Judge Michael E. Whitaker, Case Number: 24STCV02896, Date: 2024-08-19 Tentative Ruling

Judge: Michael E. Whitaker, Case: 24STCV02896, Date: 2024-08-19 Tentative Ruling

This case (number 24STCV02896) and the lead case (number 24SMCV00387) stem from a landlord-tenant dispute. On January 25, 2024, Cienega Ventures, LLC (“Cienega”) filed a complaint against The Holy Grail Hospitality Group, Inc. dba Tokyo Kitchen #2 (“Holy Grail”); Maire de la Torre (“Torre”); and Caitlin Hunt (“Hunt”) alleging two causes of action for (1) breach of written lease and (2) breach of written guaranty, alleging Holy Grail, Torre, and Hunt breached the commercial lease by failing to pay rent, etc.

On February 2, 2024, Holy Grail, Torre, and Hunt filed a separate lawsuit against Cienega, Patrick Bertranou (“Bertranou”); City Street, Inc. dba City Street Commercial (“City Street”) and Leslie Ann Haro (“Haro”) alleging eight causes of action for (1) breach of written contract; (2) fraud; (3) negligent misrepresentation; (4) unfair business practices; (5) fraud; (6) breach of duty to disclose; (7) breach of duty of honesty; and (8) negligent misrepresentation, alleging that Cienega, Bertranou, City Street, and Haro breached the lease agreement by providing a premises that, as it turned out, had not been properly constructed and permitted for Holy Grail to operate as a bar on a patio, and allegedly committed fraud and made misrepresentations regarding the same.

Cienega and Bertranou (“Moving Defendants”) now demur to the first, second, third, and fourth causes of action for failure to state facts sufficient to constitute a cause of action. The fifth through eighth causes of action are not alleged against the Moving Defendants. Moving Defendants subsequently filed a notice of errata regarding the Demurrer, as the original Demurrer was filed with the pages out of order.

Holy Grail, Torre, and Hunt (“Plaintiffs”) oppose the demurrer, and Moving Defendants reply.

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law. [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.” (See Code Civ. Proc., § 452.) “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.” (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff's performance of the contract or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

4. Plaintiffs are informed and believe that Defendant, CIENEGAVENTURES, LLC (“Cienega Ventures”) is a limited liability company organized and existing pursuant to the laws of the State of California. Plaintiff is informed and believes that Cienega Ventures has its principal place of business in the County of Los Angeles.

5. Plaiintiffs [sic] are informed and believe that Defendant PATRICK BERTRANOU (“Bertranou”) is and at all times herein mentioned was, the sole member of Defendant Cienega Ventures and its sole manager.

10. Plaintiffs are informed and believe that there exists, and at all times herein mentioned there has existed, a unity of interest and ownership between Defendant Bertranou and DOES 1 through 5 and Defendant Cienega Ventures such that any individuality and separateness between Defendant Bertranou and DOES 1 through 5 and Defendant Cienega Ventures has ceased, and Defendant Cienega Ventures is the alter ego of Defendants Bertranou and DOES 1 through 5 in that Defendants Bertranou and DOES 1 through 5 have used the assets of Cienega Ventures for their personal uses, caused assets of the limited liability company to be transferred to them without adequate consideration, and have withdrew funds from the bank accounts of Cienega Ventures for their personal use.

11. Plaintiffs are informed and believe that Defendant Cienega Ventures is, and at all times herein mentioned was, a mere shell, instrumentality, and conduit through which Defendants Bertranou and DOES 1 through 5 carried on their business in the name of the limited liability company exactly as they had conducted it previous to its formation, exercising complete control and dominance of such business to such an extent that any individuality or separateness of Defendant Cienega Ventures and Defendants Bertranou and DOES 1 through 5 does not, and at all times herein mentioned did not, exist.

12. Adherence to the fiction of the separate existence of the Defendant Cienega Ventures as an entity distinct from Defendants Bertranou and DOES 1 through 5 would permit an abuse of the limited liability company privilege and would sanction fraud or promote injustice allowing the Defendants Bertranou and DOES 1 through 5 to avoid personal liability resulting from the unlawful and/or fraudulent conduct of the business of Cienega Ventures by Defendants Bertranou and DOES 1 through 5.

15 . On or about May 3, 2023, in Los Angeles County, California, Plaintiffs and Defendants Cienega Ventures and Bertranou entered into a written agreement entitled “Standard Industrial/Commercial Single-Tenant Lease - Net,” as well as an “Addendum to Lease” (collectively “the Agreement”) a copy of which is attached as Exhibit “1" and made a part of this Complaint.

16. Pursuant the terms and provisions of the Agreement, Defendants Cienega Ventures and Bertranou agreed to lease the real property described in the Agreement as 730 North La Cienega Boulevard, Los Angeles, CA 90069 (“the Premises”) for a period of ten years for the use by the Plaintiffs as a “Restraurant and Bar” [sic] in exchange for which the Plaintiffs agreed to pay to the Defendants rent as set out in the Agreement.

17. Plaintiffs have performed all conditions, covenants, and promises required on their part to be performed in accordance with the terms and conditions of the Agreement with the exception of those conditions, covenants and promises the performance of which was prevented by the acts, conduct and omissions of the Defendants.

18. In or about June of 2023, Plaintiffs informed the Defendants following the Plaintiffs several meetings with representatives of the City of Los Angeles, that a substantial portion of the Premises and referred to by the Defendants as “the Patio” and identified by the Defendants as the most iconic portion of what Defendants referred to as an exceptionally popular destination, had been constructed without required permits and inspections mandated by the City of Los Angeles. Further, Plaintiffs informed the Defendants that according to the City of Los Angeles, “the Patio” had been constructed within that portion of the Premises reserved to the City and in which the City had easements.

19. Further, despite the agreement that the Premises was to be used as a “Restaurant and Bar” a bar could not be a lawful use of the Premises as, contrary to the representations made by the Defendants to the Plaintiffs, a Conditional Use Permit did not exist and had not been issued by the City of Los Angeles allowing for the sale of alcoholic beverages on the Premises. The lack of a Conditional Use Permit prevented the Plaintiffs from obtaining a liquor license from the California Alcoholic Beverage Control for the sale of alcoholic beverages and the operation of a bar at the premises, the specific use identified by the parties in the Agreement. Further, any anticipated sale of alcoholic beverages could not occur on portions of the Premises constructed or improved without permits and inspections, including, without limitation, the “Patio.”

20. In or about June of 2023, Defendant breached the Agreement by failing to comply with the terms of the Agreement whereby the Defendants agreed that the Plaintiffs could operate a bar at the Premises. Further, the Defendants breached the Agreement which provided, among other things, that any improvements on the Premises complied with all applicable building codes, laws, covenants or restrictions of record, regulations or ordinances.

21. Plaintiffs informed the Defendants of the Defendants’ breach of the agreement and demanded of the Defendants that all deposits and rent advances paid by the Plaintiffs be returned. Defendants refused Plaintiffs’ demand.

22.As a result of Defendants’ breach of the Agreement, as alleged herein, Plaintiffs have been damaged in a sum not less than $732,385.00, the precise amount according to proof at time of trial.

23. Pursuant to the provisions of the Agreement, the prevailing party in any action brought regarding the Agreement, its breach or enforcement [sic], shall be entitled to recover the reasonable attorneys’ fees incurred as a result.

Thus, Plaintiffs have alleged the existence of a lease agreement, Plaintiffs’ performance or excuse from performance thereunder, Defendants’ breach, and Plaintiffs’ resulting damages.

Moving Defendants first argue that the allegations that Plaintiffs could not sell alcoholic beverages is false, because Plaintiffs in fact obtained a liquor license from the California Department of Alcoholic Beverage Control. In support, they provide as Exhibit 1 a copy of the purported liquor license. The brief further provides in a footnote “The Court can take judicial notice of records and files of state administrative agencies; C.R. v. Tenet Healthcare corp. (2009) 169 CA4th 1094, 1102—licenses issued by state agency.”

California Rules of Court, r ule 3.1113(l) provides, “Any request for judicial notice must be made in a separate document listing the specific items for which notice is requested and must comply with rule 3.1306(c).”

Here, Moving Defendants did not file their request for judicial notice as a separate document. Therefore, the Court does not consider Exhibit 1.

Moving Defendants next argue that the Lease does not require that the premises comply with all current building codes, laws, etc., providing instead:

Lessor warrants that to the best of its knowledge, the improvements on the Premises comply with the building codes, applicable laws, covenants or restrictions of record, regulations, and ordnances (“Applicable Requirements”) that were in effect at the time that each improvement, or portion thereof, was constructed. Said warranty does not apply to the use to which Lessee will put the Premises, modifications which may be required by the Americans with Disabilities Act or any similar laws as a result of Lessee’s use (see Paragraph 50), or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed.

(Section 2.3 of the Lease attached to the Complaint, emphases in original.) However, this passage omits the very next sentence, which provides, “If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee set forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor's expense.” (Ibid.)

Ultimately, whether the permits were required at the time(s) the improvements were made, such that the premises to not comply with the above warranty, is a question of fact to be determined at later stages of the litigation.

Moving Defendants also argue that the Complaint fails to allege facts that the corporation “committed or intended to commit a fraud, or that injustice will be done if the corporate entity is not disregarded” sufficient to hold Bertranou personally liable.

As set forth above, based upon paragraphs 10-12 in the Complaint, Plaintiffs have sufficiently alleged ultimate facts[1] that Bertranou and Cienega are alter egos of each other. Yet, in arguing that more is required, Moving Defendants cite to Norins Realty Co. v. Consolidated Abstract & Title Guaranty Co. (1947) 80 Cal.App.2d 879[2], 883 (hereafter Norins) and Judelson v. American Metal Bearing Co. (1948) 89 Cal.App.2d 256, 263 (hereafter Judelson). However, the Court determines that neither case stands for the proposition that there is a heightened pleading standard to allege alter ego liability.

In Norins, there appeared to be no connection between the stockholders and the underlying agreement, as they were not parties to the agreements, did not guarantee performance thereon, and were not accused of any fraud or other wrongdoing, and appeared to have been named solely to try the action in Los Angeles County. By contrast, here, in addition to the allegations above that there is a unity of ownership, comingling of assets, insufficient formalities between Bertranou and Cienega, and that adherence to the fiction of a separate existence between the two “would permit abuse” an “would sanction fraud or promote injustice,” Bertranou is also alleged to have personally made fraudulent representations to Plaintiffs “that the Premises was zoned and otherwise available for the lawful use as a restaurant and bar[.]” (Complaint at ¶ 26.) Thus, this is not a situation, like in Norins, where there was no alleged connection between the individual defendant stockholder and the entity.

In Judelson, the Court was analyzing whether there was sufficient evidence in the record to support the judgment. No such evidence is required at the pleadings stage.

Therefore, the Court declines to sustain the demurrer on the grounds that alter ego liability is insufficiently pled.

Finally, Moving Defendants argue that the contract contains a “covenant not to sue” Bertranou personally in connection with the lease agreement. Specifically, Moving Defendants cite to section 20 of the Lease agreement, which provides:

20. Limitation on Liability. The obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, or its partners, members, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against Lessor’s partners, members, directors, officers or shareholders, or any of their personal assets for such satisfaction.

In support of their argument that covenants not to sue, like the one in the lease agreement, are enforceable in California, Moving Defendants cite to Pellett v. Sonotone Corp. (1945) 26 Cal.2d 705, 711-12 (hereafter Pellett) and Yanchor v. Kagan (1971) 22 Cal.App.3d 544, 551-552 (hereafter Yanchor).

Pellett explained: “A covenant not to sue, on the other hand, is not a present abandonment or relinquishment of the right or claim, but merely an agreement not to enforce an existing cause of action. It does not have the effect of extinguishing the cause of action; and while, in the case of a sole tortfeasor, the covenant may be pleaded as a bar to the action in order to avoid circuity of action, a covenant not to sue one of several joint tortfeasors may not be so pleaded by the covenantee, who must seek his remedy in an action for breach of the covenant.” (Pellett, supra, 26 Cal.2d at pp. 711-712.)

Similarly, Yanchor explained that a covenant not to sue is not a “release which would discharge a joint tortfeasor from liability.” (Yanchor, supra, 22 Cal.App.3d at p. 551.)

As discussed above, Bertranou is alleged to have personally made fraudulent misrepresentations to Plaintiffs. Therefore, the purported covenant not to sue does not bar the instant action.

Therefore, the Court overrules Moving Defendants’ demurrer to the First Cause of Action for Breach of Contract.

ii. Second and Third Causes of Action – Fraud and Negligent Misrepresentation

The elements for fraudulent misrepresentation are “(1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on the defendant's representation was a substantial factor in causing that harm to the plaintiff.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 605–606.)

“The essential elements of a count for negligent misrepresentation are the same [as intentional misrepresentation] except that it does not require knowledge of falsity but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true.” (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231 (hereafter Chapman).) Like intentional misrepresentation, causes of action for negligent misrepresentation sound in fraud, and must also, therefore, be pleaded with particularity. (Ibid.)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Ibid.)

“One of the purposes of the specificity requirement is notice to the defendant, to furnish the defendant with certain definite charges which can be intelligently met.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.) As such, less specificity is required “when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy[.]” (Ibid.) “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.)

25. In or about May 3, 2023, Defendants were the owner of the Premises. Plaintiffs are informed and believe that the Defendants had owned the Premises since at least 1985.

26. In or about February and March of 2023, during discussions and negotiations regarding the potential lease of the Premises by the Plaintiffs, Defendant Bertranou falsely and fraudulently represented to the Plaintiffs that the Premises was zoned and otherwise available for the lawful use as a restaurant and bar. Defendants represented to the Plaintiffs that the City of Los Angeles had issued a conditional use permit allowing the sale of alcoholic beverages on the Premises. Defendant Bertranou further represented to the Plaintiffs, that the Premises and all construction and improvements on the Premises were done in compliance with applicable building standards, codes and ordinances and that all required permits from the applicable public entities had been properly obtained in connection with all construction and improvements on the Premises.

27. The Agreement subsequently signed by the Parties repeated these representations, acknowledging that the Premises could be lawfully used for the operation of a restaurant and a bar and that any construction and improvements constructed on the Premises had been completed in compliance with all building codes, applicable laws, covenants or restrictions of record, regulations and ordinances.

28. These representations of the Defendants were false. The true facts were that much of the most significant construction and improvements on the Premises had been done without obtaining the required permits from the appropriate governmental agencies and that no inspection of the illegal and unpermitted construction and improvements had been obtained by the Defendants. Further, Plaintiffs learned that a bar could not be operated on the Premises as a license for the operation of a bar on the premises required the issuance of a Conditional Use Permit from the City of Los Angeles allowing the sale of alcoholic beverages on the Premises and that, despite Defendants’ representations that such a Conditional Use Permit had been issued, there had been no Conditional Use Permit issued for the Premises.

29. The Defendants, at all times herein mentioned, knew these representations to be false and made these representations with the intent to cause the Plaintiffs to rely on them and to deceive the Plaintiffs and to induce the Plaintiffs to enter into the Agreement for the lease of the Premises and take the other actions herein alleged.

30. The Plaintiffs believed and relied on these representations by the Defendants and were thereby induced to enter into the Agreement for the lease of the Premises. Plaintiffs paid the Defendants the sum of $135,000.00 as security deposit and base rent at the signing of the Agreement. Plaintiffs also incurred other obligations and made substantial payments for products and services required in the anticipated operation of the restaurant and bar per the terms of the Agreement in the additional sum of $597,385.00. Had it not been for the Plaintiffs’ reliance on the Defendant’s representations, the plaintiff would not have entered into the lease and would not have made these expenditures.

31. The aforementioned conduct of the Defendants was an intentional misrepresentation, deceit, or concealment of a material fact known to the Defendants with the intention on the part of the Defendants of thereby depriving the Plaintiffs of property or legal rights or otherwise causing injury, and was despicable conduct that subjected the Plaintiffs to a cruel and unjust hardship in conscious disregard of the Plaintiffs’ rights, so as to justify an award of exemplary and punitive damages.

32. Pursuant to the provisions of the Agreement, the prevailing party in any action brought regarding the Agreement, its breach or enforcement [sic], shall be entitled to recover the reasonable attorneys’ fees incurred as a result.

34. When the Defendants made these representations, they had no reasonable ground for believing them to be true in that Defendants, despite owning the Premises since approximately 1985, had done no research or investigation regarding the construction and improvements done to the Premises and, knowing that compliance with building codes and ordniances [sic] and the obtaining of building permits and required inspections was required, simply determined to confirm that all construction and improvements done on the Premises had been permitted. Further, Defendants had no specific information or knowledge regarding the existence of a Conditional Use Permit allowing for the sale of alcoholic beverages on the Premises and having knowledge that such Conditioal [sic] Use Permit was required simply represented to the Plaintiffs that a Conditional Use Permit had been issued.

35. The Defendants made these representations with the intention of inducing the Plaintiffs to act in reliance on these representations in the manner herein alleged, or with the expectation that the plaintiff would so act. 36. The Plaintiffs believed and relied on these representations by the Defendants and were thereby induced to enter into the Agreement for the lease of the Premises. Plaintiffs paid the Defendants the sum of $135,000.00 as security deposit and base rent at the signing of the Agreement. Plaintiffs also incurred other obligations and made substantial payments for products and services required in the anticipated operation of the restaurant and bar per the terms of the Agreement in the additional sum of $597,385.00. Had it not been for the Plaintiffs’ reliance on the Defendant’s representations, the plaintiff would not have entered into the lease and would not have made these expenditures.

37. Pursuant to the provisions of the Agreement, the prevailing party in any action brought regarding the Agreement, its breach or enforcment, [sic] shall be entitled to recover the reasonable attorneys’ fees incurred as a result.

Thus, the Complaint alleges the who (Bertranou), what (the premises were zoned for the lawful use as a restaurant and bar; that the city of Los Angeles had issued a conditional use permit allowing the sale of alcoholic beverages on the premises; and that all construction and improvements were done in compliance with applicable building standards, codes, ordinances, and required permits), when, to whom, and how (in or about February and March of 2023 during discussions and negotiations with Plaintiffs regarding their potential lease of the premise.)

Consequently, the Court finds that Plaintiffs have asserted the fraudulent and negligent misrepresentation causes of action with the requisite specificity.

Business and Professions Code section 17200, known as the Unfair Competition Law, or “UCL,” bars unfair competition, defined as “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code. “An ‘unlawful’ business practice or act within the meaning of the UCL is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.” (Bernardo v. Planned Parenthood Federation of Am. (2004) 115 Cal.App.4th 322, 351.) “By proscribing ‘any unlawful’ business practice, section 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) Moreover, “a practice may be deemed unfair even if not specifically proscribed by some other law.” (Ibid.)

As discussed above, Plaintiffs adequately allege fraud with requisite particularity, and therefore the Unfair Business Competition cause of action predicated on fraud is similarly well-pleaded.

Moving Defendants argue that the “practice” requirement requires a pattern of ongoing conduct or behavior, whereas Plaintiffs allege that fraud was committed only one time as to them.

41. As alleged herein, Defendants Cienega Ventures, Bertranou and DOES 1 through 5 have engaged in unfair, unlawful and fraudulent business practices, including the leasing of the Premises claiming that the Premises may be lawfully used to operate a restaurant and bar and asserting that any construction or improvements on the Premises have been completed in compliance with applicable laws, including building codes and ordinances and that all required permits for such construction and improvements have been first obtained. Plaintiffs are informed and believe that these representations have been made for the purpose of inducing the Plaintiffs, and perhaps others, to enter into a long term lease of the premises based upon the representations of the Defendants regarding the condition and the status of the Premises.

42. Plainitffs [sic] discovered that these representations were false and informed these Defendants that Plaintiffs had discovered the falsity of these promises. Defendants responded by insisting that the Plainitffs [sic] “prove” that these representations and promises were false and, further, by claiming that the Plaintiffs agreed to lease the Premises “as is” and therefore, Plaintiffs had no legal remedy for the unfair business practices of the Defendants.

43. Plainitffs [sic] are informed and believe that the Plaintiffs are not the only parties to whom the Defendants have made these false and fraudulent representations with the intention of inducing those parties to lease the Premises for use as a “restaurant and bar” and representing that the construction and improvements on the Premises are all “permitted.”

44. As a direct, proximate and foreseeable result of the Defendants’ wrongful conduct as alleged herein, Defendants’ business acts and practices have caused injury and damage to the Plaintiffs and the public; and Plaintiffs are entitled to relief, including full restitution and/or disgorgement of all sums, benefits, or payments which may have been obtained by the Defendants as a result of such business acts or practices.

45. Defendants, and each of them, have unlawfully and unfairly entered into a lease agreement for the Premises with the Plaintiffs knowing that the Plaintiffs intended to use the Premises to operate a “restaurant and bar” when the use as a bar was unlawful; and further represented that all construction and improvements on the Premises have been done only after acquiring all required and necessary permits with knowledge that there is substantial construction on the Premises that is not permitted. Plaintiffs are informed and believe that the Defendants are aware that to remedy these deficiencies to the Premises is cost prohibitive and, therefore, Defendants have determined to simply avoid the expense of the necessary and required remediation, make the false representations regarding the status of the property, and hope that the Plaintiffs and other possible tenants, simply do not discover these misrepresentations and the deficient condition of the Premises.

46. Plainitffs [sic] are informed and believe that the Defendants have engaged in a pattern and practice of wrongfully and unlawfully misrepresenting the condition and status of the Premises in order to convince Plaintiffs and others to lease the Premises at a substantial profit to the Defendants.

Further, the language in section 2.3 of the lease that “NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed” lends further credence to Plaintiffs’ allegations that Defendants have repeatedly made these misrepresentations to past and prospective tenants in the hopes that the tenants will simply not discover that the premises are not properly permitted and zoned for use as a restaurant and bar.

Therefore, Plaintiffs have adequately alleged Defendants engaged in a pattern or practice of misrepresenting that the premises are legally permitted for use as a restaurant and bar.

For the reasons stated, the Court overrules Moving Defendants’ Demurrer in its entirety.

Moving Defendants shall file and serve an Answer to the Complaint on or before September 9, 2024.

Further, on the Court’s own motion, the Court continues the Case Management Conference from August 19, 2024 to November 20, 2024 at 8:30 A.M. in Department 207. All parties shall comply with California Rules of Court, rules 3.722, et seq., regarding Initial and Further Case Management Conferences. In particular, all parties shall adhere to the duty to meet and confer (Rule 3.724) and to the requirement to prepare and file Case Management Statements (Rule 3.725).

Moving Defendants shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith.

[1] Ultimate facts are those “constituting the cause of action” or those upon which liability depends, e.g., duty of care, breach of the duty and causation (damages). (See Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “[T]he term ultimate fact generally refers to a core fact, such as an essential element of a claim. Ultimate facts are distinguished from evidentiary facts and from legal conclusions.” (Central Valley General Hosp. v. Smith (2008) 162 Cal.App.4th 501, 513 [cleaned up]; see also Rodriguez v. Parivar, Inc. (2022) 83 Cal.App.5th 739, 750–751 [“The elements of a cause of action constitute the essential or ultimate facts in a civil case”].)

[2] The demurrer erroneously cites to starting page 178 and pin cite page 883.

DEPARTMENT	207
HEARING DATE	August 19, 2024
CASE NUMBER	24STCV02896 (consolidated with lead case 24SMCV00387)
MOTION	Demurrer
MOVING PARTIES	Defendants Cienega Ventures, LLC and Patrick Bertranou
OPPOSING PARTIES	Plaintiffs The Holy Grail Hospitality Group, Inc.; Maira de la Torre; and Caitlin Hunt