Judge Alison Mackenzie, Case Number: 20STCV25574, Date: 2024-01-23 Tentative Ruling

Judge: Alison Mackenzie, Case: 20STCV25574, Date: 2024-01-23 Tentative Ruling

Case Number: 20STCV25574 Hearing Date: January 23, 2024 Dept: 55

NATURE OF PROCEEDINGS: Motion of Defendant Ezra Ozer for Leave to File an Amended Cross-Complaint.

The motion is denied.

Background

Plaintiffs MAYFLOWER REMODELERS, INC. (“Mayflower”) and BUILDERS OF AMERICA, INC. (“Builders”) (collectively, “Plaintiffs”) bring this case against Defendants EZRA OZ OZER, SKY HIGH BUILDERS, INC., SAFE-WAY CONSTRUCTION, INC., and VENICE 770 BH, LLC (“Defendants”) alleging Defendants fraudulently obtained loans and additionally misappropriated funds from Plaintiffs.

On 8/13/2020, Plaintiffs got default entered against Defendants. On 8/25/2020, Defendant Ozer, individually and derivatively on behalf of Builders and Mayflower (“Defendant”), filed a Cross-Complaint against Plaintiffs as well as HILDA COMBS, alleging that Combs improperly took control of Builders and diverted its funds to herself and asserting claims for conversion, civil theft, and removal of Hilda Coms as director (declaratory relief). The Cross-Complaint was never served. On 1/20/2023, the Court set aside the defaults against Defendants and dismissed the Cross-Complaint, pursuant to the parties’ stipulation.

Defendant has now filed a motion requesting leave to file an Amended Cross-Complaint against Plaintiffs and Ms. Combs with claims for (1) Fraud; (2) Conversion; and (3) Declaratory Relief. Plaintiffs oppose the motion.

Legal Standard

A defendant who “fails” to plead a compulsory cross-complaint may seek leave from the court to file or amend a cross-complaint. CCP § 426.50. The court must grant leave to file such a compulsory cross-complaint “unless bad faith of the moving party is demonstrated.” Silver Organizations Ltd. v. Frank (1990) 217 Cal. App. 3d 94, 99.

Apart from the statute governing compulsory cross-complaints, courts may allow a party to amend a pleading in the furtherance of justice. CCP § 473(a). “If discovery and investigation develop factual grounds justifying a timely amendment to a pleading, leave to amend must be liberally granted.” Mabie v. Hyatt (1998) 61 Cal.App.4th 581, 596.

The Court, however, has the discretion to deny leave to amend if it finds the party’s delay in presenting the amendment was unwarranted, or when it determines that the other party will be prejudiced due to needing more discovery or delay of the trial. Miles v. City of Los Angeles (2020) 56 Cal.App.5th 728, 739. Solit v. Tokai Bank (1999) 68 Cal. App. 4th 1435, 1448. A party filing a motion for leave to amend a pleading must comply with California Rule of Court 3.1324, including submitting a declaration specifying the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and why the request for amendment was not made earlier. CRC 3.1324(b).

“When a trial court denies leave to amend, the decision has been upheld on grounds such as … the conduct of the moving party or belated presentation of the amendment.” Atkinson v. Elk Corp. (2003) 109 Cal. App. 4th 739, 759.

Analysis

Defendant seeks to file the Amended Cross-Complaint under CCP § 426.50, arguing that the claims in the Amended Cross-Complaint are compulsory and that Plaintiffs have not and cannot show bad faith on the part of Defendant in seeking to amend the Cross-Complaint. The Court concludes that CCP § 426.50 is not the proper statute to analyze Defendant’s request because Defendant did not “fail” to plead the related causes of action prior to the instant request. The Amended Cross-Complaint attached to the motion changes one cause of action from the Cross-Complaint (alleging fraud instead of civil theft) but both pleadings allege the same conduct by Combs. Defendant chose to dismiss the Cross-Complaint; he did not “fail” to plead related causes of action. See Crocker Nat Bank v. Emerald (1990) 221 Cal. App. 3d 852, 863 (concluding that defendant had not “failed” to plead related claims under section 426.50 when the claims had been dismissed in prior demurrer).

The request to amend the Cross-Complaint therefore is analyzed under CCP § 473(a). The declaration by Defendant’s counsel does not state what Defendants discovered since the time of the filing of the Answer and Cross-Complaint that would give rise to the claims alleged in the Amended Cross-Complaint, let alone when such facts were discovered or why Defendant waited until October 2023 to seek leave to amend. In contrast, the declaration by Plaintiff’s counsel states that Defendant has not received any information during the case that he did not know at the time of the filing of the Answer and Cross-Complaint. (Latter Decl., ¶ 9.)

In addition, in August 2023 the Court granted Plaintiffs’ unopposed ex parte request to continue trial to 03/11/2024 (8/18/23 Minutes). Defendant did not tell the Court it intended to seek to amend the Cross-Complaint at that time and did not oppose Plaintiffs’ request for a six-month trial continuance. Permitting an amendment to assert claims Defendant could have (and did) assert earlier would prejudice Plaintiffs given that trial is in less than two months. (Latter Decl., ¶ 11.) For all these reasons, the Court concludes that Defendant has not made a sufficient showing to warrant relief under CCP § 473(a). The Court therefore exercises its discretion and denies the motion.