Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

BACKGROUND 

This case arises from a dispute between neighbors.  Plaintiffs Stephen Xianpeng Liu and Faye Liu own property located at 13320 Mulholland Drive, Beverly Hills, California (“Plaintiffs’ Property”).  Defendant Merlin Offshore International ( “Merlin”) owns property located at 13318 Mulholland Drive, Beverly Hills, California (“Defendants’ Property”).  Defendant Michael Edson is the Chief Executive Officer, Secretary and Chief Financial Officer of Merlin.  Plaintiffs have an express easement for ingress and egress onto Defendants’ Property (the “Easement”). 

In 2020 and 2021, Plaintiffs claim Edson harassed Plaintiffs’ realtors and agents when Plaintiffs sought to show Plaintiffs’ Property for sale and lease.  Edson allegedly littered the Easement with trash and debris, played loud music, flew a large remotely operated drone near realtors and prospective tenants, engaged in verbal and physical altercations with agents and prospective tenants, and misrepresented that Defendants have the right to restrict the Easement.  (Compl. ¶¶ 41-45.)  Plaintiffs allege such actions left Plaintiffs unable to sell or lease Plaintiffs’ Property for years, “causing millions of dollars in damages by way of lost rents and lost profits from a potential sale of the Property.”  (Id. ¶ 46.) 

The operative complaint alleges claims for (1) interference with express easement, (2) injunctive relief, (3) declaratory relief, (4) private nuisance, (5) failure to abate artificial condition on land creating nuisance, (6) trespass, (7) intentional interference with prospective economic relations, (8) negligent interference with prospective economic relations, and (9) intentional infliction of emotional distress.  

This hearing is on Defendants’ motion for leave to file a first amended answer, to add an affirmative defense of failure to mitigate.  Defendants argue their motion should be granted because recent discovery supports the assertion of the defense; public policy favors granting leave so that the case can be tried on the merits; the failure to assert the defense was the product of counsel’s mistake, inadvertence and neglect, and Plaintiffs will not be prejudiced by the amendment.  There was no opposition filed as of the posting of this tentative ruling.   

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.” 

“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.)  This policy applies “particularly [to] an amendment to an answer.”  (Gould v. Stafford (1894) 101 Cal. 32, 34; Ramos v Santa Clara (1973) 35 Cal.App.3d 93, 95-96 (“[I]t has been said that liberality should¿be particularly displayed in allowing amendment of answers so that a defendant may assert all defenses available to him.”).)  The Court of Appeal has held that it is proper to grant leave to amend an answer even at trial.  (Eng v. Brown (2018) 21 Cal.App.5th 675, 700-701.) 

Ordinarily, the court will not consider the validity of the proposed amended pleading in ruling on a motion for leave since grounds for a demurrer or motion to strike are premature.  (Id. at 1048.)  The court, however, does have discretion to deny leave to amend where a proposed amendment fails to state a valid defense as a matter of law and the defect cannot be cured by further amendment.  (See California Casualty General Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 281, (overruled on other grounds by Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390).) 

Under California Rules of Court Rule 3.1324(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 Rule of Court Rule 3.1324(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. 

Even if a good amendment is proposed in proper form, a long, unwarranted and unexcused delay in presenting it may be a good reason for denial.  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.  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.) 

DISCUSSION 

Defendants’ declaration in support of their motion meets the procedural requirements of California Rule of Court Rule 3.1324(b).  It attaches the proposed amendment, and it specifies the effect of the amendment; why the amendment is necessary and proper; when the facts giving rise to the amended allegations were discovered; and the reasons why the request for amendment was not made earlier.  (Hawkins Decl. ¶¶ 5-6.)   

Defendants seek to add an affirmative defense of failure to mitigate.  The bases for the amendment was only recently uncovered during discovery.  On December 13, 2023, Plaintiffs’ real estate agent was deposed.  Howland testified that Plaintiffs failed to properly clean and maintain their property such that it was not in a marketable condition for a lease.  (Weinberg Decl. ¶¶ 4-9.)  One prospective tenant wanted to rent Plaintiffs’ Property starting in May 2022 and was informed by Howland that “it would never be ready by May.  It’s a disaster.”  (Id. ¶ 16.)  By April 2022, Howland wrote that she was frustrated with the condition of Plaintiffs’ Property and told Plaintiffs “I just don’t see it renting out as is” and “I feel like I’m showing this for no reason.”  (Id. ¶8.) 

Howland also testified there were sixteen prospective tenant inquiries, and Plaintiffs rejected multiple viable prospective tenants.  (Id. ¶3.)  According to Howland, Plaintiffs over- qualified potential tenants to the point that many, with proof of income of hundreds of thousands of dollars a month, were summarily rejected.  (Id. ¶¶10-11.)  For example, one wealthy investor who sought a 3 year lease with a guaranty of the full lease amount ($1,080,000) secured by assets in a bank account with proof of funds was rejected because Plaintiffs believed social media pictures showed the prospective tenant was “living well beyond his means.”  (Id. ¶12.)     

Dwayne and Michelle Hall were also potential lessees.  They were specifically warned of the “crazy neighbor next door.”  But the Halls were not dissuaded and promised to provide their own full time security and offered to indemnify, release and hold Plaintiffs harmless for any condition they encountered vis-à-vis Defendants during the lease.  But Plaintiffs rejected the Halls because their lawyers told them it was “not in their best interest to rent during the lawsuit” and “we need to litigate first.”  (Id. ¶¶17-19.)      

On January 10, 2023, Raquel Rogers, another realtor, was deposed.  She was engaged to list and sell Plaintiffs’ Property in June 2022, but due to Plaintiffs’ repeated indecision and failures to act promptly to clean up Plaintiffs’ Property and make required repairs, Rogers did not actually list the property for sale until February 15, 2023.  (Id. ¶20.)  Plaintiffs’ Property was not ready to be shown after it was finally listed due to Plaintiffs’ failure to repair many items identified as crucial by Rogers.  (Id. ¶¶24-26.)  And in May 2023, Plaintiffs turned down a very reasonable offer (an all cash offer of $8,700,000) to purchase Plaintiffs’ Property.  (Id. ¶30.)         

Based on the recently taken depositions of Howland and Rogers, the Court concludes Defendants did not unreasonably delay in seeking amendment.  Even if there was delay, delay alone will not justify denying leave to amend.¿ Although it is true “a court may deny a good amendment in proper form where there is unwarranted delay in presenting it,” it remains the case that “where there is no prejudice to the adverse party, it may be an abuse of discretion to deny leave to amend.” (Fair v. Bakhtiari (2011) 195 Cal.App.4th 1135, 1147; see also Kittredge Sports co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048 (“[Defendant] contends [Plaintiff] unreasonably delayed moving to amend… [e]ven if this were so, it is an abuse of discretion to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.”)); Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761 (“[I]t is an abuse of discretion to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.”); Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 545 (“In spite of this policy of liberality, a court may deny a good amendment in proper form where there is unwarranted delay in presenting it. On the other hand, where there is no prejudice to the adverse party, it may be an abuse of discretion to deny leave to amend.”) (citations omitted).¿¿ 

Prejudice exists, for example, where the plaintiff unduly delayed in seeking leave to amend, and the amendment will require a trial continuance and a reopening of discovery on the eve of trial.¿ (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 488 (“Where the trial date is set, the jury is about to be impaneled, counsel, the parties, the trial court, and the witnesses have blocked the time, and the only way to avoid prejudice to the opposing party is to continue the trial date to allow further discovery, refusal of leave to amend cannot be an abuse of discretion”).)¿  

Here, we are not at the eve of trial.¿ Trial is set for April 2024, and the discovery cutoff is in March 2024.  There is no reason to believe trial will need to be continued if the amendment is allowed.  Plaintiffs have also been aware, as of August 2023, that Defendants intended to assert the defense of failure to mitigate.  (Weinberg Decl. ¶40.)  The facts supporting the defense are also not new or surprising to Plaintiffs as they are based on facts known to Plaintiffs including Plaintiffs’ actions vis-à-vis prospective tenants and purchasers.  Plaintiffs also have not filed an opposition, asserting any prejudice.     

In sum, given the liberal policy favoring amendments to an answer, the recent discovery of facts supporting the defense of failure to mitigate, the lack of prejudice to Plaintiffs and the absence of any opposition to the motion, the Court concludes leave to amend should be granted.   

CONCLUSION 

Based on the foregoing, the Court GRANTS the motion for leave to file a first amended answer.  Defendants are to file their proposed first amended answer within 10 days of this Order.        

 

IT IS SO ORDERED. 

 

DATED: February 7, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court