Judge Daniel M. Crowley, Case 20SMUD00869 2023-04-04 Tentative Ruling

Judge: Daniel M. Crowley, Case: 20SMUD00869, Date: 2023-04-04 Tentative Ruling

Case Number: 20SMUD00869 Hearing Date: April 4, 2023 Dept: 207

Background

Plaintiff American Financial Center, Inc. (“Plaintiff”) brings this action against Defendants Birgitta Lauren and Eric Yohan aka Eric Knipe (collectively “Defendants”). This case was originally filed as an unlawful detainer action concerning the real property located at 2010 S. Beverly Blvd., #101, Los Angeles, California 90025. Plaintiff obtained a default judgment against Defendants for possession of the premises. Defendants moved to vacate or set aside this judgment, which was denied by the Court on August 9, 2021.

On October 18, 2021, Plaintiff moved to reclassify the action as an unlimited civil action and for leave to file an amended complaint. The motion was granted by the Court and on February 23, 2022, Plaintiff filed a First Amended Complaint (“FAC”) alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and waste on real property. The Court sustained Defendants’ demurrer with leave to amend and on September 28, 2022, Plaintiff filed the operative Second Amended Complaint (“SAC”).

Defendants brought a demurrer to the SAC as well. Two days before the hearing on that demurrer, Plaintiff filed a motion for leave to file a Third Amended Complaint. On January 26, 2023, the Court sustained Defendants’ demurrer with leave to amend as to Plaintiff’s claims for breach of contract and breach of the implied covenant of good faith and fair dealing. Defendants’ demurrer to Plaintiff’s cause of action for waste on real property was sustained without leave to amend. On February 14, 2023, Defendants filed an opposition to Plaintiff’s motion for leave to amend.

On February 16, 2023, the Court on its own motion continued the hearing date on Plaintiff’s motion for leave to amend from March 1, 2023, to April 4, 2023. Thereafter, Plaintiff filed an amended motion for leave to amend, and Defendants filed an opposition to the amended motion.

Legal Standard

Leave to amend is permitted under Code of Civil Procedure section 473, subdivision (a) and section 576. The policy favoring amendment and resolving all matters in the same dispute is “so strong that it is a rare case in which denial of leave to amend can be justified. . ..” “Although 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 [citations], this policy should be applied only ‘where no prejudice is shown to the adverse party . . .. [citation]. A different result is indicated ‘where inexcusable delay and probable prejudice to the opposing party’ is shown. [Citation].” (Magpali v. Farmers Group (1996) 48 Cal.App.4th 471, 487.)

A motion for leave to amend a pleading must also comply with the procedural requirements of California Rules of Court, rule 3.1324, which requires a supporting declaration to set forth explicitly what allegations are to be added and where, and explicitly stating what new evidence was discovered warranting the amendment and why the amendment was not made earlier. The motion must also include (1) a copy of the proposed and numbered amendment, (2) specifications by reference to pages and lines where allegations would be deleted and added, and (3) a declaration specifying the effect, necessity and propriety of the amendments, date of discovery and reasons for delay. (See Cal. Rules of Court, rule 3.1324, subds. (a), (b).)

Analysis

1. Plaintiff’s Amended Motion

Defendants’ argue Plaintiff’s submission of an “amended” motion after the Court continued the hearing date on this motion was in effect supplemental briefing which is not authorized under Code Civ. Proc. § 1005. Defendants are right that Plaintiff’s purported amendment of a pending motion is technically improper. However, the Court notes Plaintiff was free to simply withdraw its original motion for leave to amend and file a new motion attaching a new proposed Third Amended Complaint. Plaintiff’s amended motion was filed on March 1, 2023, and was thus timely filed more than 16 Court days before the April 4, 2023, hearing.

It appears to the Court that Plaintiff’s “amendment” of its motion was done to comply with the Court’s January 26, 2023, ruling on Defendants’ demurrer to the SAC, which sustained Defendants’ demurrer to the cause of action for waste without leave to amend. Plaintiff’s original proposed Third Amended Complaint, filed before the Court issued that order, included a cause of action for waste. The proposed Third Amended Complaint filed on March 1, 2023, does not contain that cause of action. It also appears Plaintiff amended other provisions in response to the Court’s ruling on Plaintiff’s other causes of action. Defendants have had a full and fair opportunity to respond to the merits of Plaintiff’s amended motion. The Court in its discretion will thus ignore Plaintiff’s January 24, 2023, motion and consider it withdrawn and superseded by the March 1, 2023, amended motion for leave. All future references to the parties’ briefing are to Plaintiff’s March 1 motion and Defendants’ March 22 opposition thereto.

2. Timeliness of Opposition

The Court notes Defendants’ March 22 opposition is untimely. Pursuant to Code Civ. Proc. § 1005(b), Defendants’ opposition had to be filed nine Court days before the April 4 hearing. As March 31, 2023, is a Court holiday, Defendants’ opposition was due no later than March 21, 2023. Nonetheless, the Court in its discretion will consider Defendants’ opposition. (CRC, rule 3.1300(d).)

3. Leave to Amend

The Court notes Plaintiff has failed to comply with the requirements of California Rules of Court, Rule 3.1324 in bringing this motion. Under rule 3.1324, Plaintiff was required to provide a declaration specifically identifying what allegations were to be added and where, what new evidence was discovered necessitating the amendment and when it was discovered, as well as any reasons for delay in seeking the amendment. Plaintiff does not provide this information in its moving papers or the supporting declaration of counsel attached thereto. Plaintiff’s motion merely notes California’s liberal policy of allowing amendments, states Defendants would not be prejudiced by the amendment because no party has served discovery yet, and attaches a copy of the proposed Third Amended Complaint. This is insufficient under rule 3.1324.

Defendants argue Plaintiff’s proposed amendment would be futile. The Court examines the causes of action of the proposed Third Amended Complaint (“TAC”) in turn.

a. Breach of Implied Covenant and Breach of Contract

In its January 26, 2023, order, the Court sustained Defendants’ demurrer to these two causes of action with leave to amend. Plaintiff’s SAC alleged Defendants rented the subject property pursuant to an oral contract. (SAC at ¶6.) In sustaining Defendants’ demurrer the Court found the SAC failed to set forth the terms of that alleged oral contract. Specifically, the SAC alleged Defendants breached this oral contract by failing to pay monthly rent of $3,000 but did not allege Defendants ever agreed to pay this amount in rent. The cause of action for the breach of the implied covenant of good faith and fair dealing in the SAC alleged Defendants breached the implied covenant by filing an unmeritorious motion to set aside the default judgment entered against them in the unlawful detainer action. (SAC at ¶42.) The Court sustained Defendants’ demurrer to this cause of action because the SAC did not allege Defendants acted unreasonably or without proper cause in filing that motion, which is required to state a claim for breach of the implied covenant.

The TAC no longer asserts that Defendants rented the subject property from Plaintiff pursuant to an oral contract. Rather, the TAC now claims Defendant Brigitta Lauren acquired a loan from Plaintiff for which the subject property was used as collateral. Plaintiff claims Defendants defaulted on this loan in October 2019. (TAC at ¶7.) Around that same time, Defendants told Plaintiff they would be moving out of the property but failed to do so. (Id. at ¶8.) The property was eventually sold at a foreclosure sale on June 4, 2020. (Id. at ¶9.) Defendants failed to make any mortgage payments from October 2019 to June 2020. (Id.) After the foreclosure sale, Plaintiff requested Defendants vacate the property. Defendants agreed to move out as long as Plaintiff did not file an unlawful detainer action against them. (Id. at ¶¶14-15.) Defendants remained in possession of the property until August 23, 2021. (Id.) Plaintiff served Defendants with a notice to vacate on October 9, 2020, and on November 19, 2020, Plaintiff filed this action against them for unlawful detainer. (Id. at ¶¶20-21.)

The breach of contract action is based on Defendants’ failure to move out of the property after the foreclosure sale on June 16, 2020. (Id. at ¶¶40-54 [alleging Defendants “breached the contract with Plaintiff by intentionally failing to timely move out of the Subject Property” every month between June 2020 and August 2021].) However, the TAC does not allege the parties formed a contract which required Defendants to move out of the property. Paragraph 15 of the TAC alleges “Defendants informed Plaintiff that Defendants would be moving out of the Subject Property so long as Plaintiff did not file an unlawful detainer action against the Defendants.” The TAC does not allege Plaintiff accepted this deal or otherwise agreed to these terms. It is also not clear whether this was an oral representation or a written offer. Further, the allegation that Defendants breached this purported agreement by failing to “timely move out” implies the parties agreed Defendants would move out by a certain deadline, but the TAC fails to allege the existence of such a term in the parties’ purported agreement. Further, if the deal obligated Plaintiff to refrain from bringing an action for unlawful detainer against Defendants, it is unclear how Defendants could be in breach of the agreement after Plaintiff filed the unlawful detainer action against them in November 2020.

The cause of action for breach of the implied covenant in the TAC is based on this same alleged failure to move out. The TAC states “Defendants failed to move of the Subject Property and failed to perform pursuant to their promise to vacate the Subject Property” (id at ¶34) and “by doing so, Defendants did not act fairly and in good faith” (id at ¶35). “A breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself and it has been held that bad faith implies unfair dealing rather than mistaken judgment.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394.) “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated … [T]he only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Id. at 1394-1395.) Plaintiff’s proposed cause of action for breach of the implied covenant is thus based on the same purported breach as alleged in Plaintiff’s proposed cause of action for breach of contract and is thus superfluous.

The Court thus agrees it would be futile to allow these causes of action to be amended as proposed in the proposed TAC.

b. Promissory Estoppel

“The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” (Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734 [quotation marks and brackets omitted].)

Plaintiff’s proposed new cause of action for promissory estoppel is based on a different promise than was alleged in the causes of action for breach of contract or breach of the implied covenant. The TAC alleges “Defendants made a promise to move out of the Subject Property should they default on a business loan executed between Plaintiff and Defendants.” (FAC at ¶62.) The TAC also alleges Plaintiff reasonably relied on this promise, and resulting injury as result of that reliance. (Id. at ¶¶63-69.) The Court finds the TAC sufficiently alleges a cause of action for promissory estoppel.

Defendants argue the proposed TAC does not contain enough factual allegations in support of these claims. However, the general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) The Court finds the proposed TAC satisfies this requirement.

c. Tortious Interference with Contract

The elements of a cause of action for intentional interference with contractual relations are “(1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (I-CA Enterprises, Inc. v. Palram Americas, Inc. (2015) 235 Cal.App.4th 257, 289.) “[A] cause of action for intentional interference with contract requires an underlying enforceable contract.” (PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 601.) “It is not enough that the actor intended to perform the acts which caused the result—he or she must have intended to cause the result itself.” (Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th 242, 261.)

The TAC fails to state a valid cause of action for intentional interference with a contract. The TAC alleges “Plaintiff had reached out to a real estate broker on or about July of 2020 to list the Subject Property for rent and Defendants knew Plaintiff’s intentions to rent out the Subject Property.” (TAC at ¶73.) It further states “Defendants failed to communicate with Plaintiff in early July of 2020 and would not return Plaintiff’s phone calls resulting in Plaintiff having to stop any efforts to rent out the Subject Property.” (Id. at ¶74.) The TAC thus does not allege Plaintiff ever entered into a valid and enforceable contract with a potential tenant which Defendants interfered with. The TAC also does not allege Defendants intended to interfere with any contract between Plaintiff and a third party, but merely that Defendants intentionally remained in possession. As set forth above, this is insufficient to state a claim for intentional interference with contractual relations.

The Court agrees it would be futile to allow this proposed cause of action to be asserted as it is currently drafted.

d. Trespass

To set forth a cause of action for trespass, Defendants must allege (1) Defendants’ lawful possession or right to possession of real property; (2) Plaintiffs’ wrongful, intentional, reckless, or negligent act of trespass on the property; (3) Defendants did not give permission for the entry or scope of permission was exceeded; and (4) damage to Defendants caused by the trespass. (Ralphs Grocery Co. v. Victory Consultants, Inc. (2017) 17 Cal.App.5th 245, 262.) The Court finds the proposed TAC adequately asserts a cause of action for trespass. The TAC alleges Plaintiff lawfully acquired title to the property by foreclosure sale, that Defendants trespassed by remaining on the property without Plaintiff’s permission, and resulting harm to Plaintiff as a result. (TAC at ¶¶11-13, 80-81.) The Court finds the proposed TAC adequately states the elements of a trespass cause of action.

e. Unjust Enrichment

“The elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769, quotation marks and citations omitted.) The TAC adequately pleads a claim for unjust enrichment in that it alleges Defendants remained in possession of a property owned by Plaintiff without the Plaintiff’s permission and without paying any renumeration to Plaintiff for doing so. As a result, Defendants allegedly were able to live rent-free for several months as Plaintiff was denied the opportunity to rent out or otherwise use the property. This is sufficient to state a claim for unjust enrichment.

4. Prejudice

Plaintiff argues Defendants would not be prejudiced by the assertion of the additional causes of action in the TAC because this case is still in the pleading stage and neither party has served discovery to date. Defendants argue they would be prejudiced by the proposed amendment because they would be subject to additional causes of action. However, this is true of any amendment to add causes of action. Defendants also argue these causes of action could have been asserted earlier. The Court agrees that it appears each of these proposed new causes of action are based on information that has been in Plaintiff’s possession since the initiation of this litigation. However, that alone does not establish any substantive prejudice to Defendants. Defendants do not dispute Plaintiff’s representations regarding the status of discovery. The Court also notes no trial date has been set in this action, which means Defendants will have ample time to conduct discovery into Plaintiff’s new theories of liability.

Conclusion

Plaintiff’s motion for leave to amend is GRANTED in part and DENIED in part. Plaintiff’s motion is granted as to its proposed causes of action for promissory estoppel, trespass, and unjust enrichment and is otherwise denied. Plaintiff is directed to file a Third Amended Complaint within 20 days of the date of this order which asserts those three causes of action. If Plaintiff believes it can properly assert causes of action for breach of contract, breach of the implied covenant, and intentional interference with contractual relations, it may bring a motion for leave to amend to assert such claims in compliance with California Rules of Court, rule 3.1324.