ADK PROPERTIES LLC, ET AL. VS. FPI MANAGEMENT, INC., ET AL.

CASE NUMBER: 26CV-0210272 Tentative Ruling on Demurrer: Defendants FPI Management, Inc. (FPI), Dennis Treadaway, and Curtis Tumbaga demurrer to the Second, Fifth, Sixth, and Seventh Causes of Action in the Complaint filed by Plaintiffs on April 1, 2026. Plaintiffs oppose the Demurrer.

Meet and Confer. Defendants provided sufficient evidence of meet and confer efforts prior to filing the Demurrer.

Merits. A demurrer can be used to challenge defects that appear on the face of the complaint or from matters that may be subject to judicial notice. Blank v. Kirwan (1985) 39 Cal. 3d 311, 318. A demurrer should be sustained if the complaint fails to “state facts sufficient to constitute a valid cause of action.” CCP § 430.10(e). The Court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or

conclusions of fact or law.” Hood v. Hacienda La Puente Unified School District (1998) 65 Cal. App. 4th 435, 438. No matter how unlikely, a plaintiff’s allegations must be accepted as true for the purpose of ruling on a demurrer. Del. E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal. App. 3d 593, 604. A plaintiff must plead ultimate facts that acquaint the defendant with the nature, source and extent of plaintiff’s causes of action. Doe v. City of Los Angeles (2007) 42 Cal. 4th 542, 550.

Second Cause of Action – Breach of the Implied Covenant of Good Faith and Fair Dealing.

To state a cause of action for breach of the implied covenant of good faith and fair dealing, a plaintiff must generally establish the following elements: 1) the plaintiff and the defendant were parties to a contract; 2) the defendant owed a duty of good faith to the plaintiff; 3) the defendant breached that duty by performing in a manner that was unfaithful to the purpose of the contract or by interfering with the other party's performance; and 4) the plaintiff's justified expectations were denied, and 5) resulting in damages.

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made.” (Guz v. Bechtel Nat., Inc. (2000) 24 Cal.4th 317, 349 [100 Cal. Rptr. 2d 352, 8 P.3d 1089].) A claim for breach of the implied covenant of good faith and fair dealing requires the existence of a contract, whether express or implied. (See Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031–1032 [14 Cal.

Rptr. 2d 335] [“The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. [¶] ... [¶] [T]here is no obligation to deal fairly or in good faith absent an existing contract”].) Alameda Health System v. Alameda County Employees’ Retirement Assn. (2024) Cal. App. 5th 1159, 1190.

While this cause of action is most often sought in the case of an insured against an insurer, it is not precluded in other contexts. Here, Plaintiffs have alleged the existence of contracts, a fiduciary relationship requiring Defendant FPI to act in good faith, and several breaches of the contracts. It is alleged that FPI had discretion in how to manage the properties and exercised that discretion in a way that harmed Plaintiff to FPI’s own benefit. Based on the allegations regarding how these contracts were formed, Plaintiffs were justified in their reliance on FPI acting in good faith. Plaintiffs have alleged damages and clearly acknowledge in the complaint and in their briefing that this Cause of Action does not seek tort remedies. Plaintiffs have stated facts sufficient to constitute a cause of action.

Fifth Cause of Action – Fraud – Intentional Misrepresentation.

The elements of fraud are a) misrepresentation, b) knowledge of falsity, c) intent to defraud, d) justifiable reliance, and e) damages. Lazar v. Superior Ct. (1996) 12 Cal. 4th 631, 638. Fraud allegations must be pled with more detail than other causes of action. The facts constituting the fraud, including every element of the cause of action, must be alleged factually and specifically. The objectives are to give the defendant notice of definite charges which can be intelligently met, and to permit the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. Apollo Cap. Fund, LLC v. Roth Cap. Partners, LLC (2007) 158 Cal. App. 4th 226, 240.

In cases involving fraud, allegations as to matters which are peculiarly within the knowledge of the defendant, and as to which the plaintiff can learn only from statements made to them by others, may be made on information and belief. Less certainty is required in pleading such facts than in pleading facts presumptively or actually within the knowledge of the plaintiff. 2

Lewis v. Beeks (1948) 88 Cal. App. 2d 511, 521. Plaintiffs have alleged several facts that were represented to Plaintiffs that were not true. While Defendants argue that the facts were actually opinion, several facts are alleged in the Complaint that Plaintiff alleges were objectively untrue. On demurrer, the Court takes each facts alleged to be true. Plaintiffs have stated sufficient facts to constitute a cause of action for fraudulent misrepresentation. Sixth Cause of Action – Fraudulent Concealment.

The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact. Hambrick v. Healthcare Partners Med. Grp., Inc. (2015) 238 Cal. App. 4th 124, 162.

Plaintiffs have alleged numerous material facts that were not disclosed to Plaintiffs. FPI was in a fiduciary relationship with Plaintiffs and therefore had a duty to disclose as did Treadaway and Tumbaga. Plaintiffs have alleged that Defendants intended to defraud Plaintiffs by concealing the issues with FPI’s property management. Plaintiffs allege that had they known, they would have terminated the contracts sooner. Plaintiffs allege damages. As discussed above, less certainty is required when one party has exclusive knowledge. Plaintiffs have stated facts sufficient to constitute a cause of action for fraudulent concealment.

Seventh Cause of Action – Negligent Misrepresentation.

A cause of action for negligent misrepresentation has the same elements as a fraudulent representation, however, knowledge of the falsity is not required. Plaintiffs have properly alleged negligent misrepresentation.

The Demurrer is OVERRULED. Defendants provided a proposed Order that will be modified to reflect the Court’s ruling.

Tentative Ruling on Motion to Strike: Defendants FPI Management, Inc. (FPI), Dennis Treadaway, and Curtis Tumbaga move to strike all references to punitive damages in the Complaint filed by Plaintiffs on April 1, 2026. Plaintiffs oppose the motion.

Meet and Confer. Defendants provided sufficient evidence of meet and confer efforts prior to filing the Motion to Strike.

Merits. A motion to strike can be used to attack the entire pleading, or any part thereof, including single words or phrases. Stearns Ranchos v. Atchison Topeka & Santa Fe Railway (1981) 19 Cal. App. 3d 24. It is proper for the Court to strike any irrelevant, false or improper matter. CCP § 436(a). The Court can also strike any part of a pleading that is not drawn or filed in conformity with California law. CCP § 436(b). The proper procedure for testing the adequacy of punitive damages is a motion to strike. Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 163-64. Punitive damages require a showing of malice, oppression, or fraud. Civ. Code § 3294.

Malice is defined as conduct intended to cause injury or despicable conduct which is carried out with a willful and conscious disregard of the rights or safety of others. Civ. Code § 3294(c)(1). Despicable conduct is conduct so "vile, base and contemptible" as to be "looked down upon and despised by ordinary decent people." Lackner

v. North (2006) 135 Cal.App.4th 1188, 1210-12. The complaint must allege ultimate facts of the oppression, fraud, or malice. Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-17. A complaint must set forth the facts with sufficient precision to put the defendant on notice about what the plaintiff is complaining and what remedies are being sought. Signal Hill Aviation Co., Inc. v. Stroppe (1979) 96 Cal.App.3d 627, 636.

The Court overruled the demurrer to the fraud causes of action. Because punitive damages are permitted for fraudulent conduct, the prayer for punitive damages based on fraud will not be stricken. Punitive damages are also sought under the Third Cause of Action for breach of fiduciary duty. In ¶ 117, Plaintiffs allege that FPI’s conduct was willful, oppressive, and carried out with a conscious disregard for Plaintiffs’ rights. The allegations made in the Summary of Factual Allegations support this.

A pattern of mismanagement is alleged in ¶ 48. Specific examples are provided in ¶¶ 51, 53, 54, and 56. Plaintiffs allege in ¶ 57 that FPI demonstrated carelessness and recklessness. Plaintiffs allege that at least four formal claims and lawsuits were filed for discrimination related to Plaintiffs’ properties. ¶ 58. FPI regularly overspent Plaintiffs’ budgets and withdrew funds from Security Deposit Accounts without authorization. ¶ 60-61. While there are several additional allegations in the Complaint, the allegations described thus far are sufficient to support malice or oppression in the breach of fiduciary duty.

Therefore, punitive damages are properly alleged.

Defendants argue that Plaintiffs have not sufficiently plead a claim for punitive damages against FPI, which is an entity rather than a person.

An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation. Civ. Code § 3294(b).

The two employees mostly listed in the Complaint are Treadaway and Tumbaga who are the CEO and Vice President of Affordable Housing. These contracts were for affordable housing. When the fraud is by concealment versus misrepresentation, a party is not able to allege who, what, when, etc. for a disclosure that did not happen. The allegations made by Plaintiffs are against Defendants as a whole and are sufficient at this stage of the proceedings, especially given that concealment is attributed to the CEO and Vice President.

The motion is DENIED. Defendants provided a proposed Order that will be modified to reflect the Court’s ruling.

BERG VS. GRIFFIN