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corporation, and
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FRANCISCO IZAWA
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Plaintiffs,
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vs.
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AVT, INC., DBA AVT VENDING, INC.,
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a California Corporation,
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AC MEXICAN FOOD, INC., DBA
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JALAPENOS MEXICAN FOOD, a California )
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Corporation,
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and DOES 1-20, inclusive,
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Defendants.
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FRESCOS MEXICAN GRILL, a California
Case No.:
COMPLAINT FOR:
1. FRAUD THROUGH INTENTIONAL
MISREPRESENTATION
2. FRAUD THROUGH
CONCEALMENT/NONDISCLOSURE
3. RESCISSION
4. UNJUST ENRICHMENT
UNLIMITED CIVIL CASE
Page 1 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
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GENERAL ALLEGATIONS
1. PLAINTIFF FRESCOS MEXICAN GRILL (Frescos) is, and at all times relevant was, a
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times relevant was, a California corporation doing business in the County of Orange,
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California.
4. DEFENDANT AC MEXICAN FOOD, INC. doing business as JALAPENOS MEXICAN
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FOOD (AC MEXICAN FOOD) is, and at all times relevant was, a California corporation
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Defendants sued herein as DOES 1-20, inclusive (the DOE Defendants), are unknown to
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Plaintiff, who therefore sues DOE Defendants by such fictitious names pursuant to
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California Code of Civil Procedure 474. When said true names and capacities are
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ascertained, Plaintiff will amend this complaint by inserting their true names and capacities
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herein. Plaintiff is informed and believes and thereon alleges that each of the fictitiously
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named defendants is responsible in some manner for the occurrences herein alleged, and
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that Plaintiff's damages as herein alleged were proximately caused by such defendants.
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proper venue for the filing and prosecution of the action as the real property that is at issue
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in this Complaint is located in the County of Orange and both Plaintiffs and Defendants
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Page 2 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
FACTUAL ALLEGATIONS
8. Plaintiffs are informed and believe and thereon allege that Defendant AC Mexican Food at
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herein mentioned there existed, a unity of interest and ownership between Defendant AC
Mexican Food and Defendant AVT such that any individuality and separateness between
these Defendants had ceased. Plaintiffs are informed and believe and thereon allege that
Defendant AVT paid Defendant AC Mexican Foods taxes, paid the debts of each other,
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and shared revenue from each other. Defendants also shared employees and officers.
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10. Plaintiffs are informed and believe and thereon allege that adherence to the fiction of the
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separate existence of Defendant AVT distinct from Defendant AC Mexican Food would
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permit an abuse of the corporate privilege and would allow Defendants to commit fraud on
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11. Further reference to Defendant AVT and Defendant AC Mexican Food herein shall include
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their actions taken on behalf of that entity and/or under the guise of either and/or both
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entities.
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12. Defendant AC Mexican Food advertised the sale of its restaurant, Jalapenos Mexican Food,
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located at 23624 El Toro Road, Lake Forest, County of Orange, California 92630 and the
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13. In October 2011, Plaintiff Francisco Izawa, responded to Defendant AC Mexican Foods
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14. Defendant AC Mexican Food provided Plaintiff Izawa with financial statements for the
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Subject Property indicating an annual gross income of one million and ninety thousand
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dollars ($1,090,000.00) and a net profit of approximately one hundred fifty-eight thousand
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seven hundred and sixty-three dollars ($158,763.00) for the 2010 financial year. These
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documents also showed a potential net profit of approximately one hundred and ninety-five
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Page 3 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
thousand dollars ($195,000.00) for 2011. Plaintiff Izawa later learned that this amount was
overly inflated.
15. The financial statements Defendant AC Mexican Food provided to Plaintiff Izawa was
composed from regular restaurant sales of approximately seven hundred and thirty
thousand dollars ($730,000.00) that were included in the restaurants point of sales system,
a large third party catering business of approximately two hundred and eighty thousand
dollars ($280,000.00) that was not included in the restaurants point of sales system, and a
company Defendant AVT that was also not included in the restaurants point of sales
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system. The total amount of business not included in the restaurants point of sales system
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16. Defendant AC Mexican Food also provided additional catering invoices totaling
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invoices were not included in Jalapenos reported income but Defendant AC Mexican Food
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represented to Plaintiff Izawa that the annual gross income of the business was at least
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approximately one million one hundred and seventy thousand dollars ($1,170,000.00) with
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profits of more than one hundred and ninety-five thousand dollars ($195,000.00).
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17. Plaintiffs are informed and believe and thereon allege that Ms. Natalie Russell was the
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President of Defendant AC Mexican Food and President of Defendant AVT at the time of
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the transaction. Ms. Russell represented to Plaintiff Izawa that some of the catering
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business was not booked in the Jalapenos sales system for various accounting and tax
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reasons. Ms. Russell assured Plaintiff Izawa that Defendant AVT will continue conducting
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all the businesses they have been doing with Jalapenos with Plaintiff Izawa and Plaintiff
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Frescos. Defendant AC Mexican Foods broker, Mr. Charles Machado made a similar
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18. Defendants did not inform Plaintiff Izawa that the third party catering business was
exclusively handled by its parent company Defendant AVT, and in fact was not part of the
Page 4 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
Subject Propertys business, although these sales were included in the financials provided
to Plaintiff Izawa.
19. Defendants did not inform Plaintiff Izawa that the financials provided to Plaintiff Izawa
included sales from Defendant AC Mexican Food providing burritos for Defendant AVTs
vending machines route, which were made to appear as catering business in the financials.
Plaintiffs did not learn that the vending machine burrito sales were included in the numbers
for the catering business until after the Subject Property was transferred to Defendant
Frescos and saw a significant decrease in the sales previously promised. After the Subject
Property was transferred, Plaintiffs discovered that a substantial portion of the catering
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business to Defendant AVT was burritos provided for Defendant AVTs vending machine
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routes, which Defendant AVT sold after the sale of the Subject Property. Defendants did
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not inform Plaintiff Izawa that Defendant AVT would substantially reduce the promised
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amount of catering business after the sale of the Subject Property was consummated. After
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the Subject Property was transferred, Defendant AVT sold their vending machine route,
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thereby eviscerating the income that the Subject Property generated in selling burritos for
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Defendant AVTs vending machine route. As a result, Plaintiffs Frescos only received a
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fraction of the previously promised catering business with Defendant AVT. In fact,
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Defendants kept only approximately four hundred dollars ($400.00) per week in catering
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sales or approximately twenty thousand dollars ($20,000) per year. This is a substantially
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different amount when compared to the promised eighty thousand dollars ($80,000) per
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year.
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20. Defendants broker represented to Plaintiff Izawa that the Subject Property was worth at
least four hundred thousand dollars ($400,000.00).
21. On or about November 14, 2011, Plaintiff Izawa signed a purchase agreement with
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Defendant AC Mexican Food to acquire the Subject Property for three hundred and twenty-
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22. On or about December 20, 2011, Plaintiff Frescos and Defendant AC Mexican Food
opened escrow for the purchase of the Subject Property.
Page 5 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
23. On or about February 28, 2012, the Subject Property was transferred to Plaintiff Frescos.
24. After taking possession of the Subject Property, Plaintiffs discovered that they did not
receive all of the third party catering business in the transaction, contrary to the
representations made to him by Defendants and their representatives. Instead, the catering
business was exclusively handled by Defendant AVT and the catering customers dealt
directly with Defendant AVT. Upon information and belief, Defendants had no intention
of transferring the catering business set forth in the financial records to Plaintiffs.
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25. The gross income from the catering business and the vending routes totaled approximately
four hundred and forty thousand dollars ($440,000.00). As a result of Defendants
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misrepresentations regarding the value of the Subject Property to Plaintiffs and Defendants
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misconduct after the transfer of the Subject Property to Plaintiff Frescos, Plaintiff Frescos
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did not receive the benefit of the third party catering business or the promised catering
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26. Plaintiffs invested at least eighty-five thousand dollars ($85,000.00) in the Subject Property
after it was transferred.
27. Plaintiff Frescos has been operating at a monetary loss since the Subject Property was
transferred.
28. Defendants conduct and misrepresentations have caused and continues to cause Plaintiffs
great financial harm.
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29. Plaintiffs incorporate by reference the allegations of paragraphs 1-28 supra as though fully
set forth herein.
30. Defendants misrepresented material facts to Plaintiff including, but not limited to the
following:
Page 6 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
a.
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That the annual gross income of the Subject Property was approximately one million
That the value of the Subject Property was at least four hundred thousand dollars
($400,000.00);
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That the Subject Property generates income from restaurant sales, providing third
Defendant AVT;
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That the third party catering business and catering business with Defendant AVT were
included in the sale of the Subject Property;
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That AVT will continue to use Plaintiff Frescos for its cateringneeds;
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f.
That the Subject Property generated a profit of at least one hundred and ninety-five
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That the financial statements provided to Plaintiffs were misleading and did not
accurately reflect Defendant AC Mexican Foods income.
31. The representations made to Plaintiff Izawa were false. Neither the third party catering
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service nor the catering business with Defendant AVT were included in the sale of the
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Subject Property.
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32. Defendants knew that the representations were false when Defendants representatives
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made them. Defendants provided Plaintiffs with false and misleading financial statements.
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Defendants knew that the third party catering business was Defendant AVTs exclusive
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businesses and that Defendant AC Mexican Food only provided services to Defendant
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AVT and not to end customers. Defendants knew that those businesses would not transfer
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to Plaintiff Frescos.
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33. Defendants also knew that after selling their vending route business, Defendant AVT
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would not keep the majority of the catering business with Plaintiff Frescos as promised at
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34. Defendants intended for Plaintiffs to rely on their representations. Defendants advertised
the sale of the Subject Property as a business earning more than one million dollars
Page 7 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
($1,000,000) annually with one hundred and ninety-five thousand dollars ($195,000.00) in
profit. Defendants intended for prospective buyers to rely on these figures to enter
negotiations. Defendants intended for Plaintiffs to rely on the financial documents and
presented Plaintiff Izawa with financial statements that included income from third party
catering business, income that Plaintiff Frescos would not later receive after the Subject
Property was transferred. Defendants never disclosed to Plaintiffs that part of the catering
business to Defendant AVT included the vending route business that Defendant AVT
planned to sell to a third party. Defendants never disclosed that the third party catering
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business was exclusively handled by Defendant AVT and was not part of Jalapenos
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business. Defendants knew that both the catering business and the vending machine
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35. Plaintiffs reasonably relied on Defendants representations and the financial documents
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Defendants provided to Plaintiff Izawa. In efforts to perform due diligence, Plaintiff Izawa
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questioned the discrepancy in figures between the gross sales on the Profit & Loss
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statement provided to him and the restaurant Point of Sales System. Defendants officer,
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Ms. Natalie Russell, advised Plaintiff that these transactions had not been reported in order
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to optimize tax and accounting processes between AVT and AC Mexican Grill. Defendants
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provided invoices to Plaintiff Izawa to confirm Defendants claims regarding the above-
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mentioned discrepancies.
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36. Plaintiffs were harmed by Defendants representations in the amount of at least four
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hundred and ten thousand dollars ($410,000.00). Plaintiff Frescos purchased the Subject
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Property for three hundred and twenty-five thousand dollars ($325,000.00). Plaintiff
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Frescos also made improvements to the restaurant in the amount of at least eighty-five
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thousand dollars ($85,000.00). Plaintiff Frescos also had to pay the fees and costs
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associated with the transaction. Plaintiffs have been further financially harmed as Plaintiffs
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could have invested the money used for the Subject Property to invest in another restaurant
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Page 8 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
substantial factor in causing Plaintiffs harm. Plaintiffs were not aware that
approximately four hundred and forty thousand dollars ($440,000.00) of the annual gross
income represented to Plaintiff Izawa was earned through the third party catering and
vending route services. Plaintiffs were not aware that these income-generating assets
would not be acquired in the purchase of the Subject Property. Had Plaintiffs been fully
apprised of the aforementioned material facts, Plaintiff Frescos would not have purchased
the restaurant.
38. In doing the things herein alleged, Defendants acted willfully and with malice to defraud
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Plaintiffs as defined in California Civil Code 3294, with the intent to cause injury to
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Plaintiffs by depriving them of their assets and for Defendants financial gain. Defendants
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are therefore guilty of fraud in conscious disregard of Plaintiffs rights, thereby warranting
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39. Plaintiffs incorporate by reference the allegations of paragraphs 1-38 supra as though fully
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from discovery important facts, including, but not limited to the following:
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a.
That the Subject Propertys third party catering business never belonged to Defendant
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AC Mexican Food, and that all customers traded exclusively with Defendant AVT. As
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such, earnings from the catering business would not be included in the sale of the
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Page 9 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
b.
That a large part of the catering business to Defendant AVT included the vending
route business, and the revenue generated from the vending routes would not be
c.
That the Subject Propertys vending routes were being sold to a third party; and
d.
That the Subject Propertys financials did not accurately reflect the actual value of the
Subject Property.
41. Plaintiffs did not know of these undisclosed and concealed facts.
42. Defendants intended to deceive Plaintiffs by concealing and/or not disclosing these facts.
Upon information and belief, Defendants knew that the Subject Property would not be
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worth the purchase price and that Plaintiff Frescos would not purchase the Subject Property
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at that price if these facts were truthfully relayed to Plaintiffs. Defendants also knew at the
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time of the transaction that they would be selling the vending routes to a third party.
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Defendants knew that the catering business was from AVTs customers and not AC
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Mexican Foods customers. Defendants also knew the actual amount of profits that AC
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with financial documents including the gross income from the catering service and the
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disclosing that the catering service and vending routes were not included in the transaction.
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Defendants confirmed the Subject Propertys finances associated with the catering services,
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provided additional invoices of catering services not included in the finances, and provided
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Plaintiffs with invoices associated with the vending routes to convince Plaintiffs to
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purchase the Subject Property. Defendants misled Plaintiffs into believing that the Subject
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Property would generate gross income in the amount of approximately one million one
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Plaintiffs that the sale of the Subject Property would not include the third party catering
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business or the vending route business. These sales totaled approximately four hundred
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and forty thousand dollars ($440,000.00), which was included in the calculation of the
Page 10 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
gross income represented to Plaintiffs. Plaintiff Izawa asked Defendants about the
discrepancy in the financials, more specifically, the four hundred and forty thousand dollars
($440,000.00) gross income that was not included in the restaurants point of sales system.
Ms. Russell, Defendants officer, represented to Plaintiff Izawa that the inconsistent
transactions had not been included in order to optimize tax and accounting processes
discrepancies.
44. Plaintiffs were harmed by Defendants concealment and/or nondisclosure in the amount of
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at least four hundred and ten thousand dollars ($410,000.00). Plaintiff Frescos purchased
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the Subject Property for three hundred and twenty-five thousand dollars ($325,000.00).
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Plaintiff Frescos also made improvements to the restaurant in the amount of at least eighty-
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five thousand dollars ($85,000.00). Plaintiff Frescos also had to pay the fees and costs
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associated with the transaction. Plaintiffs have been further financially harmed as Plaintiffs
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could have invested the money used for the Subject Property to invest in another restaurant
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45. Defendants concealment was a substantial factor in causing Plaintiffs harm. Had
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Plaintiffs been aware of the true annual net income of the Subject Property without the
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catering service and vending routes, Plaintiff Frescos would not have purchased the
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restaurant.
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46. In doing the things herein alleged, Defendants acted willfully and with malice to defraud
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Plaintiffs as defined in California Civil Code 3294, with the intent to cause injury to
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Plaintiffs by depriving them of their assets and for Defendants financial gain. Defendants
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are therefore guilty of fraud in conscious disregard of Plaintiffs rights, thereby warranting
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Page 11 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
RESCISSION
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47. Plaintiffs incorporate herein by reference the allegations of 1-46 supra as though fully set
forth herein.
48. At the time Plaintiffs agreed to purchase the Subject Property, Defendants and Does 1-20
and each of them misrepresented material facts and concealed and/or failed to disclose
material facts to Plaintiffs. Plaintiffs were not aware of the true financial status of the
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Subject Property or that the third party catering business belonged to Defendant AVT and
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would not transfer with the Subject Property as promised. Plaintiffs were also not aware
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that Defendant AVTs catering business included a large vending machine route business
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which Defendant AVT planned to sell, and that Defendant AVT would not keep the totality
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of its catering business as promised throughout the negotiations. If all material facts were
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truthfully disclosed to Plaitniffs, Plaintiffs would not have agreed to purchase the Subject
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Property.
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49. Defendants knew Plaintiffs were not aware of the material facts as set forth above.
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50. At the time of the transaction, Defendants knew of the true financial status of the Subject
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Property, that the vending routes and catering business would not be included in the sale,
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51. The fraudulent and unlawful actions by Defendants were likely to induce Plaintiffs to
purchase the Subject Property.
52. By this Complaint, Plaintiffs demand that Defendants rescind the sale. Plaintiffs offer to
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return the Subject Property in exchange for a restoration to Plaintiffs of the amount paid by
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Plaintiffs to Defendants. This amount is three hundred and twenty-five thousand dollars
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($325,000.00).
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53. Plaintiffs are entitled to restitution of their costs, expenses, and damages incurred in order
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to restore the parties to their respective positions as they existed prior to the sale of the
Page 12 of 14
Frescos Mexican Grill, et al. v. AVT, et al. Complaint
Subject Property, which amount exceeds four hundred and ten thousand dollars
($410,000.00) and will be proven at trial. Plaintiffs further seek an adjustment of the
damages.
54. If the Court finds that the rescission is based upon fraud, Plaintiffs request the Court
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UNJUST ENRICHMENT
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55. Plaintiffs incorporate herein by reference the allegations of 1-54 supra as though fully set
forth herein.
56. Defendants by their conduct as alleged above have been unjustly enriched at the expense
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and detriment of the Plaintiffs. Defendants received at least three hundred and twenty-five
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thousand dollars ($325,000.00) from Plaintiff for the Subject Property. Plaintiff Frescos
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also expended at least eighty-five thousand dollars ($85,000.00) to improve the Subject
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Property.
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57. Plaintiffs do not presently know the value of goods and monetary enrichment of
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Defendants. Assets and money wrongfully begotten from Plaintiffs by the Defendants are
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unknown with specificity but are certainly in excess of four hundred and ten thousand
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dollars ($410,000.00).
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WHEREFORE, Plaintiffs Frescos Mexican Grill and Francisco Izawa pray for judgment
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against Defendant AVT, Inc., Defendant AC Mexican Food, Inc., and DOES 1-20, and each of
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them, as follows:
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Frescos Mexican Grill, et al. v. AVT, et al. Complaint
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incurred by Plaintiffs as a result of entering into the agreement and purchasing the
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Subject Property;
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13. Such further relief as the Court deems just and proper.
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Frescos Mexican Grill, et al. v. AVT, et al. Complaint