Judge: Ashfaq G. Chowdhury, Case: 21GDCV00118, Date: 2023-11-17 Tentative Ruling
Case Number: 21GDCV00118 Hearing Date: November 17, 2023 Dept: E
Hearing Date: 11/17/2023 – 10:00am
Case No. 21GDCV00118
Trial Date: 04/08/2024
Case Name: LEVON H. BARDAKJIAN, as Co-Trustee of the Levon and Sylvia
Bardakjian Family Trust dated July 24, 2004; SYLVIA R. BARDAKJIAN, a Co-Trustee
of the Levon and Sylvia Bardakjian Family Trust dated July 24, 2004; v. MARK S.
ADAMS, an individual; CALIFORNIA RECEIVERSHIP GROUP, Inc., a California
corporation
[TENTATIVE
RULING ON MOTION FOR LEAVE TO FILE FAC]
RELIEF REQUESTED
Plaintiffs, Levon H. Bardakjian and Sylvia R. Bardakjian, will and hereby do
move this Court for an order granting Plaintiffs leave to file a First Amended
Complaint (FAC).
This Motion is made pursuant to Code
of Civil Procedure §§ 473(a)(1) and 576 and California Rules of Court Rule
3.1324 on the grounds that the requested amendment is in the interests of
justice and supported by the facts alleged in the proposed First Amended
Complaint attached hereto as Exhibit 1. Plaintiffs bring this Motion based on
information discovered during the course of this litigation concerning damages
caused by Defendants’ failure to properly insure the subject real property and
continued delays that exposed Plaintiffs to litigation from the tenants
occupying the subject real property. Plaintiffs seek to add allegations to
their Complaint. Said amendment will not prejudice Defendants. Plaintiffs
request that the proposed First Amended Complaint, attached hereto as Exhibit
1, be deemed filed and served as of the date this Motion is granted.
For the reasons set out below, the
Court’s tentative is to GRANT the motion.
PROCEDURAL
Moving Party: Plaintiffs, Levon H.
Bardakjian and Sylvia R. Bardakjian
Responding Party: Defendants, Mark S. Adams and California Receivership Group,
BC (improperly named as California Receivership Group, Inc., a California
corporation). Defendants are collectively referred to as Receiver.
Moving Papers: Notice/Motion
Opposing Papers: Opposition
Reply Papers: No Reply as of 11/15
Proof of Service Timely Filed (CRC
Rule 3.1300(c)):Ok
16/21 Court Days Lapsed (CCP 1005(b)):Ok
Proper Address (CCP §1013, §1013a, §1013b):Ok
BACKGROUND
eCourt lists three related cases
that are related to the instant action (21GDCV00118).
This action (21GDCV00118) stems from
the related “receivership case” (EC067418 – City of Duarte v. Levon J
Bardakjian, et al. – initiated 12/08/2017) in which Plaintiffs in the
instant case were named as Defendants. The receivership case (EC067418)
pertained to the City of Duarte alleging nuisance abatement and receivership for
alleged substandard conditions of the Subject Property at 1001 Las Lomas Road,
Duarte, California 91010 owned by the Bardakjians. In the receivership case,
Mark Adams and California Receivership Group were appointed as receivers for
the Subject Property, but they were removed and replaced as the receiver. Eric
Beatty was appointed the replacement receiver in April of 2020.
On September 24, 2020, Miken
Construction Company, Inc. filed a Complaint in related case 20GDCV00769
alleging causes of action for breach of contract and foreclosure of mechanic’s
lien against Eric Beatty, California Receivership Group, Mark Adams, and the
Bardakjians.
Plaintiffs in the instant action
sought leave of Court in the receivership case to file the instant action, were
granted leave, and on January 26, 2021, Plaintiffs filed the instant action
(21GDCV00118) against Mark Adams and California Receivership Group alleging
claims for Intentional Misrepresentation, Breach of Fiduciary Duty,
Professional Malpractice, and Accounting. In the instant action, on or about
May 27, 2021, Mark Adams and California Receivership Group filed a
Cross-Complaint against the Bardakjians, 1001 Las Lomas LLC, and the City of
Duarte. On or about September 24, 2021, the Court granted the City of Duarte’s
special motion to strike the causes of action brought against the city of
Durate in the Cross-Complaint. On 2/9/2022, Mark Adams and California
Receivership filed an amended cross-complaint, and on 03/10/2022, Mark Adams
and California Receivership Group filed a Second Amended Cross-Complaint
against the Bardakjians, and 1001 Los Lomas LLC. On or about April 26, 2022,
pursuant to stipulation of the parties, the Second Amended Cross-Complaint was
dismissed without prejudice as to the remaining parties.
On or about January 4, 2023, a group
of the Subject Property’s tenants filed a Complaint for Damages and Injunctive
Relief (23AHCV00021 – Jose Blanco, et al. v. Levon Bardakjian, et al.
– “Tenants’ Lawsuit”) against the Bardakjians, both in their capacities as
trustees and in their individual capacities, as well as 1001 Las Lomas LLC.
LEGAL STANDARD – LEAVE TO
AMEND
The
court may, in furtherance of justice and on any proper terms, allow a party to
amend any pleading. (Code Civ. Proc., § 473, subd. (a)(1); Branick v.
Downey Savings & Loan Association (2006) 39 Cal.4th 235,
242.) The court may also, in its discretion and 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. (Code Civ. Proc., §
473, subd. (a); Branick, supra, 39 Cal.4th at
242.) Judicial policy favors resolution of all disputed matters between
the parties and, therefore, the courts have held that “there is a strong policy
in favor of liberal allowance of amendments.” (Mesler v. Bragg
Management Co. (1985) 39 Cal.3d 290, 296-97; see also Ventura v.
ABM Industries, Inc. (2013) 212 Cal.App.4th 258, 268) [“Trial courts
are bound to apply a policy of great liberality in permitting amendments to the
complaint at any stage of the proceedings, up to and including trial where the
adverse party will not be prejudiced.”].) Leave to amend
is thus liberally granted, provided there is no statute of
limitations concern. (Kolani v. Gluska (1998) 64
Cal.App.4th 402, 411.) The court may deny the plaintiff’s leave to amend
if there is prejudice to the opposing party, such as delay in trial, loss of
critical evidence, or added costs of preparation. (Id.)
Under California Rules of Court, rule 3.1324, a motion
to amend a pleading before trial must (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. (Cal. Rules of Court, rule 3.1324(a).)
Further, a separate supporting 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 reason why the request for
amendment was not made earlier must accompany the motion. (Id., rule
3.1324(b).)
“Leave to amend is in general required to be liberally
granted [citation omitted], provided there is no statute of limitations
concern. Leave to amend may be denied if there is prejudice to the opposing
party, such as delay in trial, loss of critical evidence, or added costs of
preparation. [citation omitted].” (Kolani v. Gluska (1998) 64
Cal.App.4th 402, 411.)
ANALYSIS
Plaintiffs’ Moving Arguments
Plaintiffs
seek leave to amend to file the FAC because of circumstances surrounding the
Tenants’ Lawsuit (23AHCV00021) that was filed on or about January 4, 2023 by a
group of the Subject Property’s tenants that named Plaintiffs as defendants in
both their capacities as trustees and as individuals. Plaintiffs argue that the
factual allegations and causes of action in the Tenants’ Lawsuit include
damages for habitability issues during the time period of the receivership of
the Subject Property. Plaintiffs state they made a claim with Northfield
Insurance Company, the insurer from whom Defendants had obtained a policy
during their time as receiver of the Property. Plaintiffs state that Northfield
Insurance Company issued a disclaimer and refused to accept tender because the
insurance policy acquired by Defendants had a habitability exclusion and did
not name Plaintiffs as insured. Plaintiffs seek to amend the Complaint in the
instant action to add allegations related to the Tenants’ Lawsuit and
Defendants’ failure to properly insure the Subject Property and Plaintiffs,
which are newly occurring and newly discovered facts that related to
Plaintiffs’ claims in this action, including Defendants’ breach of fiduciary
duty, professional malpractice, and the damages suffered by Plaintiffs.
More specifically, Movants argues:
The allegations
Plaintiffs seek to add in the First Amended Complaint concern the potential
liability Plaintiffs face in the now related Tenants’ Lawsuit brought by
tenants of the Property against Plaintiffs as the former owners of the
Property. Plaintiffs were initially named as defendants in said lawsuit, in
both their individual capacities and in their capacities as Trustees of the
Levon H. Bardakjian and Sylvia R. Bardakjian Family Trust dated July 24, 2004.
In addition, 1001 Las Lomas, LLC, whose sole managing members are Levon
Bardakjian and Sylvia Bardakjian, was also named as a defendant in the Tenants’
Lawsuit. Although Plaintiffs were dismissed in the
Tenants’ Lawsuit on August 29, 2023, they were dismissed without prejudice and
can be named again at any time during the pendency of the litigation. 1001 Las
Lomas, LLC was not dismissed and is still a defendant in the Tenants’ Lawsuit.
Furthermore, Defendants have not been named as
defendants in the Tenants’ Lawsuit. Because Plaintiffs contend that the alleged
damages suffered by the plaintiffs in the Tenants’ Lawsuit were caused by
Defendants’ actions, the addition of the allegations proposed by Plaintiffs in
this Motion would further the interests of judicial efficiency by eliminating
the need for Plaintiffs to file a separate action against the same Defendants
in this matter should the Tenants’ Lawsuit result in a judgment or settlement
against Plaintiffs.
Additionally, the
allegations Plaintiffs wish to add to the First Amended Complaint further
evidence Defendants’ liability. The Second Cause of Action in Plaintiffs’
Complaint against Defendants is for Defendants’ Breach of Fiduciary Duty as
court-appointed receivers. The failure to properly insure the Property is
conduct fell below the standard of care owed by in such a fiduciary
relationship, thus exposing the Property and Plaintiffs to unnecessary risk,
peril, and damages. The Third Cause of Action in Plaintiffs’ Complaint against
Defendants is for Defendants’ Professional Malpractice. Defendants’ failure to
properly insure the Property is conduct that fell below the standard of care
for receivers. Additionally, the Tenants’ Lawsuit alleges damages for habitability
issues that occurred during the time that Defendants, not Plaintiffs, were in
complete control of the Property, and which were caused by Defendants’
negligent and fraudulent actions that caused significant delays and ultimate
the failure to rehabilitate the Property.
(Pl. Mot. p. 4-5.)
Procedural
Analysis by the Court under CRC 3.1324(a)-(b)
CRC 3.1324(a)
Under California Rules of Court, rule 3.1324, a motion
to amend a pleading before trial must:
(1) include
a copy of the proposed amendment or amended pleading, which must be serially
numbered to differentiate it from previous pleadings or amendments;
Here, Plaintiffs satisfied this
requirement. Plaintiffs attached Exhibit 1 to their motion which is the
proposed “First Amended Complaint For Damages.”
(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. (Cal. Rules of Court, rule 3.1324(a).)
Here, Plaintiffs satisfied this requirement. Generally
speaking, Plaintiffs argue that the only changes in the allegations is to add
the new damages to Plaintiffs based on the Tenants’ Lawsuit and the additional
factual details regarding the failure to properly insure the Property that were
previously unknown facts stemming from the same conduct of Defendants during
the course of the receivership of the Property. Plaintiffs argue that as the
amendment is based on the same general facts pled in the Complaint, there is no
statute of limitations issue presented.
Specifically as to what allegations are proposed to be
added, and where, Plaintiffs list as follows:
·
The Defendants also failed to adequately
insure the property and the Plaintiffs during the receivership. The unnecessary
insurance policy that Defendants obtained, effective September 17, 2019 to
September 17, 2020, and September 17, 2020 to September 17, 2021 following
renewal, had a habitability exclusion in its terms. On or about January 4,
2023, a group of tenants residing at the Property filed a Complaint for Damages
and Injunctive Relief (LASC Case No. 23AHCV00021) that named Plaintiffs as
defendants, both in their capacities as Trustees of the Levon H. Bardakjian and
Sylvia R. Bardakjian Family Trust dated July 24, 2004, and in their individual
capacities, as well as 1001 Las Lomas, LLC. The factual allegations and causes
of action alleged in the Complaint include damages for habitability issues
during the time period of the receivership and the effective period between
September 17, 2019 and September 17, 2021 of the insurance policy taken out by
Defendants. However, because the insurance policy taken out by Defendants has
an exclusion for habitability, Plaintiffs are not covered by the policy and the
insurance company has issued a disclaimer. [Page 8, paragraph 31, lines 8-20]
·
Defendants further breached their
fiduciary duty by failing to adequately insure the Property. The unnecessary
insurance policy that Defendants obtained, effective September 17, 2019 to
September 17, 2020, and September 17, 2020 to September 17, 2021 following
renewal, had a habitability exclusion in its terms and did not cover the owners
of the building as they had not been named in the policy. Consequently, the
Property and its owners were unnecessarily exposed to risk and liability.
Because of the habitability exclusion and failure to cover the owners of the
Property, the insurer has refused to accept tender of the claim brought by a
group of tenants (in LASC Case No. 234HCV00021) regarding habitability during
the period of time covered under the insurance policy. Both the Property and
the Plaintiffs here face liability and have incurred attorney fees and costs in
defense of the claims brought by the tenants for the period of time the
insurance policy was in effect. The claims made by the tenants in their lawsuit
during the period after the receivership had begun, including the period after
Defendants were replaced as receivers, would not have existed had the
Defendants acted in the best interests of the Property, the Plaintiffs, and the
tenants instead of delaying the rehabilitation of the building to enrich
themselves and failing to address the habitability issues. (Page 12, paragraph
47, lines 1-15]
·
The delays and failure to remedy the
N&O violations further exposed Plaintiffs and the Property to unnecessary
risk and liability. The lawsuit brought by the tenants over habitability claims
(LASC Case No. 23AHCV00021) includes the period of time during which the
Property was in receivership while Defendants acted as receivers of the
Property and the period of time after Defendants had been replaced by the new
receiver. Because of the Defendants’ failure to remedy the N&O violations,
failure to establish a proper plan for remediation and correction of the
N&O violations, and failure to adequately manage the receivership in a
fiscally responsible manner, the Plaintiffs have incurred damages in the form
of costs and attorney fees required to defendant against the claims made by the
tenants in their lawsuit and face further liability for the claims made by the
tenants therein. Had Defendants’ management of the receivership not fallen
below the standard of care, the habitability issues would have been timely and properly
remedied. [Page 13, paragraph 55, lines 26-28, and page 14, paragraph 47, lines
1-9]
(Pl. Mot. p. 8-9.)
CRC 3.1324(b)
Further, under CRC 3.1324(b), a separate declaration
must accompany the motion and must specify:
(1) the
effect of the amendment;
Here, Plaintiffs satisfied this requirement. As noted
in Plaintiffs’ counsel’s declaration (Aroustamian’s Declaration):
“The purpose and effect of the amendment is to add the
newly discovered factual allegations which show how Defendants breached their
fiduciary duty and were professionally negligent. Furthermore, the amendment
will add to the damages caused by Defendants in light of the new development
that is the Tenants’ Lawsuit. The proposed amendment will not prejudice the
Defendants. There are several months before the scheduled date of the trial
during which time Defendants can conduct any further discovery required. Furthermore,
Plaintiffs are not adding any new legal theories or causes of action.
Plaintiffs are only adding newly discovered additional details necessary for
the prosecution of their claims.” (Aroustamian Decl. ¶6.)
(2) why
the amendment is necessary and proper;
Here, Plaintiffs satisfied this requirement. As noted
in the Aroustamian Declaration:
“The proposed additional allegations in the proposed
First Amended Complaint are necessary and proper to facilitate the interest of
justice and allow resolution of all of Plaintiffs’ claims in connection with
the wrongdoing and injuries Plaintiffs suffered as a result of the actions of
Defendants. The factual allegations are especially necessary to Plaintiffs’
claims that Defendants breached their fiduciary duty and were professionally
negligent by failing to adequately insure the Property and its owners during
Defendants’ time as receiver. Furthermore, the delays and failure to remedy the
violations exposed Plaintiffs to liability for the claims brought against them
in the Tenants’ Lawsuit and further costs, attorney fees, and time required to
defend against said claims. It would further be in the interests of judicial
economy and in furtherance of justice to allow Plaintiffs to make the proposed
amendment. The additional allegations are based on the same general facts pled
in the original complaint, which are the actions taken by Defendants during
their time as receiver of the Property. If these allegations are not added to
the complaint in this action, Plaintiffs would be required to file another,
separate action with the same parties and based on the same general facts pled
here to recover for the additional damages suffered.” (Aroustamian Decl. ¶5.)
(3) when
the facts giving rise to the amended allegations were discovered;
and
Here, Plaintiffs
satisfied this requirement. As noted in the Aroustamian Declaration:
“In or about May
17, 2023, I was informed by the attorney representing the Plaintiffs in the
Tenants’ Lawsuit that Northfield Insurance had issued a disclaimer in the
policy because there is a habitability exclusion and because the named insured
was not the defendant in the Tenants’ Lawsuit. Therefore, the insurance policy
from Northfield taken out by Defendants did not cover the claims brought by the
plaintiffs in the Tenants’ Lawsuit. After investigating the matter further and
after reviewing the pleadings filed in the Tenants’ Lawsuit and other documents
in this case, I concluded that the Defendants were potentially liable for their
failure to adequately insure the Property. I then began work on this Motion and
the proposed amendment to the complaint. At the September 19, 2023 hearing in
the related receivership action (LASC Case No. EC067418), I informed this Court
and counsel for Defendants of Plaintiffs’ intention to file this Motion.”
(Aroustamian Decl. ¶3.)
(4) the
reason why the request for amendment was not made earlier must accompany the
motion. (Id., rule 3.1324(b).)
Here, Plaintiffs satisfied this
requirement. As noted in the Aroustamian Declaration:
“The request for amendment was not
made earlier because Plaintiffs had not previously discovered the facts giving
rise to the proposed amendment. Plaintiffs were not aware that the insurance
policy Defendants had taken out had a habitability exclusion or that it failed
to name Plaintiffs because this information was in the possession of Defendants
and had not been provided to Plaintiffs. Plaintiffs were only informed when the
insurance company denied coverage in May 2023. Furthermore, the Tenants’ Lawsuit
was not filed until January 2023. Prior to that, Plaintiffs were not provided
any information regarding the claims alleged, including when the alleged claims
had happened. Therefore, it was impossible for Plaintiffs to determine that the
claims alleged in the Tenants’ Lawsuit included the period of time relevant to
this action, such as during and after Defendants’ time as receiver of the
Property and during the time the inadequate insurance policy was in place.”
(Aroustamian Decl. ¶4.)
Opposition’s Arguments
Defendants argue that Plaintiffs
should not be granted leave to amend because: (1) The proposed amendment is
futile; (2) The Receiver was not obligated pursuant to the terms of his
appointment to insure the Bardakjians; (3) The Bardakjians are not the owners
of the Property; (4) The Receiver will be prejudiced if leave to amend is
granted; (5) The delay in seeking amendment is inexcusable and therefore leave to
amend should be denied.
The Court will further address Defendants’
arguments in its Tentative Ruling.
TENTATIVE RULING
The Court tentatively plans to GRANT Plaintiffs’
motion for leave to amend to file a FAC for the reasons set forth below.
Because of the judicial policy favoring resolution of
all disputed matters, the strong policy of liberal allowance of amendments, the
limited/minimal (if any) prejudice the Defendants would face, and Plaintiffs’ adherence
to the procedural requirements to seek leave, the Court finds that granting
leave to amend to file the FAC would be appropriate.
Below, the Court addresses several of Defendants’
arguments in Opposition.
Proposed Amendment is Futile
Defendants
argue:
The Bardakjians'
proposed amended complaint is futile because any claims regarding the alleged
deficiencies with the Receiver's insurance policy are barred by the doctrine of
res judicata. First, as detailed above, the Bardakjians were aware of
the Receiver's insurance policy at the time they opposed his discharge in the
main receivership action in October 2020. However, they chose not to bring up
any alleged deficiencies with the policy at the time. At this juncture, they
cannot bring up these new allegations against the Receiver when they had notice
of the Receiver's request for discharge, opposed the discharge, but chose not
to timely assert these complaints at that time. As the Court explained in Vitug
v. Griffin (1989) 214 Cal.App.3d 488, "[a]s a general proposition a
receiver has no official duties and is not a proper party to any action after
being discharged by the court. The discharge order operates as res judicata as
to any claims of liability against the receiver in her official capacity."
Id. at 494 [ citing Brockway etc. Co. v. County of Placer (1954) 124
Cal.App.2d 371, 375; Aviation Brake Systems, Ltd. v. Voorhis (1982) 133
Cal.App.3d 230, 234].)
(Oppo. p. 4-5.)
Here, the Court
does not find these arguments availing. As to the Defendants’ argument about
res judicata, Defendants make no explanation how res judicata is applicable
here, and the Court does not understand Defendants’ res judicata argument.
Further, the
Defendants’ argument that the Plaintiffs were aware of the Receiver’s insurance
policy at the time they opposed his discharge in the main receivership action
in October 2020 seems to directly contradict what Plaintiffs alleged in their
motion, and Defendants offer no citation to proof to support their argument.
Defendants also
argue:
Second, the Bardakjians
cannot pursue claims against the Receiver on behalf of the Tenants. In their
Motion, the Bardakjians acknowledge that they are seeking to amend their complaint
after their counsel was advised in May 2023 during the course of the Tenants'
lawsuit that the insurer had issued a disclaimer on the insurance policy
because the policy contained a habitability exclusion and the named insured was
not a defendant in the Tenants' lawsuit. (Motion, Aroustamian Deel. ¶3.)
To the extent that the Tenants have claims against the Receiver, they also were
required to make such complaints at the time of the Receiver's discharge, as
opposed to the Bardakjians seeking to be reimbursed by the Receiver for any
damages they are forced to pay the Tenants. Indeed, when the Receiver was
appointed in the main receivership action, he posted notices at the Property
unit various times, including a notice of a meeting the Receiver noticed and conducted
for all tenants in November 2019. (Adams Deel. ¶8, Ex. 6.) It is impossible
that the Tenants at the Property were unaware of the receivership prior to the
Receiver's discharge, and accordingly, they needed to bring any concerns
regarding the receivership prior to his discharge. Indeed, it would set a
dangerous precedent for third parties such as the Tenants to be entitled to insert
themselves into the Bardakjians' lawsuit - thereby rendering the Receiver's
Court-ordered discharge meaningless. Furthermore, as detailed above, the
Tenants already served their own Motion for Leave to sue the Receiver based on
his alleged failure to preserve the Property, which request the Receiver
responded to at length in his Opposition. It appears that the Tenants inappropriately
failed to ever file their Motion with this Court in the main receivership
action, and instead, the Bardakjians' have filed the present Motion to add the
Tenants' claims to their pending lawsuit. This conduct should not be tolerated.
(Oppo. p. 5-6.)
Here, the Court
does not find these arguments availing. For the most part, the Court finds
these arguments unclear. The Court is unclear what Defendants mean by arguing
that the Plaintiffs cannot pursue claims against the Receiver on behalf of the
Tenants. Here, the FAC does not seek to do that. The FAC seeks to pursue
Plaintiffs’ claims, not the Tenants’ claim. This action is a different case
than the Tenants’ Lawsuit. Further, the Court does not understand Defendants’
arguments that the Tenants were required to make any claims against the
Receiver at the time of the Receiver’s discharge. To the Court’s understanding,
the Tenants were not even a party in the action when the receiver was
discharged. The Tenants’ Lawsuit arose after the discharge of the Receiver. Overall,
the Court finds these arguments unavailing and Defendants cite no legal authority
in support.
Receiver was not
obligated pursuant to the terms of his appointment to insure the Bardakjians
Defendants argue:
The proposed
amended complaint is futile based on the explicit terms of the Receiver's
appointment. While the Stipulated Order for appointment instructed the Receiver
to pay operating expenses of the Property (including insurance) - the Order did
not obligate the Receiver to bind an insurance policy under which the
Bardakjians would be additional insureds. (Adams Deel. ¶2, Ex. 1.) To the
extent the Bardakjians did not agree with the terms of the Receiver's
appointment, they should not have stipulated to the entry of the appointment
order nearly six years ago. At this point, their complaints regarding the
Receiver's insurance policy are too late and unwarranted.
(Oppo. p. 6.)
Again, the Court
finds many of these arguments unclear. The Court is unclear as to why
Defendants are arguing that the Stipulated Order did not obligate the Receiver
to bind an insurance policy under which the Bardakjians would be additional
insureds. Defendants don’t cite to any portion of the Stipulated Order that
would help the Court assess whether Defendants’ argument is accurate.
Second, even if
Defendants’ argument is accurate, the Court is unclear as to the legal
significance of Defendants’ arguments. This action is different from the
receivership action. Plaintiffs were granted leave in the receivership action
to file this action. To keep referring to what was agreed with in the
Stipulated Order does not make any sense when the court in the receivership
action granted leave to amend to file this complaint in the instant case. This
action is separate from the receivership case.
The Bardakjians
are not the owners of the Property
Defendants argue:
Finally, the
proposed amended complaint is also futile because the Plaintiffs in this action
- the Bardakjians - are not the owners of the Property. Rather, 1001 Las Lomas
LLC owned the Property during the Receiver's appointment. Further, as admitted
in their Motion, the Bardakjians have already been dismissed from the Tenants'
lawsuit. (Motion at pp. 4:27-5:2.) To the extent there are indeed any
legitimate claims regarding the Receiver's insurance policy in regard to the Property,
such claims belong to 1001 Las Lomas LLC - which is not a party to this
lawsuit.
(Oppo. p. 6.)
Here, the Court
does not find Defendants’ arguments availing. First, Defendants provide no
legal authority to support their conclusion. Second, to the extent that
Defendants are arguing that Plaintiffs have already been dismissed from the
Tenants’ Lawsuit, the Court fails to understand how or why that provides a
legal basis as to why Plaintiffs here cannot be granted leave to amend.
Plaintiffs motion acknowledged that they were dismissed in the Tenants’
Lawsuit, but explained part of their desire to still add allegations in a FAC
because:
Although
Plaintiffs were dismissed in the Tenants’ Lawsuit on August 29, 2023, they were
dismissed without prejudice and can be named again at any time during the
pendency of the litigation. 1001 Las Lomas, LLC was not dismissed and is still
a defendant in the Tenants’ Lawsuit.
Furthermore,
Defendants have not been named as defendants in the Tenants’ Lawsuit. Because
Plaintiffs contend that the alleged damages suffered by the plaintiffs in the
Tenants’ Lawsuit were caused by Defendants’ actions, the addition of the
allegations proposed by Plaintiffs in this Motion would further the interests
of judicial efficiency by eliminating the need for Plaintiffs to file a
separate action against the same Defendants in this matter should the Tenants’
Lawsuit result in a judgment or settlement against Plaintiffs.
(Pl. Mot. p. 4-5.)
Further, the Court
is unclear on Defendants’ arguments because Plaintiffs here seek, in part, to
add allegations pertaining to Defendants’ breach of fiduciary duty and professional
malpractice.
The Receiver will
be prejudiced if leave to amend is granted
Defendants argue
as follows:
Courts have held
that prejudice exists where belated amendments will result in additional time
and expense to the defendants. For instance, one Court of Appeal held that
where "an amendment would require additional discovery and perhaps result
in a demurrer or other pretrial motion," the court did not abuse its
discretion in denying leave to amend. (P&D Consultants, Inc.
v.
City of Carlsbad
(2010) 190 Cal.App.4th 1332, 1345.) Similarly, the Second District Court of
Appeal has held that prejudice includes added "time and expense." (Payton
v. CSI Electrical Contractors, Inc. (2018) 27 Cal.App.5th 832, 849.) Here,
the showing of prejudice to the Receiver if the Bardakjians are granted leave
to amend their complaint is compelling. Given that the receiver's
Court-approved fees and costs in the main receivership action of $267,604.01
have already been "on hold" for three years due to the Bardakjians'
lawsuit, the Receiver faces substantial prejudice if the Bardakjians are
permitted to amend their complaint and further prolong this lawsuit. The
Receiver is entitled to finality on his receivership which ended three years
ago. The Bardakjians should not be permitted to continue to add on unrelated
and unsubstantiated allegations on behalf of third parties to this lawsuit -
forcing the Receiver to spend additional time and expense in defending against
their grievances, which should have properly been brought up at the time of his
discharge.
Additionally, the
Receiver has already conducted discovery in this matter, and the filing of the
proposed amended complaint will require the Receiver to engage in further
discovery related to the Tenants' claims in their separate lawsuit. This will
include propounding additional written discovery on the Bardakjians, and
possibly the Tenants as well, spending a considerable additional amount of time
and money in the process. The Receiver also intends to demur to the proposed
amended complaint on the grounds that the Bardakjians are precluded from
bringing up new grievances which they did not pursue at the time of the
Receiver's discharge, and the Bardakjians are also not permitted to bring
claims on behalf of the Tenants, who also did not object to the Receiver's
discharge despite being on notice of the receivership. In light of the
prejudice the Receiver faces if leave to amend is granted to the Bardakjians,
the Motion must be denied.
(Oppo. p. 6-7.)
Here, the Court
does not find Defendants’ argument on prejudice persuasive. The Court finds the
strong policy of liberal allowance of amendments to outweigh the minimal, if
any, prejudice that Defendants would face. Defendants’ citation to P&D
Consultants, Inc. is also unpersuasive because in that case P&D did not
seek leave to amend until after the trial readiness conference and P&D
offered no explanation for the delay. Here, the trial readiness conference has
not occurred, and Plaintiffs explained their delay in seeking leave to amend.
Delay in Seeking
Amendment is inexcusable and therefore leave to amend should be denied
Defendants cite
cases that state unwarranted delay in presenting an amendment may be a valid
reason for denial. However, the Court does not find Defendants’ arguments as to
how Defendants believe they established inexcusable delay to be convincing.
Defendants argue
that Bardakjians’ counsel stating that he did not become aware of the alleged
shortcoming in the Receiver’s insurance policy for the Property until the
Tenants’ Lawsuit is false. Defendants attempt to support this argument by
stating that the Bardakjians have been on notice regarding the receivership's
insurance for the Property since at least January 2020 when the Receiver served
his monthly accounting in the main receivership action for December 2019, which
included the insurance premiums paid by the receivership. (Adams Deel. ¶5, Ex.
3.)
Here, the Court
fails to find this argument persuasive because the Court fails to understand how
the Receiver serving his monthly accounting which included insurance premiums
paid by the receivership pertains to Plaintiffs arguing they were not able to
see the insurance policy itself. The Court is unclear as to why or how Defendants
are equating the monthly accounting to the insurance policy itself.
If Defendants wish
to explain/argue how they believe Plaintiffs were already aware of the terms of
the insurance policy at the hearing, they can do so, because the Court fails to
understand Defendants’ arguments on pages 8-9 of their Opposition.