Filed 4/19/24

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

ANTHONY SAM, individually 

and as Managing Manager of 

Chino Americana Concepts 

2013303 LLC,

Plaintiff and Appellant,

v.

RENEE KWAN et al.,

Defendants and 

Respondents.

 B314426 and B315773

 Los Angeles County

 Super. Ct. No. BC721121

APPEAL from a judgment of the Superior Court of 

Los Angeles County, Hon. Michael P. Linfield, Judge. Affirmed 

in part, reversed in part, and remanded.

Berding & Weil, Anne L. Rauch and Trinette S. Sachrison

for Plaintiff and Appellant.

Office of the Los Angeles City Attorney and Miguel 

Bahamon; Best Best & Krieger, Christopher E. Deal and Bao 

Pham for Defendant and Respondent Board of Fire and Police 

Pension Commissioners for the City of Los Angeles.
2

Anderson, McPharlin & Conners, Vanessa H. Widener and 

Motunrayo D. Akinmurele for Defendant and Respondent First 

American Title Insurance Company.

Saiki Law Group and Eric H. Saiki for Defendants and 

Respondents Renee K. Kwan, Vibrant Developments LLC, Asset 

Management 328 LLC, CAC 600 LLC, Chino Americana 

Holdings, LLC, and Fidelity Surety & Investments Inc.

____________________

Anthony Sam and Renee Kwan formed a limited liability 

company and bought a parking lot. Unbeknownst to Sam, Kwan 

used their company the next year to sell the lot for millions in 

profit. Sam eventually found out and accused her of fabricating 

documents, pocketing the money, and giving Sam nothing. Sam 

sued Kwan and her entities, as well as the company providing 

title and escrow services for the sale. Sam also sued the parking 

lot buyer.

The trial court experience was unhappy for Sam. Pretrial 

rulings put him out of court without a remedy. We affirm some of 

these rulings, but reverse others, including a summary judgment 

ruling that the parking lot buyer was a bona fide purchaser for 

value. We remand.

I

When reviewing pleading challenges, we take the pleaded 

facts as true. Review of summary judgment rulings requires 

inferences in favor of the party losing its right to a jury trial. 

These familiar rules pack a hefty punch here.

A

Kwan and Sam had worked together on various deals since 

about 2011. In 2014, they got interested in a parking lot in 
3

downtown Los Angeles. They decided to buy it and redevelop it 

into a restaurant.

To proceed with the venture, Sam and Kwan formed a 

limited liability company.

On October 13, 2013, they signed an operating agreement 

for their new company: Chino Americana Concepts 2013303 

LLC.

We refer to Chino Americana Concepts 2013303 LLC 

simply as 2013 LLC.

2013 LLC had four members. Each member was, 

individually, also a limited liability company. Some had lengthy 

but similar names. This makes for a potentially confusing cast, 

but the cast is vital here: we emphasize it is important to keep 

these four straight. So we list these four members, give them 

shorthand names, and note their percentage interest in 2013 

LLC:

1. Vibrant Developments LLC (“Vibrant”) owned 49% of 

2013 LLC,

2. Chino Americana Concepts CGW LLC (“CGW”) had a 

14.78% interest,

3. CAC 600 LLC (“600 LLC”) had a 18.48% interest, and 

4. Chino Americana Concepts W LLC (“W LLC”) held a 

17.74% interest.

In sum, the four members of 2013 LLC were Vibrant, CGW, 

600 LLC, and W LLC.

Vibrant owned 49%. The combined share of CGW, 600 

LLC, and W LLC was 51%, which will prove significant.

Vibrant was Kwan’s entity. She controlled it, although 

Sam allegedly held a minority position. Kwan, however, owned 

no part of the other three members.
4

Sam alleged he owned a controlling interest in these other 

three.

As between Sam and Kwan, then, Sam had—or thought he 

had—more ultimate control over 2013 LLC than Kwan did.

2013 LLC’s operating agreement designated Sam as the 

managing manager, appointed Kwan and Sam as directors, and 

specified Vibrant would handle 2013 LLC’s day-to-day 

operations. The signature blocks for CGW, 600 LLC, and W LLC 

listed Sam as the signatory as the managing manager of each 

entity. Kwan signed on behalf of her entity Vibrant.

2013 LLC bought the parking lot in August 2014 for $1.6 

million. Half the purchase money came from a bank loan Sam 

obtained and guaranteed. The other half came from foreign 

investors Kwan procured. Kwan herself put no money into the 

deal.

To effectuate the parking lot transaction, Sam signed the 

deed of trust and the assignment of rents, which were recorded 

documents in the lot’s chain of title.

Sam’s signatures on these two recorded documents will 

assume significance in our analysis. Sam signed both documents 

as “Anthony Sam, Manager of Chino Americana Concepts 

2013303 LLC.”

In other words, recorded documents in the parking lot’s 

chain of title announced that, in 2014, the manager of 2013 LLC 

was Sam. Kwan’s name does not appear in these documents.

During the purchase of the parking lot, Kwan submitted a 

2013 LLC operating agreement, dated October 13, 2013, listing 

Sam as the managing manager.
5

As we shall see, another version of this document, bearing 

the same date but Kwan’s name and not Sam’s, will appear in 

this litigation.

B

2013 LLC successfully bought the parking lot.

Relations between Sam and Kwan, however, then soured. 

Sam alleged that, in June 2015, he and Kwan butted heads on a 

different deal. Sam claimed that, as a result, Kwan asked him to 

“sign over his interest” in 2013 LLC, but that he refused her 

request. He suggests the breakdown motivated her to do him 

wrong.

According to Sam, Kwan then “fabricated” and “forged” 

documents to shut Sam out of 2013 LLC and to sell the lot 

without Sam’s knowledge. Sam swore he never relinquished his 

rights in any company to Kwan, and he told Kwan he would not 

transfer his rights.

A contrary and anodyne version of past events was that the 

members of 2013 LLC properly and legitimately replaced Sam 

with Kwan as the LLC’s manager.

These opposing accounts presented a dispute of fact, 

unresolved to this day. In the face of this conflicting evidence, 

however, the trial court would embrace the latter anodyne 

version as the undisputed truth.

C

The 2015 parking lot buyer was the Board of Fire and 

Police Pension Commissioners for the City of Los Angeles 

(“Board”).

The Board contacted Kwan and began negotiating with her 

to buy the lot.
6

In December 2015, Kwan agreed, without informing Sam, 

to sell the parking lot to the Board. The Board paid $3.8 million 

for the lot in 2015.

In other words, the property turnaround reaped more than 

two million in profit in less than a year and a half.

To help buy the lot from Kwan, the Board retained a law 

firm as outside counsel. The firm drafted a Purchase and Sale 

Agreement and Joint Escrow Instructions for the Board.

The Board and Kwan engaged First American Title 

Insurance Company (“First American”) to perform the dual roles 

of title insurer and escrow agent.

First American prepared a preliminary report, dated 

November 23, 2015, which it sent to the Board’s attorney.

This report referred to and, in its electronic form, 

hyperlinked the recorded deed of trust and the recorded 

assignment of rents that Sam had signed in 2014 as the manager 

of 2013 LLC.

As noted, these recorded documents were in the lot’s chain 

of title. And as noted, only Sam had signed these documents. 

Kwan’s name was not in them.

The Board’s attorney devoted only limited attention to First 

American’s report. She clicked on hyperlinks to get the recorded 

deed of trust and the recorded assignment of rents.

The attorney testified she “looked at,” but did not “review,” 

the deed of trust and the assignment of rents.

Interpreted in a light favorable to Sam, this measured 

phrasing means the attorney did not carefully study the two 

documents in the chain of title identifying Sam as the 2014 

manager of 2013 LLC.
7

Corroborating this interpretation is the attorney’s 

testimony she did not know, and did not ask, “who Anthony Sam 

was.” The attorney also testified she did not review a particular 

portion of the preliminary report called the “informational notes.” 

This unreviewed portion of the report set forth what documents 

were important to examine when a land deal involved a limited 

liability company. This portion highlighted the need to examine 

the operating agreement of a limited liability company and to 

obtain proof the limited liability company was properly operating 

through its manager.

The attorney testified she did not review this portion and 

explained, “The informational notes have to do with what my 

client has to provide, not with what the seller has to provide. 

And I didn’t represent the seller in this transaction.”

The Board’s attorney thus suggested she lacked interest in 

“what the seller has to provide.”

This incurious stance is important. We will discuss the 

limited scope of the attorney’s review in our analysis of the 

motion for summary judgment, where we will conclude the 

Board’s title research was deficient. For now, however, we 

continue with the facts.

D

The 2015 sale of the parking lot proceeded.

The Board and 2013 LLC signed a Purchase and Sale 

Agreement and Joint Escrow Instructions. Kwan signed on 

behalf of 2013 LLC as its “owner representative and manager.”

The transaction between Kwan and the Board was to close 

on December 31, 2015.

The closing day of December 31 was hectic.
8

At 9:24 a.m., the escrow officer announced the buyer had 

yet to receive seven essential closing documents from the seller. 

The officer stressed the importance of closing on time to avoid 

accruing additional interest. The documents the escrow officer 

needed that day included the operating agreement for 2013 LLC 

and a “[s]ignoff to their exchange agreement.”

The escrow officer copied the Board’s attorney on this 9:24 

a.m. email.

At 12:30 p.m., Kwan emailed the escrow officer, attaching a 

version of the 2013 LLC operating agreement.

Kwan’s version of this operating agreement was identical to 

the one used earlier for 2013 LLC to buy the parking lot, except 

Kwan’s version deleted Sam as manager and put her name where 

Sam’s name used to be in the slots for manager and director and 

in the signature blocks for the member entities.

Both versions of the operating agreements, however, bore 

the same date: “October 13, 2013.”

It would take some explaining to rationalize two 

agreements with the same date naming different managers. 

Sam and Kwan developed conflicting explanations.

Kwan said it was a simple and innocent “mistake.”

Sam, however, charged Kwan forged her version by altering 

the names, but then she carelessly neglected to change the date. 

Kwan’s goal, Sam alleged, was to make it appear, falsely, that 

Kwan had authority to sell the parking lot.

We return to the minute-by-minute developments on the 

day of closing.

At 2:04 p.m., title officer Anthony Rivera emailed Kwan 

that “we have determined a written consent will be required from 

the members . . . .” Rivera explained section 4.03(b) of the 2013 
9

LLC operating agreement prompted his request. Section 4.03(b) 

allowed 2013 LLC’s manager to sell company assets, but only 

upon an “affirmative vote of a Majority of [LLC] Members . . . .”

At 2:21 p.m., Kwan responded by email, attaching a onepage document.

Kwan’s 2:21 p.m. document is central to this case. The 

document’s title was “CORPORATE RESOLUTION.” It was 

dated December 31, 2015. It purported to speak for the four 

members of 2013 LLC. It recited, with our italics, that Kwan did 

“hereby certify that at a meeting of the Board of Members” of 

2013 LLC the members resolved (1) to sell the parking lot to the 

Board for $3.8 million and (2) to authorize Kwan as 2013 LLC’s 

manager to take all necessary actions relating to this sale.

On its face, this 2:21 p.m. document posed many questions.

1. Had 2013 LLC truly held a members’ “meeting” in 

the 17 minutes between 2:04 and 2:21 p.m. on 

December 31, 2015? Had different people been 

notified, and had they communicated and voted, and 

had the document been prepared in this short time? 

Or was Kwan saying the “meeting” had been her with 

herself?

2. Kwan signed for CGW as “Managing Manager, Chino 

Americana Holdings.” She signed for 600 LLC and 

for W LLC as “Manager, Chino Americana Holdings.” 

But what was this new Chino Americana Holdings

entity, and why did its manager, or managing 

manager, have authority to sign on behalf of three 

entities comprising 2013 LLC?
10

3. Could a document signed only by Kwan constitute 

independent evidence Kwan had authority to transact 

on behalf of 2013 LLC?

Sam alleged Kwan “forged” this “fabricated” document. He 

claimed Kwan fraudulently created it to make it look like she had 

authority she did not possess.

According to Sam, discrepancies in the closing documents 

were blatant enough to put the Board on inquiry notice that 

Kwan lacked authority to sell the lot.

At 2:33 p.m. on December 31, 2015, the deal closed. Kwan 

signed the grant deed as manager of 2013 LLC.

Kwan instructed First American to transfer $190,000 of the 

purchase price to Fidelity Surety & Investments Inc. (Fidelity) as 

a “finder’s fee.” Kwan owned Fidelity.

First American wired the remainder of the funds to an 

“exchange company” that was going to assist in procuring 

another piece of property.

Kwan testified the monies from the parking lot sale 

ultimately went to fund unrelated litigation, against Sam.

D

Sam filed this lawsuit.

At the time of the parking lot negotiations and sale, Sam 

knew nothing about the transfer of the lot. Kwan had not shared 

this information with him. Some time later, however, Sam asked 

Kwan for an accounting of the parking lot rents, but she did not 

respond. Sam investigated and discovered the sale.

Sam sued Kwan. He filed suit as an individual and as the 

managing member of 2013 LLC. He sued Kwan personally and 

also First American, the title and escrow company on the 

deal. His first amended complaint added Vibrant, Asset 
11

Management 328, LLC (“Asset”), 600 LLC, Chino Americana 

Holdings, LLC (“Holdings”), the Board, and the escrow officer as 

defendants, later amending to substitute Hertzberg Holdings, 

LLC (“Hertzberg”) and Fidelity in for Does 1 and 2. Asset and 

Hertzberg are members of Vibrant.

Sam alleged claims for breach of fiduciary duty, breach of 

contract, quiet title, breach of the covenant of good faith and fair 

dealing, violations of Business and Professions Code section 

17200 et seq. (Unfair Competition Law), escrow negligence, 

fraud, civil conspiracy, and declaratory relief. Various parties 

cross-complained against each other.

The trial court denied First American’s motion for 

summary judgment.

The court granted the Board’s motion for summary 

judgment.

The remaining defendants launched pleading challenges. 

Fidelity demurred to the first amended complaint. The trial 

court sustained the demurrer in part with leave to amend and in 

part without leave to amend. Sam filed a second amended 

complaint alleging the same causes of action against the same 

defendants. Fidelity filed a demurrer to the second amended 

complaint. First American, Kwan, Vibrant, Asset, 600 LLC, and 

Holdings all filed motions for judgment on the pleadings.

Sam lodged a proposed third amended complaint in 

connection with his oppositions to the motions for judgment on 

the pleadings. The trial court overruled as moot part of Fidelity’s 

demurrer and, as to the remaining causes of action, sustained it 

without leave to amend. The trial court granted the motions for 

judgment on the pleadings of First American, Kwan, Vibrant, 

Asset, 600 LLC, and Holdings without leave to amend.
12

In short, Sam’s lawsuit met total defeat. He appealed.

II

We summarize our rulings.

● We reverse the denial of Sam’s leave to amend his claims 

on behalf of 2013 LLC. We remand to permit Sam to bring 

these claims on behalf of the member entities, as reflected 

in his proposed third amended complaint.

● We reverse the remainder of the grants of judgment on the 

pleadings, except as to the breach of contract claims based 

on the operating agreements of 600 LLC and Holdings 

against 600 LLC and Holdings.

● We affirm the ruling that the breach of contract claims 

based on the operating agreements of 600 LLC and 

Holdings against 600 LLC and Holdings cannot be 

amended to state viable claims.

● We reverse the sustaining of Fidelity’s demurrer as to the 

civil conspiracy cause of action.

● We reverse the grant of the Board’s summary judgment 

motion.

A

We begin with the motions for judgment on the pleadings.

1

Our first issue is whether Sam had standing to claim on 

behalf of 2013 LLC. Based on Sam’s supposed lack of standing, 

the court granted the motions for judgment on the pleadings as to 

his claims on behalf of 2013 LLC. Sam originally sued as the 

“managing member” of the LLC. Various defendants argued, and 

the trial court agreed, that only a member could bring a claim on 

behalf of 2013 LLC.
13

The trial court ruled Sam, as a non-member manager, 

could not bring claims on behalf of 2013 LLC. This is especially 

true as the 2013 LLC operating agreement specifically required 

approval by a majority of the members to commence “any” 

litigation.

On this point, the trial court was right.

Sam, however, was not merely a non-member manager. He 

alleged he owned a controlling interest in CGW, 600 LLC, and W 

LLC, which were three of the four LLC members of 2013 

LLC. Indeed, Sam submitted a proposed third amended 

complaint bringing the claims on behalf of 2013 LLC in the name 

of these three member entities. He attached operating 

agreements demonstrating his control of the controlling member 

of these three entities.

The proposed third amended complaint and attached 

documents established Sam could amend to allege these claims 

through appropriate entities with standing. It was an abuse of 

discretion to deny leave to amend when Sam had so clearly laid 

out a viable fix for his pleading.

Kwan argues Sam waived his right to file derivative claims 

because, by filing his second amended complaint, he conceded his 

first amended complaint was deficient. Sam included the claims 

involved here in his second amended complaint, and so Kwan’s 

argument fails.

To summarize, we reverse the order denying Sam leave to 

amend his claims to bring them in the name of the member 

entities.

2

The court correctly ruled Sam lacked standing as an 

individual to bring claims for breach of fiduciary duty and escrow 
14

negligence against First American. Because Sam was not a party 

to the escrow instructions upon which he based his claims, we 

affirm. (Summit Financial Holdings, Ltd. v. Continental Lawyers 

Title Co. (2002) 27 Cal.4th 705, 710 [escrow holder owes no duty 

to strangers to the escrow].)

First American argues 2013 LLC’s claims against it also 

fail because its conduct caused 2013 LLC no damages. 2013 LLC 

received the proceeds of the sale, and First American cannot be 

blamed if Kwan later improperly took the funds. This is true, but 

Sam did not limit the claims to the missing funds. He also 

alleged First American’s conduct allowed Kwan to take 

unauthorized action and to bypass 2013 LLC’s proper 

decisionmaking process as well. On behalf of 2013 LLC, these 

allegations sufficed to show damages.

3

As to Sam’s breach of fiduciary duty claim, the court 

granted Kwan’s motion for judgment on the pleadings. Citing 

Galardi v. State Bar (1987) 43 Cal.3d 683, 691, the court ruled 

Sam sufficiently alleged Kwan owed him a fiduciary duty as a 

joint venturer in 2013 LLC. The court reasoned, however, that 

Sam had not alleged how Kwan’s breach had harmed him.

Sam adequately alleged harm: according to his complaint, 

Kwan deceitfully removed him as managing manager, prevented 

him from exercising his right as controlling member of three 

members of 2013 LLC, barred him from participating in the 

decision to sell the property, and cut him off from the sales 

profits.

We thus reverse this ruling.
15

4

The trial court granted judgment on the pleadings to 

Vibrant, Asset, 600 LLC, and Holdings on Sam’s breach of 

contract claims. The court found Sam had not alleged the 

existence of contracts with these defendants.

We affirm the trial court’s ruling as to the claims relating 

to the operating agreements of 600 LLC and Holdings. The 

operating agreement for 600 LLC shows Sam was not a 

party. Holdings is a single-member limited liability company 

with Sam as the only member. Therefore, Sam is the only party 

to the Holdings operating agreement.

Sam was, however, a party to the operating agreement for 

Vibrant. The members of Vibrant were Asset, Hertzberg, and 

Sam. Vibrant and Asset incorrectly argue the provided operating 

agreement is invalid because it is unsigned. (Vita Planning & 

Landscape Architecture, Inc. v. HKS Architects, Inc. (2015) 240 

Cal.App.4th 763, 773 [lack of signature does not necessarily 

vitiate contract].) Sam alleged the existence of a contract, and 

the agreement identified him as a party.

Vibrant and Asset also argue that, even if a contract did 

exist, Sam failed to allege a breach. This argument falters: Sam 

alleged Vibrant and Asset divested him of his membership shares 

in contravention of the requirements laid out in the operating 

agreement. This alleged breach.

In sum, we affirm the trial court’s ruling granting 

judgment on the pleading as to the claims for breach of the 600 

LLC and Holdings operating agreement against 600 LLC and 

Holdings, and reverse as to the claim for breach of the Vibrant 

operating agreement against Vibrant and Asset.
16

5

The court granted Kwan judgment on the pleadings on 

Sam’s fraud claim. The court found Sam did not allege Kwan 

knowingly made a false representation to Sam with the intention 

of deceiving him, or that Sam justifiably relied on any false 

representation by Kwan. This ruling was erroneous.

Sam based his fraud claim on concealment. A claim for 

fraud based on concealment will lie where the defendant 

concealed a material fact; the defendant was under a duty to 

disclose the fact to the plaintiff; the defendant concealed the fact 

with the intent to defraud the plaintiff; the plaintiff was unaware 

of the fact and would have acted differently if plaintiff knew; and 

the concealment harmed the plaintiff. (Kaldenbach v. Mutual of 

Omaha Life Insurance Co. (2009) 178 Cal.App.4th 830, 850.)

The trial court found Kwan did owe Sam a fiduciary 

duty. Sam alleged that Kwan, as his fiduciary, was under a duty 

to disclose material facts that she concealed: namely, her 

fabrication of a false operating agreement, her sale of the 

property without proper approval, and her failure properly to 

account for the funds. By means of his detailed charges of 

“forgery” and “fabrication,” Sam alleged Kwan’s scienter with 

particularity.

Sam adequately alleged a claim for fraud based on 

concealment.

6

The trial court granted Kwan judgment on the pleadings as 

to the conspiracy claim because the court found the fraud claim 

formed the basis for the conspiracy claim. Thus, because the 

court had granted judgment on the pleadings on the fraud claim, 

the court found the conspiracy claim also would fail. We are 
17

reversing the trial court’s ruling on the fraud claim. We 

concomitantly reverse its conspiracy claim ruling.

7

The trial court granted Kwan judgment on the pleadings as 

to the Unfair Competition Law claim because it found the fraud 

and conspiracy claims insufficient, and these constituted the 

Unfair Competition Law claim. Thus, the court held, the Unfair 

Competition Law claim was also deficient. We reverse the ruling 

as to the Unfair Competition Law claim because we have 

reversed the rulings about fraud and conspiracy.

B

We turn to the order sustaining Fidelity’s demurrer. The 

trial court sustained this demurrer as to Sam’s claims for civil 

conspiracy. The court found the underlying conspiracy claim was 

fraud, and the allegations were insufficient because Sam did not 

name Fidelity in his claim for fraud.

In his cause of action for civil conspiracy against Fidelity, 

Sam alleged Kwan and Fidelity conspired to transfer $190,000 

from the escrow to Fidelity as a “finder’s fee.” Sam alleged 

Fidelity performed no services to earn this fee, and the funds 

rightfully belonged to 2013 LLC. Although Sam omitted these 

allegations from his cause of action for fraud, the basis of his 

claim against Fidelity was plain. (AREI II Cases (2013) 216 

Cal.App.4th 1004, 1022 [allegations of conspiracy suffice if they 

apprise defendant of character and types of facts plaintiff will 

rely on to establish conspiracy].) Sam is entitled to amend to 

state claims on behalf of 2013 LLC through the member entities. 

It was an abuse of discretion to deny Sam leave to amend his civil 

conspiracy claim.
18

C

The court erroneously granted the Board’s motion for 

summary judgment.

The ruling was that the Board was a bona fide purchaser 

for value, which gave the Board title to the parking lot free and 

clear of Sam’s claims. The court held that “[u]ndisputed 

evidence” demonstrated the Board purchased without notice of 

Sam’s alleged interest in the lot.

Factual disputes, however, precluded summary judgment.

1

The bona fide purchaser doctrine enables a buyer to keep 

the purchased property if it can show it bought for value and 

lacked knowledge or notice of another’s claim. When the buyer 

has actual or constructive notice of a prior interest, however, the 

buyer takes the property subject to those other interests. (In re 

Marriage of Cloney (2001) 91 Cal.App.4th 429, 437 (Cloney).)

For a buyer to establish it was a bona fide purchaser for 

value, it must demonstrate it conducted research with due 

diligence to see if the title it was planning to buy would be good.

California’s quiet title laws put this duty of inquiry on 

buyers of real estate. They must inquire into the validity of their 

prospective ownership claim. A contrary incentive would 

encourage deliberate blindness and would be “inimical to the 

entire system of real property law in California.” (Tsasu LLC v. 

U.S. Bank Trust, N.A. (2021) 62 Cal.App.5th 704, 720 (Tsasu).)

Due diligence requires prospective buyers to heed warning 

signs. (Tsasu, supra, 62 Cal.App.5th at p. 720.)

The buyer is not entitled to interpret ambiguities in its own 

favor. Neither may it ignore reasonable warning signs in the 

recorded documents. (Triple A Management Co. v. Frisone (1999) 
19

69 Cal.App.4th 520, 530–531.) Nor is the buyer “entitled to 

ignore information that comes to it from outside the recorded 

chain of title, to the extent such information puts [it] on notice of 

information that reasonably brings into question the state of title 

reflected in the recorded chain of title.” (Id. at p. 531; see also 

612 South LLC v. Laconic Ltd. Partnership (2010) 184 

Cal.App.4th 1270, 1280; Cloney, supra, 91 Cal.App.4th at pp. 

441–442.)

2

Two factors in this case highlighted the importance of 

investigating whether Kwan actually had the sale authority she 

claimed.

First, the preliminary report notes required proof the 

manager had duly executed authority to act on behalf of the 

limited liability company.

Second, title officer Rivera testified to industry practice. 

Recall Rivera was a key participant in this closing. Rivera had 

served as a title officer some 120,000 times in his 38 years of 

experience. About 80 percent of the time, the sellers were limited 

liability companies.

Rivera testified that a preliminary report is not a 

representation of the condition of title, but is done to evaluate 

risk solely for the benefit of the title insurer.

In accord with the notes in the preliminary report—the 

very notes the Board’s attorney did not review—Rivera testified 

that, when a limited liability company is involved, it was 

“standard procedure” to review that organization’s documents: 

“You’re supposed to get down to who actually can sign.”

Rivera therefore demanded and reviewed the operating 

agreement for 2013 LLC. Based on his review, he determined he 
20

needed proof the members of the limited liability company 

actually were consenting to the sale.

This is why, at 2:04 p.m. on the day of closing, Rivera 

emailed Kwan for proof of the members’ consent.

These two factors underlined the importance of ensuring 

Kwan actually had authority to sell on behalf of 2013 LLC.

3

At the summary judgment stage, the Board’s inadequate 

diligence flunked the test. Reading the record in Sam’s favor, the 

Board and its outside legal counsel did not question why 2013 

LLC, when buying the lot, had one manager but, the next year 

when selling the lot, it had a different manager. The lawyer 

entirely skipped the portion of the preliminary report that 

stressed the need, in the case of a limited liability company, to 

examine the company’s operating agreement and to obtain proof 

the company was properly operating through its manager. Her 

rationale was that “[t]he informational notes have to do with 

what my client has to provide, not with what the seller has to 

provide. And I didn’t represent the seller in this transaction.” 

This rationale was mistaken. The buyer should have demanded 

these documents from the seller, as Rivera in fact did for his 

employer. The attorney’s conception of the buyer’s duty of due 

diligence in this situation was flawed.

The Board’s attorney also failed to review the deed of trust 

and the assignment of rents.

As the Tsasu decision aptly noted, real estate buyers must 

inquire into the validity of their prospective ownership claim. 

(Tsasu, supra, 62 Cal.App.5th at p. 720.)

The Board argues, with our emphasis, that “Sam points to 

no statute that holds that operating agreements are proper proof 
21

of his ownership rights . . . .” No statute was needed here. As 

Rivera testified, reviewing operating agreements is standard, and 

crucial, in real estate transactions involving limited liability 

companies. The Board relies heavily on what it terms Kwan’s 

“ostensible authority” to act on behalf of 2013 LLC. But the 

Board’s observations of Kwan are no substitute for the written 

documentation Rivera testified was necessary to this crucial 

determination.

Title officer Rivera therefore asked Kwan to prove the 

members of 2013 LLC consented to her actions, but Kwan’s 2:21 

p.m. response was suspect on its face. Earlier we noted the many 

ways in which this document raised more questions than it 

answered. This suspect document asked readers to believe the 

members of the limited liability company were notified, gathered, 

voted, and typed up their corporate resolution in the 17 minutes 

between the 2:04 p.m. demand from Rivera and the 2:21 p.m. 

delivery by Kwan. Alternatively, the document might be 

interpreted as Kwan’s claim that she controlled everything and 

the “meeting” happened when she “met” with herself.

A reasonably prudent buyer would have questions about 

either story. Gathering people together, communicating, voting, 

and recording the event in 17 minutes beggars belief. 

Alternatively, if Kwan was claiming she held a “meeting” with 

herself alone and that created sufficient authority to her to 

transact the sale, a reasonable buyer would wonder what, in this 

short time, had become of Sam, who the year before had been 

signing everything for the limited liability company. And is it 

even sensible to speak of meeting with yourself?

Moreover, Kwan purported to be signing for three of the 

member entities as the “Managing Manager,” or, alternatively 
22

but without explanation, as the “Manager,” of a different entity, 

unmentioned in the 2013 LLC operating agreement.

The 2:21 p.m. document likewise bore the earmarks of selfjustification: the document was supposed to be independent 

validation of Kwan’s status, but it contained only Kwan’s 

signatures.

The fact Kwan signed her own name four times did not 

strengthen the apparent force of her supposed proof. The 

repetition merely emphasized its circular nature.

This suspect claim of authority would have caused a 

reasonable and prudent buyer to inquire further. But instead of 

pausing to get to the bottom of the situation, the Board went 

ahead and closed the deal 12 minutes later, at 2:33 p.m.

Haste makes waste.

4

Perhaps all Kwan’s documents were valid and she truly 

enjoyed full authority to sell the lot on behalf of 2013 LLC. But 

Sam’s factual claim was sharply to the contrary: that Kwan had 

forged and fabricated these instruments and that he, not Kwan, 

retained authority to manage 2013 LLC. This factual dispute 

was the heart of the case.

Another factual dispute also doomed the summary 

judgment motion. With its motion, the Board submitted a 2013 

LLC operating agreement as an exhibit to a declaration. As Sam 

gleefully pointed out in opposition, the Board’s submitted version 

of the operating agreement listed Sam as the manager, not 

Kwan. Yet the Board was moving for summary judgment on the 

ground that Kwan and not Sam was the manager. By presenting 

an account factually at odds with itself, the Board’s moving 
23

papers spotlighted the central fact in controversy: who truly was 

authorized to manage 2013 LLC in 2015, anyway?

Further to this point, Sam’s complaint appended the two 

contradictory versions of this operating agreement. These 

versions are identical in every respect, except the second 

substitutes Kwan’s name for Sam’s in every instance. One 

version names Sam as the manager. The other names Kwan. 

Perplexingly, both bear the same date: “October 13, 2013.”

How can two operating agreements for the same company 

with the same date name different managers? When Kwan was 

asked to explain, Kwan testified this was an innocent “mistake.” 

Sam alleged, however, that Kwan “fabricated” this “unauthorized 

version” of the agreement and falsified another document titled 

“WRITTEN CONSENT OF MEMBERS”—another Kwan 

invention that, Sam claimed, on its face was flawed and 

unbelievable. Sam said the only “mistake” was to believe Kwan 

at all.

A fact finder must decide who is telling the truth. We 

reverse the summary judgment ruling.

D

We deny Sam’s request for judicial notice as moot.

DISPOSITION

We reverse the order denying Sam leave to amend his 

claims brought on behalf of 2013 LLC, and we remand with 

instructions to permit Sam to bring these claims on behalf of the 

member entities as reflected in his proposed third amended 

complaint. We reverse the remainder of the court’s grant of 

judgment on the pleadings except as to the breach of contract 

claims based on the operating agreements of 600 LLC and 

Holdings against 600 LLC and Holdings. We reverse the trial 
24

court’s sustaining of Fidelity’s demurrer as to the civil conspiracy 

cause of action. We reverse the trial court’s grant of summary 

judgment in favor of the Board. We remand for further 

proceedings consistent with this opinion and award costs to Sam.

WILEY, J.

We concur: 

GRIMES, Acting P. J. 

VIRAMONTES, J.