Judge Bruce G. Iwasaki, Case Number: 23STCV30606, Date: 2025-05-08 Tentative Ruling

Tentative Ruling: The demurrer to the First Amended Complaint is overruled as to the first, second, third, sixth, seventh, eighth and ninth causes of action and sustained as to the fourth and fifth causes of action.

This is a breach of a loan agreement action. Plaintiff Bespoke Funding 2021A, LLC brings this action to recover amounts due under two written loan agreements executed with GE United Technologies, LLC (GEUT LLC) and GE United Technologies II, Inc. (GEUT Inc.) (collectively, Corporate Defendants). Defendants Vincent Hou, Zachary Ein, Anguish Singh (Individual Defendants) are accused of operating the corporate entities as alter egos. Plaintiff claims amounts due under two loan agreements with GE United Technologies, LLC and GE United Technologies II, Inc.

The First Amended Complaint alleges causes of action for: (1.) breach of contract (GE United Technologies, LLC loan), (2.) breach of contract (GE United Technologies II, Inc. loan), (3.) Business and Professions Code § 17500, (4.) equitable, (5.) fraudulent inducement, (6.) promissory estoppel, (7.) quantum meruit, (8.) open book account, and (9.) account stated.

On December 10, 2024, Defendants Vincent Chi-Chien Hou, Zachary Berke Ein and Anguish Ajendra Singh (Individual Defendants) demurred to the First Amended Complaint. Plaintiff opposed the demurrer.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading by raising questions of law. (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “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.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Individual Defendants demur to the entire First Amended Complaint on the grounds that Plaintiff has failed to sufficiently plead the alter ego allegations.

The FAC alleges that Defendants GEUT LLC and GEUT Inc. defaulted on two secured loan agreements and seeks to pierce the corporate veil to hold their parent company, GE United Holding, Inc. (“HOLDING”), and three individuals — Vincent Hou, Zachary Ein, and Anguish Singh — personally liable under an alter ego theory. Plaintiff alleges that the corporate defendants (GEUT LLC, GEUT INC, and HOLDING) and the individual defendants (Hou, Ein, and Singh) operated as a single business entity under the name “Grassdoor,” with unified ownership and control. (FAC ¶¶ 28-30.) Further, Hou, Ein, and Singh were officers, directors, and owners of all three corporate entities, holding overlapping positions; additionally, there was significant commingling of funds and assets between the entities and the individuals. (FAC ¶¶ 41, 44.)

The FAC also alleges that maintaining the corporate form would permit fraud and injustice. Specifically, Defendants used the entities to illegally acquire and sell untracked cannabis products, bypassing state regulations (e.g., METRC and CCTT requirements); then, illegally obtained cash from sales allegedly drained the borrower entities, rendering them unable to repay the loans. (FAC ¶¶ 45-46.)

“Ordinarily a corporation is considered a separate legal entity, distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. [Citation.] The same is true of a limited liability company (LLC) and its members and managers. [Citations.] [¶] That legal separation may be disregarded by the courts ‘when [a corporation or LLC] is used [by one or more individuals] to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose.’ ” (Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 220-221; see Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539.)

“Before the alter ego doctrine will be invoked in California, two conditions generally must be met. [¶] ‘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.’ [Citation.] While courts have developed a list of factors that may be analyzed in making these determinations, ‘[t]here is no litmus test to determine when the corporate veil will be pierced; rather the result will depend on the circumstances of each particular case.’ ” (Curci Investments, LLC v. Baldwin, supra, 14 Cal.App.5th at p. 221; see Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300; Sonora Diamond Corp. v. Superior Court, supra, 83 Cal.App.4th at p. 538.)

In general, the conditions in which a court may disregard the structure of a corporate entity and consider it the alter ego of a member “necessarily vary according to the circumstances in each case inasmuch as the [alter ego] doctrine is essentially an equitable one and for that reason is particularly within the province of the trial court.” (Zoran Corp. v. Chen (2010) 185 Cal. App. 4th 799, 811.)

Although some of these allegations are admittedly based on information and belief,[1] Plaintiff has alleged specific facts that support these beliefs. That is, the overlapping of corporate officers between the entities and the comingling of assets support the belief that there is a unity of interest and ownership. These allegations are sufficient under the circumstances to support the alter ego theory -- at least at the pleading stage where the allegations are liberally construed. Further, the FAC also alleges that corporate structure has been used to further a wrongful purpose, meeting the inequitable result criteria.

Defendants demur to the fourth cause of action on the grounds that it fails to state a claim.

Defendant argues that the fourth cause of action is merely a restatement of alter ego law. (FAC ¶¶ 70-75.)

As argued in the demurrer, alter-ego liability cannot be asserted as an independent claim for substantive relief. (See e.g., Leek v. Cooper (2011) 194 Cal.App.4th 399, 418 [“A claim based upon an alter ego theory is not itself a claim for substantive relief”]; Hennessey's Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1359.)

In opposition, Plaintiff does not dispute that alter ego allegations cannot be a stand-alone cause of action but argues that “the allegations in this section of the FAC are properly understood as further factual support for the alter ego theory asserted throughout the complaint.” (Opp., 5:13-14.)

There is no dispute that these allegations cannot be separate cause of action; thus, the manner in which Plaintiff has chosen to allege these so-called “additional factual allegations” is confusing – labeling it a fourth cause of action. (Cal. Rules of Court, Rule 2.112 [requiring the pleadings to state the number and nature of each cause of action in the body of the document and to state as to each separate cause of action the party or parties to whom it was directed].) Thus, the demurrer to this fourth cause of action is well taken.

The demurrer is sustained as to the fourth cause of action without leave to amend.

Individual Defendants demur to the fraud cause of action on the grounds that it has not been alleged with the adequate specificity.

“Fraud in the inducement ... occurs when “ ‘the promisor knows what he is signing but his consent is induced by fraud . . .’ ” ” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415.) Fraud causes of action must be pled with particularity. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [particularity requirement necessitates pleading facts showing how, when, where, to whom, and by what means representations were tendered]; Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157–158 [requirement of specificity in fraud action against corporation requires plaintiff to allege names of persons who made allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written]; Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 764.)

“Individual Defendants knew that they intended to include at least some of these illicit cannabis sales on the Corporate Defendants financials. Defendants used these financials to induce Bespoke Financial to provide Corporate Defendants loans to purchase additional marijuana and operate their business. Defendant SINGH, as Chief Financial Officer of HOLDING, GEUT LLC and GEUT INC oversaw the illegal and legal transactions of cannabis and entry of these sales on to the financials of Corporate Defendants. SINGH oversaw the compilation of the fraudulent financials and provided those financials to BESPOKE FINANCIAL and Plaintiff to justify terms for borrowing and repayments of the LOANS.” (FAC ¶ 84.)

The FAC alleges that Plaintiff then relied on these financials to provide the Corporate Defendants loans, and Plaintiff has been harmed because Defendants have not repaid the loans. (FAC ¶¶ 85-86)

In contrast to the specificity required for fraud causes of action, the fraud cause of action in the FAC here has been pled fraud only in generalities and bare conclusions. That is, the claim is alleged without identifying the specific persons who made the misrepresentations, the precise statements made, or the dates on which they were made. Plaintiff, for example, alleges “Defendants” used the “fraudulent financials” to induce reliance. These allegations are lacking in specifics.

Citing Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal. 4th 26, Plaintiff argues that the lack of specificity is permitted here because Defendants have “exclusive knowledge.” Plaintiff argues that it “cannot be expected to set forth the inner workings of how the fraudulent financials were prepared and submitted, how the METRC tracking data was handled, or what the true regulatory posture of GEUT’s cannabis operations was at the time.” (Opp., 7:18-19.)

While true, Plaintiffs have not even alleged what was purportedly false or who and when these representations were made – which is within Plaintiff’s knowledge where they are contending it was misled.

Defendants argue that the sixth cause of action fails because Plaintiff has pleaded a breach of a written contract based on the same allegations as the promissory estoppel.

“The elements of a cause of action for promissory estoppel are (1) a promise, (2) the reasonable expectation by the promisor that the promise will induce reliance or forbearance, (3) actual reliance or forbearance, and (4) the avoidance of injustice by enforcing the promise.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1412.)

Defendants argues the cause of action must be dismissed because “as a matter of law, “a cause of action for promissory estoppel is inconsistent with a cause of action for breach of contract based on the same facts” (Fleet, 229 Cal.App.4th at 1413) as, by definition, “a promissory estoppel claim does not arise out of [an actual] contract.” Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 211 Cal.App.4th 230, 245 (2012); Co-Investor, AG, 2008 WL 4344581, at *3 (stating that a claim for breach of contract “may not also give rise to a claim for promissory estoppel”.)” (Dem., 12:19-26.)

However, although Defendants cite Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, they omit the critical language that follows:

“Although a cause of action for promissory estoppel is inconsistent with a cause of action for breach of contract based on the same facts (see, e.g. Money Store Investment Corp. v. Southern Cal. Bank (2002) 98 Cal.App.4th 722, 732, 120 Cal.Rptr.2d 58), “[w]hen a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.” (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413 [citing Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1402] [italics added].)

Based on the foregoing legal authority, at the pleading stage, Plaintiff can allege inconsistent legal theories. The demurrer to this cause of action is overruled.

Finally, Defendants demur to the seventh, eighth and ninth causes of action on the grounds these common counts are duplicative of the contract causes of action.

“A common count is not a specific cause of action, however; rather, it is a simplified form of pleading normally used to aver the existence of various forms of monetary indebtedness, including that arising from an alleged duty to make restitution under an assumpsit theory. When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394-395.)

Here, however, the Court has overruled the demurrer to the breach of contract causes of action; thus, the demurrer to these common count causes of action also fail.

The demurrer to the First Amended Complaint is overruled as to the first, second, third, sixth, seventh, eighth and ninth causes of action and sustained as to the fourth and fifth causes of action. Plaintiff shall have leave to amend the fifth cause of action only. An amended pleading shall be filed and served on or before June 9, 2025.

[1] The complaint ordinarily may allege ultimate rather than evidentiary facts, and it may allege “ ‘on information and belief any matters that are not within [the plaintiff's] personal knowledge if he has information leading him to believe that the allegations are true.’ ” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550 [quoting Pridonoff v. Balokovich (1951) 36 Cal.2d 788].) But “a pleading made on information and belief is insufficient if it ‘merely assert[s] the facts so alleged without alleging such information that “lead[s] [the plaintiff] to believe that the allegations are true.” ’ ” (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1158–1159 [quoting Doe v. City of Los Angeles, supra, 42 Cal.4th at p. 551, fn. 5].)

Judge Bruce G. Iwasaki

Department 58