Judge: Gregory Keosian, Case: 20STCV27718, Date: 2023-11-15 Tentative Ruling

Case Number: 20STCV27718    Hearing Date: November 15, 2023    Dept: 61

Plaintiff and Cross-Defendant Old Road Realty, LLC, and Cross-Defendant William H. Quiros’ Demurrer to the Cross-Complaint of Defendants Skyhigh Valencia, LLC, Robert Rafia, Mahmoud Malakafzali, and Ron Tucker is SUSTAINED without leave to amend.

Plaintiff Old Road Realty, LLC’s Motion for Leave to File Second Amended Complaint is GRANTED.

Plaintiff to provide notice.

I.                   DEMURRER

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) A court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 (“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”))

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

The Cross-Complaint of Defendants Skyhigh Valencia, LLC, Robert Rafia, Mahmoud Malakafzali, and Ron Tucker (Defendants) rests in large part upon the argument (now allegations) that this court has now rejected in three prior instances : that Plaintiff is a different entity from that which entered into the lease.[1] Plaintiff Old Road Realty, LLC and Cross-Defendant William H. Quiros (Cross-Defendants) demurrer to each cause of action contained in the Cross-Complaint, on the grounds that Old Road Realty is the same entity as the contracting party as a matter of law, and further that the claims for indemnity rest upon a provision that Defendants do not include in their Cross-Complaint, and which does not apply to Plaintiff’s claims against them. (Demurrer at pp. 4–10.)

Cross-Defendants’ arguments are persuasive. Defendants’ claims rest upon allegations that the lease is void because the entity with which Defendants contracted — Old Road Realty, a California LLC — did not exist, or was suspended pursuant to Revenue & Tax Code § 23304.1. (XC ¶¶ 32–44, 62–66.) These allegations are defective as a matter of law. First, Defendants’ own pleading acknowledges that the California Old Road Realty was converted into a Delaware corporation of the same name in May 2015. (Complaint ¶ 22.) By law, these corporations are the same entity. (Corp. Code § 17710.09, subd. (a).) Defendants’ allegations therefore establish that they contracted with Plaintiff. Second, as this court noted in its prior rulings, Defendants’ argument relies upon statutes authorizing the suspension or forfeiture of corporations for the failure to pay taxes or penalties owed to the state, when there is no allegation that any such suspension or forfeiture has ever been imposed upon Plaintiff either as a California or Delaware corporation. (Rev. & Tax Code § 23304.1, subd. (a) [referring to corporations suspended under sections 23301, 23301.5, and 23775].)

Defendants also allege that there exists an indemnification clause in the relevant lease that requires Cross-Defendants to indemnify Defendants “for claims such as those made by Plaintiff in this action.” (XC ¶ 19.) Defendants do not include the relevant provision in their pleading, but cite its full text in their opposition to the present demurrer. (Opposition at pp. 5–6.) The provision requires the landlord to indemnify the tenant for claims or liabilities arising from “the conduct of Landlord’s agents,” “any breach or default in the performance of Landlord’s obligations under this Lease,” “any misrepresentation or breach of warranty by Landlord under this lease,” or “other acts or omissions of Landlord, its agents, representatives, contractors or subcontractors.” (Opposition at pp. 5–6.) This provision does not apply, because Plaintiff’s claims rise from allegations of Defendants’ failure to pay rent, not the acts or omission of Plaintiff’s agents.

The demurrer is therefore SUSTAINED without leave to amend.

II.                MOTION FOR LEAVE TO FILE AMENDED COMPLAINT

Code Civ. Proc. section 473 subd. (a)(1) states that:

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.

“The trial court has discretion to permit or deny the amendment of the complaint, but instances justifying the court's denial of leave to amend are rare.” (Armenta ex rel. City of Burbank v. Mueller Co. (2006) 142 Cal.App.4th 636, 642.)

“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 ‘[w]here no prejudice is shown to the adverse party . . .’ [Citation.] A different result is indicated ‘[w]here inexcusable delay and probable prejudice to the opposing party’ is shown. [Citation.]” (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487.)

Pursuant to California Rule of Court Rule 3.1324, “[a] motion to amend a pleading before trial must: (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.”

Such a motion must include a supporting declaration stating, “(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.” (CRC Rule 3.1324, subd. (b).)

Plaintiff Old Road Realty, LLC (Plaintiff) seeks leave to amend the FAC to add a cause of action for reformation of contract. In answer to Defendants’ repeated arguments that they contracted with a nonexistent entity of the same name (discussed above). (Kolber Decl. ¶ 3.) Plaintiff also seeks leave to update the amounts owed by Defendants and to clarify that Plaintiff does not seek rent for the balance of the Lease term. Kolber Decl. ¶¶ 3–4, Exh. B.)

Defendants in opposition argue that the new claim is brought beyond the applicable limitations period. (Motion at p. 2.) This argument fails, because the claim does not arise from a different set of facts than those alleged in the pleadings: “The policy behind statutes of limitations is to put defendants on notice of the need to defend against a claim in time to prepare a fair defense on the merits. This policy is satisfied when recovery under an amended complaint is sought on the same basic set of facts as the original pleading.” (Garrison v. Board of Directors (1995) 36 Cal.App.4th 1670, 1678.) The reformation claim arises from the same contract that Plaintiff seeks to enforce here.

Defendants also argue that discovery is closed, and that Plaintiff has unreasonably delayed bringing this claim. (Opposition at pp. 2–3.) But it is Defendants’ own belated arguments on this point that have occasioned the amendment sought here. Nor do Defendants explain what further discovery would need to be conducted to evaluate Plaintiff’s new legal theory, which rests upon the same facts as their own arguments.

The motion is therefore GRANTED.