Topway Electrical Appliance Co, Ltd et al v. The Ant Commandos Inc et al
Filing
172
FINDINGS OF FACT AND CONCLUSIONS OF LAW signed by Judge Stephen G. Larson. (See document for specifics) (mrgo)
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1 Paul J. Loh (Bar No. 160541) paulloh@willenken.com 2 W. Scott Norton (Bar No. 122361) 3 scottnorton@willenken.com WILLENKEN WILSON LOH & LIEB LLP 4 707 Wilshire Boulevard, Suite 3850 Los Angeles, CA 90017 5 Tel: (213) 955-9240 6 Fax: (213) 955-9250 7 Attorneys for Plaintiffs TOPWAY APPLIANCE CO., LTD. and 8 DIANA YU 9 10 11 UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA EASTERN DIVISION | Case No.: EDCV07-00588 SGL (OPx) | | FINDINGS OF FACT AND | CONCLUSIONS OF LAW | | | | | | | | | | | | |
12 TOPWAY APPLIANCE CO., LTD., a 13 China corporation, and DIANA YU, an individual, 14 Plaintiffs, 15 16 v. 17 THE ANT COMMANDOS, INC., a 18 California Corporation, RAYMOND YOW, an individual, HONG LIP YOW, 19 an individual, and Does 1-10, inclusive, 20 Defendants. 21 ________________________________ And Related Cross-Actions 22 _________________________________ 23 24 25 26 27 28
PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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FINDINGS OF FACT A. 1. Background Facts On March 18, 2008 and April 17, 2008, the Court held a trial on the
4 Ninth and Tenth Causes of Action in Plaintiffs' First Amended Complaint. Said trial 5 was combined with an evidentiary hearing on Plaintiffs' Motion for Preliminary 6 Injunction pursuant to Fed. R. Civ. P. 65(a)(2). 7 9 11 13 2. 3. 4. 5. The Court heard the testimony of Plaintiff Diana Yu, who testified on her The Court heard the testimony of Defendants Hong Lip Yow and The Court received and admitted into evidence Joint Exhibits 1 through Plaintiff Topway Electrical Appliance Co., LTD is a corporation 8 own behalf and on behalf of Topway. 10 Raymond Yow, who testified on their own behalf and on behalf of TAC. 12 44, 55 through 60, and 100. 14 organized under the laws of China with its principal place of business in Shenzhen, 15 China. 16 18 20 22 23 25 26 1. 27 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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6. 7. 8. 9. 10. 11.
Plaintiff Diana Yu, aka Yan Yu , is a Chinese national residing in Steven Tan, aka Tan Lai Suo, is and has been an owner of Topway since Defendant Hong Lip Yow ("Lip Yow") is an individual residing in Defendant Raymond Yow is an individual residing in California. Defendant The Ant Commandos, Inc. is a corporation organized under TAC was duly incorporated in California on March 10, 2006. See Exh.
17 Shenzhen, China. 19 at least 1996. 3/18/08 Transcript, p. 10, line 12-15. 21 California.
24 laws of California with its principal place of business in Chino, California.
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B. 12.
Plaintiffs' Ninth and Tenth Causes of Action Plaintiffs' Ninth Cause of Action challenges the validity of TAC's June
3 25, 2007 Action by Majority Written Consent of Shareholders of The Ant 4 Commandos, Inc. (hereinafter the "June 25, 2007 Action") (see Exh. 17 at p. 4), 5 whereby Raymond Yow and Lip Yow voted to purportedly remove Diana Yu from 6 TAC's Board. Plaintiffs contend that they are shareholders of TAC and therefore 7 seek a declaration that the June 25, 2007 Action by which Yu was voted off of the 8 Board is fraudulent and illegal because Plaintiffs, as shareholders, were not given 9 proper notice of said vote or an opportunity to vote. 10 11 12 13 14 15 16 17 18 19 20 13. By their Tenth Cause of Action, Plaintiffs seek a declaration that (a) Topway and Yu are combined 50% shareholders of TAC; (b) Yu and Tan are directors of TAC; and (c) any vote terminating Yu or Tan as directors of TAC which was taken by shareholders that did not include Topway or Yu is illegal, null and void. 14. Plaintiffs filed this action (initially in California state court) on April 20, 2007. Plaintiff Yu testified that by no later than March 19, 2007, after several failed attempts to conduct shareholder inspections of TAC's books and records, Topway and Yu came to the conclusion that Defendants would not, and will not, honor their shareholder rights. 3/18/08 Transcript, p. 63, line 23 to p. 64, line 6. C. 15. Formation and Ownership of TAC In late 2005 or early 2006, Lip Yow approached Diana Yu and Steven
21 Tan with a business proposition for Topway. Lip Yow proposed forming a new 22 American company with Topway to sell guitar gaming consoles in the United States 23 that are compatible with the highly popular "Guitar Hero" game. Lip Yow's proposal 24 contemplated that 50% of the newly formed company would be owned by the Yow 25 brothers, and the other 50% would be owned by Topway (or designees thereof). 26 4/17/08 Transcript, p. 9, line 9 to p. 11, line 1. 27 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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In early 2006, Diana Yu and Steven Tan, acting on behalf of Topway,
2 agreed to Lip Yow's business proposal. The parties' agreement led to the formation 3 of TAC. 3/18/08 Transcript, p. 23, line 23 to p. 25, line 10. 4 17. Although the agreement was not codified in a formal contract or 5 otherwise reduced to writing, the parties do not dispute that they entered into a valid 6 and enforceable oral agreement with respect to the formation of TAC. The parties do 7 dispute, however, certain specific items of consideration that each side was obligated 8 to provide in return for their respective 50% shares in the company. 9 10 11 12 19. 18. D. Defendants never delivered any TAC share certificates to Topway or Yu. Opposing Testimony Regarding Consideration Required for 50% Interest The Court heard testimony from Diana Yu describing the terms of the
13 parties' agreement as understood by her and Topway. Specifically, according to Yu, 14 Topway promised to: (a) use TAC as Topway's exclusive U.S. distributor for guitar 15 gaming consoles and accessories manufactured by Topway that were compatible with 16 "Guitar Hero"; (b) manufacture guitar gaming consoles and accessories that are 17 compatible with "Guitar Hero" for sale in the United States by TAC; (c) provide TAC 18 with its advice, expertise and contacts in the gaming industry; and (d) provide capital 19 investment for TAC in the form of a free shipment of goods to be selected by Lip 20 Yow. See 3/18/08 Transcript, p. 20, line 3 to page 21, line 25. 21 20. Yu further testified that, in exchange for the aforementioned 22 consideration, Lip Yow (on behalf of himself and Raymond Yow) promised that: (a) 23 Topway (or is designees) would own 50% of TAC; (b) Tan and Yu would serve on 24 TAC's Board; and (c) with respect to guitar gaming consoles and accessories that 25 were compatible with "Guitar Hero", TAC promised to sell in the United States only 26 those which were manufactured by Topway. See 3/18/08 Transcript, p. 22, line 1 27 through 21. 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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21.
Raymond Yow admitted he did not have personal knowledge of the terms
2 of the parties' agreement, nor the negotiations therefor. Lip Yow, however, claimed 3 he had such personal knowledge. 4 22. Lip Yow's testimony largely corroborated Yu's in terms of the items of 5 consideration that the parties agreed upon. The only material difference is that Lip 6 Yow contended (a) the Yow brothers promised to invest a monetary sum of $50,000 7 for their 50% interest, and (b) Topway agreed (but failed) to match the Yow brothers' 8 investment with a $50,000 monetary payment for the other 50% interest. 4/17/08 9 Transcript, p. 11, line 2 to 5. It appears that Lip Yow further contends that he 10 promised to make only Yu a director of TAC, not Tan. 11 23. Although he denies that he selected the products, Lip Yow does not deny 12 that Topway contributed and TAC received the initial shipment of goods in April 13 2006 which Topway contends was given for free in consideration for its 50% interest. 14 4/17/08 Transcript, p. 11, line 18 to 19. 15 24. Yu denies that the parties ever discussed or agreed to make monetary 16 payment of $50,000 or of any sum in exchange for shares. With respect to the 17 Yow brothers' purported capital investment in the form of a $50,000 payment, Yu 18 testified she understood that was a loan the Yows made to TAC. 3/18/08 Transcript, 19 p. 85, line 1 to 15; p. 102, line 8 to 18. 20 21 22 23 25. E. Plaintiffs' Contention That They Were Obligated to Ship Goods, As Opposed to Making A Monetary Investment, In Consideration for 50% Ownership Interest Finds Ample Support in the Evidence Although the parties offer contradictory testimony regarding what
24 consideration they agreed to provide in exchange for their respective 50% interest in 25 TAC, the Court finds that Plaintiffs' account of the facts on this issue is credible, and 26 that Defendants' version lacks credibility and was fabricated in an attempt to gain 27 advantage in this litigation. 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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As detailed below, the Court makes this finding based on the fact that
2 Plaintiffs' version is amply corroborated by contemporaneous documentary evidence. 3 Moreover, Defendants are in no position to challenge the veracity of said documentary 4 evidence because they were all prepared by the Defendants themselves before this 5 action was filed. The same documents also contradict the substance of Defendants' 6 trial testimony. Specifically: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 a) In October 2006, Lip Yow transmitted to Diana Yu and Topway a document via e-mail, entitled "Action by Written Consent of the Board of Directors of The Ant Commandos, Inc.", for their review and signature. This Written Consent, which was prepared at the Yow brothers' direction, authorizes and directs TAC to issue 40% of the company's shares to Topway in exchange for "Consideration Paid" of "$40,800.00 in property and past services", and 10% to Diana Yu in exchange for "Consideration Paid" of "$10,200 in property and past services." Exh. 4 at p. 10 (emphasis added). There is no mention therein of any obligation by Topway or Diana Yu to make monetary payments for their shares. b) During approximately April and May 2006, Lip Yow told Diana Yu, in recorded MSN chat/instant messenger communications, that (1) "we will build a very strong team u [sic] and me"; (2) "I will prepare container for ANTS COMMNDON [sic] and approve you as 50% shareholder"; (3) "i will send over the information to you, include stock"; (4) "you are the mother of TAC"; and (5) "we all own TAC." Exh. 3 at pp. 8-13. c) In a September 18, 2006 sworn declaration filed in the United States District Court for the Central District of California, in connection with the matter of Activision Publishing, Inc., et. al. v. The Ant Commandos, Inc., et. al., No. EDCV 06-897, Hong Lip Yow PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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unqualifiedly declared that "Forty percent (40%) of the shares of The Ant Commandos are owned by Topway Electrical Appliance Co., Ltd" (emphasis added). Exh. 17 at p. 6. d) In October 2006, Lip Yow transmitted to Diana Yu and Topway a document, entitled "Action by Unanimous Written Consent of Shareholders In Lieu of Annual Meeting of The Ant Commandos, Inc.", for their review and signature. This Written Consent, which was prepared at the Yow brothers' direction, identifies Topway and Diana Yu as signatories in their capacity as 40% and 10% owners of TAC, respectively. Exh. 3 at p. 32. e) In October 2006, Lip Yow transmitted to Diana Yu and Topway a document, entitled "Action by Written Consent of the Board of Directors of The Ant Commandos, Inc.", for their review and signature. This Written Consent, which was prepared at the Yow brothers' direction, identifies Topway and Diana Yu as 40% and 10% owners of TAC, respectively. Exh. 5 at pp. 1-2. f) TAC issued stock certificate no. 1 to Topway, dated March 20, 2006, for 204,000 shares, which constituted 40% of all TAC shares then outstanding. See Exh. 22. g) TAC issued stock certificate no. 4 to Diana Yu, dated March 20, 2006, for 51,000 shares, which constituted 10% of all TAC shares then outstanding. See Exh. 25. h) TAC issued stock certificate no. 5 to Topway, dated September 4, 2006, for 5,100,000 shares, which constituted 40% of all TAC shares then outstanding. See Exh. 26. i) TAC issued stock certificate no. 8 to Diana Yu, dated September 4, 2006, for 1,275,000 shares, which constituted 10% of all TAC shares then outstanding. See Exh. 29. PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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j) TAC prepared a Stock Transfer Ledger which indicates that on March 20, 2006, Topway and Diana Yu were issued 40% and 10%, respectively, of all TAC shares then outstanding. See Exh. 30. k) TAC prepared a Stock Transfer Ledger which indicates that on September 4, 2006, Topway and Diana Yu were issued 40% and 10%, respectively, of all TAC shares then outstanding. See Exh. 30. l) In a letter dated March 2, 2007, attorney Michael Oswald, counsel for TAC, Raymond Yow and Lip Yow, responded to a shareholder inspection demand made by the law firm of Wang Hartman & Gibbs (the "Wang firm") on behalf of Topway and Diana Yu. In his letter, Mr. Oswald indicated that "access to TAC's records and information will not be permitted so long as the Wang firm represents either Topway or Ms. Yu", but no claim was made that Topway or Diana Yu were not shareholders of TAC or had failed to pay for their shares in TAC. See Exh. 13. m) In a letter dated March 8, 2007, attorney Michael Oswald, counsel for TAC, Raymond Yow and Lip Yow, responded to a further shareholder inspection demand made by the Wang firm on behalf of Topway and Diana Yu. In his letter, Mr. Oswald indicated that "If another firm [other than the Wang firm] representing Topway contacts me, I will be happy to discuss arrangements in which their [inspection] requests can be handled", but no claim was made that Topway and Diana Yu were not shareholders of TAC or had failed to pay for their shares in TAC. See Exh. 15. n) In January or February 2007, Hong Lip Yow and Raymond Yow presented Topway and Diana Yu with a Stock Purchase Agreement in an attempt by TAC to buy back their shares in the company. In this PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27. F.
Stock Purchase Agreement, which was drafted at the Yow brothers' direction, they affirmed that Topway and Yu "are the legal and beneficial owners of an aggregate of 6,375,000 shares of Common Stock [of TAC] representing 50% of the total number of issued and outstanding shares". Exh. 3 at p. 15. o) Plaintiffs' contention that the $50,000 paid by the Yow brothers was really a loan to TAC is corroborated by a prior consistent statement Yu made during an April or May 2006 MSN chat/instant messenger communication with Lip Yow. During that communication, Yu, upon leaning from Lip Yow that he had "put in 50,000 yesterday," characterized that transaction as "borrow [sic] you money" which was her way of describing a loan made by the Yow brothers to TAC. See Exh. 3 at p. 13; 3/18/08 Transcript, p. 102, line 8 to 18. p) Defendants have failed to present any documentary evidence prepared before this litigation which support their claim that Topway and Yu agreed to make a $50,000 monetary payment for their 50% interest. q) Defendants claim that, between September 2006 and March 2007, they made demands on Plaintiffs to pay for their shares on at least a monthly basis. None of these purported demands were reduced to writing, and Defendants have not otherwise presented any prelitigation documentary evidence to corroborate their contention that they made such demands. Defendants Concede That They Agreed Plaintiffs Could Ship Goods As Consideration for 50% Ownership Interest In his trial testimony, Lip Yow indicated that he strongly preferred, and
26 thus initially demanded, that Topway make a monetary investment in consideration 27 for shares in TAC. However, Lip Yow later conceded that he ultimately acceded to 28 Tan's request for Topway to make its capital investment in the form of a free PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 shipment of goods, rather than any monetary payment. 4/17/08 Transcript, p. 11, line 2 2 to 17. 3 28. Lip Yow further testified that in or about May or June 2006, after he was 4 unable to sell the free goods for what he believed was sufficient value, he went back 5 to Tan and demanded that Topway make a monetary capital contribution in 6 consideration for shares. 4/17/08 Transcript, p. 15, line 8 to 11. 7 29. There is no evidence to corroborate Defendants' claim that Lip Yow 8 approached Topway, Yu or Tan to make a second demand for monetary investment. 9 This state of the evidence stands in sharp contrast to the substantial volume of 10 contemporaneous, pre-litigation, documentary evidence prepared by the Defendants 11 which support Plaintiffs' factual contentions in this case. See Proposed Findings of 12 Fact paragraphs 26(a)-(q), supra. Accordingly, the Court finds that Lip Yow's 13 allegation that Defendants made a second demand on Topway for monetary 14 investment is fabricated and not credible. 15 17 30. 31. There is no evidence that Topway, Yu or Tan assented to the Defendants' There is no evidence that Defendants offered or gave Topway or Yu any 16 second demand for monetary investment. 18 new or additional consideration in exchange for their purported assent to the 19 Defendants' second demand for monetary investment. 20 21 22 23 32. G. Defendants' Allegation That Plaintiffs Agreed to Make a Matching $50,000 Monetary Investment for Shares Is Riddled With Inconsistencies A further reason why the Court rejects Defendants' trial testimony that
24 Plaintiffs agreed to make a matching $50,000 monetary investment for their shares is 25 because there are numerous inconsistencies in the Defendants' story. 26 33. Specifically, Lip Yow testified at trial that the "total" consideration paid 27 by him and Raymond Yow for their 50% shares was $50,000. See 4/17/08 Transcript, 28 p. 11, line 2 to 5; p. 17, line 5 to 6; p. 31, line 6 to 9. However, in a sworn declaration PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 previously submitted in this action on Dec. 27, 2007, Lip Yow stated that in addition 2 to a $50,000 monetary investment, he and his brother also contributed $52,000 in the 3 form of salaries not taken, for a total of $102,000 in consideration for their shares. 4 See Exh. 10 at p. 4; 4/17/08 Transcript, p. 31, line 12 to p. 32, line 20. 5 34. Further, on March 20, 2006, TAC issued stock certificates to Lip Yow 6 and Raymond Yow for a total of 255,000 shares combined. See Exhs 23, 24. 7 According to a March 20, 2006 Action by Written Consent of the Board of Directors 8 of The Ant Commandos, Inc., the stated par value for TAC shares was $0.20 per 9 share. See Exh. 6 at p. 4. Based on this par value, the Yow brothers paid a total of 10 $51,000 in consideration for their shares not $50,000 or $102,000. 11 35. Lip Yow testified that Plaintiffs strung him along by continually 12 promising to make the $50,000 monetary investment, but they never followed through 13 with the payment. This led Lip Yow in January or February of 2007 to inform 14 Plaintiffs that they could no longer become shareholders of TAC. 4/17/08 Transcript, 15 p. 33, line 8 to 14. However, in a prior declaration filed in this action on Dec. 27, 16 2007, Lip Yow stated that Plaintiffs had until March 2007 to pay for their TAC shares. 17 See Exh. 10 at p. 15. Further, in an even earlier declaration filed in this action on June 18 14, 2007, Lip Yow gave yet a third version of this story: He stated that the Plaintiffs' 19 opportunity to purchase TAC shares closed at the end of 2006. See Exh. 100 at p. 2. 20 21 22 35. H. Topway Fully or Substantially Performed On Its Promise To Make an Initial Shipment of Goods to TAC for Free As noted at Proposed Findings of Fact paragraph 23, supra, Defendants
23 do not deny that Topway contributed and TAC received the initial shipment of 24 goods which Topway contends it furnished in consideration for a 50% ownership 25 interest. 26 36. The Court heard Lip Yow testify that the quality and value of the 27 products provided by Topway in this initial shipment were less than what he 28 apparently expected and, accordingly, TAC was not able to sell as many of them, or PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 fetch as high of a price for them, as Defendants expected. 4/17/07 Transcript, p. 12, 2 line 13 to p. 14, line 24. 3 37. However, there is no evidence to corroborate Lip Yow's testimony on 4 this issue: There is no contemporaneous writing evidencing Defendants' 5 dissatisfaction with the products; there is no documentary evidence that Defendants 6 returned or tried to return the products to Topway; and none of the allegedly inferior 7 products were brought to Court or admitted into evidence. This state of the evidence 8 stands in sharp contrast to the substantial volume of contemporaneous, pre-litigation, 9 documentary evidence prepared by the Defendants which support Plaintiffs' factual 10 contentions in this case. See Proposed Findings of Fact paragraphs 26(a)-(q), supra. 11 Accordingly, the Court finds that Lip Yow's allegation that Topway shipped inferior 12 goods is fabricated and not credible. 13 38. However, even if this testimony were believed, the Court does not find 14 that it shows a failure of consideration, or that Plaintiffs failed to make substantial 15 performance. This is because the Defendants presented no evidence that the parties 16 discussed or much less agreed on a specific value or quality for the goods that 17 Topway must contribute. 18 39. The Court heard testimony from the Defendants insinuating that 19 Plaintiffs failed to perform because Topway had in fact charged and received payment 20 from TAC for the initial shipment of goods. In support of this argument, Defendants 21 point to an accounting ledger prepared by Yu and transmitted to Lip Yow in early 22 2007 which appears to indicate that Topway applied payments it received from TAC 23 to the initial shipment of goods. See Exh. 56 (hereinafter "the Accounting Ledger"). 24 40. On the other hand, the Court heard testimony from Yu, who explained 25 that Topway issued invoices to TAC for the initial shipment of goods not because it 26 intended to charge TAC for the goods, but only because this is required to clear 27 customs. 3/18/08 Transcript, p. 29, line 7 to 23. 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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41.
Yu, who prepared the Accounting Ledger, also testified that the it was
2 not intended to reflect the application of payments to specific invoices or shipments of 3 goods. She explained that, rather than paying off the full amount of any invoice (or of 4 groups of invoices) on a regular basis, it was TAC's practice to pay Topway in 5 arbitrary whole-number dollars, and it did so in whatever amount it chose, whenever it 6 chose. Accordingly, the Accounting Ledger was meant only as a rough tool to keep 7 track of Topway's overall accounts receivable position with respect to TAC. 3/18/08 8 Transcript, p. 87 line 10 to p. 88, line 5; p. 99, line 14 to p. 100, line 3. 9 42. The Court accepts Yu's explanation of the purpose and meaning of the 10 Accounting Ledger because it is corroborated by the fact that under the column 11 therein entitled "Payment Status", it indicates that payment for the initial and other 12 recorded shipments of goods was merely "RECEIVED", as opposed to "PAID". 13 43. Further, the Court notes that, as the Accounting Ledger clearly shows, the 14 total outstanding debt owed by TAC to Topway is $713,114.76. This sum far exceeds 15 the invoice value of the initial shipment of goods, which was approximately $29, 000. 16 Accordingly, as an economic matter, TAC has not paid Topway for the initial 17 shipment of free goods. 18 44. Moreover, the Defendants' own conduct belies their claim that the 19 Accounting Ledger indicates TAC had paid for the initial shipment of free goods. 20 After Lip Yow received a copy of the Accounting Ledger from Yu in early 2007, he 21 nevertheless proceeded to have his lawyer draft the Stock Purchase Agreement (see 22 Exh. 3 at pp. 15-22), in which Defendants affirmed that Topway and Yu were 50% 23 owners of TAC and sought to buy back those shares. 24 45. It was also after Lip Yow received a copy of the Accounting Ledger from 25 Yu that he proceeded to authorize TAC to make at least another $200,000 payment to 26 Topway. See Exh. 38. There is no evidence that Lip Yow did this under any 27 reservation or protest. 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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I. 46.
Plaintiffs' Alleged Sale to Best Buy of Guitar Gaming Consoles That Are Compatible with the "Guitar Hero" Game The Court heard testimony from the Defendants that they purchased one
4 "shredder" style, "Guitar Hero"-compatible gaming guitar from Best Buy in 5 October/November 2006 (see Exh. 59A), and then another one sometime during 2008 6 (see Exh. 59B). Inside the bodies of these two guitars are plastic imprints bearing 7 marks with the Topway name, address and website URL. 8 47. Defendants claim that these guitar sales are evidence that Topway 9 materially breached the exclusive dealing/non-competition provisions in the parties' 10 agreement for joint ownership in TAC. Defendants further claim that, prior to 11 October/November 2006, they were not aware that Topway caused these sales to take 12 place, and that such sales were done without their authorization. 13 48. Yu testified that, in or around the summer of 2006, Lip Yow told 14 Topway that TAC would stop selling the shredder style guitars in the United States 15 because they were not selling well. Accordingly, TAC returned all such guitars to 16 Topway. Because TAC no longer wanted to sell the shredder guitars, Topway no 17 longer had any use for the molds it had on hand for making said guitars; the molds 18 would presumably cause the Topway name, address and website URL to be imprinted 19 into the plastic bodies of the guitars. At that point, according to Yu, Topway advised 20 Lip Yow that it would transfer its shredder guitar molds to another manufacturing 21 company (one separately owned by Tan's brother), which could conceivably end up 22 selling the product through American channels. Lip Yow voiced no objection to this. 23 3/18/08 Transcript, p. 52, line 1 to p. 53, line 16. 24 49. The Court rejects any claim by Defendants that Plaintiffs caused the Best 25 Buy sales to be transacted without the Yow brothers' knowledge and authorization, or 26 that these sales constitute a material breach of the exclusive dealing/non-competition 27 provision in the parties' agreement for joint ownership of TAC. This is because there 28 is no evidence to corroborate these claims. Specifically, there is not a single PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 contemporaneous writing evidencing Defendants' discovery of the Best Buy sales, or 2 their objection thereto, even though the Defendants decry these sales as a profoundly 3 dishonest act by the Plaintiffs that seriously damaged TAC's business. 4 50. Moreover, the Defendants' own conduct belies their claims. Specifically, 5 even after the discovery of the Best Buy sales in October/November 2006, TAC 6 continued doing substantial business with Topway, including paying some additional 7 $800,000 to Topway. 4/17/08 Transcript, p. 55, line 18 to 23. 8 51. Further, in early March of 2007, when TAC responded to Topway's and 9 Yu's initial requests for shareholder inspections, it did not claim that the Best Buy 10 sales had vitiated Plaintiffs' shareholder status, and nor did it object to the inspection 11 on grounds that Plaintiffs were competing against TAC. Rather, TAC's response was 12 merely that it would gladly accommodate Plaintiffs' inspection so long as they 13 retained new legal counsel. See Exhs. 13 and 15. 14 52. Accordingly, the Court finds that Defendants' claim that the Best Buy 15 sales were transacted without their knowledge and authorization, or that the sales 16 constituted a material breach of the exclusive dealing/non-competition provision in the 17 parties' agreement for joint ownership of TAC, were recently fabricated in an effort to 18 gain advantage in this litigation. 19 53. Defendants presented no evidence that they have ever sought a rescission 20 of the parties' agreement for joint ownership in TAC, or that they have ever offered to 21 restore any consideration given by Topway or Yu pursuant thereto. 22 54. The Defendants' Answer and Counterclaim contain no allegation that 23 they have ever sought a rescission of the parties' agreement for joint ownership in 24 TAC, or that they have ever offered to restore any consideration given by Topway or 25 Yu pursuant thereto. 26 27 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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J. 55.
Directors of TAC TAC's bylaws provide that its directors shall hold office until the
3 expiration of the term for which they were elected and until a successor has been 4 elected and qualified. 5 7 9 56. 57. 58. Defendants concede that, up until her purported removal on or about June There is no evidence that a successor to Yu on the board has been elected Neither Yu nor Topway learned of Yu's purported removal from TAC's 6 25, 2007, Diana Yu was a director of TAC. 8 or qualified. 10 board until August 17, 2007, when TAC's counsel advised Plaintiffs' counsel thereof. 11 See Exh. 17 at p. 2. 12 59. There is no evidence that Diana Yu has a criminal record or is of unsound 13 mind, and there is no evidence that Raymond Yow or Lip Yow filed a shareholder 14 derivative action to remove Diana Yu from the TAC board 15 60. Defendants contend that they never agreed to make Tan a director of 16 TAC, and any writings made or actions taken which tend to show otherwise was an 17 inadvertent mistake. 18 61. The Court finds Defendants' denial of Tan's seat on the TAC board is 19 fabricated and lacking in credibility. This is because, before this litigation was filed, 20 TAC, Raymond Yow and Lip Yow made numerous admissions in which they 21 acknowledged that Tan was a director of TAC. These admissions include the 22 following: 23 24 25 26 27 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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(a) In October 2006, Lip Yow transmitted to Diana Yu and Topway a document, entitled "Action by Unanimous Written Consent of Shareholders In Lieu of Annual Meeting of The Ant Commandos, Inc.", for their review and signature. This Written Consent, which was prepared at the Yow brothers' direction, indicates that the
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 22 II. 23 24 25 26 1. 62.
shareholders appointed Steven Tan to TAC's Board. See Exh. 3 at p. 30. (b) TAC prepared the minutes of its Board meeting of September 7, 2006. These minutes, which are dated September 10, 2006, indicate that Steven Tan, as well as Diana Yu and Lip Yow, were in attendance at the Board meeting described therein, and Steven Tan is specifically identified therein as one of the "undersigned Directors" of TAC. See Exh. 3 at p. 26. (c) In October 2006, Lip Yow transmitted to Diana Yu and Topway a document, entitled "Action by Unanimous Written Consent of the Board of Directors of The Ant Commandos, Inc.", for their review and signature. This Written Consent, which was prepared at the Yow brothers' direction, identifies Steven Tan, as well as Diana Yu, as signatories in their capacity as directors of TAC. See Exh. 5 at p. 3. (d) On or about October 3, 2006, TAC prepared and filed a Statement of Information with the State of California Secretary of State which identifies Steven Tan, along with Diana Yu, Lip Yow and Raymond Yow, as directors of TAC. See Exh. 53 at pp. 1-2. There is no evidence that TAC's shareholders or directors took any
20 action to remove Tan from TAC's Board. CONCLUSIONS OF LAW A. The Parties Entered Into An Enforceable Contract Whereby Topway and Yu Were Made 50% Owners of TAC Upon Topway's Initial Shipment of Goods to TAC The parties do not dispute that they entered into an enforceable,
27 contractual agreement for allocating 50% of TAC's shares to Raymond and Lip Yow 28 and the other 50% to Topway and Diana Yu. Rather, the parties' dispute centers PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 around what were the terms or consideration actually agreed upon for the 50/50 2 allocation, and whether Topway and Diana Yu fully performed thereunder. 3 2. For the reasons stated at Proposed Findings of Fact paragraphs 25-31, 4 supra, the Court concludes that the parties agreed that Topway and Yu would become 5 50% owners of TAC upon Topway's initial shipment of free goods to TAC. 6 3. For the reasons stated at Proposed Findings of Fact paragraphs 32-35, 7 supra, the Court concludes that the Defendants' story that each side had agreed to pay 8 a monetary investment of $50,000 for ownership of TAC was fabricated to gain 9 advantage in this litigation, and it is thereby rejected as lacking in credibility. 10 4. Defendants contend that, because Topway's initial shipment contained 11 what they felt were inferior goods, they approached Topway and renewed their 12 demand that it make a monetary investment as consideration for TAC shares. This 13 appears to be an effort by the Defendants to modify the parties' agreement. However, 14 the law is clear that an oral modification of an oral contract is valid and enforceable 15 only if there is mutual assent, coupled with additional or new consideration for the 16 modification. See Wade v. Diamond A Cattle Co., 44 Cal. App. 3d 453, 457 (1975); 17 Healy v. Brewster, 251 Cal. App. 2d 541, 551 (1967). 18 5. In this case, there is no evidence that Plaintiffs assented to Defendants' 19 renewed demand for a monetary investment. Further, even if Plaintiffs gave such 20 assent, there is no evidence that Defendants gave any new or additional consideration 21 therefor. Accordingly, the Court concludes that Plaintiffs' obligation to provide goods 22 for shares was never modified into an obligation to pay a monetary sum. 23 24 25 6. B. Plaintiffs Fully or Substantially Performed Their Obligations Under the Parties' Agreement Defendants do not dispute the fact that Topway did make an initial
26 shipment of goods in consideration for a 50% interest in TAC. However, Defendants 27 allege that the value or quality of said goods were substantially lower than what they 28 had expected. PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1
7.
However, even if this allegation was true, it does not constitute a failure
2 to perform or a failure of consideration on the Plaintiffs' part. This is because the 3 evidence does not indicate that the parties ever discussed or agreed upon a specific 4 level of quality or value for Topway's initial shipment of goods. 5 8. Moreover, there is no legal basis to challenge the sufficiency of the 6 consideration Topway gave for the shares. Under governing California law, any 7 consideration at all can be deemed sufficient consideration for corporate shares. See, 8 e.g., California Trona Co. v. Wilkinson, 20 Cal. App. 694, 703 (1912) ("If there is a 9 consideration of some sort . . . that is intended to redound to the benefit of the 10 corporation . . . then . . . the consideration is sufficient and . . . adequate, although it 11 may not be equal in value to that of the stock"). 12 9. Defendants also contend that Plaintiffs failed to perform because 13 Topway actually billed and received payment from TAC for the initial shipment of 14 "free" goods. However, for the reasons stated at Proposed Findings of Fact 15 paragraphs 39-45, supra, the Court concludes that TAC did not pay for the initial 16 shipment of goods, and Defendants' contentions to the contrary were fabricated to try 17 to gain advantage in this litigation. 18 10. Accordingly, the Court concludes that Plaintiffs fully or substantially 19 performed their obligation to make an initial shipment of free goods to TAC in 20 consideration for a 50% ownership interest. 21 22 23 24 11. C. Contemporaneous, Documentary Evidence Prepared by the Defendants Themselves Before Litigation Ensued Conclusively Establishes Topway's and Yu's Shareholder Status As noted at Proposed Findings of Fact paragraphs 26(a)-(q), supra, some
25 of the most powerful evidence in support of Plaintiffs' claim of shareholder status 26 comes from contemporaneous documents prepared by the Defendants themselves 27 before this litigation ensued. In these documents, the Defendants repeatedly and 28 unambiguously acknowledge the shareholder status of Topway and Yu. PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1
12.
With respect to certain of these documents for example, the corporate
2 director and shareholder written consents in Exhs. 3 at pp. 30-32; Exh. 4 at pp. 6-10; 3 and Exh. 5 at pp. 1-3 -- Defendants argue that they are of limited or no legal effect 4 because Yu and Tan did not sign them as TAC had requested. However, this confuses 5 the issue of whether the corporate actions envisioned in the various shareholder or 6 director written consents were validly approved, with whether the statements made 7 therein attesting to Plaintiffs' shareholder status amount to Defendants' admission of 8 fact. The documents at issue are certainly relevant and admissible for purposes of 9 addressing the latter inquiry. See Kendal v. San Pedro Lumber Co., 98 Cal. App. 2d 10 242, 244 (1929) (although documents prepared by debtor did not rise to the level of an 11 account stated they nonetheless constituted admissions as to the presence of a debt); 12 Fed. R. Evid. 801(d)(2) (admission/statement of party opponent); Fed. R. Evid. 13 804(b)(3) (statement against interest). 14 13. The Stock Purchase Agreement (see Exh. 3 at pp. 15-22) that was 15 tendered by the Yow brothers is particularly damaging to the Defendants' case. An 16 attempt to buy out Plaintiffs' TAC shares cannot be reconciled with the contention 17 that Topway and Yu are not owners of the company. In this regard, the Defendants 18 contend that the Stock Purchase Agreement was really an offer to compromise under 19 Fed. R. Evid. 408, and therefore it should not be admitted or accorded weight. 20 However, such a contention is without merit. Not only is the Stock Purchase 21 Agreement without any of the recognizable features of an offer to compromise, it 22 affirmatively acknowledges and warrants Topway's and Yu's rightful shareholder 23 status. See, e.g., Civic Center Drive Apartments Ltd. Partnership v. Southwestern Bell 24 Video Services, 295 F.Supp.2d 1091, 1099 n. 3 (N.D. Cal. 2003) (where there was "no 25 reference to settlement negotiations" in schedule of proposed corrective work given 26 by construction company to customer during their dispute, the document was deemed 27 to be outside the scope of Fed. R. Evid. 408); City of Honolulu v. Rivera Davila, 438 28 F.2d 1367, 1369 (1st Cir. 1971) (offer wherein alleged debt guarantor requested only PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 an extension of time and agreed to make full payment was "properly viewed . . . as an 2 admission rather than an offer in compromise"). 3 4 5 14. D. Actual Delivery of Share Certificates Is Not Necessary to Establish Plaintiffs' Valid Ownership Interest If, as the Court concluded in the foregoing pages, the parties entered into
6 a binding agreement for the allocation of TAC shares, and Plaintiffs has fully or 7 substantially performed their obligations thereunder, then the agreement is fully 8 executed and Plaintiffs are immediately and automatically vested with the ownership 9 interest as a matter of law. See, e.g., Reeder v. Finderup, 78 Cal. App. 305, 308 10 (1926); Mitchell v. Beckman, 64 Cal. 117, 121 (1883). 11 15. Defendants contend that Plaintiffs were never lawful shareholders of 12 TAC because they never received TAC share certificates. However, the law is clear 13 that when an agreement for the distribution or sale of shares is fully executed, actual 14 delivery of the share certificates is not necessary to create ownership interest in its 15 intended holder. See, e.g., United States Nat'l Bank of Los Angeles v. Stiler, 216 Cal. 16 324, 333-34 (1932); Western Pacific Paper Co. v. Hollywood Tropics, 113 Cal. App. 17 305, 308 (1931). 18 19 20 16. E. Plaintiffs' Alleged Sales of Guitars to Best Buy Do Not Vitiate Their Shareholder Status For the reasons stated at Proposed Findings of Fact paragraph 49-54,
21 supra, this Court does not give credence to Defendants' claim that Plaintiffs caused 22 the guitars depicted in Exhs. 59A and 59B to be sold to Best Buy without Defendants' 23 knowledge and authorization. The Court also rejects Defendants' contention that such 24 sales, if they occurred at all, were viewed as a material breach of the exclusive 25 dealing/non-competition provision in the parties' agreement for joint ownership of 26 TAC. Chief among the reasons for the Court's conclusion is the utter lack of 27 contemporaneous evidence showing Defendants' objection to the Best Buy guitar 28 sales. See, e.g., Bohman v. Berg, 54 Cal. 2d 787, 795 (1960) ("When one party PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1 performs under the contract and the other party accepts his performance without 2 objection it is assumed that this was the performance contemplated by the 3 agreement"). 4 17. The sale of the guitar depicted in Exh. 59B cannot, as a matter of law, 5 serve as the basis for any breach of contract allegation against the Plaintiffs. That sale 6 occurred during 2008, at which time Plaintiffs were already relieved from any 7 obligation to honor the parties' agreement because it came well after Plaintiffs filed 8 this suit on April 20, 2007 in response to Defendants' failure to honor the Plaintiffs' 9 shareholder rights. See, e.g., Harlan v. Harlan, 74 Cal. App. 555, 561-62 (1946) 10 ("Defendant may not deprive plaintiff of the sole consideration for her promises and at 11 the same time hold her to those promises").1 12 18. As for the sale of the guitar depicted in Exh. 59A under the 13 circumstances of this case that can in no way vitiate Plaintiffs' shareholder status. 14 The parties' agreement for the joint ownership of TAC is bilateral in nature expect in 15 one respect: Before it gains a 50% interest, Topway must first make the initial 16 shipment of free goods. See, e.g., Davis v. Jacoby, 1 C. 2d 370, 378 (1934) (a 17 bilateral contract is one in which there are mutual promises, a promise being given in 18 consideration of another promise). Once that shipment is made, however, the contract 19 is fully executed and Plaintiffs are immediately and automatically vested with the 20 ownership interest as a matter of law. See, e.g., Reeder v. Finderup, 78 Cal. App. 305, 21 308 (1926); Mitchell v. Beckman, 64 Cal. 117, 121 (1883). 22 19. Here, an alleged violation of the exclusive dealing/non-competition 23 provision that took place in October/November 2006 in no way negates the fact that 24 the agreement making Plaintiffs' 50% shareholders was already fully executed back in 25 April 2006, when the shipment of goods was made. 26
1 For the same be an agreement, 27 entered into onreason, Exhibit 58 is irrelevant. That purports toconferred exclusive May 15, 2007, whereby Topway (through Tan) 28 distributorship rights upon Griffin International Companies for the sale of guitar gaming consoles manufactured by Topway.
PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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1
20.
Thus, the sale of the guitar depicted in Exh. 59A to Best Buy can serve
2 only as the basis for a breach of contract claim against the Plaintiffs. To the extent 3 Defendants may seek damages for such breach, that is not a subject of this trial and it 4 will not affect Plaintiffs' shareholder status. To the extent Defendants may try to 5 vitiate Plaintiffs' shareholder status by seeking a rescission remedy for said breach, it 6 is not a legally viable option here. This is because the law requires that, to attain 7 rescission, it must be promptly announced by the promisee and consideration offered 8 to be restored. See, e.g., Brunzell Const. Co. v. G.J. Weisbrod, Inc., 134 Cal. App. 2d 9 278, 283 (1955). In this case, there is no evidence that Defendants have ever 10 demanded rescission, or offered to restore consideration. Further, Defendants' 11 Answer and Counterclaim also do not plead any of these requisite preconditions for 12 rescission. 13 21. Under the circumstances of this case, even if Defendants' allegation is to 14 be believed that Plaintiffs caused competing guitar consoles to be sold at Best Buy, it 15 does not provide any legal basis to strip Topway or Yu of their ownership interest in 16 TAC. 17 18 F. 22. Tan Was Appointed and Remains a TAC Director It is controverted whether the parties agreed, as part of the formation of
19 TAC, to install Tan, along with Yu and the Yow brothers, on the TAC Board. 20 However, the Court need not resolve this factual conflict in order to conclude that Tan 21 was duly appointed to the Board. The Court bases its conclusion on the October 2006 22 "Action by Unanimous Written Consent of Shareholders In Lieu of Annual Meeting 23 of The Ant Commandos, Inc.", which indicates that shareholders appointed Tan to the 24 board, effective immediately, until the next annual meeting of shareholders and until 25 his successor is elected. See Exh. 7 at p. 1. There is no evidence that a successor to 26 Tan's board seat has been elected. 27 23. Although the aforesaid shareholder written consent was not fully
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28 executed by TAC's shareholders, the law is clear that, in close corporations like TAC, PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
1 the law favors substance over form such that corporate actions can be deemed valid 2 even if they were not formally enacted especially if the action in question was later 3 ratified by word or conduct. See, e.g., Brainard v. De La Montanya, 18 Cal. 2d 502, 4 511 (1941) (in cases of close corporations where the directors are in frequent contact 5 with each other, it is unnecessary to hold formal meetings in order to reach decisions); 6 In re Ostwald's Estate, 189 N.Y.S.2d 472, 480 (1959) (directors of small corporations 7 may transact their business by conversation and without formal votes); American 8 Center for Education, Inc. v. Cavnar, 80 Cal. App. 3d 476, 490 -491 (1978) ("The 9 law favors substance over form. ( Civ. Code, § 3528)"); Teperman v. Atcose Baths, 10 Inc. 182 N.Y.S.2d 765, 768 (1959) (an action taken at an incorporator's meeting was 11 held to be effective even though the minutes of the meeting were not signed); 12 McCarthy v. U.S.I. Corp., 678 A. 2d 48, 52 (1996) (an unsigned unanimous 13 shareholder consent terminating certain employees was later validated by ratification 14 and therefore was held to be valid nunc pro tunc). 15 17 18 19 20 21 22 23 24 25 26 27 28 24. Here, there is substantial evidence that TAC ratified Tan's appointment (a) TAC prepared the minutes of its Board meeting of September 7, 2006. These minutes, which are dated September 10, 2006, indicate that Steven Tan, as well as Diana Yu and Lip Yow, were in attendance at the Board meeting described therein, and Steven Tan is specifically identified therein as one of the "undersigned Directors" of TAC. See Exh. 21 at p. 1. (b) In October 2006, Lip Yow transmitted to Diana Yu and Topway a document, entitled "Action by Unanimous Written Consent of the Board of Directors of The Ant Commandos, Inc.", for their review and signature. This Written Consent, which was prepared at the Yow brothers' direction, identifies Steven Tan, as well as Diana Yu, as signatories in their capacity as directors of TAC. See Exh. 8 at p. 3. PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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16 to the board:
1 2 3 4 5 6 G. 25.
(c) On or about October 3, 2006, TAC prepared and filed a Statement of Information with the State of California Secretary of State which identifies Steven Tan, along with Diana Yu, Lip Yow and Raymond Yow, as directors of TAC. See Exh. 53 at pp. 1-2. The Ninth Cause of Action Plaintiffs' Ninth Cause of Action challenges the validity of TAC's June
7 25, 2007 Action, whereby Raymond Yow and Lip Yow voted to purportedly remove 8 Diana Yu from TAC's board. 9 26. Under governing California law, a director of a California corporation 10 may be removed only as prescribed in Cal. Corp. Code §§ 302, 303 or 304. See Cal. 11 Corp. Code § 303(c); DeGarmo v. Goldman, 19 Cal. 2d 755, 760 (1942). 12 27. In this case, because there is no evidence that Diana Yu has a criminal 13 record or is of unsound mind (Cal. Corp. Code § 302), and there is no evidence that 14 Raymond or Lip Yow filed a shareholder derivative action to remove Diana Yu from 15 the board (Cal. Corp. Code § 304), Yu's removal from the Board is valid only if 16 Topway and Diana Yu are not shareholders of TAC. If they are shareholders, 17 however, then Yu's removal is invalid because there is no evidence that Topway or 18 Diana Yu received timely notice of the June 25, 2007 Action. See Cal. Corp. Code §§ 19 303, 603(a), 603(b). 20 28. For all of the foregoing reasons, the Court concludes that Yu and Topway 21 are combined 50% shareholders of TAC and, accordingly, finds in favor of Plaintiffs 22 as to the Ninth Cause of Action. Specifically, the Court finds that (a) the June 25, 23 2007 Written Action removing Yu from the Board is illegal and fraudulent because 24 Yu and Topway, as TAC shareholders, was not given any notice of the vote, and 25 therefore was not given an opportunity to cast their vote thereon; and (b) that Yu shall 26 therefore be immediately reinstated as a director of TAC. 27 28 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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H.
The Tenth Cause of Action
1
29.
For all of the foregoing reasons, the Court concludes that Yu and Topway
2 are combined 50% shareholders of TAC and, accordingly, finds in favor of Plaintiffs 3 as to the Tenth Cause of Action. Specifically, the Court declares, and grants 4 injunctive relief reasonably necessary to effectuate, the following: (a) Yu and 5 Topway are 50% shareholders of TAC; (b) Yu is a director of TAC; (c) Tan is a 6 director of TAC; and (d) any votes terminating Yu and/or Tan as directors (including 7 the June 25, 2007 Written Action) which was taken by shareholders that did not 8 include Topway and Yu is illegal, null and void.2 9 10 APPROVED AND ADOPTED BY THE COURT, 11 Dated: November 06, 2008 12 13 14 15 16 17 18 19 20 21 22 23
2 As a logical and necessary consequence of the Court also declares, 24 and grants injunctive relief reasonably necessaryforegoing, the the following: That the to effectuate, 2007, 25 Amendment to Bylaws reflected in Exhibits 31 and 32, dated August 14, of TAC, whereby Raymond Yow and Lip Yow, voting as the "sole shareholders" the number The TAC bylaws provide 26 reduced bylaws may of directors to two, is null and void. approved by at least a that the be amended by shareholders only if the election of directors at 27 majority of the outstanding shares entitled to vote in 20 at p. 6. Neither Yu nor any annual or special meeting of shareholders. See Exh. shareholders, received notice of this vote or had an opportunity to 28 Topway, astherein. participate
STEPHEN LARSON United States District Judge
PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW
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