Filed 1/19/22 Prime Care v. Nguyen Phat Real Estate Investment CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

PRIME CARE, INC.,

Plaintiff and Appellant,

v.

NGUYEN PHAT REAL ESTATE 

INVESTMENT, LLC ET AL.,

Defendants and Respondents.

B304910

(Los Angeles County Super.

Ct. No. 19STCV12513)

APPEAL from an order of the Superior Court of Los Angeles 

County, Dennis J. Landin, Judge. Affirmed.

Martin E. Jacobs and Martin E. Jacobs, Inc. for Plaintiff and 

Appellant.

Michael J. Shilub and Law Office of Michael J. Shilub for 

Defendants and Respondents.

________________________
2

INTRODUCTION

Plaintiff Prime Care, Inc. brought suit, alleging that defendants

Nguyen Phat Real Estate Investment, LLC (Nguyen Phat), and Sam

Ho misrepresented that the commercial property they leased to

plaintiff was suitable for the operation of a cannabis business.

Plaintiff appeals from a judgment of dismissal in favor of defendants

after the trial court sustained their demurrers. Plaintiff argues the

court erred in concluding the terms of the lease agreement absolved

defendants of liability for their alleged negligence, fraud, negligent

misrepresentation, rescission, and damages. Plaintiff also contends it

should have been granted leave to amend. We affirm.

FACTS AND PROCEDURAL BACKGROUND

1. Lease Agreement

On January 29, 2019, defendant Nguyen Phat agreed to rent

plaintiff an industrial building located in Montebello, California.

Defendant Sam Ho managed the Nguyen Phat company at the time. 

The commercial lease stated that the agreed use of the premises

was “Commercial Cannabis distribution, manufacturing, cultivation

and retail delivery in accordance with all state and local licenses and

laws.” When plaintiff and Nguyen Phat entered into the lease,

plaintiff had not obtained the City of Montebello’s approval for the

agreed use.

The lease contained the following provisions:

Paragraph 2.3: “NOTE: Lessee is responsible for 

determining whether or not Applicable Requirements, and especially 

the zoning are appropriate for Lessee’s intended use, and 
3

acknowledges that past uses of the Premise may no longer be 

allowed.” (Bold in the original.)1

Paragraph 2.4: “Lessee acknowledges that . . . (b) it has

been advised by Lessor and/or Brokers to satisfy itself with respect to

the size and condition of the Premises (including but not limited to . . .

compliance with Applicable Requirements . . .) and their suitability

for Lessee’s intended use. (c) Lessee has made such investigation as

it deems necessary with reference to such matters and assumes all

responsibility therefor as the same relate to its occupancy of the

Premises . . . .”

An addendum to the lease: “51E) Licenses and permits – Prior 

to Lease execution, Lessee must satisfy itself of all permits and 

licenses needed with the City of Montebello and State of California in

order to operate their business at the subject property. Lessee shall 

be responsible for all associated permits and licensing costs and shall

provide Lessor copies of all permits.”

Paragraph 22: “No Prior or Other Agreements; Broker 

Disclaimer. This lease contains all agreements between the Parties

with respect to any matter mentioned herein, and no other prior or 

contemporaneous agreement or understanding shall be effective. 

Lessor and Lessee each represents and warrants to the Brokers that 

it has made, and is relying solely upon, its own investigation as to 

the nature, quality, character and financial responsibility of the 

other Party to this Lease and as to the use, nature, quality and 

character of the Premises.”

After signing the lease, plaintiff paid a $150,000 deposit, 

advance rent, and other charges. Before plaintiff commenced 

1 The lease defines “Applicable Requirements” as the 

building codes, applicable laws, covenants or restrictions of 

record, regulations, and ordinances.
4

operations, the City of Montebello determined the property was not 

suitable for cannabis distribution because of its proximity to a 

residential area. 

2. Lawsuit

On April 9, 2019 plaintiff sued Nguyen Phat, its manager, Sam 

Ho, and the brokers on both sides of the transaction. Claims against 

the brokers are not at issue in this appeal, and we do not discuss 

them.2

The original complaint alleged five causes of action:

(1) negligence against Nguyen Phat and Ho; (2) fraud against Nguyen

Phat; (3) negligent misrepresentation against Nguyen Phat;

(4) rescission based upon fraud against Nguyen Phat; and

(5) rescission based upon unilateral mistake against Nguyen Phat. A

copy of the lease was attached as Exhibit 1 to the complaint. As to

damages, plaintiff alleged that it had suffered “$8,000 in professional

fees,” and has or will expend another “$20,000 [ ] to obtain an

extension of time to find another site as well as other expenditures

inherent in the extension.” In the rescission cause of action, plaintiff

sought return of its $150,000 deposit with ten percent interest per

annum.

3. First Demurrer

Defendants demurred to the complaint.3 They argued “the 

Lease establishes that Prime Care had sole responsibility for 

2 Subsequent use of “defendants” refers to Nguyen Phat and 

Ho only.

3 The only claim against Ho was the first cause of action for 

negligence. Defendants shared counsel and filed joint briefs, so 

unless otherwise indicated, we discuss defendants together.
5

determining whether the premises are suitable for the Agreed Use. 

Prime Care also represented that it was not relying on any purported 

representation by Nguyen Phat not set forth in the Lease,” citing 

paragraph 22. Defendants asserted plaintiff could not prove 

negligence because defendant did not have a duty to determine 

whether the property was suitable for plaintiff’s intended use. 

Defendants’ argument as to Ho was twofold: (1) the complaint lacked 

any factual allegation that Ho had acted negligently, and (2) Ho 

could not be liable as Nguyen Phat’s agent because there was no 

physical injury, citing Michaelis v. Benavides (1998) 61 Cal.App.4th 

681, 686-87 (liability imposed upon agents for active participation in 

tortious acts of the principal restricted to cases involving physical 

injury, not pecuniary harm, to third persons). 

For the fraud and negligent misrepresentation claims,

defendants asserted there was no justifiable reliance because “Prime

Care represented and warranted in the Lease that it made and was

relying solely on its own investigation as to the suitability of the

premises for the Agreed Use.” (Defendants also asserted the fraud

claim was not pleaded with specificity.) Defendants contended the

rescission and restitution claims failed for the same reason— because

plaintiff agreed it was responsible for investigating the suitability of

the premises for marijuana distribution, plaintiff could not prove

fraudulent conduct or mistake.

The trial court sustained the demurrer to the first cause of

action for negligence against defendants without leave to amend, and

sustained the demurrers to the four remaining causes of action

against Nguyen Phat with leave. The court’s order stated the lease

“clearly shows that the defendants had no duty to determine

suitability for the ‘Agreed Use’ ” and “allocates the entire risk of a

future contingency to Prime Care.”
6

The court continued: “As to the negligence causes of action

concerning Defendant Ho, there is no factual allegation that he did

anything that would amount to tortious conduct. Moreover, Ho, as a

corporate officer cannot incur liability where the injury is economic,

as opposed to personal or property damage.” The court concluded

that the complaint failed “to properly allege the fraud claims with the

specificity required by law.”

Lastly, the court held that the fourth and fifth causes of action

for rescission failed in light of the lease’s language placing the onus

on plaintiff to assess whether it was entitled to use the property for

cannabis distribution.

4. First Amended Complaint

Plaintiff filed a first amended complaint, amending only its

causes of action for negligence (as to which leave had not been 

granted), fraud and negligent misrepresentation. Plaintiff did not

amend either of the two causes of action for rescission, but simply

repeated its original allegations in its amended complaint.

Even though it had been denied leave to amend the negligence

claim, plaintiff’s amended complaint included its original claim for

negligence with allegations that read in part: “defendants so

negligently listed, advertised, leased, brokered, advised, researched

. . . investigated, represented and/or carried out their duties and

activities with respect to the said property and lease as to cause and

permit the plaintiff to enter into Exhibit ‘1,’ which plaintiff would not

have done if plaintiff had been aware that the property was not

suitable for the intended cannabis business of the plaintiff.” Plaintiff

asserted that rent under the lease was higher than it would have

been for non-cannabis uses. In the second cause of action for fraud,

plaintiff ‘s allegations now included that “The defendants

misrepresented and concealed from the plaintiff and the plaintiff’s
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broker that the property was not suitable for cannabis operations due

to its proximity to the residential areas. Defendant Phat Real Estate

Investment, LLC, by and through its manager Sam Ho, represented

to plaintiff Prime Care Inc., by and through Phat’s broker . . . in or

about February 2019 when negotiations started that the building to

be leased was in the proper location and zoning for cannabis use. 

Indeed, Phat and Sam Ho advised plaintiff’s broker through Phat’s

broker that the lease rent would be greater for cannabis use than

non-cannabis use. The same representation as to the proper location

and zoning was repeated to [plaintiff’s representative] at the

Automobile Club of Southern California location in Anaheim,

California while going through the signing process on or about

March 1, 2019. Phat and Sam Ho also represented to the City of

Montebello that Sam Ho had read the City of Montebello Municipal

Code and Zoning Code provisions regarding commercial cannabis

business at the real property in question and that they consented to

plaintiff proceeding with the proposed commercial cannabis business

at the location. . . . Further, on or about February 6, 2019 the

defendants furnished to the plaintiff by email a zoning map, . . . on

which it was indicated in handwriting and emphasized that the

properly was located a 1,000 feet [sic] from a residential area which

was a sufficient distance to permit the cannabis operations. A

minimum of 600 feet from the residential area was needed for

cannabis operations and the actual distance was less than 600 feet.”

4

4 The amended complaint alleged that defendants had 

emailed a zoning map to plaintiff with the notation that the 

premises were 1,000 feet from a residential area. At the hearing 

on the demurrer, plaintiff’s counsel agreed that neither Nguyen 

Phat nor Ho provided the map to plaintiff.
8

In the third cause of action for negligent misrepresentation,

plaintiff re-alleged previous paragraphs and asserted that

“Defendants made the misrepresentations and concealed the

unsuitability of the leased premises for cannabis negligently and

without any reasonable basis for doing so.”

5. Second Demurrer

Nguyen Phat demurred to the second and third causes of action

for fraud and negligent misrepresentation (the other causes of action

were not amended).5 Nguyen Phat argued that both causes of action

fail because plaintiff cannot demonstrate justifiable reliance on any

alleged statements regarding the appropriateness of the building for

cannabis distribution because plaintiff agreed in writing that

defendants had no duty to determine the suitability for the agreed

use and that it was plaintiff who was to assess the suitability of the

location.

The trial court sustained the demurrers without leave to

amend. The court again found that the lease precluded plaintiff from

showing the justifiable reliance necessary for fraud or negligent

misrepresentation. The court explained that plaintiff’s “added

allegations regarding oral statements or annotated zoning map do not

have any effect, as the language of the Lease Agreement specifically

5 Ho did not demurrer to the first amended complaint, 

apparently because the single cause of action against him was 

fully disposed of by the ruling on his demurrer to the initial 

complaint. Although the trial court could have struck the 

amended first cause of action as a sham pleading, it did not. 

(Ricard v. Grobstein, Goldman, Stevenson, Siegel, LeVine & 

Mangel (1992) 6 Cal.App.4th 157, 162.) The trial court did not 

further address the cause of action against Ho, and, as to Ho, 

plaintiff appeals only the sustaining of the demurrer to the 

original complaint.
9

precludes any prior or contemporaneous agreement or understanding

other than the Lease itself to be effective.” The court stated “the

consent form signed by Phat only contains a representation regarding

Phat’s acknowledgement and consent to Plaintiff’s cannabis business

on the premises but not regarding its compliance with the City of

Montebello’s zoning provisions.”

The trial court observed that it had granted plaintiff leave to

amend its fourth and fifth rescission causes of action, but plaintiff did

not amend. The court sustained the demurrer without leave to

amend as to the second through fifth causes of action.

On January 3, 2020, the trial court entered judgment of

dismissal in favor of Nguyen Phat and Ho. Plaintiff appealed.

DISCUSSION

Plaintiff argues that the court erred in sustaining demurrers to

the first three causes of action, and in refusing leave to amend the

first and fourth causes of action. It does not appeal the court’s ruling 

sustaining the demurrer to the fifth cause of action. “On appeal from

a judgment dismissing an action after sustaining a demurrer without

leave to amend, the standard of review is well settled. We give the

complaint a reasonable interpretation, reading it as a whole and its

parts in their context. Further, we treat the demurrer as admitting

all material facts properly pleaded, but do not assume the truth of

contentions, deductions or conclusions of law. When a demurrer is

sustained, we determine whether the complaint states facts sufficient

to constitute a cause of action. And when it is sustained without

leave to amend, we decide whether there is a reasonable possibility

that the defect can be cured by amendment: if it can be, the trial

court has abused its discretion and we reverse.” (City of Dinuba v.

County of Tulare (2007) 41 Cal.4th 859, 865 (internal citations

omitted).)
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1. Plaintiff Failed to Allege Duty in the First Cause of 

Action for Negligence

The trial court sustained the demurrer to the first cause of 

action for negligence in the original complaint without leave to 

amend. Nevertheless, plaintiff repeated its negligence claim in its 

first amended complaint. Plaintiff argues on appeal only that the 

court erred in sustaining the demurrer to the first cause of action in 

the original complaint.

6

“An essential element of an action for negligence is the

existence of a duty of care to the plaintiff. [Citation.] The existence

and scope of a defendant’s duty is an issue of law to be decided by the

court.” (Eriksson v. Nunnink (2011) 191 Cal.App.4th 826, 838.) 

Here, the trial court found that plaintiff failed to allege duty because

the attached lease “clearly show[ed] that defendants had no duty to

determine the suitability for the ‘agreed use.’ ”

On appeal, plaintiff does not squarely take on this argument. 

It does not suggest, for example, an alternative interpretation of the

lease. Instead, plaintiff takes a different tack – asserting that,

despite the lease language, defendants owed a “general” duty of care. 

Plaintiff argues defendants breached this duty in their listing,

advertising, leasing, and representations about the property that

caused plaintiff to enter into the lease, which plaintiff would not have

done if it had been aware that the property was unsuitable for its

intended cannabis business. Plaintiff cites cases that hold a duty of

care may be pleaded “generally.” (See Wiley v. Cole (1921)

52 Cal.App. 617, 618 (“negligence may be charged in general terms”).)

6 Because plaintiff frames his argument in terms of the original 

complaint we address it in that manner. We have observed that 

in the amended complaint, plaintiff merely repeated the critical 

allegations from his original complaint. 
11

That a duty of care can be pleaded generally is not really the

point. Plaintiff’s argument assumes a duty exists even in

contravention of the allocation of duty in the written agreement

between the parties. This is not a pleading issue, but one of

substantive law, for which plaintiff cites no legal authority. (See

Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The

Rutter Group 2021) ¶ 9:21 [“appellate court can treat as waived or

meritless any issue that, although raised in the briefs, is not

supported by pertinent or cognizable legal argument or proper

citation of authority”].) Plaintiff must allege a duty that exists within

the framework of its pleaded facts. (Jones v. Daly (1981)

122 Cal.App.3d 500, 508.) The only duty actually alleged is that

contained in the parties’ agreement attached to the complaint. The

agreement states plainly that defendants had no such duty.

Lease paragraph 2.3 states in bold that “Lessee is responsible

for determining whether or not the Applicable Requirements, and

especially the zoning are appropriate for Lessee’s intended use . . . .”

As we have recounted in our “Facts And Procedural Background”

section, in paragraph 2.4, plaintiff similarly warranted that it

investigated to the extent it deemed necessary whether the premises

were suitable for its intended use and assumed all responsibility for

such an investigation. In paragraph 22, plaintiff represented and

warranted that “it has made, and is relying solely upon, its own

investigation . . . as to the use” of the premises. In an addendum to

the lease, plaintiff agreed to “satisfy itself of all permits and licenses

needed with the City of Montebello and State of California in order to

operate their business at the subject property.” Lastly, the lease

stated that it contained “all agreements between the parties . . . and

no other prior or contemporaneous agreement or understanding shall 

be effective.”
12

In sum, the lease agreement provided that it was plaintiff that

had expressly covenanted it was not relying on defendants to ascertain 

the suitability of the property. Instead, the duty was firmly placed on

plaintiff to assess whether it could operate the cannabis distribution

business at the location.

Plaintiff argues that the lease provisions which we have quoted

and paraphrased, constitute unenforceable “exculpatory” language

that purports to insulate defendants from their own negligence. 

Plaintiff cites Viotti v. Giomi (1964) 230 Cal.App.2d 730, 739 (Viotti),

which states that “[a]n agreement insulating one from liability for his

own negligence must specifically so provide and is strictly construed

against the party asserting the exemption, especially where he is the

author of the agreement.” In Viotti, the Court of Appeal found that a

title company could not avoid liability for an erroneous title report

simply because the top of the report stated: “Preliminary report only.

No liability hereunder.” (Ibid.)

Viotti is inapt. The lease provisions here do not exempt

defendants from liability. On the contrary, the lease expressly 

provides that plaintiff has the contractual obligation to investigate

whether the premises are appropriate for its business and to obtain

government approval for its cannabis operation. The lease does not

exempt defendants from anything; it establishes that plaintiff had no

duty to ensure that the property was suitable for plaintiff’s business.

Plaintiff also relies on Civil Code section 1668 (section 1668) 

for the proposition that defendants cannot contract away their 

liability.7 Section 1668 likewise is unhelpful. “[T]he statute 

7 Section 1668 provides: “All contracts which have for their 

object, directly or indirectly, to exempt anyone from responsibility 

for his own fraud, or willful injury to the person or property of 
13

prohibits contractual releases of future liability for ordinary 

negligence when ‘the “public interest” is involved or . . . a statute 

expressly forbids it.’ ” (Frittelli, Inc. v. 350 North Canon Drive, LP

(2011) 202 Cal.App.4th 35, 43.) Plaintiff makes no cogent argument 

that the commercial lease transaction is either in the “public 

interest” or that “a statute expressly forbids” placing the obligation 

on plaintiff rather than defendants. Nor does the lease purport to 

excuse defendants from future liability. The claimed wrongs all 

occurred, if at all, before the lease was executed.

2. Plaintiff Failed to Allege Reasonable Reliance as to

Fraud and Negligent Misrepresentation (Second and

Third Causes of Action)

Among the elements necessary to establish fraud and negligent

misrepresentation is the plaintiff’s reasonable reliance on defendant’s

false statement. (Apollo Capital Fund LLC v. Roth Capital Partners,

LLC (2007) 158 Cal.App.4th 226, 243–244.) We concur with the trial

court that plaintiff did not allege the element of reasonable reliance to

support the fraud and negligent misrepresentation claims. As we

have explained, plaintiff agreed in the lease that it would not rely on

any representations by Nguyen Phat regarding the zoning and that

plaintiff was responsible for obtaining permits from the city to run its

business at the property. On appeal, plaintiff does not even address

reliance, focusing instead on plaintiff’s purported misrepresentations. 

Plaintiff’s failure to assert an argument directed to the basis of trial

court’s ruling forfeits the point on appeal. (Kinsella v. Kinsella (2020)

45 Cal.App.5th 442, 464 [“Where an appellant fails to present

another, or violation of law, whether willful or negligent, are 

against the policy of the law.”
14

argument or legal authority, he or she forfeits appellate consideration

of the issue.”].)

3. Plaintiff Does Not Appeal the Court’s Ruling Sustaining the 

Demurrers to the Fourth and Fifth Causes of Action for

Rescission

Plaintiff does not argue the trial court erred in sustaining

demurrers to the fourth and fifth causes of action for recission. We 

therefore presume these rulings correct. (Keyes v. Bowen (2010)

189 Cal.App.4th 647, 655.) 

4. Plaintiff Failed to Show that Amendments Would Cure 

the Defective Pleadings

Plaintiff argues that the court erred in denying leave to amend

causes of action one through four. Plaintiff provides no explanation

as to how it would amend its allegations to sufficiently allege each

element of each cause of action. “Because a demurrer tests the legal

sufficiency of a complaint, the plaintiff must show the complaint

alleges facts sufficient to establish every element of each cause of

action.” (Rakestraw v. California Physicians’ Service (2000)

81 Cal.App.4th 39, 43.). “The plaintiff has the burden of proving that

an amendment would cure the defect.” (Campbell v. Regents of

University of California (2005) 35 Cal.4th 311, 320.) Plaintiff has not

carried its burden. Accordingly, the trial court did not abuse its 

discretion in sustaining the demurrers without leave to amend.
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DISPOSITION

The judgment is affirmed. Defendants and respondents 

Nguyen Phat Real Estate Investment, LLC and Sam Ho shall recover 

their costs on appeal.

RUBIN, P. J.

WE CONCUR: 

BAKER, J.

KIM, J.