ON SKI RUN, LLC, ET AL. v. MOUNTAIN MEN, LLC, ET AL.

force, or which may later be in force, regarding the use of the premises. The

commencement or pendency of any state or federal court abatement proceeding

affecting the use of the premises will at the option of the Lessor is [sic] deemed a breach

of this Lease[.]” (TACC, Ex. B, ¶ 6.) Additionally, “[t]his Lease is binding upon and inures

to the benefit of the heirs, assigns, and successor of the parties.” (TACC, Ex. B, ¶ 31.)

Under the paragraph entitled, “Americans with Disabilities Act” (“ADA”) the Lease

provides: “Lessee accepts the premises in its current ‘as is’ conditions and shall be

responsible for all costs associated with meeting the requirements of the Americans with Disabilities Act.” (TACC, Ex. B, ¶ 34.) “In the event of a transfer of Lessor’s title or

interest to the property during the term of this Lease, Lessee agrees that the grantee of

such title or interest will be substituted as the Lessor under this Lease.” (TACC, Ex. B,

¶ 35.) “On ten (10) days’ prior written notice from Lessor, Lessee will execute,

acknowledge, and deliver to Lessor a statement in writing: (1) certifying that this Lease

is unmodified and in full force and effect (or, if modified, stating the nature of such

modification and certifying that this Lease, as so modified, is in full force and effect)[,]

the amount of any security deposit, and the date to which the rent and other charges

are paid in advance, if any; and (2) acknowledging that there are not, to Lessee’s

knowledge, any uncured defaults on the part of Lessor, or specifying such defaults if any

are claimed. Any such statement may be conclusively relied upon by any prospective

buyer or financier of the premises.” (TACC, Ex. B, ¶ 36(a).) Addendum No. 1 to the Lease provides: “Lessee shall prove to Lessor’s satisfaction

that all bills have been paid upon completion of any construction on the premises. ...

Also, Lessee shall obtain and deliver to Lessor a Certificate of Occupancy from the City, if

applicable[,] prior to initiating restaurant operations.” (TACC, Ex. B at Addendum No. 1,

¶ 7.) “During construction and operation of the restaurant, Lessee must conform to the

requirements of any federal, state and local governmental entity having authority over the restaurant and/or Lessor’s property. In addition, Lessee shall operate the restaurant

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in such a manner that it conforms with any and all permits and ordinances in effect,

which govern said operation[.]” (TACC, Ex. B at Addendum No. 1, ¶ 8.)

Exhibit 1.a. to the Lease provides: “Lessor shall contribute no more than $35,000 in

the form of future rent credits... to complete” various ADA issues, amongst other items.

(TACC, Ex. B at Ex. 1.a.) “The work items listed above in Exhibit 1.a. and 1.b. are to be

completed by Lessee as may be required by the City of South Lake Tahoe and to Lessor’s

reasonable satisfaction.” (TACC, Ex. B at Ex. 1.a.) “Lessee shall be obligated to complete

and pay for any additional work required to complete necessary or desired improvements for the subject Premises and associated Class A Restaurant and Bar,

including the following: 1. The remainder of any work items listed in the preceding

sections (Exhibits 1.a. and 1.b.) that were not paid or payable from Lessor’s specified

$35,000 and $15,000 contributions....” (TACC, Ex. B at Ex. 1.)

The First Amendment to Commercial Lease, executed by Thanya Starr, Supaporn

Phillips, and Maguranyi Szabolcs on August 15, 2019, states that the purpose of said

amendment is to accommodate the sale of the Property to Infinity Investment Group,

LLC (referencing Escrow # NSC 967079). (TACC, Ex. D.) Except as provided for in the

amendment, the Lease shall remain unmodified and in full force and effect. (TACC,

Ex. D.)

1.2. Additional Background

On April 4, 2019, the city of South Lake Tahoe (the “City”) issued a tenant

commercial improvement permit to cross-defendants, entitling them to commence

renovations at the premises. (TACC, ¶ 24.) The permit stated it would expire after

12 months on April 4, 2020. (TACC, ¶ 24.)

On August 26, 2019, Infinity Investments, LLC purchased the property. (TACC, ¶ 38.)

On October 3, 2019, the City issued the first of two “Correction Notices” related to

cross-defendants’ renovation projects. (TACC, ¶ 42 & Ex. E.) Said notice identifies 22 items that “shall be corrected, reinspected, and approved prior to covering,”

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including: (19) “provide all required ADA signage, front door, bathrooms, etc.” (TACC,

Ex. E.)

On October 7, 2019, the City issued its second Correction Notice. (TACC, ¶ 43 &

Ex. F.) This notice states the following item, amongst others, shall be corrected,

reinspected, and approved prior to covering: “complete all exterior ADA site

requirements, parking stalls, path of travel, sinage [sic], etc.” (TACC, Ex. F.)

After receiving these correction notices, cross-defendants refused to pay certain

invoices issued by their contractor, Mike Bailey, and ceased communications with his construction company, MB Construction. (TACC, ¶ 44.)

On October 8, 2019, the City informed Thanya Starr that the City would only be

issuing a Temporary Certificate of Occupancy given the incomplete nature of the

renovations. (TACC, ¶ 46 & Ex. G.) The City further stated that the “Dig Season is coming

to an end as of 10/15/2019[.]” (TACC, Ex. G.) “The intension [sic] is to acquire and finish

the exterior portion of our Permit in the beginning of the Spring when Dig Season starts.

05/01/2020[.] ... [¶] All other items on the Correction Notice should be addressed and or

completed within (2) weeks. 10/18/2019[.]” (TACC, Ex. G.) Cross-defendants allegedly

completed most of the other correction items identified by the City in October 2019.

(TACC, ¶ 46.)

On October 21, 2019, “after [Mike Bailey] completed the majority of the punch list

items, excepting the exterior ADA work and the hanging of one of the doors,” cross- defendants fired Mike Bailey and refused to pay his outstanding invoices or hire him for

the final items on the correction notices. (TACC, ¶ 49.)

Cross-defendants then refused to pay several other contractors who had worked on

their project, including Arctic Electric and Riley Plumbing and Heating. (TACC, ¶ 49.)

Cross-complainants allege this constituted a breach of the Lease. (TACC, ¶ 49.)

When the dig season resumed in May 2020, cross-defendants allegedly “did not perform, or attempt to perform, any of the work to complete their project, even though

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all of the outstanding exterior ADA work remained to be completed pursuant to ... the

October 7, 2019 correction notice.” (TACC, ¶ 50.)

On January 14, 2022, the City posted a “FINAL NOTICE OF PERMIT EXPIRATION” at

the premises. (TACC, ¶ 62.) Soon after, cross-defendants’ temporary occupancy permit

expired due to their failure to close out their building permit and/or address the exterior

ADA renovations. (TACC, ¶ 54.)

1.3. Fraud Allegations

On May 10, 2023, Thanya Starr, as owner of On Ski Run, executed a Tenant Estoppel

Certificate certifying various information to Lynn Odvody and Joshua Hepburn, who

were in the process of purchasing the Property from Infinity Investment Group, LLC. As

relevant here, On Ski Run made the following statements in the Tenant Estoppel

Certificate: (1) Thai on Ski Run was the tenant under the lease with Infinity Investment;

(2) “Tenant is not in default under the Lease, Tenant has not received any notices of

default under the Lease which have not been cured, and there are no events which have

occurred that with the giving of notice or the passage of time, or both, would result in a

default by Tenant under the Lease;” (3) “Tenant is not using the Premises in violation of

any applicable laws, rules, ordinances, or regulations, including but not limited to, any

applicable environmental laws, rules, or regulations (collectively, ‘Laws’) and there are

no actions or other claims pending or threatened against Tenant in connection with any

such Laws, nor has Tenant received any notices alleging Tenant’s violation of any such

Laws;” (4) “The Lease represents the entire agreement between the parties thereto

regarding the Premises;” and (5) “Tenant hereby executes this Certificate, intending

reliance hereon by Purchaser.” (TACC, Ex. I.) Attached to the Tenant Estoppel Certificate

as Exhibit A is: (1) the Commercial Lease and Deposit Receipt, executed on October 18,

2018; and (2) First Amendment to Commercial Lease, executed on August 15, 2019.

Escrow closed on May 18, 2023.

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On July 13, 2023, David Chapman performed a site assessment for cross-

complainants. (TACC, ¶ 227.) Mr. Chapman identified the work needed to bring the

Property into full ADA compliance. (TACC, ¶ 227.) Mr. Chapman did not state that the

building permit or occupancy permit had expired. (TACC, ¶ 228.)

In October 2023, cross-defendants promised to close out their ADA/Building permits

but allegedly, they “did not intend to perform on this promise when it was made.”

(TACC, ¶¶ 241, 242.)

On October 26, 2023, cross-complainants entered into a Lease Modification with cross-defendants Thanya and Oliver Starr. (TACC, ¶ 237.)

2. Legal Principles

“[A] demurrer challenges only the legal sufficiency of the complaint, not the truth or

the accuracy of its factual allegations or the plaintiff’s ability to prove those allegations.”

(Amarel v. Connell (1998) 202 Cal.App.3d 137, 140.) A demurrer is directed at the face of

the complaint and to matters subject to judicial notice. (Code Civ. Proc., § 430.30,

subd. (a).) All properly pleaded allegations of fact in the complaint are accepted as true,

however, improbable they may be, but not the contentions, deductions or conclusions

of facts or law. (Blank v. Kirwan (1985)39 Cal.3d 311, 318; Del E. Webb Corp. Structural

Materials Co. (1981) 123 Cal.App.3d 593, 604.) A judge gives “the complaint a

reasonable interpretation, reading it as a whole and its parts in their context.” (Blank,

supra, 39 Cal.3d at p. 318.)

3. Discussion

3.1. Fourth C/A for Fraud: Intentional Misrepresentation

The fourth cause of action in the TACC is based upon On Ski Run’s written

statements in the Tenant Estoppel Certificate that was executed on May 10, 2023, and

delivered to Mountain Men in connection with Mountain Men’s acquisition of the

Property. (TACC, ¶ 200.) Specifically, the TACC alleges cross-defendants intentionally misrepresented that they were not in default under the Lease, despite the fact that

LAW AND MOTION CALENDAR MARCH 27, 2026

cross-defendants: (1) had not completed their mandatory exterior ADA renovations

(TACC, ¶ 202); (2) were not operating with a valid Certificate of Occupancy (TACC,

¶ 203); (3) had an expired building permit (TACC, ¶ 204); (4) owed several contractors

monies in connection with their renovations (TACC, ¶ 204); and (5) were using the

Premises in violation of various Health Code sections (TACC, ¶ 205). Additionally, the

TACC alleges that On Ski Run misrepresented that it was the tenant under the Lease and

that the Lease “ ‘represents the entire agreement between the parties thereto

regarding the Premises.’ ” Cross-defendants first argue this cause of action is barred by the economic loss rule.

Economic loss consists of “ ‘ “ ‘damages for inadequate value, costs of repair and

replacement of the defective product or consequent loss of profits–without any claim of

personal injury or damages to other property....’ ” ’ [Citation.]” (Jimenez v. Superior

Court (2002) 29 Cal.4th 473, 482.) “The economic loss rule requires a purchaser to

recover in contract for purely economic loss due to disappointed expectations, unless he

can demonstrate harm above and beyond a broken contractual promise.” (Robinson

Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988.)

However, as cross-complainants point out, they were not parties to any contract

with cross-defendants at the time the statements were made in the Tenant Estoppel

Certificate on May 10, 2023. Mountain Men had not yet purchased the Property or

entered into an agreement with cross-defendants. Therefore, the court concludes that the economic loss rule does not apply.

Even if the economic loss rule did apply, the court agrees with cross-complainants

that the fraudulent inducement exception would apply. (Robinson Helicopter, Co., Inc. v.

Dana Corp. (2004) 34 Cal.4th 979, 989–990; see also, Harris v. Atlantic Richfield Co.

(1993) 14 Cal.App.4th 70, 78 [“when one party commits a fraud during the contract

formation or performance, the injured party may recover in contract and tort”].) Cross- defendants claim the exception does not apply where the TACC indicates Mountain Men

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received notice from the City in July 2023 of On Ski Run’s failure to complete certain

ADA work. Therefore, cross-defendants argue, by entering into the Lease Modification

in October 2023, Mountain Men waived all claims for damages arising from the alleged

fraud. (Mtn. at 7:4–8.)

However, liberally construing the allegations of the TACC (as the court must do in

considering the demurrer), the court finds the TACC alleges that cross-defendants

intended to induce cross-complainants to rely on the misrepresentations to purchase

the building without the ADA renovations they were expecting, all while cross- defendants recouped the monies they had received for ADA renovations from the

previous owner. (See, e.g., TACC, ¶ 60.) Said purchase was completed on May 18, 2023.

Accepting these allegations as true, the court finds cross-complainants have sufficiently

alleged a cause of action for fraud based on intentional misrepresentation.

The demurrer is overruled.

3.2. Fifth C/A for Fraud: Concealment / Deceit

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; (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 have acted differently if the

concealed or suppressed fact was known; and (5) plaintiff sustained damage as a result

of the concealment or suppression of the material fact. [Citations.] A duty to disclose a material fact can arise if (1) it is imposed by statute; (2) the defendant is acting as

plaintiff’s fiduciary or is in some other confidential relationship with plaintiff that

imposes a disclosure duty under the circumstances; (3) the material facts are known or

accessible only to defendant, and defendant knows those facts are not known or

reasonably discoverable by plaintiff (i.e., exclusive knowledge); (4) the defendant makes

representations but fails to disclose other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e., partial concealment); or (5) defendant actively

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conceals discovery of material fact from plaintiff (i.e., active concealment). [Citations.]

Circumstances (3), (4), and (5) presuppose a preexisting relationship between the

parties, such as ‘between seller and buyer, employer and prospective employee, doctor

and patient, or parties entering into any kind of contractual agreement. [Citation.] All of

these relationships are created by transactions between parties from which a duty to

disclose facts material to the transaction arises under certain circumstances. [Citation.]”

(Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 40–41.)

The fifth cause of action in the TACC alleges that cross-defendants concealed the following facts in their Tenant Estoppel Certificate that was executed May 10, 2023, and

delivered to cross-complainants:3 (1) that cross-defendants had not completed or

attempted to complete their exterior ADA work, as required under the operative Lease;

(2) that cross-defendants’ occupancy certificate had expired; (3) that cross-defendants’

building permit had expired; and (4) that cross-defendants had received Health Code

violation notices, and been closed at least twice, during the period of 2019 through

2022. (TACC, ¶¶ 218, 223.)

For the same reasons as discussed under the fourth cause of action, the court finds

that the economic loss rule does not prohibit the claim of fraud in this case.

Cross-defendants also argue that their demurrer should be sustained because the

fifth cause of action is duplicative of the fourth cause of action: both causes of action

claim fraud, albeit under different theories. Given the number of alleged statements, and the complexity of the allegations, the court exercises its discretion to overrule the

demurrer on these grounds and keep the claims separate.

3 The TACC alleges, “Cross-Defendants further engaged in conduct of deceit and

concealment throughout the discussions, negotiations, and execution of the Lease Modification Agreement.” However, “fraud must be pled specifically.” (Lazar, supra, 12 Cal.4th at p. 645.) The court finds that the fifth cause of action does not specifically plead fraud based on concealment at any time period after the May 10, 2023, Tenant Estoppel Certificate was issued.

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The demurrer is overruled.

3.3. Sixth C/A for Fraud: False Promises

“A promise to do something necessarily implies the intention to perform; hence,

where a promise is made without such intention, there is an implied misrepresentation

of fact that may be actionable fraud. [Citations.] [¶] An action for promissory fraud may

lie where a defendant fraudulently induces the plaintiff to enter into a contract.” (Lazar,

supra, 12 Cal.4th at p. 638.)

The TACC alleges cross-defendants “promised to close out their ADA/Building permits in October 2023” but “did not intend to perform on this promise when it was

made.” (TACC, ¶¶ 241, 242.) Allegedly, cross-defendants “intended Cross-Complainants

to rely on this promise in order to gain favorable rent concessions in the Lease

Modification Agreement.”

The court finds that this cause of action is not barred by the economic loss rule.

Additionally, it is not duplicative of the fourth cause of action for fraud based upon

statements made in the Tenant Estoppel Certificate executed May 10, 2023.

Because the TACC sufficiently alleges promissory fraud, the demurrer to this cause

of action is overruled.

3.4. Seventh C/A for Fraud: Negligent Misrepresentation

The elements of negligent misrepresentation are (1) the defendant made a false

representation as to a past or existing material fact; (2) the defendant made the representation without reasonable ground for believing it to be true; (3) in making the

representation, the defendant intended to deceive the plaintiff; (4) the plaintiff

justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.

(West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792.)

The seventh cause of action alleges cross-defendants negligently set forth the

following facts as true to the cross-complainants from May 10, 2023, to April 2025: (1) that cross-defendants were lawfully operating as of May 10, 2023; (2) that cross-

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defendants had no notice of their lease defaults as of May 2023; (3) that cross-

defendants had an open building permit in connection with their obligated ADA exterior

improvements; (4) that cross-defendants intended to close their building permit in

connection with their obligated ADA exterior improvements; (5) that cross-defendants

intended to complete the exterior ADA improvements; (6) that cross-defendants

believed the roof of the Premises needed to be replaced; (7) that cross-defendants

believed cross-complainants conduct was the cause of the rodent infestation at their

premises; (8) that cross-defendants believed their outstanding exterior ADA scope of work only involved repaving the parking lot and re-striping the ADA space; and (9) that

cross-defendants did not believe their renovation and/or their lease obligations

required them to bring the Premises and ADA paths into full ADA compliance. (TACC,

¶ 249.)

For the same reasons as discussed under the fourth cause of action, the court finds

that the economic loss rule does not prohibit the claim of negligent misrepresentation

in this case.

The demurrer is overruled.

Motion to Strike Pursuant to Code of Civil Procedure sections 435 and 436, cross-defendants move to strike various portions of the TACC related to cross-complainants’ claim for punitive

damages. Cross-defendants challenge the following paragraphs of the TACC under the

fourth and fifth causes of action for fraud: 212, 213, 220, 239; and the following

paragraphs of the TACC under the tenth cause of action for defamation: 283 and 284.

Additionally, cross-defendants challenge Line Item Number 1 in the Prayer for relief.

On March 16, 2026, cross-complainants filed a timely opposition. On

March 19, 2026, cross-defendants filed a timely reply.

LAW AND MOTION CALENDAR MARCH 27, 2026

1. Request for Judicial Notice

Pursuant to Evidence Code section 452, the court grants cross-defendants’

unopposed request for judicial notice.

2. Legal Principles

A motion to strike is generally used to address defects appearing on the face of a

pleading that are not subject to demurrer. (Pierson v. Sharp Memorial Hospital (1989)

216 Cal.App.3d 340, 342.) “The court may, upon a motion [to strike] ..., or at any time in

its discretion ... [¶] ... [s]trike out any irrelevant, false, or improper matter inserted in any pleading.” (Code Civ. Proc., § 436, subd. (a).) Like a demurrer, the grounds for a

motion to strike must appear on the face of the pleading or from any matter which the

court is required to take judicial notice. (Code Civ. Proc., § 437, subd. (a).) On a motion

to strike the trial court must read the complaint as a whole, considering all parts in their

context, and must assume the truth of all well-pleaded allegations. (Courtesy

Ambulance, supra, 8 Cal.App.4th at p. 1519.)

3.

Discussion

Civil Code section 3294 allows a plaintiff to recover exemplary (or “punitive”)

damages “[i]n an action for the breach of an obligation not arising from contract, where

it is proven be clear and convincing evidence that the defendant has been guilty of

oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).) For the purposes of

awarding exemplary damages, “ ‘[m]alice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by

the defendant with a willful and conscious disregard of the rights or safety of others.”

(Civ. Code, § 3294, subd. (c)(1).) “ ‘Oppression’ means despicable conduct that subjects

a person to cruel and unjust hardship in conscious disregard of that person’s rights.”

(Civ. Code, § 3294, subd. (c)(2).) “ ‘Fraud’ means an intentional misrepresentation,

deceit, or concealment of a material fact known to the defendant with the intention on

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the part of the defendant of thereby depriving a person of property or legal rights or

otherwise causing injury.” (Civ. Code, § 3294, subd. (c)(3).)

With respect to the claim for punitive damages under the fourth and fifth causes of

action for fraud, the allegations of the TACC demonstrate, at most, that cross-

defendants made the alleged statements for purely financial gain (i.e., with the intent to

recoup monies they received from the previous owners for ADA renovations). This does

not rise to the level of oppression, fraud, or malice.

With respect to the claim for punitive damages under the tenth cause of action for defamation, the court previously granted cross-defendants’ motion to strike the claim

for punitive damages with leave to amend. The court finds that the TACC still fails to

allege cross-defendants acted with oppression, fraud, or malice.

The court grants the motion to strike as requested.

TENTATIVE RULING # 6: THE DEMURRER IS OVERRULED. THE MOTION TO STRIKE IS

GRANTED AS REQUESTED. NO HEARING ON THIS MATTER WILL BE HELD (LEWIS v.

SUPERIOR COURT (1999) 19 CAL.4TH 1232, 1247), UNLESS A NOTICE OF INTENT TO

APPEAR AND REQUEST FOR ORAL ARGUMENT IS TRANSMITTED ELECTRONICALLY

THROUGH THE COURT’S WEBSITE OR BY TELEPHONE TO THE COURT AT (530) 573-3042

BY 4:00 P.M. ON THE DAY THE TENTATIVE RULING IS ISSUED. NOTICE TO ALL PARTIES OF AN INTENT TO APPEAR MUST BE MADE BY TELEPHONE OR IN PERSON. PROOF OF

SERVICE OF SAID NOTICE MUST BE FILED PRIOR TO OR AT THE HEARING.