Judge: Frank M. Tavelman, Case: 19BBCV00147, Date: 2023-01-17 Tentative Ruling

Case Number: 19BBCV00147    Hearing Date: January 17, 2023    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

THIS FINAL RULING IS POSTED ON THE COURT’S TENTATIVE RULING PORTAL TO PROVIDE COUNSEL ACCESS TO THE RULING PRIOR TO RECEIVING A COPY OF THE COURT’S MINUTE ORDER

MOTION TO STRIKE/QUASH AMENDMENTS

ALLEGATIONS:

JSP Medical Management Inc. (“Plaintiff”) filed its Fourth Amended Complaint in which it named as defendants 11601 Ventura Blvd., LLC (“11601 Ventura”) and 22456 Ventura Blvd., LLC (“22456 Ventura”) (collectively, “Special Defendants”). Also named as a defendant is Pierre Moeini (“Moeini”). Plaintiff alleges that Special Defendants are the alter ego of Moeini, as Moeini is the sole member of the companies. Plaintiff alleges causes of action against Moeini and Special Defendants for: (1) Fraud; (2) Negligent Misrepresentation; and (3) Fraudulent Transfer.

Plaintiff initially filed suit as against Moeini, Trans-Atlantic Motors, LTD and Does 1-10 on February 19, 2019. Relevant to both parties’ arguments is that, in a previous action, a debtor’s examination of Pierre Moeini took place on November 1, 2019. Plaintiff filed its Third Amended Complaint on April 16, 2020, alleging for the first time Fraudulent Transfer.

Special Defendants have filed a Motion to Quash Service of Summons for failure to comply with C.C.P. §474. Plaintiff opposes this motion.

HISTORY:

The Court received the Motion to Quash Service of Summons filed by Special Defendants on December 16, 2022; the opposition and request for judicial notice filed by Plaintiff on December 28, 2022; and the reply filed by Special Defendants on January 6, 2023.

RELIEF REQUESTED:

Special Defendants request that the Court strike or quash the amendments to Plaintiff’s Fourth Amended Complaint which adds 11601 Ventura Blvd., LLC and 22456 Ventura Blvd., LLC as named parties.

ANALYSIS:

I.          LEGAL STANDARD

A defendant . . . may serve and file a notice of motion for one or more of the following purposes:  (1) To quash service of summons on the ground of lack of jurisdiction of the court over him or her. . . .”  (C.C.P. § 418.10(a).)  “[C]ompliance with the statutory procedures for service of process is essential to establish personal jurisdiction. [Citation.]” (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444.  When a defendant moves to quash service of the summons and complaint, the plaintiff has “the burden of proving the facts that did give the court jurisdiction, that is the facts requisite to an effective service.”  (Coulston v. Cooper (1966) 245 Cal.App.2d 866, 868.)  “A court lacks jurisdiction over a party if there has not been proper service of process.”  (Ruttenberg v. Ruttenberg (1997) 53 Cal.App.4th 801, 808.) 

C.C.P. § 474 permits the designation of a defendant by a fictitious name when the plaintiff is ignorant of the defendant’s name. Section 474 further provides that when the defendant’s true name is discovered, the pleading must be amended accordingly and that the copy of the summons or other process must provide a notice stating in substance: “‘To the person served: You are hereby served in the within action (or proceedings) as (or on behalf of) the person sued under the fictitious name of (designating it).’” (Ibid.) 

“Improper service of a defendant under section 474 may be attacked by a motion to quash. (McClatchy v. Coblentz, Patch, Duffy & Bass, LLP (2016) 247 Cal.App.4th 368.)

II.        REQUEST FOR JUDICIAL NOTICE

Plaintiff requests that the Court take judicial notice of orders and filings in the instant case. (RJN Exhs. 1-6.)

Although it is not necessary to take judicial notice of documents in the instant case, Plaintiff’s request is GRANTED.  (Evid. Code. § 452(c), (d).)

III.       MERITS

Arguments from Hearing

During the hearing on this motion, Special Defendants argued that the language of McClatchy and A.N. requires the Court to determine if Plaintiff knew or should have reasonably known facts establishing its cause of action. The Court agrees with Special Defendants’ argument but finds that the language of McClatchy also requires knowledge of the Doe Defendant. The test in McClatchy is if plaintiff is aware of facts establishing their cause of action against the party to be substituted. Plaintiff alleges that misrepresentation of Pierre Moieni kept them from being aware of facts as to the existence of Special Defendants.

Defendants reply that Pierre Moeini answered to the best of his layman’s ability and Plaintiff was constructively on notice as public records were available to determine if the property was transferred to the trust or some other party. Special Defendants cautioned against the Court’s reliance on Schaefer, stating that it was not a Doe amendment case. While Schaefer is not a Doe amendment case, it is instructive because it deals with causes of action for fraud and constructive notice. It specifically speaks to the “reasonably should have known” standard in McClatchy. Schaefer specifically states that the existence of public records is not sufficient to serve as constructive notice in cases where fraud is alleged.

As such, Plaintiff could not reasonably know the existence of Special Defendants because they were not disclosed in discovery and the debtor’s exam from the prior action.

The Defendant’s concerns about trial timing are understandable, however the Court does not feel that Special Defendants have shown prejudice by virtue of being named to this action at this time. Plaintiff’s Opposition argues that Special Defendants are LLCs whose sole proprietor is the individual defendant Pierre Moeini. Special Defendants during argument stated that if added, the Special Defendants would not be requesting a trial delay.

Having considered the motion and responses, as well as the arguments from Counsel, the matter was taken under submission.  The Court rules as follows:

A.    Delay in Prosecution

Special Defendants argue that Plaintiff’s amendments should be quashed for failure to comply with the discovery requirement of C.C.P. §474. Special Defendants primarily rely on McClatchy v. Coblentz, Patch, Duffy & Bass, LLP (2016) 247 Cal.App.4th 368. The McClatchy court held that in order for a 474 amendment to succeed, plaintiff’s ignorance as to the Doe defendants must be genuine. McClatchy concerned a plaintiff which sought to add as defendant, via Doe amendment, a law firm under which the individual defendant worked. The Court held that the plaintiff could not do so as plaintiff was aware of the relationship between the law firm and individual defendant at the time of the original filing, providing constructive notice. In making its ruling, the Court pointed to evidence that the individual defendant used stationary bearing the law firm’s letterhead in conducting Plaintiff’s matter. (Ibid.)

Plaintiff argues that the facts in McClatchy are inapposite the facts in the instant case. The Court agrees. Here, the evidence does not support a finding of constructive notice as to the existence of Special Defendants and their relationship with Moeini. Special Defendants’ evidence showing constructive notice is too far reaching. Special Defendants argue that Plaintiff was required to conduct due diligence after the 2019 testimony of Moeini in connection with a judgment debtor exam. Special Defendants further claim that Moeini was not obscuring the nature of the transfer in his testimony, simply answering to the best of his ability as a layman. Nothing in the McClatchy decision suggests that Plaintiff must go to such great lengths as to further verify a defendant’s sworn testimony via public record search.

Special Defendants’ reliance on A.N. v. County of Los Angeles (2009) 171 Cal.App.4th 1058 is similarly misplaced. There the court found constructive notice as evidenced by Plaintiff’s counsel specifically deposing the later named parties in this initial stages of litigation. Neither McClatchy nor A.N. require extrapolation of testimony from a previous matter and a subsequent verification via public record. While the principles of McClatchy and A.N. are sound, their facts do not track to Special Defendants’ claim of constructive notice. In reply, Special Defendants continue to assert the tenants of McClatchy and A.N., but simply aver that Plaintiff had constructive notice without further basis.

Further still, Plaintiff provides sufficient rebuttal of the presumption of constructive notice in its opposition. Plaintiff cites Schaefer v. Berinstein (1956) 140 Cal.App.2d 27 which states that when fraud is involved, public records are not to be used as constructive notice. (See also Gross v. Needham (1960) 184 Cal.App.2d 446, 460.) The reasoning behind this is simple, public records statutes are intended to shield those who claim fraud, not those against whom it is claimed. (Ibid.) Here, Special Defendants cannot claim that public records as to the transfer of assets from Moeini to Special Defendants served as constructive notice as to the alleged fraud. Defendants reply brief only alleges that obtaining the public information was not difficult, this has no bearing on the legal argument at hand. Whether obtaining public records requires great effort or little, it is clear that public records are not constructive notice to those stating a claim for fraud.

Special Defendants’ motion to strike/quash amendments to Plaintiff’s complaint on grounds of delay in prosecution is DENIED.  Special Defendants’ argument that the alleged delay in prosecution prejudices all parties involved is moot.

B.    Statute of Limitations

It is unclear from the Fourth Amended Complaint whether all causes of action, or just that of Fraudulent Transfer, has been alleged against Special Defendants. The complaint states that the causes of action are as to “all defendants” and as such the Court will address statute of limitations concerns as to all causes of action.

Special Defendants do not raise any concerns with C.C.P. § 583.210; however, Plaintiff raises the issue under its own statute of limitations arguments and Special Defendants address it in reply. C.C.P. § 583.210 requires the summons and complaint be served upon a defendant within three years after the complaint is filed. If service of the summons and complaint has not been served upon a defendant within the three-year statutory time period, the court shall dismiss the action.  (Ibid.)  “The three-year rule applies where the defendant seeking dismissal was served as a Doe defendant named in the original complaint, later amended to show his or her true name.”  (Inversiones Papaluchi S.A.S. v. Superior Court (2018) 20 Cal.App.5th 1055, 1061, emphasis added.)  Thus, “a plaintiff has three years from the date of filing the complaint to identify and serve a Doe defendant.”  (Ibid.) However, in instances where statements or conduct by plaintiff have lulled defendant into a false sense of security resulting in inaction then the plaintiff can be equitably estopped from its dismissal. (Tejada v. Blas (1987) 196 Cal.App.3d 1335.)

Here, Plaintiff filed its First Amended Complaint naming Does 1-10 on February 19, 2019. The statute allows three years in which to determine the identity of these Does and serve them. Here Plaintiffs’ causes of action for Fraud and Negligent Misrepresentation were included in the First Amended Complaint. As such, service of the Fourth Amended Complaint on December 1, 2022 is outside of the three year period. However, the Court finds that statements made by Moeni during the November 1, 2019 Debtor’s exam, in which he identified the entity he transferred to as the “Trust and Partnership.” The Court finds that such a statement qualifies as lulling Plaintiff into a false sense of security. Further, the Court finds that Plaintiff reasonably relied on these statements leading to its failure to identify the Special Defendants. As such, the dismissal of Plaintiff’s claims of Fraud and Negligent Misrepresentation for failure to comply with C.C.P. § 583.210 is denied under the principle of estoppel.

Special Defendants do specifically argue that the Fraudulent Transfer is barred by the applicable statute of limitation under either the UVTA or common law.  In arguing that Plaintiff’s complaint is outside of the statute of limitations, Special Defendants rely on the ruling in a People v. Zamora (1976) 18 Cal.3d 538. While Zamora is a criminal case, it does contain language about civil rulings on fraud actions, which are relevant to the instant action. Zamora analyzed the “discovery” requirement of fraud actions to determine whether prosecutors could charge an alleged arsonist with grand theft. Zamora makes it clear that “discovery” of fraud occurs when a reasonable person would have notice. Special Defendants use this to argue that the statute of limitations for the Fraudulent Transfer cause of action began to toll after the debtor’s exam, which would have given a reasonable person notice. In other words, Special Defendants’ argument here rests on the same considerations of constructive notice as their arguments for delay in prosecution. As previously discussed, the Court does not find this argument convincing. The representations made at the debtor’s exam would not have caused a reasonable person to be on notice of the existence of the transfer to the LLC.  

Special Defendants argue in reply that Plaintiff did not conduct due diligence after the Court granted Demurrer to the Third Amended Complaint “en esse.” It is unclear what Special Defendants’ argument is here, as they refer on several occasions to the court overruling the cause of action for Fraudulent Transfer when this is not the case. In its April 27, 2021 ruling, the court overruled a demurrer to Plaintiff’s third cause of action, given that the allegation generally comported with the Uniform Fraudulent Transfer Act. (April 27, 2021 Minute Order, p. 4.) If Special Defendants wish to demur to the cause of action as it is pled in the Fourth Cause of Action they may do so, but their invocation of the previous ruling is both misstated and unrelated to the instant motion.

As such, the Court DENIES the motion to quash on grounds that it is barred by statute of limitations.

IV.       CONCLUSION

Special Defendants’ motion to strike/quash amendments to Plaintiff’s complaint is Denied.

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RULING AFTER ARGUMENT:

In the event a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records.

ORDER

Defendants 11601 Ventura Blvd., LLC and 22456 Ventura Blvd., LLC Demurrer and Motion to Strike/Quash Amendments came on regularly for hearing on January 13, 2023, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, took the matter under submission.  The Court now rules as follows:

THE MOTION TO STRIKE/QUASH AMENDMENT IS OVERRULED

PLAINTIFF TO GIVE NOTICE.

IT IS SO ORDERED.

DATE:  January 13, 2023                               _______________________________

                                                                        F.M. TAVELMAN, Judge

                                                                        Superior Court of California

County of Los Angeles