Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

 

BACKGROUND 

This action arises from a dispute between two joint venture partners.  Plaintiffs Ward-Schurr, Inc., James Ward and Defendant Tony Scott entered into a joint venture agreement (“JVA”) to develop property in Houston, Texas.  Scott provided the funds to purchase the property.  The project became much more complicated and expensive than anticipated, and Scott wanted to end the partnership and sell the joint venture property.  Plaintiffs objected and wanted Scott to continue to fund the project.   

Scott filed an arbitration demand to dissolve the partnership and liquidate its assets.  Scott obtained an arbitration award that was converted to a judgment that permitted Scott to sell the joint venture property and granted Scott monetary relief against Plaintiffs.  The parties then signed an agreement called a Memorandum of Settlement (the “Agreement”) allowing Scott to sell the property unilaterally and requiring Plaintiffs to pay Scott $75,000 by May 1, 2023.   

On February 7, 2023, Plaintiffs filed a complaint, alleging that Scott breached the Agreement.  Scott filed an answer to the complaint on April 21, 2023, before the $75,000 payment was due.  On May 1, 2023, Plaintiffs failed to pay Scott the $75,000. 

This hearing is on Scott’s motion for leave to file his compulsory cross-complaint, seeking the $75,000 from Plaintiffs.  Scott argues that the Court is required to grant leave to file a compulsory cross-complaint, in the absence of bad faith as is the case here.  Scott did not file the cross-complaint earlier because at the time his answer was due, Plaintiffs were not yet obligated to pay the $75,000.  No opposition has been filed as of the posting of this tentative ruling. 

LEGAL STANDARD 

California Code of Civil Procedure section 428.50 states, “(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.” 

Leave must be granted to file a compulsory cross-complaint when the defendant is acting in good faith.  (Code Civ. Proc. § 426.50.)  A cross-complaint is compulsory when a related cause of action existed at the time of serving the defendant’s answer to the complaint.  (Code Civ. Proc. § 426.30, subd. (a); see also Crocker Nat. Bank v. Emerald (1990) 221 Cal.App.3d 852, 864.)  A related cause of action is “. . . 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.”  (Code Civ. Proc. § 426.10, subd. (c).)   

DISCUSSION 

Scott argues his proposed cross-complaint is compulsory and the Court must grant him leave to file a compulsory cross-complaint where he has acted in good faith.  The Court agrees. 

Scott’s cross-complaint arises from breach of the same agreement as the complaint.  In their complaint, Plaintiffs allege Scott breached the Agreement.  In his cross-complaint, Scott alleges Plaintiffs breached the Agreement.    

  Because the claims are related, the cross-complaint is compulsory, and a failure to bring a compulsory counterclaim means “such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.”  (Code Civ. Proc. §426.30.)   Due to the prohibition on filing a separate action to pursue a related cross-claim, Code Civ. Proc. §426.50 provides that a party who, for any reason, fails to file the compulsory cross-complaint at the time it files its answer “may apply to the court for leave … to file a cross complaint … at any time during the course of the action.”  Section 426.50 further states that “[t]he court, after notice to the adverse party, shall grant upon such terms as may be just to the parties, leave … to file the cross-complaint to assert such a 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.”  (Emphasis added.) 

Courts have confirmed that §426.50 must be liberally construed in favor of granting leave to file a cross-complaint in the absence of bad faith.  For example, in Foot’s Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 903-904, the Court of Appeal issued a writ of mandate requiring the trial court to allow a defendant to file a cross-complaint against plaintiff even though the defendant waited 23 months after service of the complaint and 16 months after it had filed its answer to the complaint, to assert the right to file a cross-complaint and “engaged in as much delay in this litigation as possible.”   

The facts of this case are much less egregious than those in Foot’s Transfer.  Scott seeks to file his cross-complaint only a few months after he filed his answer.  And the basis for his cross-complaint did not arise until his answer was due.     

Additionally, pursuant to Code Civ. Proc. section 428.50, any cross-complaint “may be filed at any time before the court has set a date for trial.”  No trial was set as of the time Scott filed his motion.   

CONCLUSION 

Based on the foregoing, the Court GRANTS Defendant Tony Scott’s motion for leave to file a cross-complaint.   

 

IT IS SO ORDERED. 

 

DATED: September 19, 2023                   ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court