Judge Bruce G. Iwasaki

Department 58

Hearing Date: February 27, 2024

Case Name: Mirna Cuellar v. Fok Family Trust, et al.

Case No.: 22STCV04496

Matter: Motion for Leave to File Cross-Complaint

Moving Party: Defendant May Fok, individually and as trustee of the Fok Family Trust

Responding Party: Plaintiffs Mirna Cuellar and Hector Cuellar

Tentative Ruling: The Motion for Leave to File Cross-Complaint is granted.

This action arises out of an employment dispute.

Plaintiffs Mirna Cuellar and Hector Cuellar (Plaintiffs) sued Defendant May Fok in her individual capacity and as trustee of the Fok Family Trust (Defendant) for breach of contract and various Labor Code violations, such as failure to pay minimum wage and waiting time penalties. Plaintiff Mirna Cuellar alleges she worked as the property manager of an apartment building (Property) pursuant to a written agreement. Plaintiff Hector alleges he entered into an oral agreement to provide handyman services for the Property but has not been paid any of his wages.

On March 21, 2022, Plaintiffs filed a First Amended Complaint. The parties stipulated to allow Plaintiffs to file a Second Amended Complaint.

On January 12, 2023, Defendant May Fok, individually and trustee of the Fok Family Trust, filed a demurrer to the Second Amended Complaint. The court sustained the demurer in its entirety with leave to amend. On March 14, 2023, a Third Amended Complaint was filed. Defendant again filed a demurrer. The Court overruled this demurrer.

Defendant May Fok, individually and trustee of the Fok Family Trust, now moves to file a Cross-Complaint. Plaintiffs filed an opposition.

The Court grants the motion for leave to file a Cross-Complaint.

Legal Standard

Code of Civil Procedure section 428.50 provides as follows:

“(a) A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint.

(b) Any other cross-complaint may be filed at any time before the court has set a date for trial.

(c) A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.”

Under the statutory scheme, “[s]ubdivision (a) addresses compulsory cross-complaints, those related to the subject matter of the underlying complaint which exist at the time of service of the answer to the complaint on the particular plaintiff.” (City of Hanford v. Superior Court (1989) 208 Cal.App.3d 580, 586–587; see also Code Civ. Proc. § 426.30, subd. (a).)

Code of Civil Procedure section 428.10 governs permissive cross-complaints. It provides in relevant part: “A party against whom a cause of action has been asserted ... may file a cross-complaint setting forth [¶] ... [¶] (b) Any cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party to the action, if the cause of action asserted in his cross-complaint (1) arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against him.” (Code Civ. Proc., § 428.10, subd. (b).)

Discussion

Defendant moves for leave to file a Cross-Complaint pursuant to Code of Civil Procedure sections 428.10 and 428.50.

The Cross-Complaint alleges Plaintiffs engaged in tortious conduct from 2019 to 2020, which included improperly taking Trust bank account funds, tenant rent payments, title to a vehicle owned by Defendant, and storing personal property on the Property without paying any rent. The Cross-Complaint contains causes of action for (1.) conversion, (2.) breach of fiduciary duty, (3.) constructive fraud, (4.) financial elder abuse, and (5.) aiding and abetting.

In support of this motion, Defendant submits evidence that new counsel for Defendant substituted into this case on October 23, 2023 and, after months of investigation, discovered the factual allegations to support the new cross-claims brought in the Cross-Complaint. (Murphy Decl., ¶¶ 2-5.) Thus, Defendant asserts she acted diligently upon the discovery of these claims.

Defendant also submits evidence that filing this Cross-Complaint will not prejudice Plaintiffs because trial is not set until July 21, 2025. Thus, Defendant asserts, there is ample time to take discovery on these new cross-claims and for Plaintiffs to prepare a defense. (Murphy Decl., ¶¶ 6-7.) Further, it will save judicial resources to try these claims together given the overlapping witnesses and evidence between the operative complaint and the Cross-Complaint. (Murphy Decl., ¶ 6.)

In opposition, Plaintiffs argue that the Cross-Complaint is substantively deficient because the allegations are contrary to responses made by Defendant in her discovery responses. Specifically, Defendant has – up to this point – consistently maintained that Plaintiffs were not employees; however, now the Cross-Complaint alleges a breach of fiduciary relationship based on the duty Plaintiffs as employees owe their employer, Defendant. This substantive argument is best adjudicated on the merits on a more appropriate motion (such as demurrer or summary adjudication) and not a motion for leave to file a cross-complaint.

Plaintiffs also argue that this Cross-Complaint will “compound” discovery difficulties. This argument is not well taken. Plaintiffs can utilize the existing discovery to make their case and challenge the cross-claims; Plaintiffs can also take new additional discovery. In either case, there is adequate time to explore these new legal theories. Moreover, expanding the issues for litigation does not automatically result in prejudice where there is adequate time to develop the evidence and address these issues before trial.

Here, as discussed with regard to the nature of the cross-claims above, there can be no dispute that the Cross-Complaint arises out of the subject matter of Plaintiffs’ operative pleading based upon facts that existed at the time of the Complaint. Thus, the Cross-Complaint contains “related causes of action” and the Cross-Complaint must be treated as a compulsory cross-complaint. (See Code Civ. Proc., § 426.10, subd. (c) [The phrase “related cause of action” is defined as “a cause of action which arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.”]; Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 960 [Relatedness “ ‘requires “not an absolute identity of factual backgrounds for the two claims, but only a logical relationship between them.”].)

A trial court must allow a party to file a compulsory cross-complaint unless that party has acted in bad faith. (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98.) “Factors such as oversight, inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless accompanied by bad faith.” (Id. at p. 99.) “ ‘Bad faith’ is defined as ‘[t]he opposite of “good faith,” generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake ..., but by some interested or sinister motive[,] ... not simply bad judgment or negligence, but rather ... the conscious doing of a wrong because of dishonest purpose or moral obliquity; ... it contemplates a state of mind affirmatively operating with furtive design or ill will.’ ” (Pugh v. See's Candies, Inc. (1988) 203 Cal.App.3d 743, 764.)

Here, there is no evidence of bad faith. Thus, the Court must grant the motion for leave to file a Cross-Complaint. The law is clear that a party may request to file a compulsory cross-complaint “at any time during the course of the action” (Code Civ. Proc., § 426.50 [italics added]), and a court “shall grant, upon such terms as may be just to the parties, leave to ... file the cross-compliant, to assert such cause if the party who failed to plead the cause acted in good faith. This subdivision shall be liberally construed to avoid forfeiture of causes of action.” (Code Civ. Proc., § 426.50 [italics added].)

Finally, the Court declines to impose the conditions of granting leave identified by Plaintiffs in their opposition. (Opp., 11:11-20.) These conditions are unjustified based on Defendant’s merely seeking leave to file a Cros-Complaint.

Conclusion

In sum, the motion for leave to file a cross-complaint is granted. Defendant shall file and serve the Cross-Complaint attached as Exhibit A to the Murphy declaration on or before March 1, 2024.