New Beginnings Diversified LLC vs. H Greg Auto Buena Park LLC

In the APA, I-M made express representations and warranties concerning the legal compliance of the dealership business, the absence of undisclosed material liabilities, and the sufficiency of assets to support continued operations of the Nissan Dealership. But Cross Defendants knew that the Nissan Dealership required additional vehicle storage to satisfy Nissan North America’s franchise requirements, and that such off-site storage space offered by Cross Defendant New Beginnings was not lawfully permitted for that intended.

That is, Cross-Defendants knew that the Premises located at 8255 Orangethorpe Avenue—an essential operational component (the “premises”)—was not zoned for vehicle inventory storage, had been cited for code violations, and lacked a valid Conditional Use Permit or other lawful entitlement for the intended use. These facts were not disclosed by Brown or New Beginnings to H Greg Auto in connection with the APA or in negotiations related to the subsequent lease of the premises. [FAXC, ¶¶ 27-28.]

Further, Cross-Defendants concealed that the premises, which were off-site from the dealership, required substantial improvements to become legally usable, including stormwater compliance, lighting infrastructure, and driveway reconstruction. Cross-Defendants also failed to disclose that the City had already cited the Premises for violations and that no permit authorizing vehicle storage was then in effect at the Premises. These omissions directly affected the value and usability of the Nissan Dealership assets, and materially impaired H Greg Auto’s ability to operate in compliance with local law and manufacturer standards.

H Greg Auto relied on the representations and omissions in the APA when proceeding with the acquisition of the Nissan Dealership and was later induced to enter the lease of the Premises—under false assurances from the same parties—based on the belief that the Premises could legally fulfill the required vehicle storage function. [FAXC, ¶29.]

In response to questions from Cross-Complainants, on 5/13/21 Cross-Defendant Brown promised to clean up the premises and assured that was usable for its intended purposes by representing that he had previously used the Premises to store new and used vehicle inventory while he owned the Nissan Dealership. He further promoted the Premises as necessary under Nissan North America’s franchise requirements for additional parking. [FAXC, ¶ 37.]

Initially hesitant to lease the premises without confirming it was properly zoned, after assurance and pressure from Cross-Defendant Brown, Cross-Complainant H Greg Auto signed a lease on 5/15/21 and H Greg Holdings executed a guaranty. [FAXC, ¶¶ 38-43.]

The lease of the premises was critical for H Greg Auto’s operations, providing essential inventory storage adjacent to its Nissan Dealership per its franchise agreement with Nissan North America. The Lease stated that Lessor would “provide evidence” to Lessee that the parking of motor vehicles was “consistent with applicable zoning” and stated that “no other use [than the parking of motor vehicles] shall be allowed.” (Lease, Section 1.7.) [FAXC, ¶ 44 and Ex 1.]

On 5/21/21, Brown sent Cross-Complainants a falsified temporary use permit (“TPU”) as evidence that Lessee could use the Premises for vehicle storage and parking. [FAXC, ¶¶ 46-67.] Further, Cross- Defendants concealed that a prior TPU for the premises had expired, that there was no, and there had not been, conditional use permit (“CPU”) for the premise, and that the City had issued a 5/3/21 code enforcement notice to Cross-Defendants concerning the condition and use of the Premises. Even when Cross-Defendants did finally obtain a CPU (discussed further below), they concealed from Cross-Complainants that the City imposed numerous conditions requiring substantial site improvements before any lawful use for vehicle storage could commence. [FAXC, ¶ 48.]

In reliance on the representations described above and deferring to their apparent expertise and long-standing ties, to the local dealership community, H Greg Auto began using the premises for vehicle storage. [FAXC, ¶49.]

H Greg Auto put gravel as it was not told a permit was required to do that – or that the City had not authorized use of the premises to store vehicles. [FAXC, ¶ 50.] Between November 2021 and January 2022, H Greg Auto suffered a string of thefts and vandalism at the Premises, including catalytic converter thefts and smashed vehicle windows. lighting and video surveillance purposes to the site. Despite repeated requests, New Beginnings failed to provide basic security upgrades like unbreachable closed lot fencing or lighting and refused to install or arrange for electrical power for lighting and video surveillance purposes to the site. [Id., ¶ 52.]

Meanwhile in early 2022 Cross-Defendant New Beginnings (via I.Properties and its agent Logan Kornblum of Commercial Development Resources) began trying to get a CPU for the premises. [FAXC, ¶¶ 53-65.] When a CUP was finally obtained on 6/8/22, it included significant conditions. The language of the CUP made

clear that vehicle storage could not legally begin at the premises until all conditions were met. The CUP conditions were never met, even after an extension was granted, and on 7/4/24 the City issued a stop work notice. [FAX, ¶¶ 66.]

Cross-Defendant New Beginnings, through Cross-Defendant Brown, directed H Greg Auto to return the premises to its original condition or be in breach of the lease. Then, on 11/4 and 11/26/24, the City confirmed that vehicle storage remained unauthorized at the Premises and detailed multiple unresolved CUP deficiencies. [FAXC, ¶¶ 67-68.]

On 11/18/24, H Greg Auto gave Lessor formal written notice that the CUP had lapsed and that Lessor had 30 days to cure or be in breach. The following day, Lessor issued H Greg Auto a notice of forfeiture for non-payment of rent. Meanwhile, in early 2025, H Greg Auto was attempting to sell the Nissan Dealership to a new buyer. However, such sale fell through when the buyer failed to secure financing—largely due to the uncertainty caused by whether the franchise application of the purported buyer would be accepted in light of its inability to meet the facilities requirements due to Lessor’s failure to maintain the conditions necessary for issuance of a CUP on the Premises. [FAC, ¶¶ 72-73.]

As it turned out, months before this and unbeknownst to Cross- Complainants, before the stop work notice I.Properties, owner of the premises, had been negotiating to and on 4/11/24 sold the premises out from under Cross-Complainants – showing that Cross- Defendants had no intention of complying with the CUP since at least 4/11/24. [FAXC, ¶¶ 75-82.]

Demurrer Legal Standard A demurrer can be used only to challenge defects that appear within the “four corners” of the pleading – which includes the pleading, any exhibits attached, and matters of which the court is permitted to take judicial notice. Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994. Limited to the “four corners” as such, a pleading is adequate if it contains a reasonably precise statement of the ultimate facts, in ordinary and concise language, and with sufficient detail to acquaint a defendant with the nature, source and extent of the claim. Leek v. Cooper (2011) 194 Cal.App.4th 399, 413.

On demurrer, a complaint must be liberally construed. Code Civ. Proc. § 452; Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601. All material facts properly pleaded, and reasonable inferences,

must be accepted as true. Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.

Discussion

First Cause of Action for Fraudulent Inducement – by Lessee against Lessor and Brown The elements of fraud are: "(a) [a] misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or "scienter"); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Lazar v. Superior Court (1996) 12 Cal.4th 631, 638; see also Engalla v. Permanente Medical Grow, Inc. (1997) 15 Cal.4th 951, 974.

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” Lazar, supra, 12 Cal.4th 631, 645, citing Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 74. “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.” Id. In cases against corporate employers, “the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’” Id., citing Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.

The statute of limitations on a fraud claim is three years. Code Civ. Proc. §388(d). “The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” Id.

On demurrer, the burden is on Defendant to establish the Plaintiffs’ cause of action is necessarily timed barred and not that it may be time-barred. That defect must be shown by the allegations of the complaint. Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.

But where the allegations of the complaint (or judicially noticeable facts) show the claim is time-barred, it is Plaintiff’s burden to plead around the statute of limitations when it appears on the face of the complaint that it applies. Carrillo v. County of Santa Clara (2023) 89 Cal.App.5th 227, 234-236.

For this cause of action, Cross-Complainants allege that Cross- Defendants New Beginnings and Brown fraudulently induced H Greg Auto to enter into the lease for the premises by their false representations as to the zoning and legal entitlement status of the premises – including providing the false TUP. [FAXC, ¶¶ 86-88.]

For their demurrer, Cross-Defendants dispute the sufficiency of these allegations and the reliance allegation as well. The bigger issue, however, is the statute of limitations since the actions inducing the 5/15/21 lease necessarily happened more than three years before this case was commenced on 7/7/25. See California- American Water Co. v. Marina Coast Water Dist. (2016) 2 Cal.App.5th 748, 763 (“As a general rule, the filing of a complaint tolls the statute of limitations applicable to a cross-complaint so long as the cross-complaint is related to the original complaint and its causes of action were not barred when the original complaint was filed.”).

In opposition Cross-Complainants argue fraudulent concealment and equitable tolling but these are not clearly supported by the current allegations.

Accordingly, the demurrer to the first cause of action for fraudulent inducement into the lease for the premises is sustained with 15 days leave to amend.

Second Cause of Action for Fraudulent Concealment – by Lessee against Lessor and Brown For this cause of action Cross-Complainants allege that H Grego Auto was essentially fraudulently induced to enter into the APA by New Beginning and Brown’s concealment of the issues with the premises and the problems for its intended (and necessary use) for operation of the dealership. [FAXC, ¶¶ 96-100.]

For the reasons discussed above, the demurrer to the second cause of action for fraudulent concealment is sustained with 15 days leave to amend.

Eighth Cause of Action for Accounting – by Lessee against Lessor and Brown With this cause of action, H Greg Auto seeks an accounting of the money it paid to New Beginnings, and its alter ego Brown, for rent under the lease for the premises – which turned out not to be useable for the intended purpose. [FAXC, ¶¶ 132-134.]

An action for an accounting has two elements: (1) “that a relationship exists between the plaintiff and defendant that requires an accounting” and (2) “that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle, supra, 173 Cal.App.4th at p. 179, 92 Cal.Rptr.3d 696; see also 5 Witkin, Cal. Procedure, supra, Pleading, § 820.) The action carries with it an inherent limitation; an accounting action “is not

available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.” (Teselle, at p. 179, 92 Cal.Rptr.3d 696; see also St. James Church of Christ Holiness v. Superior Court of Los Angeles County (1955) 135 Cal.App.2d 352, 359, 287 P.2d 387.)

An action for an accounting has been characterized as “a means of discovery.” (Teselle, supra, 173 Cal.App.4th at p. 180, 92 Cal.Rptr.3d 696 [“the purpose of the accounting is, in part, to discover what, if any, sums are owed to the plaintiff, and an accounting may be used as a discovery device”].)

Sass v. Cohen (2020) 10 Cal.5th 861, 272 Cal.Rptr.3d 836, 842, (emphasis added).

Cross-Defendants object that Cross-Complainants have not alleged a fiduciary or special relationship that would “justify” an accounting.

An action for an accounting may be brought to compel the defendant to account to the plaintiff for money or property (1) where a fiduciary relationship exists between the parties, or (2) where, even though no fiduciary relationship exists, the accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable. (5 Witkin, Cal. Procedure, supra, Pleadings, § 819, p. 236.) “A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179, 92 Cal.Rptr.3d 696.)

Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 910 (bold added).

Cross-Complainants’ allegations meet the requirements set on in Jolley. [FAXC, ¶ 134.] Accordingly, the demurrer to the eighth cause of action for accounting is overruled.

Ninth Cause of Action for Rescission of Guaranty – by Guarantor against Lessor and Brown

A party to a contract may rescind the contract if that party’s consent was obtained through “fraud ... exercised by or with the connivance

of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.” Civ. Code §1689(b)(1).

Rescission, however, “is not a cause of action; is a remedy.” Nakash v. Superior Court (1987) 196 Cal.App.3d 59, 70.

Cross-Complainants have also prayed for rescission of both the lease and the guaranty. [FAXC, prayer items 1 and 2.]

The demurrer to this ninth cause of cause of action for rescission of guarantee is sustained with 15 days leave to amend.

Tenth Cause of Action for Fraud – by Guarantor against Lessor and Brown

For this cause of action H Greg Holdings alleges the same fraud (misrepresentation/ concealment) about the premises discussed above as inducing it to execute the guaranty. [FAXC, ¶¶ 144-145.]

For the reasons discussed above, the demurrer to the tenth cause of action for fraud in inducing the Guaranty is sustained with 15 days leave to amend.

Eleventh Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing – by Guarantor against Lessor and Brown

For this cause of action, Cross-Complainants allege that H Greg Holding has been denied the benefits of the Guaranty by the acts of New Beginnings and Brown in violation of the covenant of good faith and fair dealing attendant to the Guaranty.

Cross-Complainants do not, however, allege what purpose of the Guaranty was frustrated or from what terms of the Guaranty the breached covenant arose. [See FAXC, ¶¶ 151-153.]

To state a claim for breach of the covenant of good faith and fair dealing, a plaintiff must prove all of the following:

1. That plaintiff and defendant entered into a contract; 2. That plaintiff did all, or substantially all of the significant things that the contract required him/her/it to do, or that he/she/it was excused from having to do those things; 3. That all conditions required for defendant ‘s performance had occurred; 4. That defendant unfairly interfered with plaintiff ‘s right to receive the benefits of the contract; and

5. That plaintiff was harmed by defendant’s conduct.

CACI 325.

[B]ecause the purpose of the implied covenant of good faith and fair dealing is limited to assuring the parties’ compliance with the contract at issue, the scope of conduct prohibited by the implied covenant is confined by the “purposes and express terms” of the agreement. (Carma Developers, supra, 2 Cal.4th at p. 373, 6 Cal.Rptr.2d 467, 826 P.2d 710.) Consequently, an action alleging a breach of the implied covenant cannot be used by a plaintiff to try to extend existing, or to create new, obligations that were not contemplated by the parties when the contract was executed. (Ibid.) In light of this fundamental principal of contract law, a plaintiff raising a claim for the breach of the implied covenant must allege a reasonable relationship between the defendant’s allegedly wrongful conduct and the express terms or underlying purposes of the contract. (Ibid.)

Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 527–528, disapproved on other grounds, Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919.

The demurrer to the eleventh cause of action for breach of the implied covenant of good faith and fair dealing in the guaranty is sustained with 15 days leave to amend.

Twelfth Cause of Action for Fraudulent Inducement – by Lessee against I-M and Brown

For this cause of action Cross-Complainants allege that H Grego Auto was essentially fraudulently induced to enter into the APA by “Cross-Defendants’” misrepresentations as discussed above. Cros- Defendant I-M is the target of this cause of action, as opposed New Beginning and Brown, who are the target in the second cause of action. The is no specific allegation of a representation made by I-M or on its behalf. [See FAXC, ¶¶ 158-160.]

For this reason as well as those discussed above, the demurrer to the twelfth cause of action for fraudulent inducement by I-M of the APA is sustained with 15 days leave to amend.

Thirteenth Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing – by Lessee against I-M and Brown

For this cause of action, Cross-Complainants allege that I-M and Brown breach the implied covenant of good faith and fair dealing for the APA:

[B]y failing to disclose the non-permitted status of the Orangethorpe lot and its central role in continued dealership operations, Cross-Defendants effectively deprived Cross-Complainant of the benefits of the APA—namely, a legally compliant and operational dealership that satisfied manufacturer site requirements. On information and belief, these acts were arbitrary, dishonest, and intended to mislead.

[FAXC, ¶ 167.]

Cross-Defendants argue this is insufficient because such concealment predated the APA so cannot be a violation of the covenant that later arose when the APA was executed.

Accordingly, the demurrer to the thirteenth cause of action for breach of the implied covenant of good faith and fair dealing arising out of the APA is sustained with 15 days leave to amend,

Fourteenth Cause of Action for Negligent Misrepresentation – by Lessee against I-M and Brown

For this cause of action, Cross-Complainants allege that during negotiations for the APA, I-M and Brown made the same misrepresentations as discussed above to H Greg Auto, when they had no reasonable basis to do so. [FAXC, ¶¶ 171-172.]

The elements of a negligent misrepresentation cause of action are the same as the ones for fraud except for the requirement of scienter. Bains v. Moores, 172 Cal.App.4th 445, 454 (2009). In a claim for negligent misrepresentation, the plaintiff need not allege that the defendant made an intentionally false statement, but simply one as to which he or she lacked any reasonable ground for believing the statement to be true. Id.

This cause of action, too, must be pleaded with particularity. Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal. App. 4th 1150, 1166, disapproved on other grounds by Sheen v. Wells Fargo Bank (2022) 12 Cal. 5th 905.

If based on fraud (versus negligence) a negligent misrepresentation claim has a three year statute of limitations. William L. Lyon & Associates, Inc. v. Superior Court (2012) 204 Cal.App.4th 1294, 1314.

For the reasons discussed above, the demurrer to the fourteenth cause of action for negligent misrepresentation is sustained with 15 days leave to amend.

Fifteenth Cause of Action for Concealment – by Lessee against I-M and Brown

This cause of action is for I-M and Brown’s fraudulent concealment from H Greg Auto of the facts about the premises and its availability for use in connection with the APA.

For the reasons discussed above, the demurrer to the fifteenth cause of action for fraudulent concealment inducing the APA is sustained with 15 days leave to amend.

Sixteenth Cause of Action for Negligence – by Lessee against I-M and Brown The elements of negligence are: (1) defendant’s legal duty to conform to a standard of conduct to protect the plaintiff; (2) defendant failed to meet this standard of conduct; (3) causation; (4) damages. Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917.

Here, Cross-Complainants allege that Cross-Defendants owed Cross-Complainant H Greg Auto a duty to exercise reasonable care in connection with the negotiation and execution of the APA, including a duty to disclose material information relating to the regulatory status of the dealership and its ability to lawfully operate the Nissan Dealership post-closing – and that they breached this duty. [FAXC, ¶¶180-181.]

The court cannot discern that this is any different or more than their earlier negligent misrepresentation claim in connection with the APA. [See fourteenth cause of action, supra.]

Accordingly, the demurrer to this cause of action is sustained with 15 days leave to amend.

Motion to Strike Legal Standard

A court may strike out any irrelevant, false, or improper matter inserted in any pleading or strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule or an order of the court. Code Civ. Proc. § 436. “Irrelevant” matters include: allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim

or a demand for judgment requesting relief not support by the allegations of the complaint. Code Civ. Proc. § 431.10(b).

The same liberal policy regarding amendments that applies to the sustaining of demurrers applies for motions to strike. If a defect may be correctible, leave to amend should usually be given. Id. at 168.

Discussion

Amendment beyond Leave to Amend

Cross-Defendants seek to have stricken the new causes of action added by way of the FAC, specifically the seventeenth through twenty-first causes of action, on the ground that they are beyond the scope of Cross-Complainants’ leave to amend.

Once the time for amendment of right has passed, a party seeking to amend its pleadings must obtain express permission from the court to do so. Code Civ. Proc. § 473(a)(1).

Leave to amend is limited to the scope of the court’s order. See People By and Through Dept. of Public Works v. Clausen (1967) 248 Cal.App.2d 770, 785 (noting that where amendment permitted on a motion, scope of leave determined by proposed pleading presented with request for leave to amend). See also People By and Through Dept. of Public Works v. Clausen (1967) 248 Cal.App.2d 770, 785– 786 (“

Where a court grants leave to amend after sustaining a demurrer, the scope of permissible amendment is limited to the causes of action to which the demurrer has been sustained. Harris v. Wachovia Mortgage, FSB (2010) 185 Cal. App. 4th 1018, 1023 (ruling that adding new cause of action after demurrer is improper); People v. Clausen (1967) 248 Cal. App. 2d 770, 785-86 (finding that adding new party after demurrer is improper). See also People By and Through Dept. of Public Works v. Clausen (1967) 248 Cal.App.2d 770, 785–786 (“Thus, in the instant case since the leave to amend which the trial court gave to Clausen was granted upon the sustaining of State’s demurrer to his original cross-complaint, such leave to amend did not entitle Clausen to add new parties as crossdefendants.”).

Here, one view is that the parties’ stipulation and the court’s order on it took the place of an actual ruling on the then-pending demurrer to the original complaint. Thus, the scope of Cross- Complainants’ leave was defined by the causes of action demurred to, as would have been case had the court ruled on the demurrers and sustained them.

In response, Cross-Complainants contend that when they stipulation was entered into the time to oppose based on the continued hearing date has not run, so they still could amend as of right under Code of Civil Procedure section 473(a) – that is without any limitations. According to Cross-Complainants, the stipulate simply extended that period of “as of right” amendment past the day the opposition would have been due.

But Cross-Complainant had, in fact, filed an opposition to the demurrer and the hearing date was continued only after the statutory time to amend as of right was over. [ROA ## 47, 56, 58, 78.]

As a result, the court concludes that the stipulation and the order on it effectively took the place of a ruling on the pending demurrer. Accordingly, the court finds that the seventeenth through twenty- first causes of action were added without leave.

Accordingly, the motion to strike these causes of action is granted, but without prejudice to Cross-Complainants bring a motion to amend.

As a result of this ruling and the demurrer ruling, the remainder of the motion to strike is moot.

12. 2025-1511360 Defendants Law Offices of Michael Taibi and Michael Taibi, Esq.’s Salazar vs. motion to arbitrate all claims asserted by Plaintiffs Baltazar Law Offices of Salazar Jr., Lilliana Venegas, Baltazar M. Salazar, Humerto Michael A. Rosales, and Imperium Metal Products is granted. The action is Taibi, P.C. stayed pending completion of arbitration. (Code Civ. Proc. § 1281.4.) Defendants’ request for sanctions is denied.

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists.” (Gravillis v. Coldwell Banker Residential Brokerage Co. (2006)143 Cal. App. 4th 761, 770-71 [internal quotations and citations omitted]). In determining whether there is a duty to arbitrate, the court must examine and, “to a limited extent, construe the underlying agreement.” (Ibid.)

Arbitration, whether under the California Arbitration Act (CAA) or Federal Arbitration Act (FAA), “is a matter of consent, not coercion ... a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” (Pinnacle Museum Tower