Judge Kerry Bensinger, Case Number: 24STCV01636, Date: 2025-01-30 Tentative Ruling

Counsel may submit on the tentative ruling by emailing Dept. 31 before 8:30 the morning of the hearing. The email address is smcdept31@lacourt.org. Please do not call the court to submit on the tentative. Please do not submit to the tentative ruling on behalf of the opposing party. Please do not e-mail the Court if you plan to appear and argue.

In deciding whether to submit on the tentative ruling or attend the hearing and present oral argument, please keep the following in mind:

The tentative rulings authored by this court reflect that the court has read and considered all pleadings and evidence timely submitted to the court in connection with the motion, opposition, and reply (if any). Because the pleadings were filed, they are part of the public record.

Oral argument is not an opportunity to simply regurgitate that which a party set forth in its pleadings. Nor, is oral argument an opportunity to "make a record" when there is no court reporter present and the statements and arguments of counsel are already part of the record because they were set forth in the pleadings. Finally, simply because a party or attorney disagrees with the court's analysis and ruling or is not satisfied with it does not necessarily warrant oral argument when no new arguments will be articulated.

If you submit on the tentative, you must immediately notify all other parties email that you will not appear at the hearing. If you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the motions. If all parties to the motion submit, this tentative ruling will become the final ruling after the hearing date and it will be memorialized in a minute order. This tentative ruling is not an invitation, nor an opportunity, to file further documents relative to the hearing in question. No such document will be considered by the Court.

**Tentative rulings on Motions for Summary Judgment will only be available for review in the courtroom on the day of the hearing.

MOVING PARTY: Defendants Andrew Park, Andre & Mario Brothers, Inc., and Themes East, Inc.

In January 2022, plaintiff Deuk Lee (Plaintiff) and defendant Andrew Park (Park) entered into an oral partnership for the distribution of various consumable products in Los Angeles. Plaintiff and Park equally owned Andrew & Mario Brothers, Inc. (AMB). In total, Plaintiff invested over $200,000 into AMB at Park’s request. In October 2022, the parties agreed that AMB would repurchase Plaintiff’s shares of AMB for the amount of $200,000. Park guaranteed the agreement. To date, Plaintiff has not received payment. Plaintiff now alleges, among other things, that Park used his investments as the sole source of capital to operate AMB and Park’s other business, Themes East, Inc. (TEI), and for Park’s personal use.

On January 22, 2024, Plaintiff commenced this action against Park, AMB, and TEI (hereafter, Defendants). On September 9, 2024, Plaintiff filed the operative First Amended Complaint (FAC) against Defendants for (1) breach of contract, (2) conversion, (3) breach of fiduciary duty, (4) fraud, (5) fraudulent concealment, suppression, non-disclosure, (6) negligent misrepresentation, and (7) unfair business practice.

A demurrer for sufficiency tests whether the complaint states a cause of action.¿ (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)¿ When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true.¿ (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)¿ “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.”¿ (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 556.)¿¿

Defendants demur to each cause of action. The court addresses the challenges in turn.

Plaintiff’s first cause of action for breach of contract is based on the following allegations: “In or about October of 2022, the parties agreed that Defendant AMB would repurchase the shares of AMB held by Plaintiff for the amount of $200,000. Said payments were to be completed by November 30, 2022. This was guaranteed by PARK. To date, no payment was been received by Plaintiff and as such, Plaintiff remains as an equal shareholder with PARK as to AMB. (See Exhibit “A”).” (FAC, ¶ 31.) “Plaintiff fully performed all acts, services and conditions required of the Contract, if any.” (FAC, ¶ 32.) “Plaintiff made continuous requests for payment.” (FAC, ¶ 33.) “Defendants have refused to make any such payments.” (FAC, ¶ 34.) “As a direct and proximate result of Defendants’ breach, Plaintiff incurred damages in an amount according to proof at trial.” (FAC, ¶ 35.)

The elements of a breach of contract cause of action are: (1) the existence of a valid contract between the plaintiff and the defendant, (2) the plaintiff’s performance, (3) the defendant’s unjustified failure to perform, and (4) damages to the plaintiff caused by the defendant’s breach. (CACI No. 303; Careau & Co. v. Security Pacific Business, Inc. (1990) 222 Cal.App.3d 1371, 1388 (Careau); Otworth v. Southern Pac. Transportation (1985) 166 Cal.App.3d 452, 458.) “[T]he complaint must indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth, 166 Cal.App.3d at pp. 458-459.)¿ The elements of a breach of oral contract claim are the same as those for a breach of written contract. (Careau, 222 Cal.App.3d at p. 1388.)¿

Defendants argue the claim is vague or uncertain because it is unclear whether the contract is oral or written. The court disagrees. The FAC clearly references Exhibit A to the FAC. Exhibit A is a Stock Repurchase Agreement entered into by AMB and Plaintiff on October 10, 2022. In other words, Exhibit A is a written contract. The first cause of action is not uncertain.

Defendants next argue the claim is vague or uncertain because the element of damages is not clearly plead. In Defendants’ view, it is unclear how or to what extent Plaintiff was damaged given his continued 50% ownership in AMB. The argument lacks merit. Plaintiff alleges that his damages relate to the $200,000 Defendants failed to pay pursuant to the Stock Repurchase Agreement.

Plaintiff alleges that “Park at no time invested any money into AMB, but rather solely used Plaintiff’s money in all of his operations, including AMB and TEI, and to support his lavish

lifestyle. (FAC, ¶ 24.) “All the while, Park drove lavish cars, lived in a million dollar home, spent limitless amounts of money all on Plaintiff’s dime.” (FAC, ¶ 25.) “On information and belief, Defendants kept no records and or accounting including but not limited to any corporate formalities of AMB and TEI.” (FAC, ¶ 26.) “On information and belief, AMB and TEI, and unknown to Plaintiff, AMB and TEI made distributions of profits solely to PARK, allowed PARK to make withdrawals, debits, charges for personal usage from AMB and TEI.” (FAC, ¶ 27.) “On information and belief, during the period in which Plaintiff owned 50% of AMB, Defendants sold portions of Plaintiff’s 50% ownership to a third party/parties.” (FAC, ¶ 28.) “Defendants have acted to seize, hold and convert to their own use property rightfully belonging to Plaintiff in derogation of his rights. Such property includes, but are not limited to, profits, commission, and other cash owed to Plaintiff from the activities of AMB but which has been withheld and misappropriated by Defendants.” (FAC, ¶ 37.)

“Conversion is the wrongful exercise of dominion over the property of another. The

elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the

property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.)

Focusing solely on paragraph 37, Defendants argue the conversion claim fails because it is conclusory and is an improper attempt to convert a breach of contract claim into a conversion claim. The argument is not well taken. Defendants ignore the rest of the pleading. Plaintiff alleges sufficient facts to describe the nature of his conversion claim and defendants’ respective roles or violations constituting conversion. (See FAC, ¶¶ 24-28.)

Plaintiff alleges the following: “From the onset, to the present, Plaintiff contributed over $200,000 into AMB at the request of Park. Park stated that in each instance of Plaintiff investing

money, Park would make such an equal money investment into AMB. As time passed, Park would continuously ask Plaintiff for additional capital contribution into AMB. In each instance, Plaintiff would comply. From the initial agreement, in return for said investments made by Plaintiff, Park agreed to give Plaintiff 50% ownership in AMB.” (FAC, ¶ 18.) As co-shareholder of AMB, and as Park serving as an officer of AMB, Defendants owed a fiduciary duty to all other shareholders. These duties include, but are not limited to, duties of care, loyalty, candor and independence. Defendants further owes separate and continuing fiduciary duties to Plaintiff as a partner.” (FAC, ¶ 40.) “These breaches of fiduciary duty by Defendants have included, but are not limited to the following: a. refusing to comply in good faith to Plaintiff’s request for access to financial records; b. refusing to allocate cash distributions equally; c. Using Plaintiff’s funds for Park’s own personal usage and transfer between AMB and TEI; d. Sale/transfer of Plaintiff’s shares; e. Failure to maintain corporate formalities.” (FAC, ¶ 41.)

“The elements of a cause of action for breach of fiduciary duty are the existence of a

fiduciary relationship, its breach, and damage proximately caused by that breach.” (Knox v. Dean (2012) 205 Cal.App.4th 417, 432-33.)

Defendants argue this claim fails because the failure to pay $200,000 does not give rise to a breach of fiduciary duty. The argument fails. Defendants again ignore other portions of Plaintiff’s pleading. (See FAC, ¶¶ 18-29, 39-42.) The claim is not based on the failure to pay $200,000 but rather, Defendants’ failure to observe its fiduciary obligations to Plaintiff. “[A] fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent”. (Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1338 (cleaned up).) “[E]xamples of relationships that impose a fiduciary obligation to act on behalf of and for the benefit of another are ‘a joint venture, a partnership, or an agency.’” (Id. at p. 1339.)

Here, Plaintiff alleges the existence of a partnership between Plaintiff and defendant Park. Plaintiff also alleges that he is a shareholder in AMB. The third cause of action is not deficient.

“Fraud must be pleaded with specificity rather than with general and conclusory allegations.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 (cleaned up).) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)¿¿

Defendants argue the fourth cause of action fail because they lack the requisite particularity. The court disagrees. Plaintiff alleges that he and Park orally agreed to enter a partnership January 2022 and that they agreed to share and own AMB equally in exchange for Plaintiff’s investments into AMB. Plaintiff alleges the representation of equal ownership was false at the time it was made. Plaintiff alleges the hallmarks of a well-pleaded fraud claim, specifically, allegations show the “how, when, where, to whom, and by what means the representations were tendered.”

Plaintiff’s fifth cause of action is based on the following allegations: “Plaintiff and Defendants were co-shareholders and partners of the AMB. Defendants intentionally failed to disclose certain facts that were known only to them through Park’s status as the only person with complete control and access to financial matters of the AMB. (FAC, ¶ 54.) “Plaintiff could not have discovered and was unaware of such facts due to Defendants’ continuous refusal and prevention of access to such information.” (FAC, ¶ 55.) Defendants intended to deceive Plaintiff by concealing such facts by scheming against Plaintiff through their refusal to give Plaintiff access to financial or corporate records, the sale and transfer of Plaintiff’s shares, and the improper usage of Plaintiff’s cash investment. Had such omitted information been disclosed, Plaintiff would have taken immediate actions to protect his interests and investments into AMB.” (FAC, ¶ 56.) “As a direct and proximate result of Defendants’ actions, Plaintiffs incurred damages in an amount according to proof at trial.” (FAC, ¶ 57.)

Fraud based on concealment requires that “(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.”¿ (Bigler-Engler v. Breg, Inc.¿(2017) 7 Cal.App.5th 276, 310-311 (Bigler-Engler; CACI No. 1901.)¿ An essential element of intentional concealment includes the duty to disclose, which must be based upon a transaction, or a special relationship, between plaintiff and defendant.¿ (Bigler-Engler,¿at p. 314.) “[T]o establish fraud through nondisclosure or concealment of facts, it is necessary to show the defendant ‘was under a legal duty to disclose them.’”¿ (OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845.)¿

Defendants argue the fifth cause of action fails for the same reason as the fourth cause of action. Not so. The claim is sufficiently pleaded. (See FAC, ¶¶ 52-57.) Defendants also argue that the fifth cause of action is duplicative of the fourth cause of action because “fraud also implies alleged concealment.” (Dem., p. 11:2.) The argument lacks merit. Fraud and fraudulent concealment are distinct causes of action. (Compare CACI No. 1900 with CACI No. 1901.)

Plaintiff’s sixth cause of action is based on the following allegations: “During the start of their businesses, Defendants represented to Plaintiff that they would share and own AMB equally and fairly. Defendants continued to reassure Plaintiff that they were equal and fair co-shareholders throughout many years.” (FAC, ¶ 59.) “Defendants’ representations were false because 1) Plaintiff was not given his fair share of cash distributions from AMB, 2) Plaintiff was prevented from access to material financial documents as was his lawful right as a co-shareholder, 3) Plaintiff was not informed of all material developments and expenses concerning the business of the AMB, 4) Defendant used the cash investment of Plaintiff for improperly, and (5) sold Plaintiff’s shares to other third party/parties.” (FAC, ¶ 60.) “Plaintiff is informed and believes and thereon alleges that when Defendants, made these representations, Defendant PARK, as the only other shareholder and the only one who had complete control over all financial matters, knew or, in the exercise of reasonable care, should have known them to be false.” (FAC, ¶ 61.) “Defendants made such misrepresentations without any reasonable justification in order to induce Plaintiff to expend a considerable amount of time and money into Enterprise to the detriment of Plaintiff.” (FAC, ¶ 62.) “At the time Defendants made such misrepresentations, and at the time Plaintiff took the actions alleged herein, Plaintiff was unaware of the falsity and/or misleading nature of the representations. Even in the exercise of reasonable diligence, Plaintiff could not have discovered such falsity. Furthermore, in light of their business relationship and the oral representations Plaintiff made over the years confirming their agreement as partners and co- shareholders, Plaintiff was justified and reasonable in relying on these misrepresentations.” (FAC, ¶ 63.) “In reliance on Defendants’ misrepresentation, Plaintiff was induced to and did make significant contributions to AMB. If Plaintiff had known the true facts, he would not have invested such contributions to AMB or would have taken other actions to minimize the damages that he had incurred.” (FAC, ¶ 64.)

The elements of a cause of¿action for negligent misrepresentation are (1) that defendant represented to him that a fact was true, (2) that defendant’s representation was false, (3) that defendant knew that the representation was false when it was made or that said statement was made without regard for its truth, (4) that defendant intended that plaintiff rely on the representation, (5) that plaintiff reasonably relied on defendant’s representation, (6) plaintiff was harmed, and (7) plaintiff’s reliance on defendant’s representation was a substantial factor in causing him harm. (Civ. Code § 1710(1); CACI No. 1903.) Causes of action for negligent misrepresentation sound in fraud and, therefore, each element must be pleaded with specificity. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 231.)

Defendants argue the sixth cause of action is subject to demurrer for the same reasons as the fourth cause of action. Defendants’ argument fails for the same reasons. Defendants also argue that the negligent misrepresentation claim fails because Plaintiffs do not allege negligence. The argument lacks merit. Negligence and negligent misrepresentation are separate and distinct torts. (Bock v. Hansen (2014) 225 Cal.App.4th 215, 227-228.) Plaintiff alleges the latter claim.

Plaintiff states he will withdraw the seventh cause of action. Accordingly, the demurrer to this claim is MOOT.

The demurrer to the first, second, third, fourth, fifth and sixth causes of action is Overruled. The demurrer to the seventh cause of action is Moot.

Plaintiff is directed to serve and file the Second Amended Complaint which omits the seventh cause of action within 5 days of this order. Defendants are to file their Answer within 10 days of being served with the amended pleading.

Kerry Bensinger

Judge of the Superior Court