SPCB Ventures, Inc. v. Senoa Holdings, Inc.

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.)

Here, Defendants Anthony Perkins, Matsuki Perkins, and Senoa Holding demurrer to the four causes of action for fraud, the breach of contract cause of action, the violation of Bus. & Prof. Code § 17200 cause of action and the bad faith cause of action.

Violation of Cal. R. Ct., rule 3.1113

As a preliminary matter, Plaintiff’s Opposition violates Cal. R. Ct., rule 3.1113, subd. (d), which provides that: “Except in a summary judgment or summary adjudication motion, no opening or responding memorandum may exceed 15 pages.” Plaintiff’s Opposition memorandum starts on page 5 and goes to page 26. It exceeds the limit by 7 pages.

According to Cal. R. Ct, rule 3.1113, subd. (g), “A memorandum that exceeds the page limits of these rules must be filed and considered in the same manner as a late-filed paper.”

The court will consider the merits of the first 15 pages of the Opposition brief (through page 19).

Alter Ego

First, the individual defendants, Anthony Perkins and Matsuki Perkins, contend that the alter ego allegations fail.

Plaintiff alleges the following in support of its alter ego theory of liability:

“At all times relevant hereto, Defendant Senoa was the alter ego of Defendants Anthony and Matsuki, and there exists, and at all times herein mentioned has existed, a unity of interest and ownership between Defendants such that any separateness between them has ceased to exist in that Defendants Anthony and Matsuki completely controlled, dominated, managed, and operated Defendant Senoa to suit their convenience.” (Compl., ¶ 7).

“At all times relevant thereto, Defendant Senoa was not only influenced and governed by Defendants Anthony and Matsuki, but there was such a unity of interest and ownership that the individuality, or separateness, of Senoa and Anthony and Matsuki have ceased, and that the facts are such that an adherence to the fiction of the separate existence of these entities would, under the particular circumstances, sanction a fraud or promote injustice.” (Compl., ¶ 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.)

Plaintiff relies on Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, where the court held that Plaintiff’s alter ego liability cause of action was sufficient where the Plaintiff alleged: “Caswell dominated and controlled PDR; that a unity of interest and ownership existed between Caswell and PDR; that PDR was a mere shell and conduit for Caswell's affairs; that PDR was inadequately capitalized; that PDR failed to abide by the formalities of corporate existence; that Caswell used PDR assets as her own; and that recognizing the separate existence of PDR would promote injustice.” (Id. at 235).

The court held that “Rutherford was required to allege only ‘ultimate rather than evidentiary facts.’ ... Moreover, the ‘less particularity [of pleading] is required where the defendant may be assumed to possess knowledge of the facts at least equal, if not superior, to that possessed by the plaintiff,’ which certainly is the case here.” (Id. at 236 [internal citations omitted]).

However, Plaintiff’s allegations are not as specific as those set forth in Rutherford. Furthermore, Plaintiff fails to allege the second element, which is that there would be an inequitable result if the acts in question are treated as those of the corporation alone.

Accordingly, the court finds that Plaintiff failed to allege alter ego liability against the individual Defendants. Nevertheless, Plaintiff has adequately alleged individual liability for some of the causes of action, as more fully explained below.

Fraud causes of action

Plaintiff asserts four claims for fraud: fraudulent misrepresentation, concealment, fraudulent inducement, and negligent misrepresentation.

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.). Facts must be plead with particularity, and this requirement “necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645).

“An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.” (Id. at 638).

Additionally, the elements for a claim for negligent misrepresentation are: “1. The defendant must have made a representation as to a past or existing material fact. [¶] 2. The representation must have been untrue; [¶] 3. Regardless of his actual belief the defendant must have made the representation without any reasonable ground for believing it to be true; [¶] 4. The representation must have been made with the intent to induce plaintiff to rely upon it; [¶] 5. The plaintiff must have been unaware of the falsity of the representation; he must have acted in reliance upon the truth of the representation and he must have been justified in relying upon the representation. [¶] 6.

And, finally, as a result of his reliance upon the truth of the representation, the plaintiff must have sustained damage.” (Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 402 [emphasis in original]). A cause of action for negligent misrepresentation is “sound in fraud and, therefore, each element must be pleaded with specificity.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166, overruled on other grounds, Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 919-920, 948, fn.12.)

Defendants contend that Plaintiff failed to plead these claims with the requisite specificity, and contend that Plaintiff cannot allege justifiable reliance, because Plaintiff had ample opportunity to verify the very facts it now claims were concealed or misstated. Specifically, Plaintiff alleges that it had 21 days to conduct due diligence, was permitted to visit the business at the end of each business day for three weeks before purchasing, and personally observed the daily on-site cash collections.

The court finds that Plaintiff adequately plead all four claims for fraud. With regards to the fraudulent and negligent misrepresentation claims, Plaintiff adequately plead that in September of 2024, Defendant Matsuki provided the Plaintiff with the business’s monthly expense information, that Plaintiff relied on when making an offer. (Compl., ¶ 13). In November of 2024, Defendant Anthony Perkins discussed the monthly operating and payroll expenses, as well as profitability based on the reported revenue and expenses. (Compl., ¶ 14).

In the three weeks following the signed amended agreement on January 10, 2025, Plaintiff would observe Anthony Perkins removing bills and coins from two coin change machines and replenishing their contents, but he did not disclose to the Plaintiff the existence of the compartment containing $5 bills within the larger change machine intentionally hidden from Plaintiff. The due diligence documentation provided by the Defendant also omitted any reference to costs associated with replenishing the $5 bill compartment. (Compl., ¶ 18).

Furthermore, Plaintiff alleged that Defendants reported the full $20 as revenue but deliberately failed to account for the approximate $10 that was removed from the location. (Compl., ¶ 21). Plaintiff alleges that it incurred damages, which include, but are not limited to, the disparity between the purchase price and the actual value of the business, lost profits, and additional consequential damages resulting from the Defendants’ conduct. (Compl., ¶ 27).

Accordingly, Plaintiff has alleged the “who” (Anthony Perkis and Matsuki Perkins), the “where” (in the advertisement and at the business location), the “how” and the “means” (through the advertisement, the reports, and the concealment of the hidden compartment), the “when” (September and November of 2024, and the three weeks following the agreement) and to whom (to Mr. Lad and Mr. Desai).

Regarding the justifiable reliance argument, Plaintiff did not plead that Mr. Lad and Mr. Desai had unfettered access to the business during the inspection period. Rather, Plaintiff alleged that its representatives were only allowed to come at the end of each business day after obtaining prior approval from Mr. Perkins, and that Mr. Perkins would collect from the machines and hid the compartment from Plaintiff. There is no indication in the complaint that Plaintiff’s representatives had unfettered access to the machines prior to closing. The court finds that Plaintiff alleged justifiable reliance. (See Compl., ¶ 26).

With regards to Plaintiff’s concealment cause of action, Plaintiff also alleged that Mr. Perkins concealed the hidden compartment and the additional expense, and that both Mr. Perkins and Ms. Perkins concealed the accurate expenses and financial performance. (Compl., ¶ 38).

Finally, with regards to fraudulent inducement, Plaintiff also alleged that Defendants made various representations regarding the Business’s financial performance, condition, and other material information that Plaintiff relied on when agreeing to purchase the Business for $665,000.00, and that Defendants concealed the hidden compartment and its expense when making these representations. (Compl., ¶ 42).

Accordingly, the court overrules the demurrer as to these causes of action.

Breach of contract

In order to state a cause of action for breach of contract, a Plaintiff must plead as follows: (1) the existence of the contract, (2) plaintiffs’ performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821).

Plaintiff has plead the existence of a contract with Senoa. (Compl., ¶ 33, Ex. A). The contract, which is titled a “Purchase Agreement for the Sale of Sparkle Coin Laundry”, provides:

“Due Diligence. From the date of the execution hereof until twenty-one (21) business days thereafter (“Due Diligence Period”), the Seller will, and will cause the Seller to, provide Buyer or her representative reasonable access to the Premises to inspect the HVAC, plumbing/utilities, equipment, condition of the premise, books, and records. Buyer herein acknowledges they have already had access to the books and records of the Seller. Upon execution of this Agreement, Buyer shall provide Seller with a list of documents necessary for review, such as a copy of the current lease/rental agreement and utility bills (water, gas, electricity, etc.) documentation deemed necessary by Buyer.

Due to the nature of a coin/cash business operation, Seller shall allow Buyer to witness coin/cash collection at various periods to understand the financial health of the Coin Laundry Business based upon Seller claims. Notwithstanding anything to the contrary contained herein, such access and inspections shall not materially interfere with the operations of the Seller. (Compl., Ex. A).”

The agreement also provides that Defendants were obligated to provide a minimum of two weeks of training, totaling at least 14 hours. (“Seller agrees to provide training to Buyer over a two-week period following the Closing Date per Seller’s schedule. At minimum, Seller shall train Buyer for 14 hours during the two weeks period.” [Ex. A]).

Plaintiff alleges that Defendants provided inaccurate or misleading financial information and by failing to disclose material facts regarding the Business’s profit and loss, and also failed to comply with the training requirement. (Compl., ¶¶ 20, 34). Plaintiff alleges that it paid the earnest deposit, closed the deal and assumed control of the business. (Compl., ¶¶ 16, 20, 22). Finally, Plaintiff alleges that it sustained damages from Defendants’ breach. (Compl., ¶ 35).

However, Plaintiff failed to allege that the individual Defendants were parties to the contract. The contract was only signed by Ms. Perkins “on behalf of” Senoa. Because the alter ego theory of liability is insufficiently plead, and Plaintiff has not alleged a contract with the individual Defendants, the court overrules the demurrer as to Senoa and sustains the demurrer as to the individual Defendants.

Breach of implied covenant of good faith and fair dealing

The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. (See Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031). “[A]llegations which assert such a claim must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v.

Security Pacific Business Credit (1990) 222 Cal.App.3d 1371, 1395). Furthermore, if allegations of breach of the covenant of good faith “do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated.” (Id. at p. 1395.)

Defendants contend that this cause of action fails because it relies on the same facts and the same harm as the breach of contract cause of action. However, Plaintiff has adequately plead actions by Defendants that go beyond just breaching the terms of the contract. Plaintiff adequately plead fraudulent misrepresentation, concealment, and inducement in connection to the misrepresented revenue and concealed expenses.

Therefore, the court overrules the demurrer as to Senoa.

However, a plaintiff cannot have a bad faith claim without a claim for breach of contract. (See Racine & Laramie, supra, 11 Cal.App.4th at 1032 [“There is no obligation to deal fairly or in good faith absent an existing contract.”]). Because Plaintiff failed to state a cause of action for breach of contract against the individual Defendants, the demurrer is sustained as to this cause of action against the individual Defendants.

Unfair business practices

Business and Professions Code section 17200 prohibits “unfair competition,” which is defined to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act prohibited by business and professions code section 17500. A cause of action must be stated with “reasonable particularity.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)

Because Plaintiff has adequately alleged fraudulent business practices as discussed above, the court overrules the demurrer as to this cause of action.

Defendants shall give notice.

Case Management Conference

The Case Management Conference is continued to July 16, 2026, at 9:00 a.m. in this department.

Plaintiff to give notice.

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