Diyar Irvine, LLC vs. Elzoheiry

Superior Court of the State of California County of Orange TENTATIVE RULINGS FOR DEPARTMENT N16

HON. Donald F. Gaffney

Counsel and Parties Please Note: Law and Motion in Department N16 is heard on Wednesdays at 9:00 a.m.

Date: September 2, 2026

Tentative Rulings will be posted on the Internet on the day before the hearing by 5:00 p.m. [or earlier] whenever possible. To submit on the tentative ruling, please contact the clerk at (657) 622-5616, after contacting opposing party/counsel. Prevailing party shall give notice of the Ruling and prepare the Order/Judgment for the Court’s signature if required.

NOTE: After posting of tentative rulings, the Court will not take the motion off calendar and will grant a continuance of the motion only upon stipulation of all affected parties.

If no appearances are made on the calendared motion date, then oral argument will be deemed to have been waived and the tentative ruling will become the Court’s final ruling.

# Case Name Tentative 1 Diyar Irvine, TENTATIVE RULING: LLC vs. Elzoheiry Demurrer to Cross-Complaint

Cross-Defendants Diyar Irvine, LLC, Green City Development, LLC, Sadek El Seqedy, and Ahmed El Sewedy demur to the Cross- Complaint filed by Cross-Complaint Andrew Abas (“Abas”). For the following reasons, the demurrer is SUSTAINED WITHOUT LEAVE TO AMEND.

Statement of Law

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.) A demurrer is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code §§ 451 or 452.

Merits

On August 20, 2026, Abas filed a dismissal of the first cause of action (equitable indemnity) and the second cause of action (contribution) in the Cross-Complaint filed July 15, 2026 (ROA 2136) only as to Cross-Defendants Diyar Irvine, LLC; Green City Development, LLC; Sadek El Sewedy; and Ahmed El Sewedy. (ROA 2199.) The parties agree that the demurrer to the first and second causes of action is rendered moot.

Thus, the only remaining claims as against moving Plaintiffs / Cross- Defendants are the third cause of action for negligence and the sixth cause of action for declaratory relief.

On December 18, 2023, this Court (Judge David J. Hesseltine) sustained Plaintiffs and Cross-Defendants’ demurrer to the Third Amended Cross-Complaint (TACC) filed by Toorak Capital Partners, LLC without leave to amend. Toorak’s TACC asserted a cause of action for negligence, and the Court sustained the demurrer to that cause of action, principally on the grounds that Plaintiffs had no duty to protect Toorak against criminal conduct by third parties and the negligence claim is also barred by the economic loss rule.

Plaintiffs/Cross-Defendants assert that the demurrer to Abas’ Cross- Complaint should be sustained on the same grounds.

The negligence cause of action in Abas’ Cross-Complaint alleges:

70. Plaintiff Cross-Defendants, as the owners of the subject properties and entities, owed a duty of reasonable care to exercise oversight and supervision over their agent Elzoheiry and the management of their real property holdings. This duty of care was heightened by Plaintiffs’ documented prior experience with agent misconduct, specifically the approximately $2,000,000 misappropriation by Tawfik.

71. Plaintiff Cross-Defendants breached their duty of care by, inter alia: (a) failing to exercise any meaningful supervision over Elzoheiry from at least 2016 through 2021; (b) failing to implement internal controls, financial auditing procedures, or oversight mechanisms despite the documented Tawfik misconduct; (c) failing to monitor property records, title reports, and financial statements that would have revealed the existence of unauthorized encumbrances on the subject properties; (d) maintaining a registered business address for Diyar and Green City that was accessible to Elzoheiry rather than to the Elsewedys; (e) executing the Green City

Development Agreement delegating broad authority to Elzoheiry’s entity, KAZ, without commensurate oversight; (f) through their agent Rutan, drafting and perpetuating Authorizing Resolutions that clothed Elzoheiry with documented authority relied upon by Cross-Complainant and multiple independent professionals. Cross-Complainant’s position is consistent with and supported by the positions taken by the lender-defendants.

Plaintiffs rely on Sheen v. Wells Fargo Bank (2022) 12 Cal.5th 905. In Sheen, the plaintiff alleged the lender had a duty to respond to his loan mod application and that by breaching that duty “ ‘for[went] alternatives to foreclosure’ ”. (Sheen at 915) The court held “that when a borrower requests a loan modification, a lender owes no tort duty sounding in general negligence principles to ‘process, review and respond carefully and completely to’ the borrower's application.” (Sheen at p. 948.) This was based on the Supreme Court’s observation that plaintiff had an agreement with the bank that specified the parties’ rights and obligations with respect to the loan, including foreclosure.

The Court held that “To impose a tort duty in such circumstances would go further than creating obligations unnegotiated or agreed to by the parties; it would dictate terms that are contrary to the parties’ allocation of rights and responsibilities. The proposed duty would impede [the bank's] right to foreclose by permitting foreclosure only after [the bank] discharges a tort duty to ‘process, review and respond carefully and completely to [a borrower's] loan modification application[s].’ ” (Id. at p. 925.)

Plaintiffs also assert that there was no duty to protect Abas from Elzoheiry’s criminal conduct. As a general proposition, there is no duty to protect against criminal conduct by third parties, absent a special relationship or knowledge of previous criminal conduct. (See Delgado v. Trax Bar & Grill (2005) 36 Cal.4th 224, 234-235.)

Abas argues that this rule does not apply because his Cross- Complaint pleads Plaintiffs’ own “affirmative” conduct. Specifically, the Cross-Complaint alleges that Plaintiffs and their counsel, Rutan & Tucker, drafted and transmitted the instruments authorizing Elzoheiry as CEO and President of Diyar. (Cross-Complaint, ¶¶ 40- 50.)

However, an attorney owes no duty of care to a non-client in an at arm’s length relationship. (Osornio v. Weingarten (2004) 124 Cal.App.4th 304, 320, as modified on denial of reh'g (Dec. 16, 2004) [“The Supreme Court very recently reiterated that the general rule [is] that an attorney owes a duty of care, and is thus answerable in

malpractice, only to the client with whom the attorney stands in privity of contract.”], internal quotation marks omitted.) Courts have extended an attorney's duty of care to nonclients, such as will and trust beneficiaries, in limited circumstances. (Lucas v. Hamm (1961) 56 Cal.2d 583 [permitting malpractice suit by will beneficiaries against attorney whose negligent preparation of a will caused them to lose their testamentary rights].)

Whether an attorney owes a nonclient a duty of care depends on an analysis of the Biakanja factors, which are discussed below. (Paul v. Patton (2015) 235 Cal.App.4th 1088, 1096, citing Biakanja v. Irving (1958) 49 Cal.2d 647.)

With respect to the economic loss rule, Plaintiffs argue that “Plaintiffs owed no duty to protect Abas from the purely economic losses he asserts as damages.” (Demurrer at 13:8-9) As discussed previously, Plaintiffs rely on Sheen which held that “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses.’ ” (Dem. at 13:3-4)

Abas argues that Sheen only applies when the parties are in privity of contract. Part of the rationale from Sheen was that the economic loss rule “functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Sheen at 922.)

In reply, Plaintiffs argue that the economic loss rule does not require a contract or a viable contract claim as a prerequisite. However, Sheen generally applies where the parties are in privity of contract:

The economic loss rule most generally applies to suits between the parties to a contract. But as observed in Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922, 290 Cal.Rptr.3d 834, 505 P.3d 625 (Sheen), a version of the doctrine may also apply in cases involving parties not in contractual privity, such as when a plaintiff seeks to impose “ ‘ “liability in an indeterminate amount for an indeterminate time to an indeterminate class.” ’ ” (Id. at p. 922 [Citations].) But this case, like Sheen, falls into the more traditional “contractual economic loss rule” category of cases. (Sheen, at p. 923, 290 Cal.Rptr.3d 834, 505 P.3d 625.)

(Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 19, fn. 3.) The Cross-Complaint here does not seek to impose liability in an indeterminate amount for an indeterminate time to an indeterminate class.

However, application of the Biakanja factors shows that Plaintiffs did not owe a duty of care to Abas.

“The principal question is whether defendant was under a duty to exercise due care to protect plaintiff from injury and was liable for damage caused plaintiff by his negligence even though they were not in privity of contract.” (Biakanja v. Irving (1958) 49 Cal. 2d 647, 648)

“The primary exception to the general rule of no-recovery for negligently inflicted purely economic losses is where the plaintiff and the defendant have a “special relationship.” (J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804.) What we mean by special relationship is that the plaintiff was an intended beneficiary of a particular transaction but was harmed by the defendant's negligence in carrying it out. Take, for example, Biakanja v. Irving (1958) 49 Cal.2d 647. There, we held that the intended beneficiary of a will could recover for assets she would have received if the notary had not been negligent in preparing the document. (Id. at pp. 650-651.)

A special relationship existed between the intended beneficiary and the notary in Biakanja, we emphasized, because “the ‘end and aim’ of the transaction” between the nonparty decedent and the notary was to ensure that the decedent's estate passed to the intended beneficiary. (Id. at p. 650.)” (S. California Gas Leak Cases (2019) 7 Cal.5th 391, 400; see also The Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, 605 - “Courts sometimes impose a duty to prevent pure economic loss when there is no privity of contract when the injured party is an intended beneficiary of a contract between the defendant and another party.”)

The Court in Desert Healthcare Dist. v. PacifiCare FHP, Inc.(2001) 94 Cal. App. 4th 781, sets forth the general rule where the partis are not in privity and the case involves purely economic loss:

“The threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion. [Citation.] Whether this essential prerequisite to a negligence cause of action has been satisfied in a particular case is a question of law to be resolved by the court. [Citation.] [¶] A judicial conclusion that a duty is present or absent is merely ‘ “a shorthand statement ... rather than an aid to analysis.... ‘[D]uty,’ is not sacrosanct in itself, but only an expression of the sum total of those considerations of policy which lead the law to say that the particular plaintiff is entitled to protection.” ' [Citation.]” (Bily v. Arthur Young &

Co. (1992) 3 Cal.4th 370, 397); see also Quelimane Co. v. Stewart Title Guarantee Co. (1998) 19 Cal.4th 26, 57–58)

Where there is no privity of contract between parties in a case involving purely economic loss, California courts have evaluated the question of duty by looking to the general factors set forth in Biakanja v. Irving (1958) 49 Cal.2d 647): “The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm.” (Citations.) (Desert Healthcare Dist. v.

PacifiCare FHP, Inc.(2001) 94 Cal. App. 4th 781, 791–92)

Applying the Biakanja factors, Abas fails to allege facts showing that that the alleged failure to oversee or supervise Elzoheiry was intended to affect Abas. As to the second factor, Abas has not alleged facts showing that the harm was foreseeable. Also, “foreseeability of financial injury to third persons alone is not a basis for imposition of liability for negligent conduct.” (Quelimane Co. v. Stewart Title Guar. Co.(1998) 19 Cal. 4th 26, 58.) Further, the fourth element of closeness between the failure to oversee or supervise Elzoheiry and Abas’ conduct does not support the finding of a special relationship.

Accordingly, based on the foregoing, the demurrer to the negligence claim is sustained based on the application of the Biakanja factors and that no duty is owed to prevent a third party’s criminal behavior.

Thus, the only remaining claim in the Cross-Complaint as to Plaintiffs is for declaratory relief. The declaratory relief cause of action alleges:

85. An actual, present, and justiciable controversy has arisen and now exists between Cross-Complainant and Cross- Defendants concerning their respective rights, duties, and obligations with respect to the claims asserted in the underlying action, including: (a) the relative degrees of fault and responsibility of each party; (b) the right of Cross- Complainant to equitable indemnity, contribution, and/or total indemnity; (c) whether Cross-Complainant acted in good faith and within the scope of his limited role; (d) the extent to

which Plaintiffs' negligent conduct contributed to the harm alleged.

(Cross-Complaint, ¶ 85.)

The declaratory relief claim seeks to determine relative degrees of fault based on Abas’ claims of indemnity, contribution, and negligence. However, those claims have been dismissed as to Plaintiffs. Given that the other claims have been dismissed, there is no basis for declaratory relief as to Plaintiffs. (Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800 [“Where a trial court has concluded the plaintiff did not state sufficient facts to support a statutory claim and therefore sustained a demurrer as to that claim, a demurrer is also properly sustained as to a claim for declaratory relief which is “wholly derivative” of the statutory claim.”].)

On demurrer, a court determines whether the complaint states facts sufficient to constitute a cause of action. If the court sustains the demurrer, it must decide whether to grant leave to amend. Leave to amend should be granted if there is a reasonable possibility that the defect can be cured by amendment. Plaintiff has the burden of proving that there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Abas has not satisfied his burden of proving that there is a reasonable possibility that the defect in the pleading can be cured by amendment. Thus, the demurrer is sustained without leave to amend.

Moving party shall give notice of this ruling.

2 Dong vs. TENTATIVE RULING: Sepulveda Demurrer

For the reasons set forth below, Plaintiff and Cross-Defendants Yanan Dong, Confident Serenity, Inc., and Xian Huang’s demurrer to Defendants and Cross-Complainants Brent Sepulveda, Jami Lynn Sepulveda, and Sepulveda Builders, Inc.’s Cross-Complaint is SUSTAINED as to the 4th cause of action for breach of fiduciary duty by Brent Sepulveda and Jami Lynn Spulveda and as to the 8th cause of action for constructive trust, only. The demurrer is OVERRULED as to the 5th, 9th and 11th causes of action, and the unjust enrichment claim in the 8th cause of action.

Cross-Complainants are granted 30 days leave to amend.