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Little Cottage Caregivers v. Meiri

Little Cottage Caregivers v. Meiri

Court of Appeal of California, Second Appellate District, Division Three

August 21, 2020, Opinion Filed

B294533

Opinion

In 2010, Vietnam Nguyen (Nguyen) sold a 50 percent interest in The Little Cottage Caregivers, LLC, a California limited liability company (Caregivers), to respondent Adie Meiri (Meiri). The following year, Nguyen signed a second agreement giving Meiri an option to buy an additional 35 percent interest in Caregivers for $1,000.

In 2012, while the option period remained open, Nguyen sold a 50 percent interest in Caregivers to Yun Kang (Kang), appellant Tzehou Kung's (Kung) predecessor in interest. Thereafter, Meiri purported to exercise his option. This litigation followed.

The case was tried to the court, which concluded that Meiri owned an 85 percent interest in Caregivers because [*2]  he entered into the 2010 purchase agreement and the 2011 option agreement before Kang purported to purchase his competing 50 percent interest in the company. Kung challenges this finding on appeal: Although he concedes that Meiri validly acquired his initial 50 percent interest, Kung urges that Meiri's purported subsequent acquisition of an additional 35 percent interest was invalid because Kang did not have actual or constructive knowledge of the option agreement. We conclude that Kung is correct, and thus we reverse the judgment with directions.

FACTUAL AND PROCEDURAL BACKGROUND

Background1

A. Meiri's Acquisition of an Interest in Caregivers

Caregivers is a medical marijuana collective that has operated in Los Angeles since at least 2006. Prior to the events at issue, Nguyen was Caregivers's sole owner.

At some point in 2010, Meiri's father, Shlomo Meiri (Shlomo), decided to give 19-year-old Meiri a gift in the form of a business. Shlomo met Nguyen through a third party and, in September 2010, he purchased a 50 percent interest in Caregivers in Meiri's name.

After the transaction closed, Nguyen "approached [Shlomo] in tears" and asked to repurchase the 50 percent interest in Caregivers. [*3]  Shlomo agreed and retained an attorney to draft a repurchase agreement. As relevant here, the repurchase agreement provided as follows:

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2020 Cal. App. Unpub. LEXIS 5383 *; 2020 WL 4915447

THE LITTLE COTTAGE CAREGIVERS, Plaintiff and Respondent, v. ADIE MEIRI, Defendant, Cross-complainant and Respondent; TZEHOU KUNG, Cross-defendant and Appellant.

Notice: NOT TO BE PUBLISHED IN 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 THE PURPOSES OF RULE 8.1115.

Subsequent History: Review denied by, Request denied by Little Cottage Caregivers v. Meire, 2020 Cal. LEXIS 7810 (Cal., Nov. 10, 2020)

Prior History:  [*1] APPEAL from a judgment of the Superior Court of Los Angeles County, No. SC126909, Gerald Rosenberg, Judge.

Disposition: Reversed with directions.

CORE TERMS

percent interest, bona fide purchaser, investment agreement, notice, option agreement, option to purchase, repurchase agreement, undisputed, purported, constructive knowledge, percent, rights, no evidence, substantial evidence, constructive notice, inquiry notice, acquisition, unexercised, contends, acquire, rent