Yes it will, if the car is set up properly. In California, there is nothing illegal about swaping engines into another car. If I remember correctly (and please verify with the DMV before doing it) you can swap a different engine in, but you will have to notify the DMV of the change, and your car will take on the smog characteristics of the new engine. For example, if you put in a 96 M3 engine into your e30, it will have to run the smog test as the 96 M3, not as your 318i.