Dong vs. Sepulveda

which Plaintiffs' negligent conduct contributed to the harm alleged.

(Cross-Complaint, ¶ 85.)

The declaratory relief claim seeks to determine relative degrees of fault based on Abas’ claims of indemnity, contribution, and negligence. However, those claims have been dismissed as to Plaintiffs. Given that the other claims have been dismissed, there is no basis for declaratory relief as to Plaintiffs. (Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800 [“Where a trial court has concluded the plaintiff did not state sufficient facts to support a statutory claim and therefore sustained a demurrer as to that claim, a demurrer is also properly sustained as to a claim for declaratory relief which is “wholly derivative” of the statutory claim.”].)

On demurrer, a court determines whether the complaint states facts sufficient to constitute a cause of action. If the court sustains the demurrer, it must decide whether to grant leave to amend. Leave to amend should be granted if there is a reasonable possibility that the defect can be cured by amendment. Plaintiff has the burden of proving that there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Abas has not satisfied his burden of proving that there is a reasonable possibility that the defect in the pleading can be cured by amendment. Thus, the demurrer is sustained without leave to amend.

Moving party shall give notice of this ruling.

2 Dong vs. TENTATIVE RULING: Sepulveda Demurrer

For the reasons set forth below, Plaintiff and Cross-Defendants Yanan Dong, Confident Serenity, Inc., and Xian Huang’s demurrer to Defendants and Cross-Complainants Brent Sepulveda, Jami Lynn Sepulveda, and Sepulveda Builders, Inc.’s Cross-Complaint is SUSTAINED as to the 4th cause of action for breach of fiduciary duty by Brent Sepulveda and Jami Lynn Spulveda and as to the 8th cause of action for constructive trust, only. The demurrer is OVERRULED as to the 5th, 9th and 11th causes of action, and the unjust enrichment claim in the 8th cause of action.

Cross-Complainants are granted 30 days leave to amend.

Statement of Law

A demurrer only tests the sufficiency of the pleadings. (See Satyadi v. West Contra Costa Healthcare District (2014) 232 Cal.App.4th 1022, 1028 [in analyzing a demurrer, the court looks only to the face of the pleadings and to matters judicially noticeable and not to the evidence or other extrinsic matters]).

In reviewing the propriety of the sustaining of a demurrer, the “court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.]

And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1379 [citing Aubry v. Tri–City Hospital Dist. (1992) 2 Cal.4th 962, 967].). A court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v.

Great W. Bank (1991) 231 Cal.App.3d 713, 718 fn.7.)

General Allegations

Cross-Complainants allege the following:

In or about 2017-2018, SBI and Dong began doing a number of projects together in which Dong invested capital into purchasing property, SBI would build a luxury home on the property, and then the parties would jointly sell the property and share the profits. (CC, ¶ 10). In April 2019, SBI and Dong entered into an Operating Agreement (the “Kings Road Agreement”) for the creation of Kings Road, LLC, the purpose of which was to own and invest in real property located at 1210 Kings Road, Newport Beach, California. (CC, ¶ 11).

A copy of the Kings Road Agreement is attached as Exhibit A. Pursuant to the Kings Road Agreement, Dong agreed to provide capital and SBI agreed to provide manpower and services to renovate the Kings Road Property pursuant to plans approved by Dong, consistent with the parties’ past practice. In exchange for SBI’s work, SBI was to receive a 40% membership interest in the entity that owned the Kings Road Property, Kings Road, LLC. The plan was for the parties to promptly sell the property upon completion of the construction as the parties had done on its other deals so that SBI could be compensated for its work from the sale proceeds. (CC, ¶ 11).

After three years of work, SBI built a beautiful 6394 square foot luxury ocean view home on the Kings Road Property, and was owed at least $2,595,000 for the construction of the Kings Road Property. (CC, ¶ 14).

The property was initially listed for sale at about $12.5 million, at Dong’s request. The parties received interest from several potential buyers, who offered to purchase the property at various prices below the asking price. Cross-Complainants and the real estate agents repeatedly recommended lowering the asking price to reflect the market realities. However, Dong unreasonably and without justification refused to do so, causing the home to sit idly on the market for years while SBI continued to incur the costs of maintaining the home. (CC, ¶ 16).

In May 2021, Dong’s entity Confident Serenity Inc. (“CSI”) and SBI entered into a similar Operating Agreement (the “430 Tustin Agreement”) for the creation of 430 Tustin, LLC, the purpose of which was to own and invest in real property located at 430 Tustin, Newport Beach, California (the “430 Tustin Property”). (CC, ¶ 20). Dong agreed that SBI was owed at least $1,590,000 for the construction of the 430 Tustin Property. (CC, ¶ 22). The property was initially listed for sale at about $6.4 million, at Dong’s request.

The parties received interest from several potential buyers, who offered to purchase the property for about $5.8-$5.85 million in the 2023-2025 timeframe. On information and belief, those offers were within the range of fair market value at the time. Cross-Complainants and the agents repeatedly advised Dong to lower the asking price. However, Dong unreasonably and without justification refused to even consider any offers below $6 million, which caused the home to sit on the market for years. (CC, ¶ 24).

Ultimately, SBI could no longer afford to continue maintaining the property and refused to continue doing so given Dong’s repeated refusal to consider reasonable offers. Dong took over the maintenance and repair responsibilities in fall of 2025 and thereafter locked SBI out of the property of which it is 49% owner. (CC, ¶ 27).

Given Dong’s actions, SBI had little choice but to obtain funding so that it could continue operating its business. Dong offered to lend SBI money and sent Cross-Complainants a promissory note reflecting the loan (the “Note”). A copy of the Note is attached as Exhibit C. The Note dated June 15, 2023, had unreasonable and unconscionable terms such as making the Sepulvedas personally liable at a usurious interest of 1% per month. Dong forced Cross Complainants to take more money than they needed or had requested in order to increase the interest incurred to her benefit. (CC, ¶ 29).

In a good faith attempt to resolve the parties’ dispute, Cross- Complainants offered to relinquish their interests in both the Kings Road Property and the 430 Tustin Property in exchange for full satisfaction of the Note. Dong agreed to this proposal, and took full possession of both properties. Dong rekeyed the properties, refused to allow Cross-Complainants any access to the properties, and told third parties that she owned both properties outright. However, despite taking possession of the properties, Dong refused to sign any releases or acknowledgements of satisfaction of the Note, even though that was part and parcel of the negotiated deal. (CC, ¶¶ 31-32).

Cross- Complainants’ counsel wrote Dong with an agreement reflecting the terms of the deal and requesting the deal be finalized and executed. Dong referred the letter to her counsel, who delayed responding for over a month until January 13, 2026. (CC, ¶ 33). While Cross- Complainants were awaiting Dong’s response to finalization of the agreed-upon deal, Cross-Complainants became aware through other means that Dong secretly had the 430 Tustin Property under escrow and had expressly instructed the real estate agents not to publicize it or make it known to Cross-Complainants (who were still 49% owner and had every right to know about the sale). (CC, ¶ 34).

Counsel wrote Dong’s counsel, who represented that the property was in escrow but there was no specified date for close of escrow, yet escrow closed the very next day on January 14 at approximately $5.75 million. (CC, ¶ 35).

Then, on January 26, 2026, Dong claimed that because of the 8% preferred return incurred in the years the 430 Tustin Property remained unsold (due to her unjustified refusal to lower the asking price), she was entitled to a preferred return of $1,314,862.93 plus return of $3,458,468.54 in alleged capital contributions, leaving only $696,560.96 in net profits. Dong unreasonably offered SBI only $341,314.87 from the net sale proceeds, despite this being far less than SBI’s out-of-pocket costs and time/labor invested and the fair market value of SBI’s work, and despite previously agreeing that SBI was due at least $1,590,000 for its work on the 430 Tustin Property. (CC, ¶ 36).

Cross-Complainants are informed and believe that Cross-Defendants have continued to receive offers on the Kings Road Property of $9.5 million or more and are continuing to unreasonably reject offers so they can purport to claim even more in 8% preferred returns. (CC, ¶ 38).

Standing

First, Cross-Defendants demurrer to the 4th cause of action for breach of fiduciary duty, 5th cause of action for fraud, 8th cause of action for unjust enrichment and imposition of a constructive trust, 9th cause of action for accounting and 11th cause of action for quantum meruit by Cross-Complainants Brent Sepulveda and Jami Lynn Sepulveda on the basis that they do not have standing, because there is no allegation that any compensation is owed to them as individuals, and neither Brent nor Jami is a member of either LLC.

Code Civ. Proc. § 430.10, subds. (b) and (d), provide that a party against whom a cross-complaint has been filed may demurrer to the pleading on any one or more of the following grounds: the person who filed the pleading does not have the legal capacity to sue, and there is a defect or misjoinder of parties.

“[A]s a general matter, to have standing to pursue a claim for damages in the courts of California, a plaintiff must be beneficially interested in the claims he is pursuing.” (Limon v. Circle K Stores Inc. (2022) 84 Cal.App.5th 671, 700).

In PacLink Communications Intern., Inc. v. Superior Court (2001) 90 Cal.App.4th 958, the court held: “In this case, the essence of plaintiffs' claim is that the assets of PacLink–1 were fraudulently transferred without any compensation being paid to the LLC. This constitutes an injury to the company itself. Because members of the LLC hold no direct ownership interest in the company's assets (Corp.Code, § 17300), the members cannot be directly injured when the company is improperly deprived of those assets. The injury was essentially a diminution in the value of their membership interest in the LLC occasioned by the loss of the company's assets. Consequently, any injury to plaintiffs was incidental to the injury suffered by PacLink–1.” (Id. at 964 [footnote removed]).

Cross-Defendants contend that the fiduciary duties owed under the Revised Uniform Limited Liability Act (the “Act”) extend only to the other members of each LLC and Brent and Jami were not members of either limited liability company (citing to Corp. Code §17704.09). Defendants also contend that there is no basis for imposition of any affirmative duty.

In their Opposition, Cross-Complainants refer to Ex. A, the Kings Road Operating Agreement, which contains a Guaranty by both Jami Lynn Sepulveda and Brent Sepulveda, wherein they guaranteed the prompt payment of all guaranteed obligations to Yanan Dong, among other representations. (CC, Ex. A). Cross-Complainants also note that the Promissory Note to pay Yanwen Dong, the lender, was signed and is binding on both Jami Lynn and Brent Sepulveda. (CC, Ex. C).

In support of their cause of action for breach of fiduciary duty, Cross- Complainants allege that SBI and CSI are parties to the 430 Tustin Agreement. SBI and Dong are parties to the Kings Road Agreement. As the Manager and majority member of 430 Tustin, LLC and Kings Road, LLC, CSI and Dong, respectively, owed SBI and its principals (the Sepulvedas) a fiduciary duty of loyalty and disclosure. (CC, ¶ 55). They allege that CSI and Dong breached their fiduciary duties by, among other things, acting in their own personal best interests and not in the best interests of 430 Tustin, LLC or Kings Road, LLC or its members.

For example, they repeatedly unreasonably rejected good offers for both the Kings Road Property and the 430 Tustin Property that were reflective of market value and would have provided a good return for the shared entities, in favor of collecting an 8% preferred return for their own personal benefit, to SBI and the entities’ detriment. (CC, ¶ 56).

Cross-Complainants have not adequately explained why signing the Promissory Note or entering into the Guaranty gives them standing as to this cause of action as nonmembers of either of the LLCs. The elements for a cause of action for breach of fiduciary duty are: (i) Existence of a fiduciary duty; (ii) Breach of the fiduciary duty; and (iii) Damage proximately caused by the breach. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101 [emphasis added]). “The allegation of a fiduciary relationship must be supported by either a contract, or a relationship that imposes it as a matter of law.” (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1558).

Cross-Complainants allege that the fiduciary duty owed by Cross- Defendants arises from their status as Manager and majority member of 430 Tustin, LLC and Kings Road, LLC. While they argue that they “have a beneficial interest in those claims given the individual guaranty to the Kings Road Agreement and the offsets owed under the Note” (Opp., 15:14-16), more is required for a breach of fiduciary duty claim. They must assert the existence of a fiduciary duty, and they have not provided any facts which demonstrate that they are owed a fiduciary duty arising out of the membership of the LLCs. Accordingly, the court SUSTAINS the demurrer to this cause of action as to Brent and Jami Lynn Sepulveda.

However, the court finds that Cross-Complainants have adequately alleged standing for the remaining claims.

With regards to the fifth cause of action for fraud, they allege that “Dong (on behalf of CSI and herself personally) and Huang repeatedly represented both orally and in emails and text messages to the Sepulvedas that the Sepulvedas/SBI would be fairly compensated for their construction work and would receive their agreed-upon share of the profits from any sale of the Kings Road Property and the 430 Tustin Property” and that they relied on these representations and forewent other lucrative projects in order to work on these two projects in reliance on CSI, Dong, and Huang’s representations. (CC, ¶¶ 59-62).

Because the Sepulvedas alleged that they relied on the representations, and signed the guaranty in their own capacity for the Kings Road agreement, the court finds that they have alleged standing as to the fraud cause of action.

With regards to the cause of action for unjust enrichment and imposition of a constructive trust, Cross-Complainants allege that “CSI, Dong, and Huang have been unjustly enriched at the expense of Cross-Complainants in the form of monies and other assets wrongfully obtained by CSI, Dong, and Huang.” (CC, ¶ 77). They allege that they are entitled to an order: (a) requiring CSI, Dong, and Huang, inclusive, to disgorge all funds or monies that they have and/or will otherwise unjustly obtain; and (b) imposing a constructive trust on all such funds. (CC, ¶ 79).

With regards to the cause of action for accounting, Cross- Complainants allege that they “are entitled to an accounting of all revenues, expenses, profits, and other matters related to the business of Kings Road, LLC and 430 Tustin, LLC and/or related to the Kings Road Property and the 430 Tustin Property, including an accounting of all funds or other assets obtained by CSI, Dong, and Huang, or any of them, from the sale thereof.” (CC, ¶ 81). With regards to quantum meruit, Cross-Complainants allege that the reasonable value of the goods services rendered to Cross-Defendants is in an amount of at least $6.8 million for the Kings Road Property and at least $5.5 million for the 430 Tustin Property. (CC, ¶ 88).

The elements of an unjust enrichment claim are the “receipt of a benefit and [the] unjust retention of the benefit at the expense of another.” (Lectrodryer v. SoeulBank (2000) 77 Cal.App.4th 723, 726). “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 [citations].)

Cross-Complainants rely on their allegations that that they signed the Promissory Note (Ex. C to CC) under economic duress caused by Cross-Defendants’ breaches of the Kings Road Agreement (that Cross-Complainants Brent and Jami Lynn guaranteed) and the 430 Tustin Agreement (CC, ¶¶ 28-33.); and contend that any amounts owed under the Note (if any) should be offset by the damages that Cross-Defendants caused by their breaches of the Kings Road Agreement and the 430 Tustin Agreement. (CC, ¶¶ 28-33.)

The court notes that Cross-Complainants never alleged that the Promissory Note should be offset by Cross-Defendants’ breach. Nevertheless, any determination by this court as to how much SBI is owed will likely involve Brent and Jami Lynn’s obligations under the Guaranty to the Kings Road Agreement, as well as their obligations under the Promissory Note. This demonstrates that Brent and Jami Lynn Sepulveda are beneficially interested in the claims they are pursuing. (Limo, supra, 84 Cal.App.5th at 700). Accordingly, the court OVERRULES the demurrer as to these causes of action by Brent and Jami Lynn Sepulveda.

Fraud

Next, Cross-Defendants contend that the fraud cause of action fails to state a cause of action because it is barred by the economic loss rule, and also because the promise of “fair compensation” is too vague to be actionable.

The essential allegations for a fraud claim include “(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.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974.).

Every element of the cause of action for fraud must be alleged factually and specifically since the policy of liberal construction of pleadings will not ordinarily be invoked to sustain a defective pleading of fraud. (Hall v. Department of Adoptions (1975) 47 Cal.App.3d 898, 904).

The economic loss rule “precludes recovery for purely economic loss due to disappointed expectations, unless the plaintiff can demonstrate harm above and beyond a broken contractual promise. Conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988-989).

However, the economic loss rule does not apply to fraudulent inducement to enter into a contract. As our Supreme Court held in Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988: “Robinson contends the Court of Appeal erred in its decision because the economic loss rule does not bar its fraud and intentional misrepresentation claims. We conclude that, with respect to Dana's provision of false certificates of conformance, Robinson is correct.” See also Rattagan v. Uber Techs., Inc. (2024) 17 Cal.5th 1, 38: “The doctrine only applies to bar tort recovery for negligently inflicted economic losses ... .”

With regards to the contention that the promise of “fair compensation” is too vague to be actionable, Cross-Defendants cite to Ladas vs. California State Automobile Association (1993) 19 Cal.App.4th 761, 771, wherein the court held that “promises ... to pay ‘parity’ or ‘according to industry standards’ are not sufficiently definite to be enforceable.”

However, Cross-Complainants do not solely base their cause of action on this promise. Cross-Complainants also allege that Cross- Defendants represented that Cross-Complainants would receive their agreed-upon share of the profits from any sale of the Kings Road Property and the 430 Tustin Property. (CC, ¶ 59).

Cross-Defendants failed to address whether this promise is actionable in their demurrer. Accordingly, the court OVERRULES the demurrer to this cause of action.

Unjust Enrichment and Imposition of Constructive Trust

Finally, Cross-Defendant contends that the 8th cause of action for unjust enrichment and imposition of constructive trust fails because unjust enrichment cannot apply where the parties have an express contract, and because Cross-Complainants have not plead specific or identifiable property that would constitute the “res” for the trust.

In support of this cause of action, Cross-Complainants allege that CSI, Dong, and Huang have been unjustly enriched at the expense of Cross-Complainants in the form of monies and other assets wrongfully obtained by CSI, Dong, and Huang. (CC, ¶ 77); that Cross-Complainants are entitled to an order: (a) requiring CSI, Dong, and Huang, inclusive, to disgorge all funds or monies that they have and/or will otherwise unjustly obtain; and (b) imposing a constructive trust on all such funds (CC, ¶ 78); and that a constructive trust should be imposed in equity upon all proceeds, ownership, monies, and assets of CSI, Dong, and Huang, inclusive, insofar as Claimants are proven to be damaged, in the interests of justice. (CC, ¶ 79).

As previously stated, the elements of an unjust enrichment claim are the “receipt of a benefit and [the] unjust retention of the benefit at the expense of another.” (Lectrodryer v. SoeulBank (2000) 77 Cal.App.4th 723, 726).

Both parties rely on Sepanossian v. National Ready Mixed Concrete Co. (2023) 97 Cal.App.5th 192, 207 wherein the court held:

Unjust enrichment is generally an inapplicable basis for restitution where the parties have an enforceable express contract; however, “restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason,” or “where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct.” [internal citation omitted]

...

Thus, Sepanossian's “unjust enrichment” claim “does not properly state a cause of action.” (Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1138, 117 Cal.Rptr.3d 262.) Because Sepanossian does not dispute there were express form contracts in this case, he cannot assert a quasi-contract claim for restitution based on unjust enrichment. “Although a plaintiff may plead inconsistent claims that allege both the existence of an enforceable agreement and the absence of an enforceable agreement, that is not what occurred here. Instead, [Sepanossian's] breach of contract claim pleaded the existence of ... enforceable agreement[s] and [his] unjust enrichment claim did not deny the existence or enforceability of [those] agreement[s]. [Sepanossian is] therefore precluded from asserting a quasi- contract claim under the theory of unjust enrichment.” [internal citation omitted]

Cross-Defendants contend that Cross-Complainants cannot state a cause of action for unjust enrichment because there was an express contract regarding payment to SBI. However, as Cross- Complainants point out, they allege that they were fraudulently induced into entering the agreements. (CC, ¶¶ 59-63). Furthermore, with regards to the promissory note, Cross-Complainants allege that it had unreasonable and unconscionable terms, and Cross- Complainants had “little to no choice” but to sign it, and that Cross- Complainant Dong forced Cross Complainants to take more money than they needed or had requested in order to increase the interest incurred to her benefit. (CC, ¶ 29). The court finds this sufficient at the pleading stage.

With regards to constructive trust, three conditions must be shown to impose a constructive trust: (1) a specific identifiable property interest, (2) the plaintiff’s right to the property interest, and (3) the defendant’s acquisition of the property interest by some wrongful act. (Calistoga Civic Club v. City of Calistoga (1983) 143 Cal.App.3d 111, 116). All that must be shown is that the acquisition of the property was wrongful and that the keeping of the property by the defendant would constitute unjust enrichment. (Id.).

Cross-Defendants cite to Deane v. Superior Court (1985) 164 Cal.App.3d 292, wherein the court held that a constructive trust may not be imposed to secure an ordinary business debt. (But see Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150 [“a constructive trust requires ‘money or property identified as belonging in good conscience to the plaintiff [which can] clearly be traced to particular funds or property in the defendant's possession.” [citation]]).

In their Opposition, Cross-Complainants contend that their claim is for any money generated from sale of the Kings Road and 430 Tustin properties, as well as specific monies paid under the Note. Cross- Complainants alleged the specific amounts of these sums. (See CC, ¶¶ 30, 35 [“Cross Complainants made payments on the Promissory Note totaling at least $941,450” and property sold for “approximately $5.75 million”]).

However, the cause of action for constructive trust does not seek these specific sums. Rather, Cross-Complainants allege that they are entitled to an order requiring CSI, Dong, and Huang to disgorge “all funds or monies that they have and/or will otherwise unjustly obtain”, and to impose “a constructive trust on all such funds.” (CC, ¶ 78).

Accordingly, Cross-Complainants failed to state a claim for constructive trust.

Motion to Strike

For the reasons set forth below, Plaintiff and Cross-Defendants’ motion to strike is GRANTED as to the following, only:

1. The words “alter egos” at ¶8, line 26, of the cross-complaint; 2. The allegation at ¶14, lines 18 – 19 (which states that, “Dong agreed that SBI was owed at least $2,595,000 for the construction of the Kings Road Property”); 3. The allegation at ¶14, lines 22 – 23 (which states that “SBI was also entitled to a reasonable construction management /general contractor fee in addition to its hard costs”); 4. The allegations in paragraph 22, lines 1 - 2 of the cross- complaint (which states that “Dong agreed that SBI was owed at least $1,590,000 for the construction of the 430 Tustin Property”); 5. The allegation at ¶22, lines 5 – 7 (which states that “[i]n a typical project of this size, SBI also would have been entitled to a construction management /general contractor fee”); and 6. Paragraph 78 in its entirety.

The motion is DENIED as to the remainder.

Cross-Complainants are granted 30 days leave to amend.

Statement of Law

Code Civ. Proc. § 436 provides that a court “may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strikeout any irrelevant, false, or improper matter inserted in any pleading. (b) 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.”

“While under section 436, a court at any time may, in its discretion, strike portions of a complaint that are irrelevant, improper, or not drawn in conformity with the law, matter that is essential to a cause of action should not be struck and it is error to do so.” (Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281.)

With regards to motions to strike, courts “have no intention of creating a procedural ‘line item veto’ for the civil defendant.” (PH II, Inc. v. Superior Court (lbershof) (1995) 33 Cal.App.4th 1680, 1683).

“Pleading in the language of the statute is not objectionable when sufficient facts are alleged to support the allegation.” (Perkins v. Sup. Ct. (1981) 117 Cal. App. 3d 1, 6-7.)

Alter Ego Allegations

First, Cross-Defendants move to strike the words “alter egos” at ¶8, line 26 on the basis that Cross-Complainants have not sufficiently alleged alter ego allegations against Cross-Defendants.

This paragraph reads:

Cross-Defendants at all times mentioned herein were the agents, servants, employees, partners, members, shareholders, officers, directors, joint venturers, and alter egos of each other, and in doing or failing to do the things hereinafter mentioned were acting within the purpose and scope of their agency and employment and with the knowledge and consent of each other. As used herein the term “Cross-Defendants” means all Cross-Defendants, both jointly and severally, and references by name to any named Cross-Defendants shall include all Cross Defendants, both jointly and severally. (CC, ¶ 8).

With regards to alter ego liability, “two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.’ [Citations.]” (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 155.)

“Whether a party is liable under an alter ego theory is normally a question of fact. [Citations.] ‘The conditions under which the corporate entity may be disregarded, or the corporation be regarded as the alter ego of the stockholders, necessarily vary according to the circumstances in each case inasmuch as the doctrine is essentially an equitable one and for that reason is particularly within the province of the trial court.’ [Citation.]” (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811 [setting forth a multitude of factors to be considered].)

Cross-Complainants do not allege the basis for their alter ego allegations in the Cross-Complaint, and argue in their Opposition that they are not pleading alter ego as to Cross-Defendants. Cross- Complainants contend that they are pleading alter ego as to the Roe Cross-Defendants, only. However, this is incorrect. Paragraph 8 of the Cross-Complaint specifically refers to all Cross-Defendants, including the moving parties. Accordingly, the court strikes “alter egos”.

“Past Practices” Allegations

Next, Cross-Defendants contend that the allegation of conduct “consistent with the parties past practice” at ¶11, lines 24 – 25 should be stricken as there is no allegation reciting what the alleged “past practices” were.

The complete paragraph states:

In April 2019, SBI and Dong entered into an Operating Agreement (the “Kings Road Agreement”) for the creation of Kings Road, LLC, the purpose of which was to own and invest in real property located at 1210 Kings Road, Newport Beach, California (the “Kings Road Property”). A copy of the Kings Road Agreement is attached as Exhibit A. Pursuant to the Kings Road Agreement, Dong agreed to provide capital and SBI agreed to provide manpower and services to renovate the Kings Road Property pursuant to plans approved by Dong, consistent with the parties’ past practice.

In exchange for SBI’s work, SBI was to receive a 40% membership interest in the entity that owned the Kings Road Property, Kings Road, LLC. The plan was for the parties to promptly sell the property upon completion of the construction as the parties had done on its other deals so that SBI could be compensated for its work from the sale proceeds.

(CC, ¶ 11).

The court finds that there is nothing irrelevant, false or improper about this allegation. Cross-Complainants allege in another paragraph that “in these past deals, upon completion of construction, the parties would sell the properties within months of completing construction, SBI would submit its hard costs relating to the construction, then sale proceeds would be used first to reimburse Dong’s capital contribution and SBI’s costs, and then the parties would split remaining profits based upon an agreed-upon split. In total, SBI and Dong did three such homes together successfully in this manner...” (CC, ¶ 10). This allegation is relevant to establish the background between the parties’ relationships.

Paragraphs 14 and 22

Paragraphs 14 and 22 of the Cross-Complaint allege the following:

Dong agreed that SBI was owed at least $2,595,000 for the construction of the Kings Road Property. This included significant out-of-pocket expenses in hard costs incurred by SBI consisting of, among other things, development costs of nearly $100,000 (including for development plans, soil surveys, and permitting) and hard construction costs of approximately nearly $1 million (including for materials, subcontractors, and labor). SBI was also entitled to a reasonable construction management/general contractor fee in addition to its hard costs. On information and belief, the fair market value of the construction work SBI performed in connection with the building of the Kings Road Property from the ground up exceeds $6.8 million.

(CC, ¶ 14).

Dong agreed that SBI was owed at least $1,590,000 for the construction of the 430 Tustin Property. This included significant out-of-pocket expenses in hard costs that SBI incurred consisting of, among other things, development and underground utility costs of nearly $140,000 (including for development plans, soil surveys, and permitting) and hard construction costs of approximately $700,000 (including for materials, subcontractors, and labor). In a typical project of this size, SBI also would have been entitled to a construction management/general contractor fee. On information and belief, the market value of the construction work SBI performed in connection with the building of the 430 Tustin Property from the ground up exceeds $5.5 million.

(CC, ¶ 22).

Cross-Defendants move to strike the following from these paragraphs: “Dong agreed that SBI was owed at least $2,595,000 for the construction of the Kings Road Property”, “SBI was also entitled to a reasonable construction management /general contractor fee in addition to its hard costs”, “Dong agreed that SBI was owed at least $1,590,000 for the construction of the 430 Tustin Property”, and “[i]n a typical project of this size, SBI also would have been entitled to a construction management /general contractor fee.”

Cross-Defendants contend that the right to the payments demanded in paragraphs 14 and 22 of the cross-complaint is not contained in the Operating Agreement for either development project (which are incorporated by reference as Exhibits A and B to the Cross- Complaint).

In their Opposition, Cross-Complainants concede that these numbers did not arise from the agreements, but were based on past deals. Cross-Complainants contend that “[t]he $2,590,000 and $1,590,000 figures were cited as examples of what payment consistent with the past practices would have generated for Cross-Complainants for Kings Road and 430 Tustin, because Dong herself indicated that Cross-Complainants would have been owed that much per the compensation system used on past deals.” (Opp., 14:22-25).

However, the Cross-Complaint does not provide that this amount as allegedly stated by Plaintiff/Cross-Defendant Dong was based on past deals. Cross-Complainants go on to state in their Opposition that they can amend the Cross-Complaint to specify that these amounts were reflected in text messages between the parties. The court grants the motion as to these allegations so that Cross-Complainants may add these allegations.

Unjust Enrichment and Constructive Trust Allegations

Finally, Cross-Defendants contend that the following paragraphs should be stricken in their entirety, because Cross-Complainant’s cause of action for unjust enrichment and constructive trust fails:

“Cross-Complainants are informed and believe, and based thereon allege, that, as a result of the conduct described above, CSI, Dong, and Huang have been unjustly enriched at the expense of Cross- Complainants in the form of monies and other assets wrongfully obtained by CSI, Dong, and Huang.” (CC, ¶ 77).

“Cross-Complainants are informed and believe, and based thereon allege, that, as a direct and proximate result of the foregoing conduct, Cross-Complainants are entitled to an order: (a) requiring CSI, Dong, and Huang, inclusive, to disgorge all funds or monies that they have and/or will otherwise unjustly obtain; and (b) imposing a constructive trust on all such funds.” (CC, ¶ 78).

The arguments regarding Cross-Complainant’s claims for unjust enrichment and constructive trust have been addressed in the demurrer. Cross-Complainants have adequately stated a claim for unjust enrichment, but have not stated a claim for imposition of a constructive trust. Accordingly, the court grants the motion as to paragraph 78, only.

Should Cross-Complainants wish to file an amended cross-complaint that addresses the issues in this ruling, Plaintiff must file and serve it within 30 days of service of notice of ruling.

Cross-Defendants shall give notice of both rulings.

3 Jahanmir vs. TENTATIVE RULING: Mercedes Benz USA, LLC For the reasons set forth below, Defendant Mercedes-Benz USA, LLC (MBUSA)’s motion to compel Plaintiff Kamran Jahanmir to binding arbitration and stay action is GRANTED.

The court DENIES Defendant’s request for judicial notice, as it was presented for the first time in the Reply. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1538).

Statement of Law

A court shall order arbitration if it determines an agreement to arbitrate exists, unless the moving party waived arbitration, grounds exist for revocation of the agreement, or a party to the agreement is also a party to a pending action involving the same transaction with a third party and there is a possibility of conflicting rulings on a common issue of law or fact. (Code Civ. Proc., § 1281.2.) If the court orders arbitration, it shall, upon motion of either party, stay the action or proceeding until the completion of the arbitration, or until such earlier time as the court specifies. (Code Civ. Proc., § 1281.4; Thomas v. Westlake (2012) 204 Cal.App.4th 605, 620.)

There is a strong public policy favoring arbitration, and any doubts regarding arbitrability are resolved in favor of arbitration, “unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Rice v. Downs (2016) 248 Cal.App.4th 175, 185.) However, ordinary principles of contract interpretation apply, meaning the court must determine whether the parties agreed to arbitrate the claims at issue, the scope of the arbitration clause, and the terms of the arbitration clause. (Id.) In determining the applicability of an arbitration agreement, the court should attempt to give effect to the parties’ intentions, considering