Bret Sewell et al v. Andrew Medeiros et al.

Demurrer to Complaint by defendants TTNC, Inc., Trim Tech Industries, Inc., Andrew J. Medeiros, Ellen M. Medeiros, Matthew Medeiros, Andrew J. Medeiros, as co-trustee of the Medeiros 2007 Living Trust dated 5/17/04, and Ellen Medeiros as co-trustee of MEM Vida Trust dated 9/7/06. Factual and Procedural Background This is a fraud and breach of contract action brought by plaintiff Trim Tech Distribution, LLC (“TTD”), Trim Tech Construction, Inc. (“TTC”), Bret Sewell (“Bret”), and Christine Sewell (“Christine”; collectively, “Plaintiffs”) against defendants TTNC, Inc. (“TTNC”), Trim Tech Industries, Inc. (“TTI”), Andrew J. Medeiros (“Andrew”), Ellen M. Medeiros (“Ellen”), Matthew Medeiros (“Matthew”), Andrew J. Medeiros, as co-trustee of the Medeiros 2007 Living Trust dated 5/17/04, and Ellen Medeiros as co-trustee of MEM Vida Trust dated 9/7/06 (collectively, “Defendants”).1 Bret and Christine are the owners of TTD and TTC, which were formed for the purpose of acquiring the business sold by Defendants, TTNC and TTI (collectively, the “Trim Tech Business”). (Complaint, ¶¶ 3, 15.) Andrew was a co-founder of the Trim Tech Business, owned 51% of TTI, and led all Trim Tech Business construction operations and product sales. (Complaint, ¶ 6.) Andrew is also co-trustee of the Medeiros 2007 Living Trust Dated 5/17/04 (the “Medeiros Trust”), a revocable living trust settled by Andrew and a 49% owner of TTNC. (Id. at ¶ 9.) Ellen was a co-founder of the Trim Tech Business, 49% owner of TTI, and the controller who led Trim Tech Business’s finance and administration. (Complaint, ¶ 7.) Ellen is also co-trustee of MEM Vida Trust dated 9/7/06 (the “MEM Vida Trust”), a revocable living trust settled by Ellen and a 51% owner of TTNC. (Id. at ¶ 10.) Matthew led the marketing and selling of the Trim Tech Business and was the primary contact for Defendants’ selling agent that advised Defendants on the sale. (Complaint, ¶ 8.) The Complaint alleges that TTNC and TTI are the alter egos of Andrew, Ellen, Matt, the Medeiros Trust, the MEM Vida Trust (collectively, “Individual Defendants”). (Id. at ¶ 13.) On December 20, 2022, TTD and TTC entered into a written Asset Purchase Agreement (the “APA”) for the purchase of Trim Tech Business. (Complaint, ¶ 15.) Plaintiffs purchased the Trim Tech Business for $11.7 million, and TTD and TTC were required to enter a five-year lease of the building owned by Defendants. (Id. at ¶ 16.) The transaction closed on December 22, 2022. (Id. at ¶ 15.) Prior to entering the APA, Andrew, Ellen, and Matthew falsely represented to Plaintiffs—primarily Bret—that the Trim Tech Business was profitable with a strong and experienced team of employees that knew how to run the business and were compensated at market levels. (Complaint, ¶¶ 16, 19-20.) After the close of the APA, many employees complained to Plaintiffs about their pay, Bret had to personally conduct hiring interviews as none of the existing employees had experience recruiting, and Plaintiffs learned that employees

1 The court refers to the individual plaintiffs and defendants by their first names for purposes of clarity. No disrespect is intended. (See Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1136, fn. 1.) were paid as much as 50% below market rate through 2022. (Id. at ¶ 19.) Despite making salary adjustments, eight legacy Trim Tech Business employees left, citing below market compensation. (Ibid.) Defendants also falsely represented that a $14 million project backlog was included in Trim Tech Business’s assets, which would sustain a significant portion of the company for the next two years. (Complaint, ¶ 18.) While Defendants agreed to provide Trim Tech Business’s material contracts, Defendants did not provide Plaintiffs with the agreements detailing the backlog projects. (Ibid.) The projects did not generate the 40% gross margin represented in the Confidential Information Memorandum (the “CIM”) Defendants provided to Plaintiffs prior to the APA. (Ibid.) It became clear that the backlog projects were bid at margins lower than represented in the CIM, and Defendants had deliberately bid on projects with thin margins. (Ibid.) On July 29, 2025, Plaintiffs filed the Complaint alleging the following causes of action: (1) intentional misrepresentation; (2) concealment; (3) negligent misrepresentation; and (4) breach of contract. On November 6, 2025, the Defendants filed the instant demurrer. Plaintiff filed a timely opposition, and the Defendants filed a timely reply. Demurrer to the Complaint The Individual Defendants demur to each cause of action on the ground that the pleadings fail to state sufficient facts for alter ego liability against the Individual Defendants. (Code Civ. Proc., § 430.10, subd. (e).) All Defendants demur to each cause of action on the ground that the pleadings fail to state sufficient facts. (Code Civ. Proc., § 430.10, subd. (e).) Legal Standards In ruling on a demurrer, the court treats the motion “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Piccinini v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688 [citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318].) “The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.) However, it has long be held that on demurrer, leave to amend should be granted where “‘there is a reasonable possibility that the defect can be cured by amendment.’” (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100; see also A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 687.) Pleading Requirements for Alter Ego Liability In demurring to the Complaint, Individual Defendants assert that the Complaint fails to allege sufficient facts supporting the theory that they are alter egos of TTNC and TTI. (Demurrer at p. 8-3:5.) To support an alter ego theory of liability, a plaintiff must plead: (1) such a unity of interest and ownership that the separate personalities of the corporation and the individuals do not exist, and (2) that an inequity will result if the corporate entity is treated as the sole actor. (See Stodd v. Goldberger (1977) 73 Cal.App.3d 827, 832.) Courts consider whether an individual or organization dominated and controlled the entity, the controlling party used the entity’s assets as his or her own, the entity served as a mere shell and conduit for the controlling party, the entity was undercapitalized, and the entity failed to abide by the formalities of corporate existence. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235 (Rutherford Holdings).) “Courts have followed a liberal policy of applying the alter ego doctrine where the equities and justice of the situation appear to call for it rather than restricting it to the technical niceties depending upon pleading and procedure.” (First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 915.) A party is only required to allege ultimate rather than evidentiary facts in support of an alter ego theory. (Rutherford Holdings, supra, 223 Cal.App.4th at p. 236.) Here, the allegations of paragraph 13 simply restate the elements of alter ego liability and fail to allege how TTNC and TTI could be considered as the alter ego of the Individual Defendants. Furthermore, the allegations are made solely—and inadequately—on information and belief. Even when it is permissible to allege an ultimate fact on information and belief, a plaintiff cannot simply rely on the phrase “information and belief” without more. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1158-1159.) Instead, a plaintiff must allege the facts or information that led to the inference or belief in the truth of the ultimate fact allegation. (Ibid.) The Complaint fails to allege any facts supporting Plaintiffs’ belief that TTNC and TTI are alter egos of the Individual Defendants. As this is the first substantive pleadings challenge, the demurrer to the entire Complaint against the Individual Defendants is SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND for failure to allege sufficient facts. (Code Civ. Proc., § 430.10, subd. (e).) Pleading Requirements for Fraud Claims In demurring to the first cause of action for intentional misrepresentation, second cause of action for concealment, and third cause of action for negligent misrepresentation, Defendants argue that the claims fail to allege facts with the specificity required for fraud claims. As a general rule, each element in a fraud cause of action must be pleaded with specificity. (Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 645 (Lazar); Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) Thus, to properly allege a fraud or negligent misrepresentation cause of action, a plaintiff must plead “facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Lazar, supra, 12 Cal.4th at 645.) “Causes of action for intentional and negligent misrepresentation sound in fraud and, therefore, each element must be pleaded with specificity.” (See Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166, [overruled in part on a different ground Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 919].) Courts have recognized certain exceptions that mitigate the rigor of the rule requiring specific pleading of fraud. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217 (Committee).) Thus, even under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party. (Ibid.; 5 Witkin, California Procedure (6th ed. 2026) Pleading, §725 [“Intent, like knowledge, is a fact. Hence, the averment that the representation was made with the intent to deceive the plaintiff, or any other general allegation with similar purport, is sufficient.”].) Intentional Misrepresentation and Negligent Misrepresentation The elements of a negligent misrepresentation claim are (1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage. (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 196.) The elements of an intentional misrepresentation claim are similar, except that the defendant must know the representation was false at the time it was made. (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792 (West).) Here, the Complaint essentially alleges four subjects of misrepresentation: (1) Trim Tech Business’s profitability as a business generating 40% gross margins and 20% adjusted EBITDA margins; (2) Trim Tech Business’s $14 million project backlog that would sustain a significant portion of business for the next two years; (3) Trim Tech Business’s legacy employees’ capacity to run the business; and (4) the market rate compensation of Trim Tech Business’s employees. (Complaint, ¶ 49.) While the Court acknowledges that the Complaint does allege each purported misrepresentation with some particularity, the allegations are still lacking in some respect. First, the Complaint alleges that (1) at a meeting on September 1, 2022, Andrew represented to Bret that TTI was a 50% gross margin business; (2) at a meeting on October 3, 2022, Ellen and Matthew represented to Bret that Trim Tech Business’s 2022 consolidated gross margin would be 40-41%; and (3) at a meeting on December 14, 2022, Ellen and Matthew represented to Bret that the final 2022 EBITDA was 27%. (Complaint, ¶ 17.) As Defendants argue, it is unclear whether these representations are necessarily false. These representations concern Trim Tech Business’s gross profit margins and EBITDA in 2022, and the Complaint subsequently alleges that Trim Tech Business lost money within eighteen months of the APA, with 2024 gross margins of 16% and a sizeable EBITDA loss. (Complaint, ¶ 17.) As pled, the Complaint does not allege that Defendants falsely represented that Trim Tech Business would maintain its 2022 numbers in 2024. Second, the Complaint alleges that prior to the APA, Defendants presented Plaintiffs with the CIM that represented a 40% gross margin for the $14 million in backlog projects. (Complaint, ¶ 18.) The Complaint does not allege who presented the CIM, how the CIM was presented, or to whom the CIM was presented. Third, the Complaint alleges on November 22, 2022, Andrew represented to Bret that certain employees could all manage their respective functions, but managers and team leaders actually had no experience with managing material or labor costs or pricing projects. (Complaint, ¶ 19.) The Complaint does not allege how or by what means the representation was made, and where the representation was made. Finally, while the Complaint alleges one phone call and one meeting2 wherein Andrew and/or Ellen represented to Brett that they expected all employees to stay and that there had been “infrequent” complaints about pay, none of these representations support the allegation that “Defendants assured that the Trim Tech Business employees were being compensated at market levels.” (Complaint, ¶ 20.) Defendants also argue that the Complaint fails to allege sufficient facts demonstrating that (1) the representations were false when made; (2) Defendants knew the representations were false; (3) Defendants intended to deceive Plaintiffs; and (4) Plaintiff reasonably relied on the misrepresentations. The argument is unpersuasive. First, the Complaint does allege facts

2 The Complaint also alleges a conversation during a meeting on December 14, 2022, wherein Andrew represents to Bret that “Project Managers can be hired for $60-70K”. (Complaint, ¶ 20.) It is unclear how this is relevant or supports the alleged misrepresentation. demonstrating that some representations were false when made. The Complaint alleges that the CIM represented a 40% gross margin for the $14 million in backlog projects, but upon investigation, Plaintiffs realized that the projects were heavily underbid at thin margins. (Complaint, ¶ 25.) Second, as noted above, the Complaint’s general averment of Defendants knowledge of falsity and intent to deceive are sufficient to survive demurrer. (See 5 Witkin, California Procedure (6th ed. 2026) Pleading, §725.) Third, the Complaint expressly alleges the facts underlying Plaintiff’s justifiable reliance on the misrepresentations—i.e., Defendants found and ran the business for 30 years, and Plaintiffs did not have access to material contracts and bid sheets. (Complaint, ¶ 28.) On Reply, Defendants primarily contend that representations concerning the experience and market rate compensation of legacy Trim Tech Business employees all constitute nonactionable statements of opinion. (Reply, at pp. 7-8.) The Court declines to consider the argument as it is raised for the first time on reply. (See e.g., Browne v. County of Tehama (2013) 213 Cal.App.4th 704, 720, fn. 10 [“‘Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.’”]) The demurrer to the first and third causes of action is therefore SUSTAINED WITH 20 DAYS LEAVE TO AMEND for failure to allege sufficient facts. (Code Civ. Proc., § 430.10, subd. (e).) Concealment The essential elements of a fraud cause of action based on concealment or nondisclosure are: (1) the defendant had a duty to disclose the concealed or suppressed fact to the plaintiff; (2) the defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, and (3) the plaintiff was damaged as a result. (See Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1198.) As an initial matter, Defendants complain that the Complaint fails to allege (1) which Defendants concealed the fact; (2) how concealment occurred; (3) when concealment occurred; and (4) Defendants’ intent to deceive. (Demurrer at p. 6:15-21.) The argument is unpersuasive as the specificity requirement in pleading fraud is relaxed for concealment claims. As one court has stated, “How does one show ‘how’ and ‘by what means’ something didn’t happen, or ‘when’ it never happened, or ‘where’ it never happened?” (Alfaro v. Community Housing Imp. System & Planning Ass’n., Inc. (2009) 171 Cal.App.4th 1356, 1384.) The who, how, and when of the concealment claim falls squarely within Defendants’ unique knowledge. (See Committee, supra, 35 Cal.3d at p. 217.) The same goes for Defendants’ intent to deceive. (See 5 Witkin, California Procedure (6th ed. 2026) Pleading, §725.) Accordingly, the demurrer cannot be sustained on this basis. Defendants also argue that the bare allegation of “derogatory material” without describing the facts alleged concealed renders the claim deficient. (Demurrer at p. 6:13-15.) The Complaint generally alleges that “Defendants prevented Plaintiffs from discovery derogatory material facts regarding the value, profitability[,] and viability of the Trim Tech Business that were known only to Defendants prior to close of the APA.” (Complaint, ¶ 40.) The concealment claim, however, also realleges the preceding allegations, including that “Defendants failed to provide Plaintiffs with copies of agreements showing the backlog projects’ details” and that “Defendants prevented Plaintiffs from meeting anyone on the Trim Tech team prior to the close of the APA.” (Id. at ¶¶ 18-19.) Construing the pleadings liberally, as the Court must do, preventing Plaintiffs from meeting Trim Tech Business employees could be understood as concealing their experience and compensation. (Code Civ. Proc., § 452 [“In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.”]) These allegations are therefore sufficient for purposes of demurrer. The demurrer to the second cause of action is OVERRULED. Breach of Contract In demurring to the fourth cause of action for breach of contract, Defendants contend that the Complaint fails to address the APA’s integration clause and identify any specific provision of the APA that was purportedly breached. As an initial matter, the Court rejects the integration clause and parol evidence rule argument as it impermissibly requires the Court to consider extrinsic evidence—i.e., the APA’s integration clause. On demurrer the Court considers only the pleading under attack, any attached exhibits, and any facts or documents of which the court may take judicial notice. (See Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505.) The integration clause is not incorporated into the Complaint, and Defendants do not request judicial notice of the APA or its integration clause. Defendants’ assertion that the Complaint fails to identify the specific provision of the APA that was purportedly breached fairs no better. As Plaintiffs point out in their opposition, the Complaint may plead the contract provisions in lieu of attaching the APA. (Opposition at p. 8:12-17; see Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199 (Construction) [“a plaintiff may plead the legal effect of the contract rather than its precise language.”]; see also McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489 [“In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms.’”].) And, paragraph 56 of the Complaint alleges that Defendants breached the APA by failing to transfer a Trim Tech Business that (1) was profitable and generated 40% gross margins and 20% adjusted EBITDA margins; (2) had a $14 million project backlog that would sustain a significant portion of the business for the next two years; (3) the management team consisted of seasoned key employees that knew how to run the business; and (4) had employees who were being compensated at market levels. (Complaint, ¶ 56.) In a case Defendants cite, Perry v. Robertson (1988) 201 Cal.App.3d 333, 341 (Perry), the appellate court found plaintiff’s allegation of “the nature of the contract as one engaging defendants as agents for purposes of selling her residence” to be sufficient for purposes of demurrer, noting, “The purpose of the specific pleading of a written contract requirement is to permit the defendant to demur to the breach of contract claim based upon the construction of the text of the contract, a question of law unless extrinsic facts bearing upon meaning are alleged.” Here, the Complaint alleges more substance compared to Perry. On Reply, Defendants surmise that Plaintiffs have not attached the APA because the agreement contains no provision that supports the allegation of breach and again cite extrinsic evidence (i.e. provisions of the APA) in support. (Reply, p. 5:1-3.) Again, the Court cannot consider these excerpts, or the arguments made in reliance thereof, as they go outside of the four corners of the Complaint. Moreover, it is well settled, that “[a] demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee, supra, 35 Cal.3d at pp. 213-214.) To the extent that Defendants contest the veracity of the pleadings, the proper procedural vehicle would be a motion for summary judgment or summary adjudication—not a demurrer. Finally, Defendants provide no authority to support their request that the Court order the APA to be attached to any amended pleading and incorporated by reference. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]) Moreover, as noted above, the legal effect of the APA may be alleged in lieu of attaching the agreement itself. (See Construction, supra, 29 Cal.4th at p. 199.) The demurrer to the fourth cause of action is OVERRULED.

Disposition

The demurrer to the entire Complaint against Individual Defendants is SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND for failure to state a valid claim. The demurrer to the first and third causes of action is SUSTAINED WITH 20 DAYS’ LEAVE TO AMEND for failure to state a valid claim. The demurrer to the second and fourth causes of action is OVERRULED.