Court Opinion

ID: 4664263
Source: CourtListenerOpinion
Date Created: 2021-03-02 22:02:16.272883+00
Date Added: 2024-06-11T08:02:35.170106
License: Public Domain

Filed 3/2/21
                 CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                  SECOND APPELLATE DISTRICT

                          DIVISION EIGHT

HOLISTIC SUPPLEMENTS, L.L.C.,              B300711
et al.,
                                           (Los Angeles County
       Plaintiffs and Appellants,          Super. Ct. No. BC599796)

       v.

CHRISTOPHER STARK et al.,

            Defendants and Respondents.

      APPEAL from a judgment of the Superior Court of
Los Angeles County. Rupert A. Byrdsong, Judge. Reversed and
remanded.
      Horvitz & Levy, Lisa Perrochet and Aaron Henson; Nelson
Hardiman, Salvatore J. Zimmitti and Mark S. Hardiman for
Plaintiffs and Appellants.
      Buchalter, Robert M. Dato; and Arthur D. Hodge for
Defendants and Respondents.
                 _____________________________
       This case arises from an ownership dispute over a medical
marijuana dispensary in Los Angeles. In essence, plaintiff Jamie
Kersey claims defendant Christopher Stark transferred his
ownership in Holistic Supplements, L.L.C. (hereafter the LLC) to
her in April 2015. Unbeknownst to Kersey and despite that
alleged transfer, he later converted the LLC from a limited
liability company to a corporation and then a mutual benefit
corporation in his name called Holistic Supplements Inc. (the
corporation) and changed the business address. In that process,
he claimed rights to a Business Tax Registration Certificate, a
city-issued tax document that enabled the dispensary to operate.
       Kersey and the LLC sued Stark and the corporation for
conversion, unfair competition, and declaratory relief, among
other claims. The case went to a jury trial, presenting the core
factual dispute of whether Stark validly signed the April 2015
transfer documents or whether his signatures were forged.
The jury ultimately decided only a single claim of conversion
asserted by the LLC against the corporation, returning a defense
verdict. The trial court removed the rest of the claims from the
jury by granting nonsuit to defendants.
       On appeal, plaintiffs argue nonsuit was improper and the
trial court committed prejudicial instructional error on the
conversion claim decided by the jury. We agree on both points.
We conclude: (1) nonsuit was erroneous on Kersey’s individual
claims because she has standing to sue for conversion of her
personal property membership interest in the LLC; (2) nonsuit
was erroneous on claims against Stark in his individual capacity,
since he can be held liable for personally participating in the
tortious conduct of the corporation; (3) nonsuit was erroneous on
plaintiffs’ claims under the unfair competition law (Bus. & Prof.

                                2
Code, § 17200 et seq.; the UCL) because we reject the only two
grounds for nonsuit defendants raise on appeal; and (4) the BTRC
is property subject to conversion, so the trial court prejudicially
erred when it instructed the jury it was not.
       We also reject defendants’ contention Kersey lacked
standing because she failed to file a petition for reinstatement of
the LLC pursuant to Government Code section 12261. The plain
language of that provision permits a court to order reinstatement
of a falsely or fraudulently terminated business entity upon
either submission of “a petition to the superior court containing
the legal and factual basis for reinstatement or as part of a civil
action for damages or equitable relief.” (Gov. Code, § 12261,
subd. (c), italics added.) Plaintiffs permissibly sought
reinstatement as part of this lawsuit, so they did not need to file
a separate petition in the superior court.
       We reverse the judgment.
                           BACKGROUND
       Holistic Supplements, LLC is a limited liability company
formed in 2005 to operate a medical marijuana dispensary in
Canoga Park consistent with California’s Medical Marijuana
Program Act. (Health & Saf. Code, § 11362.7 et seq.) For
practical purposes, Brad Barnes owned the dispensary. He also
owned a strip club, a bar, and an adult entertainment store in the
same shopping center. Although Barnes was a member of the
LLCs that owned his other businesses, he was not a member of
the LLC that owned the dispensary. Instead, the sole member
was David Gold, with Barnes overseeing operations. Barnes
worried having his name on the LLC would jeopardize the
licenses for his other businesses. So in exchange for 10 percent of

                                3
the dispensary’s net revenue, he and Gold agreed Gold would be
listed as the sole member of the LLC.
       Shortly after formation, the LLC obtained a Business Tax
Registration Certificate, or BTRC, from the City of Los Angeles
(the City), listing the dispensary’s Canoga Park address. The
City requires every business to have a BTRC, not just marijuana
dispensaries. (L.A. Mun. Code, § 21.03, subd. (a).) The BTRC
bears the disclaimer: “ISSUED FOR TAX COMPLIANCE
PURPOSES ONLY [¶] NOT A LICENSE, PERMIT, OR LAND
USE AUTHORIZATION.” As we will discuss in more detail
below, various City laws after 2007 prevented medical marijuana
dispensaries from operating unless they had a pre-2007 BTRC.
In light of this prohibition, the LLC’s grandfathered BTRC
allowed it to continue operating after 2007.
       In April 2014, Gold left the LLC and transferred his
interest to defendant Christopher Stark, Barnes’s friend and
employee at the strip club. Gold backed out because he no longer
wanted to work with Barnes. He also feared he might be
arrested after the dispensary was raided by police in 2011.
       In July 2014, the LLC filed an updated “Statement of
Information” with the Secretary of State reflecting Stark as the
new sole member. Barnes and Stark orally agreed to the same
arrangement Barnes had with Gold—Stark would be the sole
member of the LLC in exchange for 10 percent of net revenue.
       The dispensary was not profitable during this time, and by
the start of 2015, the relationship between Stark and Barnes had
deteriorated. The parties dispute what happened next.
       According to plaintiffs, in April 2015, Stark told plaintiff
Kersey (who is Barnes’s ex-wife) and the dispensary’s corporate
attorney Robert Manuwal that he no longer wanted to own the

                                 4
dispensary. Stark explained he didn’t want to work with Barnes
anymore, the dispensary wasn’t profitable, and the dispensary
still owed Barnes for financing the opening and fixing property
damage from the 2011 raids. Barnes testified Stark agreed to
transfer his LLC interest to Kersey. Kersey similarly testified
she talked to Stark, who agreed to transfer his ownership to her
in exchange for her agreeing to repay the dispensary’s debt to
Barnes.
       Documents dated April 23, 2015 reflect the transfer of
ownership of the LLC from Stark to Kersey. They bear Stark’s
signatures, but Stark disputes their authenticity. Kersey,
attorney Manuwal, and Barnes testified that on the night of April
23, 2015, Stark and Kersey signed these documents at Manuwal’s
home transferring Stark’s interest in the dispensary to Kersey,
leaving her with the debts and assets of the LLC. Manuwal and
Barnes testified they personally witnessed Stark signing; Kersey
arrived later.
       For his part, Stark confirmed he went to Manuwal’s house
that night. He claimed he went to pick up dispensary-related
documents and endorse some checks at Barnes’s request. The
only documents he signed were the check endorsements; he did
not sign any transfer documents and claimed his signatures were
forgeries. When pressed at trial, he conceded the signatures
could be his, but he never knowingly signed any documents
transferring his interest in the LLC.
       After that night, Stark had no further involvement in the
dispensary operations at the Canoga Park location. He never
returned to pick up any assets, cash, marijuana product, or
equipment. The day after the alleged transfer, Kersey met with
dispensary employees to tell them about the change in

                                5
ownership. Dispensary operations continued as normal. A few
weeks later on May 11, 2015, the LLC filed an updated
“Statement of Information” with the Secretary of State
identifying Kersey as the new sole member.
       Unbeknownst to Kersey and Barnes, Stark did not
relinquish his ownership of the LLC. On September 2, 2015, he
filed “Articles of Incorporation With Statement of Conversion”
with the Secretary of State. The form listed Stark as the
managing member of the LLC and purported to convert the LLC
to Holistic Supplements, Inc., a corporation with Stark as the sole
shareholder. The document listed Stark’s home address as the
business address for the corporation. On September 30, 2015,
Stark converted the corporation to a nonprofit mutual benefit
corporation “in order to comply with state and local laws and
regulations.” He was still listed as the sole shareholder. He filed
a statement of information with the Secretary of State on the
same day listing the corporation’s address as his home address.
       On September 30, 2015, Kersey and Barnes first learned
Stark was still claiming ownership of the dispensary. Kersey and
the LLC filed this lawsuit against Stark and the corporation in
November 2015. As relevant here, Kersey and the LLC each
asserted causes of action for conversion, violation of the UCL, and
declaratory relief.1
      In December 2015, Stark changed the address for the
BTRC to a downtown Los Angeles location. Throughout 2016,
the parties submitted a number of competing requests to change

1      Plaintiffs also asserted claims for corporate identity theft
and trade name infringement, but those claims were dismissed at
trial and are not at issue here.

                                 6
the BTRC address back and forth between the Canoga Park and
downtown Los Angeles locations. The City eventually froze the
BTRC at Stark’s downtown address sometime in late 2016 or
2017, saying a court must determine the rightful owner of the tax
account.
      In response to the dispute over the BTRC, plaintiffs filed a
supplemental complaint, alleging defendants had illegally
operated a dispensary at the downtown Los Angeles location
between December 2015 through April 2017, and had
“hijacked . . . and purported to use [the LLC’s] business taxation
accounts, including business tax registration certificate account
no. 0002072981-0001-4.” Plaintiffs alleged Stark’s attempts to
take the BTRC were additional bases for their unfair competition,
conversion, and declaratory relief claims.
      For the declaratory relief claim, plaintiffs alleged Stark
“was never authorized to change Holistic Supplements, LLC’s
organization from a limited liability company to a stock
corporation to a mutual benefit corporation; or change the
registered address associated with the BTRC.” Plaintiffs sought
“a judicial declaration of the rights and duties of Defendants with
respect to entities known as Holistic Supplements, LLC and
Holistic Supplements, a California non-profit mutual benefit
corporation.” In the prayer for relief, plaintiffs sought
declarations that Stark had unlawfully converted the LLC to the
corporation; Kersey “is the owner and managing member of
Holistic Supplements, LLC”; Stark “is not the owner of Holistic
Supplements, LLC and/or any of the converted entities”; and
Kersey had the authority to manage the BTRC whereas Stark did
not.

                                7
       The case proceeded to a jury trial. Kersey testified she had
ceased operations of the dispensary in Canoga Park because it
could not operate without the BTRC. Stark testified his
downtown Los Angeles dispensary was associated with an
investor who agreed to buy the corporation from Stark for $1.85
million should he win this lawsuit and be found owner of the
dispensary and the BTRC. The same investor was financing
Stark’s legal defense.
       After plaintiffs’ opening statement, defendants moved for
nonsuit. The court deferred ruling until the close of evidence, at
which point it granted the motion. It dismissed all of Kersey’s
individual claims, all claims against Stark individually, and
plaintiffs’ UCL claims. The court did not set forth the reasons in
an order or on the record in open court. All that remained were
the LLC’s claims for conversion and declaratory relief against the
corporation. The jury returned a defense verdict for the
corporation on the conversion claim. The LLC dismissed its
remaining declaratory relief claim with prejudice and plaintiffs
appealed the defense judgment.
                             DISCUSSION
       1.     Nonsuit Was Improper
       Standard of Review
       “A defendant is entitled to a nonsuit if the trial court
determines that, as a matter of law, the evidence presented by
plaintiff is insufficient to permit a jury to find in his favor.
[Citation.] ‘In determining whether plaintiff’s evidence is
sufficient, the court may not weigh the evidence or consider the
credibility of witnesses. Instead, the evidence most favorable to
plaintiff must be accepted as true and conflicting evidence must
be disregarded. The court must give “to the plaintiff[’]s evidence

                                 8
all the value to which it is legally entitled, . . . indulging every
legitimate inference which may be drawn from the evidence in
plaintiff[’]s favor.” ’ [Citation.] A mere ‘scintilla of evidence’ does
not create a conflict for the jury’s resolution; ‘there must be
substantial evidence to create the necessary conflict.’ ” (Nally v.
Grace Community Church (1988) 47 Cal.3d 278, 291 (Nally).)
       We review the grant of nonsuit de novo. (Legendary
Investors Group No. 1, LLC v. Niemann (2014) 224 Cal.App.4th
1407, 1422.) “In reviewing a grant of nonsuit, we are ‘guided by
the same rule requiring evaluation of the evidence in the light
most favorable to the plaintiff.’ [Citation.] We will not sustain
the judgment ‘ “unless interpreting the evidence most favorably
to plaintiff’s case and most strongly against the defendant and
resolving all presumptions, inferences and doubts in favor of the
plaintiff a judgment for the defendant is required as a matter of
law.” ’ ” (Nally, supra, 47 Cal.3d at p. 291.)
       There is a split of authority on whether our review of a
nonsuit motion is limited to the reasons given by the trial court
or whether we may examine grounds raised by a defendant but
not ruled on by the trial court in order to affirm the ruling.
(Compare Alpert v. Villa Romano Homeowners Assn. (2000) 81
Cal.App.4th 1320, 1328, fn. 8 [noting split of authority over
whether review of grant of nonsuit is limited to grounds raised by
defendant and ruled on by trial court] with Saunders v. Taylor
(1996) 42 Cal.App.4th 1538, 1542, fn. 2 [rejecting narrow scope of
review and finding no bar to the “consideration on appeal of
alternative grounds which were stated by the moving party but
which were not among those relied upon by the trial court in
granting the motion”].)

                                   9
        We need not take a side. The trial court did not explain its
reasons for granting nonsuit on plaintiffs’ various claims, so
presumably the court accepted the reasons presented by
defendants. In any case, all the issues raised by defendants were
legal questions and did not turn on the evidence presented.
We may address them to determine “whether, as a matter of law,
there is no basis for the plaintiff’s claim.” (Alpert v. Villa
Romano Homeowners Assn., supra, 81 Cal.App.4th at p. 1328,
fn. 8.)
        Kersey Has Standing to Pursue Individual Claims
        Defendants sought nonsuit on Kersey’s individual claims
because they believed she lacked standing to assert the LLC’s
derivative claims in an individual capacity. In response, Kersey
argued she was asserting individual claims based on the theft of
her membership interest in the LLC as distinct from any
derivative claim for injury to LLC assets. Kersey is correct.2
      “[I]t is settled that one who has suffered injury both as an
individual owner of a corporate entity and in an individual
capacity is entitled to pursue remedies in both capacities.”
(Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1221.)
The line between personal and derivative claims is drawn
according to the injury inflicted: “The claims are derivative
where the injury alleged is one inflicted on the corporate entity or
on the ‘whole body of its stock.’ [Citation.] A personal claim, in
contrast, asserts a right against the corporation which the
shareholder possesses as an individual apart from the corporate

2     On appeal, the parties do not draw any distinction among
the conversion, UCL, and declaratory relief claims for the
purpose of analyzing Kersey’s standing. We will likewise handle
them together for the purpose of our opinion.

                                 10
entity: ‘If the injury is not incidental to an injury to the
corporation, an individual cause of action exists.’ ” (Id. at
p. 1222.) “In determining whether an individual action as
opposed to a derivative action lies, a court looks at ‘the
gravamen of the wrong alleged in the pleadings.’ ” (PacLink
Communications Internat., Inc. v. Superior Court (2001) 90
Cal.App.4th 958, 965 (PacLink).)
       The “ ‘gravamen’ ” of Kersey’s individual claims was the
injury inflicted when “[d]efendants willfully took [her]
membership interest in Plaintiff Holistic Supplements, LLC by
changing its organization from a limited liability company to a
stock corporation to a mutual benefit corporation; changing the
registered address associated with the BTRC; and causing the
City of Los Angeles Office of Finance to place a freeze on the
BTRC.” Kersey’s membership interest in the LLC was personal
property belonging to her as an individual. (Corp. Code,
§ 17701.02, subd. (r) [“membership interest” in LLC encompasses
“member’s rights in the [LLC], including the member’s
transferable interest,” italics added]; id., § 17705.01 [“transferable
interest” in LLC is “personal property”]; id., § 17701.02, subd.
(aa) [“transferable interest” in LLC includes “right . . . to receive
distributions from a limited liability company”].) As personal
property, Kersey’s membership interest could be subject to
individual claims based on theft of that interest.
       An apt analogy is to the law of corporate stock. California
law treats corporate stock as personal property, and an
individual shareholder may bring personal claims for conversion
based on theft of that stock. (Payne v. Elliot (1880) 54 Cal. 339,
342 (Payne); Fremont Indemnity Co. v. Fremont General Corp.
(2007) 148 Cal.App.4th 97, 122 (Fremont) [“ ‘It is a uniform rule

                                 11
of law that shares of stock of a company are subject to an action
in conversion.’ ”]; Haro v. Ibarra (2009) 180 Cal.App.4th 823, 835
(Haro).) In Haro, for example, former shareholders brought
individual claims for conversion of their stock and derivative
claims for breach of fiduciary duty on behalf of the corporation
and shareholders. (Id. at pp. 826–830.) The court allowed the
conversion claim to proceed, finding the plaintiffs adequately
alleged the defendants engaged in a wrongful scheme to deprive
the plaintiffs of ownership of their shares in the corporation.
(Id. at p. 835.) Kersey’s claim of conversion of her personal
property membership interest in the LLC is no different.
       Defendants characterize Kersey’s claims as derivative
based on PacLink. While PacLink involved a dispute among
members of an LLC, its resemblance to this case ends there.
Minority members of the LLC alleged the majority shareholders
defrauded them through a series of transfers of the LLC’s assets.
(PacLink, supra, 90 Cal.App.4th at p. 961.) They asserted
personal causes of action alleging “ ‘[t]he fraudulent transfers
and the conversion of the “sale” proceeds rendered [the LLC]
insolvent and thereby defrauded plaintiffs by preventing them
from being paid for their Ownership Interests in [the LLC] and
its business and assets.’ ” (Id. at pp. 961–962.) Two of the
defendants demurred, arguing the plaintiffs lacked standing to
bring their claims as individuals because the real party in
interest was the LLC, and “ ‘the gravamen of the claim is that
[its] assets and net worth have been diminished. Plaintiffs do not
claim any direct injury or loss suffered by them; their only claim
is that the value of the LLC was diminished and that their
ownership interests as members were thereby diminished. The
claim belongs to the LLC, not to the plaintiffs.’ ” (Id. at p. 962.)

                                12
      The PacLink court agreed. “[T]he essence of plaintiffs’
claim is that the assets of [the LLC] were fraudulently
transferred without any compensation being paid to the LLC.
This constitutes an injury to the company itself. Because
members of the LLC hold no direct ownership in the company’s
assets [citation], the members cannot be directly injured when
the company is improperly deprived of those assets. The injury
was essentially a diminution in the value of their membership
interest in the LLC occasioned by the loss of the company’s
assets. Consequently, any injury to plaintiffs was incidental to
the injury suffered by [the LLC].” (PacLink, supra, 90
Cal.App.4th at p. 964.)
      Kersey’s claims look nothing like the derivative claims in
Paclink. They are not based on any alleged diminution of the
value of the LLC’s assets. The LLC has alleged those claims on
its own behalf.3 Instead, Kersey claims Stark’s actions in
reorganizing the LLC and naming himself as sole shareholder
amounted to theft of her personal property membership interest
in the LLC. The distinction in Haro fits this scenario snugly:
Kersey may pursue her personal claims to recover for the direct
injury caused by Stark’s alleged theft of her personal property
membership interest, apart from any derivative claims for injury

3       Plaintiffs label the LLC’s claims as “derivative.” That may
not be accurate since the LLC has sued in its own name. (See
PacLink, supra, 90 Cal.App.4th at p. 965 [corporate entity must
“ ‘ “itself bring the action to recover the losses thereby occasioned,
or if the corporation fails to bring an action, suit may be filed by a
stockholder acting derivatively on behalf of the corporation,” ’ ”
italics added].) The parties have not addressed the issue further;
neither do we.

                                 13
to the LLC’s assets. The trial court erred in granting nonsuit on
these claims.
       Stark Can Be Personally Liable for Plaintiffs’ Claims
       In a brief comment to the trial court, defendants argued for
nonsuit on all of plaintiffs’ claims asserted against Stark
individually, claiming Stark “did not do anything to individually
gain by any evidence. Anything that happened here is part of
Holistic Supplements, the corporation. There’s no evidence
Mr. Stark personally benefitted in any way related to this
assignment or transfer.” Their position is incorrect.
       As the director and shareholder of the corporation, Stark
could be held personally liable for participating in, directing, or
authorizing tortious conduct. (Frances T. v. Village Green
Owners Assn. (1986) 42 Cal.3d 490, 504 (Frances T.) [“Directors
are liable to third persons injured by their own tortious conduct
regardless of whether they acted on behalf of the corporation and
regardless of whether the corporation is also liable.”]; Wyatt v.
Union Mortgage Co. (1979) 24 Cal.3d 773, 785 [“Shareholders of a
corporation are not normally liable for its torts, but personal
liability may attach to them . . . when the shareholder specifically
directed or authorized the wrongful acts.”]; United States
Liability Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586,
595 [“Directors or officers of a corporation do not incur personal
liability for torts of the corporation merely by reason of their
official position, unless they participate in the wrong or authorize
or direct that it be done. They may be liable, under the rules of

                                14
tort and agency, for tortious acts committed on behalf of the
corporation.”].)4
      Stark personally performed every act plaintiffs claim was
tortious. He secretly converted the LLC to a corporation, then a
mutual benefit corporation; he changed the corporate address to
his home address; and he changed the address of the BTRC to the
downtown Los Angeles location. If a jury were to conclude he
validly signed the documents in April 2015 transferring his
membership interest in the LLC to Kersey, it could find his later
actions exercising ownership over the LLC were unlawful and he
was personally liable for the torts he committed on behalf of the
corporation.
      Defendants assert a few brief arguments in response,
but none is meritorious. They contend plaintiffs should not be
allowed to obtain a new trial on the core ownership issue because

4      Stark does not suggest a different rule applies after he
converted the corporation to a nonprofit mutual benefit
corporation. (See, e.g., Frances T., supra, 42 Cal.3d at p. 500,
fn. 7 [noting case involved nonprofit mutual benefit corporation].)
The same rule also governs any acts Stark took as sole member of
the LLC. (Corp. Code, § 17703.04, subd. (b) [“A member of a
limited liability company shall be . . . personally liable under a
judgment of a court or for any debt, obligation, or liability of the
limited liability company, whether that liability or obligation
arises in contract, tort, or otherwise, under the same or similar
circumstances and to the same extent as a shareholder of a
corporation may be personally liable for any debt, obligation, or
liability of the corporation.”]; see id., § 17703.04, subd. (c)
[“Nothing in this section shall be construed to affect the liability
of a member of a limited liability company to third parties for the
member’s participation in tortious conduct.”]; People v. Pacific
Landmark, LLC (2005) 129 Cal.App.4th 1203, 1212.)

                                15
the LLC dismissed its remaining declaratory relief claim after
the jury’s verdict. However, our opinion will permit plaintiffs to
proceed on five claims, including Kersey’s individual claim for
declaratory relief. Those claims will present and resolve the core
ownership dispute between Kersey and Stark. The LLC’s
dismissal of its declaratory relief claim does not affect them.
      To the extent defendants suggest Stark didn’t “personally
benefit” from the conversion of the LLC and change of address for
the BTRC, they are wrong. Stark is claiming ownership of a
corporation authorized to run a valuable medical marijuana
dispensary in Los Angeles. Apparently the business is worth
nearly $2 million, the price in the contract he has in place to sell
the corporation should he prevail here. Stark will surely
personally benefit as sole shareholder of the corporation if he
wins and sells the business.
      Defendants respond that Stark didn’t personally benefit
because the BTRC was never technically “transferred” from the
LLC to the corporation. They are correct that a business entity
converting to another type of business entity is “the same entity
that existed before the conversion and the conversion shall not be
deemed a transfer of property.” (Corp. Code, § 17710.09, subd.
(a).) Upon conversion, however, “[a]ll the rights and property,
whether real, personal, or mixed, of the converting entity or
converting limited liability company are vested in the converted
entity or converted limited liability company.” (Id., § 11710.09,
subd. (b)(1).) If a jury were to find Stark was no longer owner of
the LLC, it could readily conclude he personally benefitted when
he wrongly took over the LLC and the BTRC, since the BTRC
moved with the LLC’s “rights and property” when he converted
the LLC to a corporation.

                                16
      The trial court erred in granting nonsuit on the claims
against Stark individually.
      Plaintiffs’ UCL Claims May Proceed
      “The purpose of the UCL . . . ‘is to protect both consumers
and competitors by promoting fair competition in commercial
markets for goods and services. [Citation.]’ [Citation.] It ‘defines
“unfair competition” to mean and include “any unlawful, unfair or
fraudulent business act or practice.” ’ ” (McKell v. Washington
Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1470.) “Because the
statute is framed in the disjunctive, a business practice need only
meet one of the three criteria to be considered unfair
competition.” (Id. at p. 1471.)
      On appeal, plaintiffs have not briefed their claims based on
the fraudulent prong. We find those claims forfeited. (Christoff
v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125.)
      As for plaintiffs’ unfair and unlawful conduct UCL claims,
defendants’ perfunctory defense of the nonsuit rests on two legal
errors.5
      Their first claim is that the BTRC is not property and
cannot be the subject of restitution. Below we reject this
mistaken view; the BTRC indeed counts as property.
      Defendants’ second claim is the LLC had to exhaust
administrative remedies. This “exhaustion” argument is based
upon their position plaintiffs were required to petition for

5      We will not address the trial court’s tentative passing
comment that plaintiffs’ UCL claims were not viable because
“[t]here was no evidence regarding whatever business Mr. Stark
was trying to set up was in competition or unfair competition.”
Defendants did not advance that ground in their nonsuit motion
and do not raise it on appeal.

                                17
reinstatement of the LLC pursuant to Government Code section
12261 before filing suit. As we explain below, we disagree.
       The trial court erred in granting nonsuit on plaintiffs’ UCL
claims to the extent they were based on unlawful and unfair
conduct. They must be remanded for further proceedings.
       2.     The Trial Court Incorrectly Instructed the Jury
the BTRC Was Not Property For Purposes of Conversion
       For the conversion claim that went to the jury, plaintiffs
contend the trial court committed prejudicial instructional error
when it refused to instruct the jury the BTRC was property
subject to conversion, and then, in response to a jury question,
told them it was not property. We agree the BTRC qualifies as
property under the circumstances. The court’s instruction was
legally incorrect, and it almost certainly led to the defense
verdict.
       Background
       The parties agreed to give the following modified version of
CACI No. 2100 on the elements of conversion, which did not
define the term “property”:
       “In its cause of action for conversion, Holistic Supplements,
LLC claims that Holistic Supplements, the corporation,
wrongfully exercised control over Holistic Supplements LLC’s
property. To establish this claim, Holistic Supplements, LLC
must prove all of the following essential elements:
       “1.    Holistic Supplements LLC had a right to possess the
property;
       “2.    Holistic Supplements, the corporation, intentionally
and substantially interfered with Holistic Supplements, LLC’s
property by taking possession of the property, or assuming

                                 18
control or ownership over the property, or applying the property
to his or its own use;
       “3.    Holistic Supplements, LLC did not consent;
       “4.    Holistic Supplements, LLC was harmed; and
       “5.    Holistic Supplements, the corporation’s conduct was
a substantial factor in causing Holistic Supplements, LLC’s
harm.”
       The LLC requested an additional instruction that defined
the BTRC as property: “A Business Tax Registration Certificate
or BTRC issued by the City of Los Angeles to a medical
marijuana dispensary is property.” The LLC argued it had a
protectable property interest in the BTRC that could be subject to
conversion. Defendants argued the BTRC was not property, but
rather a “tax certificate for purposes of tracking the collection of
tax.” The trial court refused to give the instruction, but
permitted the parties to “argue what they want to argue.”
       The jury was given a special verdict form setting out the
elements of conversion. Like the instructions, the form did not
define what “property” was subject to the conversion claim.
       An hour into deliberations, the jury sent the court
questions asking, “On the verdict form, what does ‘property’ refer
to?” and “Can the BTRC be legally considered property?” The
court conferred with the parties and submitted written responses,
which are not in the record. According to the trial transcript, the
parties agreed to respond that “property” in the verdict form
referred to “things under the control of the party.” That response
is not at issue.
       On the second question about the BTRC, the parties once
again argued their positions. The court decided to answer the
question “no,” effectively instructing the jury that a BTRC is not

                                19
property as a matter of law. The LLC complained this was
tantamount to a directed verdict “on the state of the evidence.”
The court disagreed, saying, “You don’t know what they’re
considering,” and “Maybe they’re figuring something else out.”
       Ten minutes after getting these responses, the jury came
back with a defense verdict. It found on the verdict form that the
LLC had a right to possess “the property,” but the corporation did
not “intentionally and substantially interfere with Plaintiff
Holistic Supplements, LLC’s property by taking possession of the
property, or assuming control or ownership over the property, or
applying the property to its own use[.]”
       Analysis
       We review a claim of instructional error de novo. (Crouch
v. Trinity Christian Center of Santa Ana, Inc. (2019) 39
Cal.App.5th 995, 1021.) “[W]e view the evidence in the light most
favorable to the appellant. In such cases, we assume that the
jury might have believed the evidence upon which the instruction
favorable to the appellant was predicated.” (Alcala v. Vazmar
Corp. (2008) 167 Cal.App.4th 747, 754.) We will not reverse
unless it is reasonably probable the error affected the verdict.
To evaluate prejudice, we examine “ ‘(1) the state of the evidence,
(2) the effect of other instructions, (3) the effect of counsel’s
arguments, and (4) any indications by the jury itself that it was
misled.’ ” (Id. at p. 755.)
       The definition of property in California is broad,
encompassing nearly every “thing” over which a person can
exercise ownership. (Civ. Code, § 654 [“The ownership of a thing
is the right of one or more persons to possess and use it to the
exclusion of others. In this Code, the thing of which there may be
ownership is called property.”]; see Civ. Code, § 655 [“There may

                                20
be ownership of all inanimate things which are capable of
appropriation or of manual delivery; of all domestic animals; of
all obligations; of such products of labor or skill as the
composition of an author, the good will of a business, trade marks
and signs, and of rights created or granted by statute.”].)
       The type of property that can be subject to conversion is
similarly broad. It includes not only tangible things, but
“ ‘ “every intangible benefit and prerogative susceptible of
possession or disposition.” [Citation.]’ ” (Welco Electronics, Inc. v.
Mora (2014) 223 Cal.App.4th 202, 211 (Welco Electronics).)
Courts have held a wide array of intangible interests may be
converted, including a business’s net operating loss (Fremont,
supra, 148 Cal.App.4th at p. 122), a credit line from a credit card
(Welco Electronics, supra, 223 Cal.App.4th at p. 212), and
corporate stock (Payne, supra, 54 Cal. at p. 342), to name a few.
The question here is whether we may add the BTRC to this list.
       We start with the nature of the BTRC. Every business
within the City of Los Angeles must pay a business tax and
obtain a BTRC in order to operate. (L.A. Mun. Code, § 21.03,
subds. (a) & (b).) It is not a permit to do business, so obtaining a
BTRC does not “authoriz[e] the conduct or continuance of any
illegal business or of a legal business in an illegal manner.”
(Id., § 21.01.) Indeed, each BTRC must have this disclaimer
printed on the back: “This certificate does not authorize the
person to conduct any unlawful business or to conduct any lawful
business in an illegal manner or to conduct within the City of Los
Angeles the business for which this certificate has been issued
without strictly complying with all the provisions of the
ordinances of said City, including but not limited to those
requiring a permit from any board, commission, department or

                                 21
office of the City. THIS BUSINESS TAX REGISTRATION
CERTIFICATE DOES NOT CONSTITUTE A PERMIT.” (Id.,
§ 21.08, subd. (b).) As defendants point out, the BTRC at issue
here had a similar disclaimer that it was “ISSUED FOR TAX
COMPLIANCE PURPOSES ONLY [¶] NOT A LICENSE,
PERMIT, OR LAND USE AUTHORIZATION.”
       Under this scheme, then, a BTRC is a required, but not
necessarily sufficient, step to operate a business in the City.
       A BTRC also has limited transferability. While it is not
transferable on its own, it is transferable “where the business
taxed is transferred, whether by sale or otherwise, to another
person under such circumstances that the real or ultimate
ownership of the business after the transfer is substantially
similar to the real or ultimate ownership existing before the
transfer. For purposes of this section, stockholders, bond-holders,
partners, or other persons holding an interest in a corporation or
other entity herein defined to be a person are regarded as having
the real or ultimate ownership of such corporation or other
entity.” (L.A. Mun. Code, § 21.11.)
       The BTRC in dispute here—obtained by the LLC prior to
2007 to operate a medical marijuana dispensary—gained
additional significance due to the developments in marijuana
regulation in the City. Many cases have traced the history of
marijuana laws in California and we need not repeat it. (See,
e.g., Safe Life Caregivers v. City of Los Angeles (2016) 243
Cal.App.4th 1029, 1033–1038 (Safe Life Caregivers)
[summarizing medical marijuana law up to 2016].) Suffice it to
say, starting in 2007, the City made several attempts to regulate
medical marijuana dispensaries consistent with state law. The
first law was a temporary Interim Control Ordinance that barred

                                22
“Medical Marijuana Dispensaries,” except for “any dispensary
established before the ordinance’s effective date (Sept. 14, 2007)
and operating in accordance with state law, if the owner or
operator of the dispensary were to register with the City Clerk by
filing certain identified documents within 60 days (Nov. 13,
2007).” (Id. at pp. 1034–1035.) Those documents included a
BTRC. (420 Caregivers, LLC. v. City of Los Angeles (2012) 219
Cal.App.4th 1316, 1327, fn. 3.)
       After other legal developments between 2007 and 2013 (see
Safe Life Caregivers, supra, 243 Cal.App.4th at pp. 1035–1037),
City voters enacted Proposition D in May 2013. Proposition D
banned all medical marijuana businesses in the City but granted
“limited immunity from prosecution under Los Angeles Municipal
Code sections 11.00 (code violations generally) and 12.27.1
(administrative nuisance abatement) to some establishments that
are medical marijuana businesses as defined under the
ordinance. . . . [T]his limited immunity extends ‘only [to] a
medical marijuana business at the one location identified in its
original or any amended business tax registration certificate
issued by the City, and only if that medical marijuana business
does not violate any of’ the 15 conditions” set forth in Proposition
D. (People ex rel. Feuer v. Nestdrop, LLC (2016) 245 Cal.App.4th
664, 669–670.) Those conditions included that the business “was
established as of September 14, 2007, and registered with the
City Clerk by November 13, 2007 [citation]; submits proof of
continual ‘operation at the location set forth in its original or any
amended business tax registration or tax exemption certificate’
[citation]; [and] registered to pay and pays applicable taxes to the
City.” (Id. at p. 670; see People ex rel. Feuer v. Progressive
Horizon, Inc. (2016) 248 Cal.App.4th 533, 540.)

                                 23
       The parties do not dispute that the LLC obtained its BTRC
prior to 2007 and was grandfathered through these changes in
the law, enabling it to continue operating the dispensary at the
time Stark allegedly converted the LLC to a corporation in 2015
and changed the address on the BTRC.
       The law has continued to evolve. “On November 8, 2016,
California voters passed as an initiative measure the Control,
Regulate and Tax Adult Use of Marijuana Act, more commonly
known as Proposition 64. [Citation.] Proposition 64 legalized
adult, recreational use of marijuana and reduced the criminal
penalties for various offenses involving marijuana, including its
cultivation and possession for sale.” (County of Kern v. Alta
Sierra Holistic Exchange Service (2020) 46 Cal.App.5th 82, 106
(County of Kern).)
       After the passage of Proposition 64, the Governor signed
into law the Medicinal and Adult-Use Cannabis Regulation and
Safety Act. (Bus. & Prof. Code, § 26000 et seq.) The statute
repealed previous state law on medicinal marijuana and “created
one regulatory system for both medicinal and adult-use (i.e.,
recreational) cannabis.” (County of Kern, supra, 46 Cal.App.5th
at p. 106.) It did not “supersede or limit the authority of a local
jurisdiction to adopt and enforce local ordinances to regulate
businesses licensed under this division, including, but not limited
to, local zoning and land use requirements, business license
requirements, and requirements related to reducing exposure to
secondhand smoke, or to completely prohibit the establishment or
operation of one or more types of businesses licensed under this
division within the local jurisdiction.” (Bus. & Prof. Code,
§ 26200, subd. (a); see County of Kern, supra, at p. 106.)

                                24
        In response to these state-level changes, the City repealed
Proposition D effective January 1, 2018 and replaced it with
Ordinance No. 185343, a comprehensive licensing scheme for
retail sales of marijuana. (L.A. Mun. Code, § 104.00 et seq.;
People v. Onesra Enterprises, Inc. (2018) 24 Cal.App.5th Supp. 9,
15.) Ordinance No. 185343 was predicated on voter-enacted
Proposition M passed the year before. Through Proposition M,
City voters “contemplated that [medical marijuana businesses]
‘that have been operating in compliance with the limited
immunity [provided by Proposition D] . . . should continue to
operate until City licenses or permits are available.’ ” (People v.
Onesra Enterprises, Inc., supra, at p. 20.) To that end, Ordinance
No. 185343 gave “ ‘an existing medical marijuana dispensary that
is in compliance with all restrictions of Proposition D’ . . . priority
in obtaining a city license, only as long as it has been in full
compliance with the Proposition D requirements for limited
immunity. (L.A. Mun. Code, § 104.07(a).)” (Id. at p. 20.)
        Thus, an existing medical marijuana dispensary that met
“ ‘all of Proposition D requirements shall continue to have limited
immunity up until the time the [existing medical marijuana
dispensary] receives Temporary Approval’ for a license to sell
marijuana.’ (L.A. Mun. Code, § 104.07(b), italics added.)” (People
v. Onesra Enterprises, Inc., supra, 24 Cal.App.5th Supp. at pp.
20–21.) Ordinance No. 185343 also gave Proposition D-compliant
dispensaries limited immunity from prosecution while their
license applications were processed (L.A. Mun. Code, § 104.07,
subd. (b)) and exempted them from some pre-licensing inspection
and zoning requirements (id., § 104.07, subds. (g), (h)).
        There was a time limit in Ordinance No. 185343 for
Proposition D-compliant dispensaries to obtain priority

                                  25
processing of licensing applications. They had to apply within 60
days after the Los Angeles Department of Cannabis Regulation
began “accepting applications.” (L.A. Mun. Code, § 104.07, subd.
(a).) The record reflects the LLC sought to apply for this priority
processing for a temporary license on January 30, 2018 by
requesting the City unfreeze the BTRC. The City declined to
process the application due to this ongoing litigation and the
parties’ competing claims to the BTRC. It appears plaintiffs
received a temporary license for the Canoga Park dispensary in
2018 pending the City’s review of the priority processing
application and the outcome of this lawsuit.
       This is a long way of saying the BTRC had real value to the
LLC beyond registering with the City for tax purposes. It
allowed the dispensary to operate when non-grandfathered
dispensaries could not. More to the point, the parties are fighting
tooth-and-nail over it in this litigation, and Stark has a contract
to sell the dispensary business for nearly $2 million should he
win. As plaintiffs’ counsel astutely pointed out in the trial court,
if the BTRC “has no value, give it to us, and [defendants]
shouldn’t care about it. If they’re correct and it didn’t matter,
they have given [it] to us already. We’d have no case.” Of course,
defendants haven’t taken plaintiffs up on that offer.
       We think the circumstances and nature of the BTRC here
points ineluctably to characterizing it as property that can be
converted. The treatment of other government certificates and
licenses provides the closest analog. In Golden v. State (1955)
133 Cal.App.2d 640 (Golden), the question was whether a federal
tax lien could reach a liquor license as “property” under the
federal tax code. Looking to the California Civil Code definitions
of property, the court said yes. The license was “issued to a

                                26
specific person,” was “renewable under the conditions expressed
in the statute,” and was “transferable from one person to another
upon approval” by the regulating agency and upon paying a
transfer fee. (Golden, supra, at p. 643.) The court noted the
limits on the number of on-sale licenses, coupled with
transferability, created substantial value in the license, as
demonstrated by $7,700 a purchaser paid into escrow, “the
license being the principle item of value in the transfer.” (Id. at
pp. 643–644.)
       G.S. Rasmussen & Assocs. v. Kalitta Flying Serv., Inc.
(9th Cir. 1992) 958 F.2d 896 (G.S. Rasmussen), was a conversion
case involving a federally issued certificate permitting
modifications to certain airplane designs. To obtain the
certificate, the applicant must complete the “arduous process” of
proving the modification is airworthy. (Id. at p. 899.) Taking a
cue from Golden and other California cases, the federal court
distilled three criteria to identify property subject to conversion
in California: “First, there must be an interest capable of precise
definition; second, it must be capable of exclusive possession or
control; and third, the putative owner must have established a
legitimate claim to exclusivity.” (G.S. Rasmussen, at pp. 902–
903, fns. omitted.)
       The court applied these criteria to find the certificate was
property subject to conversion. It was “capable of precise
definition: It enables an airplane owner to obtain an
airworthiness certificate for a particular design modification
without the delay, burden and expense of proving to the FAA that
the plane so modified will be safe.” (G.S. Rasmussen, supra, 958
F.2d at p. 903.) Federal regulations restricted the rights in the
certificate to the holder, creating exclusive possession. (Ibid.)

                                27
And the holder had a legitimate claim to exclusivity because he
had invested significant time and effort to obtain the certificate.
(Ibid.)
       Plaintiffs urge us to apply this three-part test from G.S.
Rasmussen to the BTRC. (See, e.g., Welco Electronics, supra, 223
Cal.App.4th at p. 211 [applying test to find credit line from credit
card was subject to conversion]; Kremen v. Cohen (9th Cir. 2003)
337 F.3d 1024, 1030 [applying test to find Internet domain name
was property subject to conversion].) Without deciding whether
this test is always applicable in every case in which the property
element of conversion is implicated, we agree the test stakes out
useful guideposts here.
       Interest Capable of Precise Definition. This criterion is
easily met. A BTRC is a necessary feature for every business
operating in the City. The LLC’s grandfathered BTRC for the
medical marijuana dispensary here was capable of even more
precise definition because it enabled that business to continue
when dispensaries without grandfathered BTRCs could not.
More so than the airworthiness certificate in G.S. Rasmussen
that merely allowed the holder to avoid additional delay, burden,
and expense, the BTRC enabled the dispensary to exist.
       Exclusive Possession or Control. This criterion is met
because a BTRC is exclusive to the business that obtains it.
Indeed, it is not transferable except when the underlying
business is transferred and only in limited circumstances.
(L.A. Mun. Code, § 21.11.)
       Legitimate Claim to Exclusivity. This criterion is similarly
met because the LLC applied for and maintained the BTRC for
the Canoga Park dispensary location since 2007 until Stark
attempted to change the registration address in 2015. The BTRC

                                28
enabled the dispensary to navigate the City’s bans on similar
dispensaries and may still provide preferential benefits. Again,
like the time and effort to obtain the certificate in G.S.
Rasmussen, the LLC’s efforts in obtaining and maintaining the
BTRC established its legitimate claim to exclusivity.
       Defendants insist the sin qua non of property is
transferability, and because, in their view, the BTRC “cannot be
transferred or sold, it is not property under Civil Code section
654.” (See Yuba River Power Co. v. Nevada Irrigation Dist.
(1929) 207 Cal. 521, 523 [“ ‘The term “property” is sufficiently
comprehensive to include every species of estate, real and
personal, and everything which one person can own and transfer
to another. It extends to every species of right and interest
capable of being enjoyed as such upon which it is practical to
place a money value.’ ” (Italics added.)]; Douglas Aircraft Co. v.
Byram (1943) 57 Cal.App.2d 311, 317; see also In re Marriage of
McTiernan & Dubrow (2005) 133 Cal.App.4th 1090, 1100 [“[E]ven
if incorporeal or intangible, property must be capable of being
transferred. ‘[I]t is a fundamental principle of law that one of the
chief incidents of ownership in property is the right to transfer it.’
[Citation.] ‘A common characteristic of a property right, is that it
may be disposed of, transferred to another.’ ”].)
       None of the cases defendants cite involved the tort of
conversion. As for the cases we have discussed, Golden found the
transferability of the liquor license significant in defining it as
property for the purpose of a federal tax lien statute. While G.S.
Rasmussen did involve conversion and the court found it
“relevant” that the certificate at issue was “transferrable and it
may be licensed, in accordance with FAA procedures” (G.S.
Rasmussen, supra, 958 F.2d at pp. 901–902), the court did not

                                 29
mention transferability in its three-part test for defining
property.
      Whether the tort of conversion requires that the property
be transferable is a question we need not decide because
defendants’ factual premise is incorrect. As noted, a BTRC can
be transferred, albeit in a very circumscribed way—as part of the
sale of the business to which it belongs and only if “the real or
ultimate ownership of the business after the transfer is
substantially similar to the real or ultimate ownership existing
before the transfer.” (L.A. Mun. Code, § 21.11.) Defendants have
cited no law suggesting these kinds of strict limits on
transferability strip the BTRC of its character as property for the
purpose of conversion. (See Civ. Code, § 679 [“The ownership of
property is absolute when a single person has the absolute
dominion over it, and may use it or dispose of it according to his
pleasure, subject only to general laws.” (Italics added.)]; 51
Cal.Jur.3d Property, § 32 [“Even when transfer is generally
permitted, restrictions on the manner of disposal of personal
property may be enacted . . . .”].)6
      In the context of this case, the BTRC is a sufficiently
definable interest exclusive to the LLC that it qualifies as
property subject to conversion as a matter of law. The trial court
erred in instructing the jury otherwise.

6      Defendants note the back of the BTRC says: “This
certificate is void upon any change of ownership or location.”
That may be true for a general change of ownership, but the
BTRC may be transferred between the same effective owners as
part of a transfer of the taxed business, as permitted by the
Municipal Code.

                                30
       This error almost certainly affected the jury’s verdict. The
LLC’s conversion claim rested primarily on the theft of the
BTRC. The jury must have focused on the BTRC because it not
only asked what “property” meant in the verdict form but also
asked specifically whether the BTRC qualified as property.
When the court told them it was not property, the jury returned a
defense verdict within 10 minutes, a strong signal the nature of
the BTRC was dispositive. (Cf. Sandoval v. Bank of America
(2002) 94 Cal.App.4th 1378, 1388 [question about verdict form
reflected jury’s confusion, which was exacerbated by court’s
erroneous response].) If the BTRC was not property as the court
instructed the jury, the only “property” subject to conversion was
perhaps the LLC’s physical assets, money, and product at the
Canoga Park dispensary. The evidence was undisputed
defendants took nothing from the dispensary, so it’s no surprise
the jury so quickly found the LLC had the right to possess “the
property” but the corporation did not interfere with that right.
       Defendants seem to imply plaintiffs suffered no prejudice
from the court’s incorrect instruction because they failed to offer
any evidence of damages. They cite testimony from Kersey that
“the dispensary wasn’t making money for several years,
especially during the time that [Stark] was the owner.” But the
LLC didn’t seek lost profits as damages. As the jury was
instructed, the LLC sought the fair market value of the
“property” and compensation for the time and money it spent in
attempting to recover the “property.” (See Civ. Code, § 3336.)
The jury could have concluded the grandfathered BTRC had
significant value by allowing the dispensary to continue
operating as the legal landscape around it changed. This is
perhaps best demonstrated by the nearly $2 million price tag on

                                31
the corporation should the corporation be declared the rightful
owner of the dispensary and the BTRC.
       The trial court prejudicially erred by refusing to give the
LLC’s proposed instruction that the BTRC was property and then
instructing the jury the BTRC was not property as a matter of
law. Upon any retrial, the court must instruct the jury the BTRC
at issue here qualifies as property for the tort of conversion.
       3.    Plaintiffs Complied with Government Code
Section 12261
       Government Code section 12261 creates a procedure for the
Secretary of State to reinstate a business entity to active status if
“a court finds any of the following: [¶] (1) The factual
representations by a shareholder, member, partner, or other
person that are contained in the termination document are
materially false. [¶] (2) The submission of the termination
document to the Secretary of State for filing is fraudulent.” (Gov.
Code, § 12261, subd. (a).)7 If a court orders reinstatement, the
statute sets forth the information that must be contained in the
court order. (Id., § 12261, subd. (b).) At issue here is the
statutory procedure to obtain this court order: “The court order
for reinstatement may be obtained by submitting a petition to the

7      A “termination document” is defined as “the certificate or
other document required by the Corporations Code that is the
last certificate or document filed with the Secretary of State to
effect the final dissolution, surrender, or cancellation of the
business entity.” (Gov. Code, § 12260.) While the conversion
document Stark filed isn’t listed, it qualifies because “[t]he filing
with the Secretary of State of . . . articles of incorporation
containing a statement of conversion . . . shall have the effect of
the filing of a certificate of cancellation by the converting limited
liability company . . . .” (Corp. Code, § 17710.06, subd. (d).)

                                 32
superior court containing the legal and factual basis for
reinstatement or as part of a civil action for damages or equitable
relief. The Secretary of State shall not be made a party to the
proceeding.” (Id., § 12261, subd. (c).)
       In the trial court, defendants sought nonsuit on the LLC’s
claims, arguing the LLC “lacked capacity” by not filing a petition
for reinstatement pursuant to this provision. Defendants also
sought nonsuit against both Kersey and the LLC on their
declaratory relief claims because they did not “exhaust legal
remedies,” again by not filing a petition to reinstate the LLC.
It appears the court rejected these arguments because it allowed
the LLC’s conversion and declaratory relief claims to proceed.
If the court had believed the LLC was required to file a petition
for reinstatement under this statute, then it would have
dismissed all of the LLC’s claims.8
       On appeal, defendants raise a new argument that Kersey
lacked standing because she did not “restore” her interest in the
LLC by petitioning for reinstatement pursuant to Government
Code section 12261. While a party normally forfeits a claim
raised for the first time on appeal (Truck Ins. Exchange v. AMCO
Ins. Co. (2020) 56 Cal.App.5th 619, 635), plaintiffs do not argue
forfeiture, so we turn to the merits.

8     Plaintiffs did not address the Government Code section
12261 issue in their opening brief on appeal, taking the position
that the trial court must have rejected defendants’ arguments.
In response, defendants argue plaintiffs forfeited the issue by not
addressing it, taking the position the trial court did accept this
argument in granting nonsuit. We agree with plaintiffs. We find
no forfeiture under the circumstances.

                                33
       Defendants’ position that Kersey needed to file a separate
petition to reinstate the LLC pursuant to Government Code
section 12261 contradicts the plain language of the statute.
When we interpret a statute, “ ‘our goal is “to ascertain the intent
of the enacting legislative body so that we may adopt the
construction that best effectuates the purpose of the law.” ’
[Citation.] First, we must look to the words of the statute, which
generally provide the most reliable indicator of legislative intent.
[Citation.] If the statutory language is unambiguous, then we
presume the Legislature meant what it said and our inquiry
ends.” (Barker v. Garza (2013) 218 Cal.App.4th 1449, 1454.)
       Government Code section 12261 is clear: an individual
may obtain a court order for reinstatement of a wrongly
terminated business entity in one of two ways, either by (1)
“submitting a petition to the superior court containing the legal
and factual basis for reinstatement” or (2) “as part of a civil
action for damages or equitable relief.” (Gov. Code, § 12261,
subd. (c).) Defendants’ view that plaintiffs needed to file a stand-
alone petition before pursuing their claims in this case is simply
wrong.
       While a separate petition is not necessary, plaintiffs did not
expressly plead a claim for reinstatement pursuant to
Government Code section 12261 as part of their complaint.
But the statute does not impose any specific pleading
requirements when seeking an order as part of a civil case.
The statute only imposes a pleading requirement for a stand-
alone petition, which must “contain[] the legal and factual basis
for reinstatement.” This distinction makes sense. A court
evaluating a stand-alone petition may know nothing about the

                                 34
facts supporting reinstatement, whereas a court handling other
claims in a civil case probably will.
       Plaintiffs’ complaint here was enough—albeit barely—to
obtain an order for reinstatement, should one be warranted.
The complaint was built on the core factual allegation that Stark
transferred his membership in the LLC then filed documents
with the Secretary of State converting the LLC and falsely
representing he still had that membership interest. Plaintiffs
sought a declaration that Kersey was the owner of the LLC and
Stark was not. If a jury were to find Stark transferred his
membership interest in the LLC to Kersey, plaintiffs’ complaint
gave the trial court adequate grounds to issue an order declaring
Stark fraudulently converted the LLC and reinstating the LLC.
While we encourage parties in future cases to more clearly plead
relief under Government Code section 12261, plaintiffs’ complaint
was enough here.
       For similar reasons, we reject defendants’ argument
plaintiffs failed to expressly “plead that the modification filings
were materially false or fraudulent.” This presumably refers to
subdivision (a) of the statute, which directs the Secretary of State
to reinstate an entity if a court finds factual representations were
“materially false” or submission of the termination document was
“fraudulent.” Again, this is not a pleading requirement. Even if
it were, plaintiffs alleged Stark filed documents converting the
LLC “without basis or authority” and was “never authorized” to
convert the LLC to a corporation or mutual benefit corporation.
While not using the magic words “fraudulent” or “materially
false,” this was sufficient to allege entitlement to an “order for
reinstatement . . . as part of a civil action for damages or

                                35
equitable relief,” should one be warranted. (Gov. Code, § 12261,
subd. (c).)
                          DISPOSITION
       The judgment is reversed and the matter is remanded for
further proceedings consistent with this opinion. Appellants are
entitled to costs on appeal.
       CERTIFIED FOR PUBLICATION

                                               BIGELOW, P. J.

We Concur:

                 STRATTON, J.

                 WILEY, J.

                               36