SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al.

A Stipulation and Appointment of Official Reporter Pro Tempore (CV/E-206) is required to be signed by each party, the private court reporter, and the Judge prior to the hearing, if not using a reporter from the Court’s Approved Official Reporter Pro Tempore list.

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

Once the form is signed it must be filed with the clerk. If a litigant has been granted a fee waiver and requests a court reporter, the party must submit a Request for Court Reporter by a Party with a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk will forward the form to the Court Reporter’s Office and an official reporter will be provided.

*** EFFECTIVE APRIL 13, 2026, THIS DEPARTMENT HAS MOVED TO THE TANI G. CANTIL-SAKAUYE COURTHOUSE LOCATED AT 500 G STREET IN SACRAMENTO, CA 95814. ALL HEARINGS NOTICED FOR DEPARTMENT 53 WILL BE HEARD IN DEPARTMENT 16D OF THE NEW COURTHOUSE. ***

TENTATIVE RULING:

Cross-Defendant David L. Kosh, M.D.’s (“Kosh”) demurrer to Associated Family Physicians, Inc. (“AFP”) and Sarah Alarabi (“Alarabi;” collectively “Cross-Complainants”) cross-complaint is ruled upon as follows.

Background

The underlying dispute in this action relates to a commercial lease between Plaintiff Spaans Cookie Company, Inc. and AFP for a medical practice in Galt, California (“Premises”). In May 2015 AFP, by Kosh as sole shareholder, entered into a five-year lease of the Premises (“2015 Lease”). The 2015 Lease contained a provision allowing month-to-month extension after the five-year term. On or about May 7, 2020, AFP entered into a new five-year lease (“2020 Lease”), again by Kosh as sole shareholder.

In November 2020, Alarabi and a non-party purchased all of Kosh’s shares in AFP as detailed in a Stock Purchase Agreement (“SPA,” attached as Exhibit A to the XCompl.). Alarabi alleges that Kosh provided her with the 2015 Lease but failed to provide the 2020 Lease. (XCompl. ¶ 18.) Alarabi further alleges that Kosh represented that he disclosed all of AFP’s business documents, including real property leases. (Id. ¶ 30.)

In December 2023, AFP vacated the Premises. Plaintiff Spaans Cookie Company filed its complaint against AFP and Alarabi in May 2024 alleging breach of contract and related claims. AFP and Alarabi filed their cross-complaint against Kosh on July 11, 2025, with four causes of action: (1) Fraud – Intentional Misrepresentation; (2) Breach

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

of Contract; (3) Breach of Covenant of Good Faith and Fair Dealing; (4) Express Indemnity.

Kosh now demurs to all four causes of action on the grounds that each fails to state sufficient facts to constitute a cause of action. Cross-Complainants oppose.

Kosh’s request for judicial notice is DENIED. A letter from Cross-Complainants’ counsel does not contain “facts or propositions that are of such common knowledge that they cannot reasonably be the subject of dispute.” (Evid. Code, § 452, subd. (h).) To the extent Kosh requests the Court notice the letter only to show Cross-Complainants’ knowledge of the 2020 Lease, rather than the truth of any matter, the Court finds the letter is not the “logical opposite” of the allegations in the complaint such that the Court could treat the Cross-Complaint as a sham. (Dang v. Smith (2010) 190 Cal.App.4th 646, 658.)

Legal Standard

The function of a demurrer is to test the sufficiency of the pleading it challenges by raising questions of law. (Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App.4th 216, 219; Nordlinger v. Lynch (1990) 225 Cal.App.3d 1259, 1271.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.” (SKF Farms v. Super. Ct. (1984) 153 Cal.App.3d 902, 905.)

For the purpose of determining the effect of a complaint, its allegations are liberally construed, with a view towards substantial justice. (Code Civ. Proc. § 452; Amarel v. Connell (1988) 202 Cal.App.3d 137, 140–141; Quelimane Co., Inc. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 43, fn. 7.) In this respect, the Court treats the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law, and considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1111–1112.)

A demurrer may be sustained only if the complaint lacks any sufficient allegations to entitle the plaintiff to relief. (Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 778.) “[P]laintiff need only plead facts showing that he may be entitled to some relief . . . [W]e are not concerned with plaintiff’s possible inability or difficulty in proving the allegations of the complaint.” (Highlanders, Inc. v. Olsan (1978) 77 Cal.App.3d 690, 697.) A demurrer admits the truth of all material facts properly pled and the sole issue raised by a general demurrer is whether the facts pled state a valid cause

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

of action, not whether they are true. (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) The Court draws all reasonable implications and inferences in favor of upholding the complaint. (Poseidon Development, Inc. v. Woodland Lane Estates, LLC, supra, 152 Cal.App.4th at p. 1112.)

Analysis

AFP as a party to the Cross-Complaint

Kosh first argues that AFP does not have standing to assert any cause of action in the Cross-Complaint because “There is no indication that AFP was a party to the SPA [and] [b]ecause AFP has made no independent allegations, it cannot claim damages or relief under the SPA.” (MPA at p. 9:7–11.)

To the contrary, AFP is a party to the SPA. Kosh signed the SPA on behalf of both himself as “Seller” and AFP as “Corporation.” (SPA at p. 6.) The SPA is “by and among” Kosh, AFP, and Purchasers. (Id. at p. 1.) As such, AFP is a party with rights and obligations under the SPA. For instance, the indemnity provision in the SPA applies to “[t]he parties, and each of them.” (Id. ¶ 6.1) Accordingly, AFP is a proper party that may bring claims as to the three causes of action arising under the SPA: breach of contract, breach of covenant of good faith and fair dealing, and express indemnity.

The Court however agrees with Kosh that AFP does not allege a cause of action for fraud. Alarbi alleges that Kosh intentionally misled her into entering the SPA, at time AFP was solely owned by Kosh. The Complaint does not allege that AFP was misled to its detriment.

Kosh’s demurrer on the basis of standing is SUSTAINED as to the first cause of action, fraud. Kosh’s demurrer on the basis of standing is OVERRULED as to the second, third, and fourth causes of action.

First Cause of Action: Fraud

“The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another's reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166, disapproved on other grounds by Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 950.) Fraud must be pled specifically, including “facts showing how, when, where,

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

to whom, and by what means the representations were made.” (Ibid.)

Kosh contends that Cross-Complainants’ allegations fail to be specific enough because they do not specify “when the alleged misrepresentation was made, the exact words or statements, the context or setting, or the manner in which the communication occurred.” (MPA at p. 10:5–7.)

Cross-Complainants allege that the SPA states that both the Sacramento and Galt facilities held real property leases and refers to a “new lease effective October 1, 2020” for the Sacramento Facility but does not mention the 2020 Lease. (XCompl. ¶¶ 16, 17.) Kosh provided Alarabi with the lease for a Sacramento facility and the 2015 Lease but failed to provide the 2020 Lease. (Id. ¶ 18.) Alarabi believed in good faith that the 2015 Lease applied to the Galt facility. (Id. 23.) Kosh represented to Alarabi that he disclosed all of AFP’s business documents during the SPA transaction, including real property leases for the Premises. (Id. ¶ 30.) Kosh knew that his representations were false when he made them or he made them recklessly and without regard for their truth and knew that Alarabi would not have entered into the SPA had she known about the 2020 Lease. (Id. ¶¶ 33, 34.)

The Cross-Complaint states that Kosh (who) affirmatively “represented to” Alarabi (to whom) during the SPA transaction (when) that he had disclosed all relevant documents, when he had not provided the 2020 Lease (what). However, even liberally construing the allegations, the Court finds no allegation specifically stating how or in what manner Kosh made the misrepresentation. The phrase “represented to” could mean orally, in writing, by conduct, through an agent, or other things. California law does not require, as Kosh suggests, that allegations of fraud must include the “exact words or statements,” but the allegations must fairly describe how the misrepresentation was made.

Cross-Complainants argue that less specificity should be required here because “only Dr. Kosh knows what he told Dr. Alarabi about the Galt lease.” (Opp. at p. 9:7–9.) But Alarabi is a party to the Cross-Complaint and presumably knows what Kosh represented to her and how. Cross-Complainants cite Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, but the plaintiffs in Alfaro alleged fraud by nondisclosure or concealment, not by intentional misrepresentation.

Accordingly, Kosh’s demurrer to the first cause of action for fraud is SUSTAINED.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

Second Cause of Action: Breach of Contract

The elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff. (Reichert v. General Ins. Co. of America (1968) 68 Cal.2d 822, 830.) “If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)

Cross-Complainants allege that Kosh breached the SPA by failing to disclose or provide the 2020 Lease and by failing to indemnify and defend Alarabi. (XCompl. ¶¶ 43–44.) The SPA, attached to the Cross-Complaint, contains an express indemnity provision:

The parties, and each of them, agree to indemnify and hold harmless the other against any and all losses, liabilities, claims, damage and expense whatsoever (including, but not limited to, reasonable attorney's fees or other expenses reasonably incurred in investigating, preparing or defending against any litigation commenced or threatened or any claim whatsoever) arising out of or based on any false representation or warranty or breach or failure by the breaching party to comply with any covenant or agreement made by the breaching party herein or in any other document furnished by the breaching party to any of the foregoing in connection with this transaction.

(SPA ¶ 6.1 [emphasis added].) Cross-Complainants allege Kosh’s false representation. (XCompl ¶¶ 29–38.)

The duty to indemnify does not arise until the indemnitee becomes liable. (Civ. Code, § 2778, subd. (1).) “Unless a contrary intention appears,” an indemnity provision includes a duty to defend. (Id., ¶ 2778, subds. (3)–(4); Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 553.) The duty to defend arises upon request by the indemnitee for a defense related to claims encompassed by the indemnity provision. (Code Civ. Proc., subd. (4); Crawford, supra, at pp. 553–555.) Here, the indemnity provision covers liabilities arising out of false representations. Cross-Complainants allege they tendered their defense and Kosh refused. (XCompl, ¶¶ 25–26.) Cross-Complainants have stated a cause of action for breach of the express indemnity provision.

Cross-Complainants also contend that Kosh breached Paragraph 2.2 of the SPA by

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

failing to disclose or provide the 2020 Lease. Paragraph 2.2 states

The parties shall execute any and all documents required for the assumption of the leases at the Facilities by the Corporation. There is a security deposit in the name of the Corporation held by the landlord for the Sacramento Facility in the amounts of $10,500, based on a new lease effective October 1, 2020.

But Cross-Complainants do not explain what documents Kosh failed to execute. By a plain reading of Paragraph 2.2, the 2020 Lease itself is not one of the “documents required for the assumption of the leases.” And AFP was already a party to the 2020 Lease. (XCompl ¶ 14.) It is not clear which additional documents, if any, were required for the parties to assume the 2020 Lease. The Court does not find a breach of Paragraph 2.2 alleged.

Regardless, Cross-Complainants state a claim for breach of the express indemnity provision. A party may not demur to only part of a cause of action. (Daniels v. Select Portfolio Servicing, Inc., supra, 246 Cal.App.4th at p. 1167.) Kosh’s demurrer to the second cause of action for breach of contract is OVERRULED.

Third Cause of Action: Breach of the Covenant of Good Faith and Fair Dealing

“Every contract imposes on each party a duty of good faith and fair dealing in each performance and in its enforcement. Simply stated, the burden imposed is that neither party will do anything which will injure the right of the other to receive the benefits of the agreement. Or, to put it another way, the implied covenant imposes upon each party the obligation to do everything that the contract presupposed they will do to accomplish its purpose. The precise nature and extent of the duty imposed will depend on the contractual purposes.” (Careau & Co. v.

Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1393 [citations and internal quotation marks omitted].) To support the claim, a plaintiff must allege that defendant failed or refused to discharge contractual responsibilities by a conscious and deliberate act, which unfairly deprives one party of the benefits of the agreement. (Id. at 1395.)

Cross-Complainants allege that Kosh knowingly failed to provide the 2020 Lease, while representing that he had disclosed all documents relevant to the transaction. (XCompl ¶ 30, 34.) As alleged, Kosh unfairly interfered with Alarabi’s right to receive the benefits of the SPA. (Id. ¶ 50.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

Immediately above, the Court found that Cross-Complainants failed to allege an express contractual provision in the SPA requiring Kosh to provide the 2020 Lease. Accordingly, these allegations go beyond the express terms of the SPA to the purpose of the SPA: the sale of AFP, including its real properly leases. (SPA ¶ 1.1.2.)

The SPA’s express disclaimers do not defeat this claim. Alarabi agreed that Kosh made “no representations or warranties as to [the leases’] condition.” (SPA ¶ 1.1.2.) But she alleges that she was aware of only the 2015 Lease and the Sacramento lease. Alarabi agreed that she had the opportunity to ask questions of the Corporation and review documents and information provided by the Corporation. (SPA ¶ 5.5.) But Alarabi alleges that Kosh, not the Corporation, disclosed only the 2015 Lease and failed to disclose the 2020 Lease.

Kosh’s demurrer to the third cause of action for breach of the implied covenant of good faith and fair dealing is OVERRULED.

Fourth Cause of Action: Express Indemnity

The Court has already found that the allegations in the Cross-Complaint regarding the SPA’s express indemnity provision, Paragraph 6.1, state a claim for the breach of duty to defend. Although the obligation to indemnify does not arise until liability attaches (Civ. Code, § 2778, subd. (1)), the allegations in the Cross-Complaint are appropriately phrased:

Pursuant to California Civil Code section 2778, if Plaintiff recovers against Cross Complainants, the Cross-Complainants are entitled to express indemnity for the damages allegedly sustained by Plaintiff, by way of sums paid in settlement, or judgment rendered against Cross Complainants in the action based upon Plaintiff’s Complaint. Such indemnification shall include any and all attorneys’ fees and court costs incurred by Cross- Complainants in the defense of Plaintiff’s Complaint.

(XCompl., ¶ 55 [emphasis added].)

Kosh’s demurrer to the fourth cause of action for express indemnity is OVERRULED.

Disposition

Kosh’s demurrer is SUSTAINED as to the first cause of action for fraud–intentional

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV009576: SPAANS COOKIE COMPANY, INC. vs ASSOCIATED FAMILY PHYSICIANS, INC., et al. 08/06/2026 Hearing on Demurrer in Department 16D

misrepresentation and against AFP on standing as to the first cause of action. As this is the first challenge to this pleading, the Court grants leave to amend. (City of Stockton v. Super. Ct. (2007) 42 Cal.4th 730, 747.)

Kosh’s demurrer to the second, third, and fourth causes of action and as against AFP on standing as to these causes of action is OVERRULED.

Cross-Complainants may file and serve an Amended Cross-Complaint no later than August 27, 2026. (Cal. Rules of Court, rule 3.1320(g).) Although not required by statute or court rule, Cross-Complainants are directed to present the clerk a copy of this ruling at the time of filing the Amended Cross-Complaint. Defendant may file and serve a response within 30 days of service of the Amended Cross-Complaint, 35 days if served by mail.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc., § 1019.5; Cal. Rules of Court, rule 3.1312.)