Judge: Anne Richardson, Case: 23STCV07389, Date: 2024-03-29 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 23STCV07389    Hearing Date: March 29, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

1. Complaint [Plaintiff Calima Electric, Inc.]

Plaintiff Calima Electric Inc. (Calima Electric) sues (1) Defendant /Cross-Defendant/Cross-Complainant The Hatch Group, Inc. (The Hatch Group or THG), (2) Defendant/Cross-Complainant/Cross-Defendant Rolling Greens Nursery, Inc. (Rolling Greens), (3) Defendant/Cross-Complainant SL Retail Owner LLC (SL Retail), and Does 1 through 100 pursuant to an April 4, 2023, Complaint alleging claims of (1) Breach of Written Contract, (2) Open Book Account, (3) Quantum Meruit, and (4) Foreclosure on Mechanic’s Lien.

The first through third causes of action are alleged only against The Hatch Group and Does 1-25 and arise from allegations that THG owes Calima Electric $215,936.95 in relation to certain labor, supplies, materials, and/or services for certain renovation work at the work improvement commonly known as the Rolling Green Home & Garden located at 12833Ventura Boulevard, Studio City, California 91604 (the Property). The work was performed pursuant to a subcontractor agreement, with THG as the general contractor and Calima Electric as the subcontractor.

The fourth cause of action is alleged only against Rolling Greens, SL Retail, and Does 20-100 based on allegations that Rolling Greens, SL Retail, and these Does outright own or own some interest in the Property on which work was performed by Calima Electric, thus supporting a foreclosure on a mechanic’s lien on that property.

On May 18, 2023, THG filed an Answer to Complaint.

On July 26, 2024, Rolling Greens and SL Retail filed an Answer to Complaint.

2. Cross-Complaint [Rolling Greens and SL Retail]

On July 27, 2023, Rolling Greens and SL Retail filed a Cross-Complaint alleging claims of (1) Declaratory Relief and (2) Indemnity against The Hatch Group and Does 1 through 20.

The claims arise from allegations that in 2021, Rolling Greens and SL Retail entered into a written lease agreement relating to Rolling Greens’ lease of the Property, and that in March 2022, THG bound itself to that lease agreement by entering a separate contractor agreement with SL Retail as owner of the Property, with the contractor agreement incorporating the lease agreement’s terms at Article 9, including a term requiring that THG pay off any mechanic’s lien on the Property.

The Cross-Complaint attaches a copy of the contractor agreement but not the written lease agreement.

On September 12, 2023, The Hatch Group filed an Answer to Cross-Complaint.

3. Cross-Complaint [The Hatch Group (THG)]

That same day, THG filed a Cross-Complaint alleging claims of (1) Breach of Contract, (2) Quantum Meruit, and (3) Account Stated against Rolling Greens and Roes 1 through 100.

The claims arise from allegations that Rolling Greens and Roes 1 through 100 owe THG $345,276 for the reasonable value of services rendered in relation to the contractor agreement.

B. Relevant Procedural History

On October 11, 2023, Rolling Greens filed a notice of posting of mechanic’s lien discharge bond, noticing for the Court that, pursuant to Civil Code section 8424, on August 2023, Rolling Greens recorded a “Discharge of Lien Bond” with the County Recorder for the County of Los Angeles in the amount of $269,921.19, the purpose of which was to discharge the mechanic’s lien recorded by Plaintiff Calima Electric on February 23, 2023.

On November 29, 2023, Rolling Greens filed a notice of related case regarding this action and case numbers 23BBCV01490 (June 30, 2023, action filed with the Burbank court and involving Rolling Greens and THG) and 23BBCV02081 (September 11, 2023, action filed with Burbank court and involving “Glover Plumbing and Mechanical” against THG, et al.).

On December 13, 2023, Rolling Greens again filed a notice of posting mechanics lien release bond attaching the August 2, 2023, “Discharge of Lien Bond.”

C. Motion Before the Court

On January 9, 2024, Plaintiff Calima Electric filed a motion for leave to file a First Amended Complaint. The motion was set for hearing at 8:30 AM on March 29, 2024, and involves the elimination and addition of various claims and the addition of various defendants.

On February 29, 2024, the Court reset the hearing to 1:30 PM on March 29, 2024.

On March 18, 2024, Defendant THG filed an opposition to Calima Electric’s motion.

On March 22, 2024, Plaintiff Calima Electric filed a reply to THG’s opposition.

Later that same day, Defendant Rolling Greens noticed its intent to appear remotely at the hearing on Calima Electric’s motion. However, the record fails to show that Rolling Greens filed an opposition to the motion to file the proposed FAC.

SL Retail has not made any filings with respect to Calima Electric’s motion.

Plaintiff Calima Electric’s motion is now before the Court.

II. Evidentiary Objections

A. Reply Evidentiary Objections to Opposition’s Cate Declaration

Objections to ¶¶ 3, 5, Exs. B, D: OVERRULED.

III. Motion for Leave to Amend: GRANTED.

A. Legal Standard

California Code of Civil Procedure section 473, subdivision (a)(1) provides, in relevant part: “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.”

Under California Rules of Court Rule, rule 3.1324, subdivision (a), a motion to amend a pleading shall:

(1) Include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments;

(2) State what allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph and line number, the deleted allegations are located; and

(3) State what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located.

Under California Rules of Court, rule 3.1324, subdivision (b), a separate declaration must accompany the motion and must specify:

(1) The effect of the amendment;

(2) Why the amendment is necessary and proper;

(3) When the facts giving rise to the amended allegations were discovered; and

(4) The reasons why the request for amendment was not made earlier.

“This discretion should be exercised liberally in favor of amendments, for judicial policy favors resolution of all disputed matters in the same lawsuit.” (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1047 (Kittredge Sports).)

Although California courts will not ordinarily consider the validity of a proposed amended pleading in ruling on a motion for leave to amend given that any grounds for a demurrer or a motion to strike will be premature at that time, courts do have discretion to deny leave to amend when “the insufficiency of the proposed amendment is established by controlling precedent and … [can]not be cured by further appropriate amendment.” (See California Casualty General Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280-281 (California Casualty), citations omitted, overruled on other grounds by Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 403-406; see, e.g., Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 231 [not an abuse of discretion to deny leave to amend when “proposed amendment would have been futile because it was barred by the statute of limitations” with no indication of relating back to the original complaint].) However, where “the proposed legal theory [at issue] is a novel one, ‘the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings.’” (Kittredge Sports, supra, 213 Cal.App.3d at p. 1048, quoting California Casualty, supra, at p. 280.)

Alternately, even if a proposed amendment is filed in proper form, a long, unwarranted, and unexcused delay in presenting the amendment may nevertheless serve as grounds for a court to deny leave to amend. (Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 939-940.) In most cases, the factors for timeliness are: (1) lack of diligence in discovering the facts or in offering the amendment after knowledge of them; and (2) the effect of the delay on the adverse party. (Id. at p. 940.) If the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party, the judge has discretion to deny leave to amend. (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490.) Prejudice exists where the amendment would require delaying the trial, resulting in loss of critical evidence, or added costs of preparation such as an increased burden of discovery. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488.)

B. Analysis

1. Procedural Requirements

First, Plaintiff Calima Electric’s motion satisfies California Rules of Court, rule 3.1324, subdivision (a)(1) because clean and redline copies of the proposed FAC are attached to the moving papers. (Mot., Gharakhani Decl., Exs. A-B.)

Second, Plaintiff Calima Electric’s motion satisfies California Rules of Court, rule 3.1324, subdivision (a)(2)-(3) by clearly establishing the differences between the Complaint and proposed FAC through the points and authorities (see Mot., p. 1, § I) and through the attachment of a redline copy of the proposed FAC showing its differences from the Complaint (Mot., Gharakhani Decl., Ex. B.)

Third, Plaintiff Calima Electric’s motion satisfies California Rules of Court, rule 3.1324, subdivisions (b)(1)-(4) by describing:

(1) Through incorporation, the effect of the amendment, i.e., (a) the elimination of the fourth cause of action, (b) the addition of THG’s owner, Ronald L. Hatch, as a Defendant to the claims stated against THG, (c) the addition of claims for violation of Civil Code section 8800 et seq., conversion, and receipt of stolen property against THG and Ronald L. Hatch, and (d) the addition of two claims for enforcement of various bonds, which add American Contractors Indemnity Company (ACIC) and The Hanover Insurance Company (Hanover) as Defendants in addition to Rolling Greens and SL Retail (see Mot., Gharakhani Decl., ¶ 3, Ex. B);

(2) Why the amendment is necessary and proper, i.e., (a) to eliminate a claim that is no longer operative, (b) to add claims based on new discovery to the effect that Rolling Greens and SL Retail paid THG as general contractor and that THG’s owner, Ronald L. Hatch, intentionally diverted those monies to himself, and (c) to have the case tried on the merits (see Mot., Gharakhani Decl., ¶¶ 5-13);

(3) When the facts giving rise to the amendment were discovered, i.e., (a) on August 2, 2023, for the removal of the fourth cause of action—which can be alternately effected through a request for dismissal at any time—and (b) on or around December 2023 for the facts relating to payment to THG and unlawful diversion of funds by Ronald L. Hatch (Mot., Gharakhani Decl., ¶¶ 6-12); and

(4) Why the amendment was not requested sooner, i.e., (a) as to removal of the fourth cause of action, not directly addressed, but the Court notes dismissal is a matter of right for the pleading party, and (b) ongoing discovery as to THG and Ronald L. Hatch, with this motion being filed on January 29, 2023, a little over a month after Ronald L. Hatch’s deposition on December 21, 2023, when the intentional diversion of funds to be paid to Calima Electric was discovered. (Mot., Gharakhani Decl., ¶¶ 7-12).

2. Substantive Discussion

a. Parties’ Arguments

In its opposition, The Hatch Group argues that the motion for leave to amend should be denied because it states causes of action that are fatally defective on two grounds: (1) Plaintiff Calima Electric’s license to operate as a contractor was not operative at all relevant times for this action, for which reason, pursuant to Business and Professions Code 7031, subdivision (a), Calima Electric should not be able to recover compensation for its work; (2) the claims to be stated against Donald L. Hatch are defective based on the above; and (3) Calima Electric’s motion does not identify when the new information was obtained and on what information the new discovery was obtained. (Opp’n, pp. 2-4.)

In reply, Plaintiff Calima Electric filed objections to the evidence attached to the opposition to show that Calima Electric was unlicensed at all relevant times in this action, which the Court overruled in Section II.A. above. Plaintiff Calima Electric also argues that section 7031 does not bar the relief requested in the Complaint for various reasons: (1) these grounds should be raised in a challenge to the pleading and a challenge now is premature (argued as “untimely”); (2) section 7031 contains an exception at subdivision (e) that is not addressed in the opposition and may permit relief despite the general rule in subdivision (a) of this statutory section; and (3) if necessary, Plaintiff can provide proof of licensure or satisfy the requirements of subdivision (e). (Reply, pp. 2-7.)

b. Court’s Determination

The Court finds in favor of Plaintiff Calima Electric.

First, the Court rejects the third point argued by THG, i.e., that the proposed amendment did not identify the new information that was discovered (the grounds for liability against Ronald L. Hatch, for example) and when that information was discovered (on or around December 2023). (See Mot., Gharakhani Decl., ¶¶ 5-12.)

Second, the Court finds that the opposition’s failure to discuss the exception to the rule stated in subdivision (e) of Civil Code section 7031 undercuts a finding that THG has shown that the proposed amendment is fatally defective, and incapable of curing based on section 7031, subdivision (a).

Third, the Court notes that any dispute as to licensure or exceptions thereto would best be addressed in an evidentiary motion, which is premature at this juncture.

Accordingly, the Court GRANTS Plaintiff Calima Electric’s motion. Any challenge to the pleadings can proceed after service of the proposed FAC, which must be filed with the Court in the same form as now attached to the Gharakhani declaration as Exhibit A. 

IV. Conclusion

Plaintiff Calima Electric, Inc.’s Motion Seeking Leave to Amend Complaint is GRANTED.

Plaintiff Calima Electric, Inc. SHALL file its First Amended Complaint in the same form as now attached to the Gharakhani declaration as Exhibit A within 5 days of this ruling.