Judge: John J. Kralik, Case: 21BBCV00674, Date: 2025-01-24 Tentative Ruling

Counsel who wish to submit on the tentative ruling may do so by emailing BURDeptB@lacourt.org

PLEASE WRITE THE CASE NUMBER AND PARTY YOU REPRESENT.  YOU MAY ONLY SUBMIT ON BEHALF OF THE PARTY YOU REPRESENT.  YOU MAY NOT SUBMIT ON BEHALF OF ANOTHER PARTY. Counsel are directed to cc all other counsel if you are submitting on the tentative ruling.

IF YOU HAVE QUESTIONS OR NEED CLARIFICATION ON THE TENTATIVE, YOU MUST APPEAR AND ADDRESS YOUR QUESTIONS TO THE COURT.

IF BOTH SIDES SUBMIT ON THE TENTATIVE RULING, THE TENTATIVE RULING THEN BECOMES THE ORDER OF THE COURT ON THE MOTION DATE AND NO APPEARANCES ARE NECESSARY.

THERE WILL BE NO RESPONSES TO ANY INQUIRIES SUBMITTED THROUGH THIS SITE.

Warning regarding electronic appearances:    All software for remote or electronic appearances is subject to malfunction based on system weakness and human error, which can originate from any of the multiple parties participating each morning. The seamless operation of the Court’s electronic appearance software is dependent on numerous inconstant and fluctuating factors that may impact whether you, or other counsel or the Court itself can be heard in a particular case. Not all these factors are within the control of the courtroom staff. For example, at times, the system traps participants in electronic purgatories where they cannot be heard and where the courtroom staff is not aware of their presence. If you call the courtroom, please be respectful of the fact that a court hearing is going on, and that the courtroom staff is doing their best to use an imperfect system. If it is truly important to you to be heard, please show up to the courtroom in the normal way. Parking is free or reasonable in Burbank.

THANK YOU!

Case Number: 21BBCV00674    Hearing Date: January 24, 2025    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations of Complaint

Plaintiff DBIK Construction & Design, Inc. (“DBIK”) alleges that it entered into a construction agreement with Defendant Four Joy Investment LLC on April 30, 2019, in which DBIK agreed to provide certain improvements to real property located at 1200 E Huntington Dr., Duarte, CA 91010 including the renovation of the exterior and roof of a 67-unit hotel building, the exterior renovation of a separate 8-unit commercial building, and landscaping of the entire property.  In exchange, Defendants agreed to pay Plaintiff a total of $945,000.  In the next four months, structural safety concerns were discovered with respect to the commercial building, which necessitated the addition of a central column in the building and other design changes.  During the construction, supervision costs escalated due to increased scope of work, COVID-19 pandemic challenges, involvement of third-party contractors hired by Four Joy Investment LLC, etc. DBIK alleges that for the provided additional supervision, it is entitled to a project management fee of $828,823.31, or approximately 20%.  DBIK alleges that the total change order between the parties increased the contract amount by $3,899,454.44, resulting in an adjusted contract amount of $4,844,454.44.  DBIK alleges it made a demand for $4,844,454.44 and Defendants have failed to pay $1,776,084.08 of that amount.    

The complaint, filed July 30, 2021, alleges causes of action for: (1) Breach of Contract; (2) Open Book Account; (3) Account Stated; (4) Reasonable Value of Labor and Materials Furnished; and (5) Foreclosure of Mechanic’s Lien.  

On October 1, 2021, DBIK filed an amendment to complaint, naming Doe 1 as “Four Joy One LLC a California limited liability company.”  On October 8, 2021, DBIK filed an amendment to complaint, correcting the name of “Four Joy Investment LLC, a California Corporation” to “Four Joy Investment LLC, a California Limited Liability Company.”   

On October 24, 2023, DBIK dismissed without prejudice Four Joy One LLC as to the complaint.  

B.     Cross-complaint

On July 11, 2022, Cross-Complainants DBIK and Cheng filed a cross-complaint against Angel Development Inc., N Pro Electric, Inc., and Albert Harding Butcher, Jr. dba Harding Construction, and Moes 1 through 100. Their cross-complaint alleges causes of action for: (1) Implied Indemnity; (2) Contribution and Indemnity; (3) Declaratory Relief; and (4) Negligence. On August 22, 2024, Cross-Complainants named New Sunrise Building, Inc. as Moe 1; R&S Rain Gutters Sheet Metal as Moe 2; Iron Dragon Manufacturing, Inc. as Moe 3; Mage Group Inc. as Moe 4 (updated from “Mage USA Group” on September 4, 2024); JFE HVAC Inc. as Moe 5; and California Garvey Glass and Awnings, Inc. as Moe 6.  On September 4, 2024, DBIK filed an amendment to cross-complaint, correcting the name of “Mage USA Group” to “Mage Group Inc.”   

On January 20, 2023, Cross-Complainant Four Joy Investment, LLC filed a cross-complaint against Cross-Defendant Angel Development, Inc. for: (1) Intentional Misrepresentation (Fraud/Deceit); (2) Negligent Misrepresentation; (3) Breach of Contract; (4) Breach of Implied Covenant of Good Faith and Fair Dealing; (5) Negligence; and (6) Recovery of Payments Made to Unlicensed Subcontractors Pursuant to Business & Professions Code, § 7031(b). That same day, Four Joy Investment, LLC filed an amendment to cross-complaint naming Roe 1 as DC International Design & Construction, Inc.

On July 9, 2024, Cross-Complainants Four Joy Entities filed a Second Amended Cross-Complaint (“Four Joy SAXC”) against Cross-Defendants DBIK, “Danny” Hung Cheng, and DC International Design & Construction, Inc. for: (1) Violation of Business & Professions Code, §§ 7125.2 and 7031(b) (Disgorgement Action Against Unlicensed Contractor); (2) Violation of Business & Professions Code, § 7160 (Statutory Fraud by Unlicensed Contractor); (3) (Deceit) Intentional Misrepresentation; (4) Deceit (Negligent Misrepresentation); (5) Negligence; and (6) Violation of Business & Professions Code, § 17200 et seq.

On October 31, 2024, Cross-Complainants R & S Rain Gutters Sheet Metal (R & S) filed a cross-complaint against Toes 1 through 20 for: (1) Implied and Equitable Indemnity, (2) Contribution, and (3) Declaratory Relief. On December 3, 2024, R & S filed an amendment to cross-complaint, naming Toe 1 as “DBIK Construction & Design, Inc.” 

On January 13, 2025, all parties stipulated to State Farm General Insurance Company to filing a Complaint in Intervention and intervening on behalf of Cross-Defendant California Garvey Glass and Awning, Inc.

C.     Relevant Background

On September 21, 2023, the default of N Pro Electric, Inc. was entered upon the request of DBIK and Cheng.

On January 8, 2025, the default of Mage Group Inc. was entered upon the request of DBIK.

D.    Motion on Calendar

On December 12, 2024, Cross-Complainant Four Joy Investment filed a motion for leave to file an amended cross-complaint.

On January 10, 2025, Cross-Defendants Angel Development, Inc. and JFE HVAC (Cross-Defendants) filed an opposition brief.

On January 16, 2025, Four Joy Investment filed a reply brief.

LEGAL STANDARD

The trial court has discretion to allow amendments to pleadings in the furtherance of justice. (Code Civ. Proc., § 473, subd. (a)(1).) Any judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading. (Code Civ. Proc., § 576.) There is a policy of great liberality in permitting amendments to the pleadings at any stage of the proceeding. (Berman v. Bromberg (1997) 56 Cal.App.4th 936, 945.) An application to amend a pleading is addressed to the trial judge’s sound discretion. (Ibid.) A judge may deny a motion for leave to amend where a moving party has been dilatory in seeking leave to amend and such delay has prejudiced the opposing party. (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490.) “It is difficult to understand how [a named defendant] can be prejudiced by amendment to add an additional theory of liability against it.” (Ibid.) If a motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend.  (Morgan v. Superior Court of Los Angeles County (1959) 172 Cal.App.2d 527, 530.)

If the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party, the Court has the discretion to deny leave to amend.  (Hirsa v. Superior Court, supra, 118 Cal.App.3d at p. 490.)  Prejudice exists where the amendment would require delaying the trial, resulting in loss of critical evidence, or added costs of preparation due to the reopening of discovery.  (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488 [“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.”].) 

A motion for leave to amend must include a separate declaration specifying: (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. (Cal. Rules of Court, rule 3.1324(b).) A motion for leave to amend must include a copy of the proposed amendment or amended pleading. (Cal. Rules of Court, rule 3.1324(a)(1).) Moreover, a motion to amend must state what allegations in the previous pleading are proposed to be deleted or added, if any, and must set forth the page, paragraph, and line number of such allegations. (Cal. Rules of Court, rules 3.1324(a)(2)-(3).)  

DISCUSSION

A.    Procedural Compliance

Four Joy Investment’s attorney, Roland Ho (Ho), provides a declaration in support of the motion. The declaration satisfies the requirements under the California Rules of Court, rule 3.1324(b). Ho identifies the amendments, their effect, why they are necessary and proper, when the facts giving rise to the amendments were discovered, and the reason why the request for amendment was not made earlier. (Motion, Ho Decl. ¶¶ 2-5.) 

Four Joy Investment intends to include the following: “It is believed that Angel Development was not properly licensed during the construction period in question, including but not limited to failure to maintain worker’s compensation insurance. That a proper licensure was required, including maintaining worker’s compensation insurance; Cross-Defendant, Angel Development, failed to retain and to use licensed contractors or subcontractors and to maintain proper worker’s compensation insurance; and Four Joy paid Angel Development about 1.4 million for services performed by unlicensed contractors or subcontractors, including lack of proper worker’s compensation insurance coverage.” The amendments’ effect is to “resolve all claims.” (Motion, Ho Decl. ¶ 4.) 

Four Joy Investment’s amendments are necessary and proper to “address the issues of payment (the disgorgement claim) to unlicensed general contractor and subcontractors.” (Motion, Ho Decl. ¶ 5.)

On or around November 26, 2024, Ho discovered Four Joy Investment did not plead clear or specific factual claims alleging that Angel Development, Inc. was not properly licensed and lacked worker’s compensation insurance during the time of construction in question. (Motion, Ho Decl. ¶ 2.) Ho makes the amendment to resolve this issue. (Motion, Ho Decl. ¶ 4.)

Four Joy Investment did not request the amendments earlier, because Ho only discovered Angel Development’s lack of worker’s compensation coverage after conducting discovery and preparing for a deposition of PMK. (Motion, Ho Decl. ¶ 2.) In preparation for the deposition, Ho reviewed the cross-complaint against Angel Development. (Motion, Ho Decl. ¶ 2.) This is when he noticed the missing allegations. (Motion, Ho Decl. ¶ 2.) The same day, Ho reserved the motion date of January 17, 2025, the soonest date available. (Motion, Ho Decl. ¶ 6.)

Accordingly, the Court finds that Four Joy Investment satisfies the procedural requirement under the California Rules of Court, rule 3.1324(b).

However, Four Joy Investment does not meet all the procedural requirements under the California Rules of Court, rules 3.1324(a)(1)-(3). Four Joy Investment provides one copy of the proposed First Amended Cross-Complaint. Four Joy Investment also states the language it wants to add. (Motion p. 6.) However, it is unclear how Four Joy Investment wishes to amend the cross-complaint, because Four Joy Investment does not set forth the page or line number of such allegations. Instead, Four Joy Investment states the language it wants to add, and says, “See [Proposed] First Amended Cross- Complaint, ¶¶ 10, 46, 47 & 48.” Four Joy Investment does not state whether all or part of the proposed language will be included in those paragraphs.

 In the end, Angel Development knows whether or not it had workers’ compensation insurance, and so is already in possession of the most important fact regarding this additional language.

B.     Prejudice

Cross-Defendants contend that granting leave to amend the cross-complaint will prejudice their rights. (Opp. ¶ 10.) Cross-Defendants allege Four Joy Investment is drastically expanding the scope of litigation and altering the nature of the lawsuit by adding Business and Professions Code 7031(b) five months before trial. (Opp. ¶¶ 8, 13.) Cross-Defendants believe they have “no realistic opportunity to serve discovery requests, take depositions, or file necessary motions on these new claims” due to the new deadlines under Civil Code of Procedure section 437c. (Opp. ¶ 14.) This will likely cause the trial to be continued. (Opp. ¶ 15.) A delay in trial is a reason sufficient to show prejudice. (Opp. ¶ 16.) Cross-Defendants also believe Four Joy Investment is adding the code past the one-year statute of limitations. (Opp. ¶¶ 13, 14.)

Allowing Four Joy Investment to file an amended cross-complaint at this stage would not result in undue prejudice to Cross-Defendants. Four Joy Investment is not adding Business and Professions Code 7031(b) five months before trial. This cause of action was in its original cross-complaint. (Reply, Ho Decl. ¶ 2 Exh. 1.) Rather, Four Joy Investment is adding new factual allegations supporting its causes of action in the cross-complaint. This will certainly, at least to some extent, expand the scope of the litigation.

Four Joy Investment and Cross-Defendants may need to conduct depositions or propound discovery as to the new factual allegations. Discovery does not cut off until June as Cross-Defendants admit. Although Four Joy Investment does not satisfy all the procedural requirements under the California Rules of Court, rules 3.1324(a)(1)-(3), the Court finds these procedural defects to be minor and so grants Four Joy Investment’s Motion for Leave to Amend Cross-Complaint.

There is time to conduct discovery. Cross-Defendants also state they may file a demurrer or motion to strike and must file it before March 17, 2025 to comply with Civil Code of Procedure section 437c’s 81 day deadline. (Opp. ¶¶ 14, 16) However, Civil Code of Procedure section 437c only applies to motion for summary judgment. (Code Civ. Proc., § 473c.) Cross-Defendants do not discuss filing a motion for summary judgment. It is unlikely that trial will need to be continued.

Cross-Defendants also claim that Four Joy Investment is adding a claim past the one-year statute of limitations. As Business and Professions Code 7031(b) was included as part of Four Joy Investment’s initial cross-complaint, this is not correct.

Thus, granting leave to amend the cross-complaint will not cause undue prejudice to Cross-Defendants.

Based on the foregoing, the Court grants Four Joy Investment’s Motion for Leave to Amended Cross-Complaint.

CONCLUSION AND ORDER

Four Joy Investment’s Motion for Leave to Amend Cross-Complaint is granted.

Four Joy Investment shall provide notice of this order.

DATED: January 24, 2025                                                     ___________________________

                                                                                                JOHN J. KRALIK, Judge

                                                                                                Superior Court of California

                                                                                                County of Los Angeles.