblo Partners, LLC v. Stone Brewing Co., LLC (2023) 90 Cal.App.5th 1179,
1185 [“court[s] ‘should avoid an interpretation which will make the contract
unusual, extraordinary, harsh, unjust or inequitable [citations], or which
would result in an absurdity . . . .’ [Citation.]”].) We decline to adopt such a
narrow view of the operating agreement and ignore the impossible situation
these two (admittedly) holdout members posed to Patriot’s operations. (See
Civ. Code, § 1653 [“Words in a contract which are wholly inconsistent with its
nature, or with the main intention of the parties, are to be rejected”].)
Therefore, we conclude the court did not err in finding that section 6.4 was
not reasonably susceptible to plaintiffs’ proposed interpretation of the
removal of a member by unanimous vote.

                                       13
      B. Notice of Removal
      Plaintiffs contend the trial court erred in concluding that section 6.4 of
the operating agreement was not reasonably susceptible to their proposed
interpretation of the notice Patriot was required to give plaintiffs prior to
their removal for “cause.” Plaintiffs assert that the operating agreement as a
whole demonstrates that their proposed interpretation is not only reasonable
but also the correct interpretation of the provision. We disagree. The
unambiguous language of section 6.4.1 provides that Patriot is entitled to
remove a member “at any time” for “cause.” Its only notice obligation in this
section was to “provid[e] notice to the [m]ember” after he or she has been
removed for “cause.” Thus, there is no requirement for Patriot to provide
advance notice to a member who is subject to a removal vote by its members.
      On appeal, plaintiffs focus on Patriot’s notice requirements to inform
members about an upcoming meeting (as discussed in section 5.4),8 rather
than the notice required for a member subject to removal for “cause.”
However, that is not the issue presented in the motion for summary
judgment nor was it argued by plaintiffs in the opposition. Therefore, it is
not an issue before us.

8      Section 5.4, titled “Notice of Meetings” provides: “[w]ritten notice
stating the place, day and hour of the meeting shall be delivered to each
Member not less than two (2) nor more than thirty (30) days before the date
of the meeting, either personally, by mail, by fax or by email with return
authorization receipt by or at the direction of the Members. Notice of a
meeting need not be given to a Member who signs a waiver of notice, whether
before or after the meeting, or who attends the meeting without protesting
the lack of notice before or at its commencement.”

                                       14
      C. Removal for “Cause”
      Plaintiffs argue there is a triable issue of material fact as to whether
they were removed for “cause” under section 6.4 of the operating agreement.
We agree.
      As pertinent here, section 6.4.1 of the operating agreement defines
“cause” as a “misappropriation on [a] [m]ember’s part which has/is a
detrimental impact on [Patriot’s] finances, reputation, business, or goodwill”
and also includes “[m]ember’s willful material breach of [m]ember’s
obligations with respect to [Patriot’s] conflicts of interest policy or any other
rules or regulations of engagement which may be adopted or amended from
time to time by [Patriot] of which [Patriot] has given written notice to the
[m]ember.”9 Patriot contends there is no triable issue of material fact that
plaintiffs were removed for “cause,” consistent with the operating agreement.
The basis for the assertion is that plaintiffs misappropriated Patriot’s
confidential customer information and in so doing significantly harmed
Patriot’s finances, reputation, business, and goodwill.
      Patriot presented evidence demonstrating that on May 9, 2017,
plaintiffs entered Patriot’s office and removed items. At some point after
plaintiffs left the office that day, Patriot learned certain highly confidential
and proprietary company documents were missing and concluded plaintiffs
removed them. In response, plaintiffs put forth evidence establishing that no

9     In support of its finding of “cause” for removal, Patriot speaks in
generalities as to the conflict of interest created by plaintiffs and plaintiffs’
breach of the duty of loyalty to Patriot. In their briefing in both the lower
court and this court, Patriot fails to point to a specific written policy or
document other than the operating agreement to establish “cause” for
removal. Rather, Patriot applies the Corporations Code to redefine “cause.”
We decline to apply the Corporations Code as the plain language of the
operating agreement controls.

                                        15
Patriot employee or member personally witnessed what items plaintiffs had
removed from the office on May 9, 2017. In his declaration, Celano stated
that two Patriot employees (Clay and Moore) informed him that they saw
plaintiffs remove documents from their workstations. However, Clay
admitted in his deposition that he did not actually know what items Novak
was carrying out of his office, and no sworn testimony was filed by Moore. In
addition, Novak attested that he had “briefly” entered the office and “noticed
it ha[d] been rifled through and [his] items had been moved.” And “[n]othing
of any commercially sensitive nature relating to Patriot was left.” Similarly,
Blalock attested that he entered the office “but was too embarrassed and
distraught to go any further” and decided to wait outside for Novak. Both
plaintiffs denied they took “any customer list or anything else that would be
considered commercially sensitive to Patriot.”
      In further support of removal, Patriot presented evidence that plaintiffs
formed a competing business while they were members of Patriot. Patriot
argues this act also demonstrates a “significant conflict of interest” created by
plaintiffs as well as a breach of plaintiffs’ duty of loyalty to Patriot. After
their termination of employment and prior to removal, plaintiffs filed articles
of incorporation with the State for Orion and then executed a shareholder’s
agreement with investors. However, Patriot did not present evidence that
Orion was competing with Patriot at that time. In fact, Patriot members
attested they learned Orion began operating in September 2017 (after
removal) and plaintiffs confirmed the same timeline in their declarations.
Thus, we conclude the parties’ competing evidence establishes a triable issue

                                        16
of material fact as to whether plaintiffs were removed for “cause” consistent
with the operating agreement.10

     III.   Conversion
        Plaintiffs contend the trial court erred in granting summary
adjudication as to their conversion claim on the ground that it was based on
the same factual allegations in the breach of contract claim and such
allegations alone cannot form the basis for a tort claim. On appeal, plaintiffs
argue the conversion claim “included an element of wrongful conduct above
and beyond their breach of contract claim.” Specifically, Patriot’s act of
reacquiring their membership units under the operating agreement was
“wrongful, malicious, fraudulent, and in conscious disregard” of plaintiffs’
rights. We disagree.
        It is well-settled that “‘“a breach of contract, even though it result[s] in
injury to, or loss of, specific property, [cannot] constitute[ ] a conversion.”’
[Citation.]” (Multani v. Knight (2018) 23 Cal.App.5th 837, 854; Emmert v.
United Bank etc. Co. (1936) 14 Cal.App.2d 1, 4 [same].) “[C]onduct
amounting to a breach of contract becomes tortious only when it also violates

10     Patriot also argues the business judgment rule precludes judicial
review of Patriot’s finding that it had “cause” to remove plaintiffs. (See Palm
Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th
268, 279 [the business judgment rule “‘refers to a judicial policy of deference
to the business judgment of corporate directors in the exercise of their broad
discretion in making corporate decisions’”].) Because we conclude there is a
triable issue of material fact as to whether plaintiffs were dismissed for
“cause,” we need not address Patriot’s argument. (See Scheenstra v.
California Dairies, Inc. (2013) 213 Cal.App.4th 370, 388 [company’s decision
is not scrutinized under the business judgment rule until after the court
determines that the company’s action falls within the discretionary range of
action authorized by the contract].)

                                          17
a duty independent of the contract arising from principles of tort law.
[Citation.]” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551.) Here, the
conversion claim is based entirely on Patriot’s alleged breach of the operating
agreement. Plaintiffs fail to allege that Patriot violated any duty
“independent of the contract.” Thus, we affirm the trial court’s order
granting summary adjudication as to the conversion claim.

   IV.   Declaratory Judgment
      Plaintiffs argue the trial court erred in granting summary adjudication
as to their declaratory judgment claim. Plaintiffs sought declarations that
Patriot had no contractual right to remove plaintiffs for “cause” and that
Patriot had no contractual right to reacquire plaintiffs’ membership units.
The court concluded Patriot had met its burden because the claim was wholly
derivative of the breach of contract claim. Plaintiffs now argue because the
court erred in finding no triable issue of material fact as to the breach of
contract claim, the stated reasoning for granting summary adjudication of
the declaratory judgment claim was also error.
      While we agree with plaintiffs that the court erred in granting
summary adjudication as to the breach of contract claim, summary
adjudication of the declaratory judgment claim was proper for an
independent reason. Plaintiffs sought declarations only redressing alleged
past wrongs, i.e., Patriot’s breach of the operating agreement. However,
“[t]he purpose of the declaration is to allow the parties to shape their conduct
to avoid a breach.” (See Cordoba Corp. v. City of Industry (2023) 87
Cal.App.5th 145, 157, italics added.) “In essence, declaratory relief operates
to declare future rights, not to address past wrongs. (Canova v. Trustees of
Imperial Irrigation Dist. Employee Pension Plan (2007) 150 Cal.App.4th

                                       18
1487, 1497.)” (Monterey Coastkeeper v. Central Regional Water Quality
Control Bd., etc. (2022) 76 Cal.App.5th 1, 13.) We therefore affirm summary
adjudication of the declaratory judgment claim.

                                DISPOSITION
      The trial court’s order granting summary judgment and the resulting
judgment are reversed as to Patriot. We affirm the grant of summary
adjudication on the issues of (1) whether Patriot was required to permit
plaintiffs to vote on each other’s removal for “cause” and (2) whether Patriot
was required to provide plaintiffs with advance notice of their removal for
“cause.” In addition, we affirm the grant of summary adjudication on the
conversion and the declaratory judgment claims. We reverse the grant of
summary adjudication on the issue of whether plaintiffs were removed for
“cause.” We remand the matter for further proceedings on this issue. The
parties are to bear their costs on appeal.
      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                             ZUKIN, J.

      WE CONCUR:

      COLLINS, Acting P. J.

      MORI, J.

                                       19