Judge: David A. Rosen, Case: 21GDCV00182, Date: 2022-12-23 Tentative Ruling
Case Number: 21GDCV00182 Hearing Date: December 23, 2022 Dept: E
Hearing Date: 12/23/2022 – 8:30am
Case No: 21GDCV00182
Trial Date: 03/13/2023
Case Name: SERJIK ALEHVERDIAN, et al. v. PALM DELUXE PARTNERS LP
TENTATIVE RULING ON MOTION FOR LEAVE TO FILE CROSS-COMPLAINT
Moving Party: Defendant, Palm Deluxe Partners, LP (“PDP” or “Defendant”)
Responding Party: Plaintiffs, Serjik Alehverdian and Mineh Abrahimi
Oppo and Reply Submitted.
Proof of Service Timely Filed (CRC Rule 3.1300): ok
16/21 Court Days Lapsed (CCP 1005(b)): ok
Proper Address: ok
Moving Papers: Motion; Decl. Nelson; Proposed Order
Opposition Papers: Opposition
Reply Papers: Reply; Second Decl. Nelson
RELIEF REQUESTED
Defendant, Palm Deluxe Partners, LP moves the Court for an order granting leave to file a cross-complaint against Plaintiffs/Proposed Cross-Defendants Serjik Alehverdian, Mineh Abrahimi, and proposed Cross-Defendant Loris Nersissian to recover unpaid rent that is due and owing pursuant to the Lease Agreement that is the subject of Plaintiffs’ complaint and pursuant to the Guaranty of the Lease Agreement executed by proposed cross-defendant Loris Nersissian in favor of PDP.
BACKGROUND
Plaintiffs filed a complaint on 02/04/2021 alleging nine causes of action: (1) Private Nuisance, (2) Breach of the Warranty of Habitability, (3) Negligence, (4) Breach of Covenant of Good Faith and Fair Dealing, (5) Breach of Implied Covenant of Quiet Enjoyment, (6) Intentional Infliction of Emotional Distress, (7) Violation of CA Civil Code §1942.4, (8) Violation of CA Civil Code §1950.5, and (9) Constructive Eviction. This action arises from Plaintiffs seeking monetary damages against Defendants stemming from Defendants improper and negligent maintenance of Plaintiffs’ leased premises.
On 09/29/2021, Defendant filed an answer.
On 09/06/2022, Defendant Palm Deluxe Partners LP filed a motion for leave to file a cross-complaint. The hearing on the motion for leave to file a cross-complaint was initially scheduled for 10/28/2022, but this hearing was continued to 12/23/2022.
LEGAL STANDARD LEAVE TO FILE COMPULSORY CROSS-COMPLAINT
Code of Civil Procedure section 426.10 et seq. sets forth California’s “compulsory cross-complaint" statute. (Code Civ. Proc., § 426.10 et seq. [titled “Compulsory Cross-Complaints"].) Therein, Code of Civil Procedure section 426.30 provides, “if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” (Ibid.) Related cause of action means “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.” (CCP §426.10(c).)
In the event a party fails to file a compulsory cross-complaint concurrently with his or her answer, CCP §426.50 provides the following available remedies:
A party who fails to plead a cause of action subject to the requirements of this article, whether through oversight, inadvertence, mistake, neglect, or other cause, may apply to the court for leave to amend his pleading, or to file a cross-complaint, to assert such cause at any time during the course of the action. The court, after notice to the adverse party, shall grant, upon such terms as may be just to the parties, leave to amend the pleading, or to file the cross-complaint, 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.
(CCP §426.50)
“A policy of liberal construction of section 426.50 to avoid forfeiture of causes of action is imposed on the trial court. A motion to file a cross-complaint at any time during the course of the action must be granted unless bad faith of the moving party is demonstrated where forfeiture would otherwise result. Factors such as oversight, inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless accompanied by bad faith.” (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98-99.)
MOVING ARGUMENTS BY DEFENDANT
Defendant summarizes the events as follows: (1) The parties are in the process of conducting discovery and intend to participate in private mediation; (2) Defendants propounded certain written discovery around April 25, 2022; (3) Defendant PDP also advised its counsel that Serjik Alehverdian and Mineh Abrahimi failed to pay amounts due and owing under the Lease Agreement and Loris Nersissian executed a written guaranty and guaranteed Plaintiffs’ obligations; (4) Around the same time it propounded written discovery, PDP’s counsel requested Plaintiffs’ counsel stipulate and agree that PDP be granted leave to file claims against the proposed cross-defendants; (5) Plaintiffs’ counsel requested several extensions to extend the deadline to respond to written discovery and PDP’s counsel agreed to such requests; however, Plaintiffs’ counsel did not agree to stipulate that PDP be granted leave to file claims against the proposed cross-defendants; (6) PDP asserts causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, common count account stated, and breach of guaranty/misrepresentation; and (7) Since the amount owed to PDP arises out of the same Lease Agreement that is the subject of Plaintiffs’ complaint, PDP’s claims clearly arise out of the same transactions and occurrences.
PDP argues that this motion is brought in good faith and timely made because in drafting discovery and working with PDP in late April, PDP’s counsel learned that PDP wanted to proceed with a cross-complaint to collect the amounts due and owing under the lease agreement. PDP argues that Plaintiffs made it clear they would stipulate to allow PDP the necessary leave to file the cross-complaint, but PDP promptly filed this motion once Plaintiffs’ counsel refused to stipulate.
PDP argues there will be no prejudice to Plaintiffs because the case is still in the discovery stage, Plaintiffs just served their written discovery responses on August 5th and August 3rd, and Plaintiffs knew since late April that PDP intended to file this motion.
Defendant attached the proposed cross-complaint as Exhibit 1 in the instant motion.
OPPOSITION ARGUMENTS BY PLAINTIFFS
Plaintiffs summarize the events as follow: (1) Nearly two years ago, on February 4, 2021, Plaintiffs filed the Complaint; (2) On September 29, 2021, Defendant filed its Answer which made no reference to any of the claims in the proposed Cross-Complaint; (3) On November 18, 2021, Plaintiffs served their first set of written discovery on Defendant; (4) On April 18, 2022, the Parties scheduled mediation for August 31, 2022; (5) On July 28, 2022, the Parties canceled the mediation that was set for August 31, 2022; (6) On September 6, 2022, Defendant filed the instant Motion for Leave to File Cross-Complaint; and (7) Trial is currently scheduled for March 13, 2022.
Plaintiffs argue that this motion should be denied because Defendant acted in bad faith due to Defendant’s unreasonable delay in bringing the instant motion nearly two years after this action commenced, over three years following the first alleged breach, and approximately five months prior to the parties’ trial date.
Plaintiffs also argue Defendant filed this motion late as a tactical and strategic maneuver. Plaintiffs argue this was a bad faith move because mediation between Plaintiffs and Defendants was scheduled for August 31, 2022, but Defendant canceled mediation with Plaintiffs because of their failure to file the motion for leave to file the cross-complaint.
Plaintiffs argue that there will be prejudice to Plaintiffs because Plaintiffs’ attorney’s fees will increase from 40% to 45%, and there will be added delay in the case. Plaintiffs argue that Plaintiffs’ counsel suggested to Defendant’s counsel that the alleged causes of action that Defendant seeks to bring could have been dealt with at the mediation previously scheduled for August 31, 2022, but Defendant refused which caused the parties to cancel the scheduled mediation and Defendant still waited approximately five months later to file this motion.
Plaintiffs argue that Defendant was well aware of the purported issues set forth in their proposed cross-complaint at the commencement of this action because not only were the alleged $2,700 in damages all calculated from notices Defendant allegedly sent to Plaintiffs throughout their tenancy but also because Defendant’s counsel admitted in an email dated April 20, 2022, to Plaintiff’s counsel that this cross-complaint should have been filed at the time Defendant filed its Answer. Plaintiffs also state that Plaintiffs did not provide these alleged notices to Defendants during discovery. (Oppo. p. 7.)
Plaintiffs also argue Plaintiffs deny the alleged damages in Defendant’s proposed cross-complaint, which would require further investigation, discovery, and overall cause further delay in the instant action that was already scheduled for mediation and has not been rescheduled since cancelling the mediation.
REPLY ARUGUMENTS
Defendant’s Reply: distinguishes cases in the Opposition; argues there is no evidence of bad faith; and discusses the procedural history of this case with respect to discovery.
Defendant portrays the procedural history as follows:
“Here, Plaintiff filed the complaint against PDP-LP on February 3, 20217. See Second Declaration of Vernon Nelson (“SDVN”) at § 2. PDP-LP engaged ADLI on August 24, 2021 and answered on September 29th. Id. In November 2021, Plaintiffs served discovery on all Defendants. Id. Attorney John Landis help Defendants respond on February 16, 2022. Id. In March 2022, Vernon Nelson took over the case. Id. At the time, the parties were trying to mediate and agreed to a date in August. Id. Mr. Nelson noticed Defendants had not served discovery and they could not attend mediation without discovery. Id. PDP-LP told Mr. Nelson it wanted to file a Cross-complaint for $2,017.05. Id. Mr. Nelson told Plaintiffs about the cross-complaint and Defendants would not go to mediation without discovery responses. Id. Defendants served discovery on April 25, 2022. Id. Mr. Nelson reiterated PDP-LP wanted to file a Cross-complaint and asked Plaintiffs to stipulate – but they refused. Id. referencing Exhibit “1.” Defendants agreed to discovery extensions and Nelson asked Plaintiffs to stipulate to the Cross-complaint; they never did. Id. referencing Exhibit “2.”
Plaintiffs served discovery responses on August 1, 2022; but their responses were grossly deficient/in bad faith. Id. Defendants sent a “Meet and Confer” letter to Plaintiffs on September 11, 2022. Id. citing “Meet and Confer Letter” – Exhibit “3.” Due to the lack of discovery, the parties cancelled the August mediation. Id. referencing Exhibit “4.” Mr. Nelson stopped asking for a stipulation and PDP-LP filed a Motion for Leave on September 6, 2022. Id.
The parties discussed discovery responses on September 16, 2022. Id. at ¶4. At that time, Plaintiffs’ counsel agreed to stipulate to the filing of the cross-complaint. Id. Mr. Nelson noted the motion was filed and they did not need to stipulate – with the understanding Plaintiff would not oppose the motion. Id. Plaintiffs’ counsel also addressed potential discover disputes and the parties agreed to extend the motion to compel deadline to November 1st. Id. citing Exhibit “5.” The parties needed more time for amended responses and on October 20, 2022, they agreed to extend the Motion to Compel deadline until November 30, 2022. Id. citing Exhibit 6. Plaintiff continued to press mediation. Id. Defendants would not agree to mediation until the Cross-complaint was filed; and they had adequate discovery responses.”
(Reply p.3-4.)
ANALYSIS
Plaintiffs cited several cases to support its argument that Defendant should be denied leave to file a cross-complaint.
Plaintiffs cited Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 99 to argue a motion to file a cross-complaint should be denied if the moving party acted in bad faith. However, this opinion would support the grant of leave in this case. In Silver, the Court of Appeal reversed and remanded the trial court’s decision to deny leave to file a compulsory cross-complaint. (Italics added.) The Court of Appeal held that, where forfeiture would otherwise result, a motion to file a compulsory cross-complaint pursuant to CCP §426.50, must be granted at any time during the course of the action unless bad faith of the moving party is demonstrated. (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94.) The Court of Appeal found that the trial court erred in denying defendants’ motion since the record failed to reveal, directly or inferentially, any substantial evidence of bad faith by defendants.
Silver explains what is considered bad faith. “ ‘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.” (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 100 citing Pugh v. See’s Candies, Inc. (1988) 203 Cal.App.3d 743, 764.)
Plaintiffs argued as follows as to why it believed Defendant acted in bad faith:
Defendant’s motion is brought in bad faith because of Defendant’s unreasonable delay. Exhibit 1 of Defendant’s Motion for Leave to File Cross-Complaint, their proposed Cross-Complaint, alleges that Plaintiffs breached and/or violated the lease agreement in August 2019, September 2019, February 2020, July 2020, and August 2020. Defendant’s motion was filed on September 6, 2022, approximately nineteen (19) months after Plaintiffs’ filed their Complaint, and over three (3) years following the first alleged breach by Plaintiffs. Defendant’s unreasonable delay in bringing their alleged claims constitutes bad faith, and therefore the Court should deny Defendant’s Motion for Leave to File Cross-Complaint because “bad faith of the moving party is demonstrated.”
Additionally, Defendant’s motion is brought in bad faith because Defendant’s Motion for Leave to File Cross-Complaint was a tactical and strategic maneuver. Mediation between Plaintiffs and Defendants was scheduled for August 31, 2022, but Defendant canceled mediation with Plaintiffs because of their failure to file the motion for leave to file cross-complaint and cause further delay in this Action. As such, Defendant’s Motion for Leave to File Cross-Complaint was merely a tactical, strategic maneuver and therefore was an act of bad faith. Gherman at 559.
(Pl. Oppo. p.4.)
Plaintiffs’ arguments here are not convincing. While it does appear that Defendant delayed in bringing the cross-complaint, that delay does not appear to amount to bad faith. Plaintiff cited Gherman v. Colburn (1977) 72 Cal.App.3d 544, 559 to further its argument on bad faith. However, in Gherman, the Court of Appeal affirmed the trial court’s decision to deny leave to file a compulsory cross-complaint because the Court of Appeal found that the trial court impliedly found and concluded that by attempting to file the cross-complaint on the first day of trial, defendants were not acting in “good faith” but were merely seeking to deprive plaintiffs of a right to a jury trial. Here, Defendant did not wait to file the cross-complaint until the first day of trial, and discovery has not closed.
Plaintiffs cited Rainer v. Buena Community Memorial Hosp. (1971) 18 Cal.App.3d 240, 258 to argue that a long, unexcused delay may provide a basis for denying permission to amend a pleading, especially when the proposed amendment introduces an issue which may require further investigation or discovery. Plaintiffs’ citation is distinguishable from the instant scenario and thus unavailing. In Rainer, the Court of Appeal found that the trial court did not abuse its discretion in denying plaintiff’s request to amend her first amended complaint because plaintiff, without good cause, waited until the third day of trial and more than ten months after she had notice of this theory by virtue of the trial court’s detailed written discovery order (Id.) Here, trial has not commenced and is thus obviously distinguishable.
Plaintiffs cited Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487 to argue that while amendments should be liberally permitted, denial of leave to amend is justified where inexcusable delay and probable prejudice to the opposing party is demonstrated. Plaintiffs’ citation is distinguishable from the instant scenario and thus unavailing. In Magpali, the Court of Appeal held that the trial court properly denied plaintiff leave to amend on the day of trial. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 472.) Here, discovery is still open, and the day of trial has not arrived.
Plaintiffs cited Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926 to argue that even where a valid amendment to a pleading is proposed in the proper form, unwarranted delay in presenting it may, of itself, be a valid reason for denial. Plaintiffs’ citation is distinguishable from the instant scenario and thus unavailing. In Roemer, the Court of Appeal upheld the trial court’s denial of leave to amend the answer at the close of defendant’s case and its refusal to instruct the jury on alleged mitigating circumstances. (Id.) Here, trial has not commenced and is thus obviously distinguishable.
Plaintiffs cited Record v. Reason (1999) 73 Cal.App.4th 472, 486-487 to argue that a motion for leave to amend must be made promptly on discovery of the need to amend. Plaintiffs’ citation is distinguishable from the instant scenario and thus unavailing. In Record, the Court of Appeal ruled as follows, “Finally, we do not see how appellant could have been prejudiced by the rejection of the proposed amendment. In order to determine whether primary assumption of risk applied, the trial court was obliged to focus on whether respondent's conduct was reckless, and appellant put forth nearly identical evidence in opposition to summary judgment as he did in support of the motion to amend. For all these reasons, we conclude the trial court did not abuse its discretion in denying appellant leave to amend his complaint.” (Record v. Reason (1999) 73 Cal.App.4th 472, 487.) Here, Defendant has not already put forth identical evidence in opposition to a motion for summary judgment to support it’s argument as to why leave should be granted.
Further, Plaintiffs cited North 7th Street Associates v. Constante (2001) 92 Cal.App.4th Supp. 7 to make the same argument Plaintiffs made with respect to Record. Plaintiffs’ citation is not on point, and if anything, supports granting leave to file a cross-complaint. In North 7th Street Associates, the Appellate Division of the Superior Court held that: (1) amendment alleging nonpayment of rent, was not based on same facts as original complaint, and thus, amendment without a continuance prejudiced tenant, and (2) provision of code of civil procedure requiring an amendment according to proof did not apply to permit amendment before there was any evidence before the court. (Id.) Therefore, North 7th Street Associates is about how when amendment is granted without a continuance in the context of the facts in North 7th Street Associates, then not allowing for a continuance is improper. That scenario is inapposite here.
Plaintiffs cited Falcon v. Long Beach Genetics, Inc. (2014) 224 Cal.App.4th 1263, 1280 and Duchrow v. Forrest (2013) 215 Cal.App.4th 1359, 1377-1380 to argue that although judges should apply a policy of liberality in permitting amendments to pleadings at any stage of the proceeding, including during trial, when no prejudice to the opposing party is shown, an unwarranted delay in presenting the amendment may, of itself, be a valid reason for denial. Plaintiffs’ citations are distinguishable from the instant scenario and thus unavailing. In Falcon plaintiffs sought leaved to amend when defendant had already mounted a summary judgment motion. Here, that is not the case. Duchrow is also inapposite because the case was already called for trial by jury and evidence was presented. (Duchrow v. Forrest (2013) 215 Cal.App.4th 1359, 1362.) Here, the same cannot be said.
Plaintiffs also argue as follows, “An amendment that contradicts an admission in the original pleading should not ordinarily be allowed, unless the moving party shows that the admission was the result of mistake or inadvertence. Astenius v State (2005) 126 CA4th 472, 476–477, 23 CR3d 877; Green v Rancho Santa Margarita Mtg. Co. (1994) 28 CA4th 686, 693–694, 33 CR2d 706. See §§ 12.61- 12.62.” Here, the Court does not understand how Plaintiffs’ citation is relevant. There is no amendment that is contradicting an admission in an original pleading because Defendant has not filed an initial cross-complaint. Therefore, the Court is uncertain how this initial cross-complaint could contradict an admission in an original pleading when there is no original cross-complaint to begin with.
TENTATIVE RULING
Defendant’s motion for leave to file a cross-complaint is GRANTED. Although Defendant does not make it clear as to when it learned that PDP informed Defendant’s counsel it wanted to proceed with a cross-complaint, and although it does appear that there was delay in seeking leave, it does not appear that Defendant acted in bad faith in seeking leave to file a cross-complaint. Further, although Plaintiffs argue they will be prejudiced with the delay, the merits of the claims have yet to be adjudicated. Accordingly, Plaintiffs do not raise a colorable argument that they will be prejudiced by Defendant being granted leave to file a cross-complaint. Plaintiffs’ argument that Defendant’s counsel admitted in an email dated April 20, 2022, to Plaintiffs’ counsel that this cross-complaint should have been filed at the time Defendant filed its answer does not appear to be dispositive. Lastly, a policy of liberal construction of section 426.50 is imposed on the trial court to avoid forfeiture of causes of action. (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98-99.)
Movant is to e-file and e-serve the Cross-complaint within twenty (20) days.
Application: The Court will hear argument.