Judge: John J. Kralik, Case: 21BBCV01045, Date: 2023-05-05 Tentative Ruling

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Case Number: 21BBCV01045    Hearing Date: May 5, 2023    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

            Plaintiff Creditors Adjustment Bureau, Inc. (“Plaintiff”) alleges that it was assigned the debt of $313,014.75 for Policy No. 9254579-19 and the debt of $7,812.38 for Policy No. 9254579-20 from its assignor, State Compensation Insurance Fund.  Plaintiff alleges that the due date for the first policy was January 11, 2021 and the due date for the second policy was July 6, 2021.  Plaintiff alleges that its assignor and Defendants CNA Partners, Inc. aka CAN Partners Inc dba Property Damages Specialists (“CNA Partners”) and PDS Construction Inc aka Property Damage Specialists aka Property Damages Specialist (“PDS”) entered into a written agreement wherein Plaintiff’s assignor agreed to provide policies of workers compensation insurance to Defendants in the aforementioned two policies.  Plaintiff alleges Defendants breached the policies by failing to make the required payment of premiums assessed after audit by Plaintiff’s assignor.   

            The complaint, filed December 20, 2021, alleges causes of action for: (1) breach of contract; (2) open book account; (3) account stated; and (4) reasonable value.

            On April 22, 2022, Plaintiff filed an Amendment to Complaint, correcting the name “CNA Partners, Inc. aka CAN Partners Inc dba Property Damages Specialists” to “CNA Partners, Inc. aka CNA Partners Inc dba Property Damages Specialists.”  (Underline added.) 

            On June 16, 2022, the default of CNA Partners was entered.  

B.     Motion on Calendar  

On April 4, 2023, Plaintiff moves for an order allowing Plaintiff to file a second amended complaint (“SAC”).

On April 21, 2023, PDS filed an opposition brief.

On April 28, 2023, Plaintiff filed a reply brief.

LEGAL STANDARD

CCP § 473(a)(1) states: “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.” 

            CRC rule 3.1324 requires a motion seeking leave to amend to include a copy of the proposed pleadings, to identify the amendments, and to be accompanied by a declaration including the following facts:

            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.

The Court’s discretion regarding granting leave to amend is usually exercised liberally to permit amendment of pleadings.  (Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939.)  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.)

DISCUSSION

Plaintiff moves for leave to file the proposed SAC.  A copy of the proposed SAC is attached as Exhibit 6 to the moving papers. (Brown Decl., Ex. 6.) 

In support of the motion, Tiffanie Brown, counsel for Plaintiff, provides her declaration.  She states that on or about March 13, 2023, through the normal course of file review and skip-tracing of Nazareth Abovian, Plaintiff discovered the existence of GLA Puroclean (“GLA”).  (Brown Decl., ¶4, Ex. 1.)  She states upon further investigation and review, Plaintiff is informed and believes that GLA is an alter ego/successor in interest of CNA Partners and PDS for the purposes of perpetrating a fraud and other wrongful/inequitable acts against Plaintiff’s assignor.  (Id., ¶5.)  Counsel states that CNA Partners and GLA were both incorporated by Nazareth Abovian aka Nazareth Abovyan aka David Abovian who is listed as the sole officer, sole director, and registered agent for both companies, and that both companies list the same principal address at 2310 N. Fairview St., Suite 206, Burbank, CA 91504.  (Id., ¶6, Ex. 2.)  She states that at the time of incorporation, Abovian was listed as the registered agent for PDS.  (Id., ¶7, Ex. 3.)  She states that the 3 companies are engaged in the same business of damage repair, construction, restoration, removal, and clean-up.  (Id., ¶8, Ex. 4 [websites].)  Counsel states that the current or last known address for all 3 companies is 11523 Sherman Way in North Hollywood.  (Id., ¶9, Ex. 5.)  Counsel states that the effect of the amendment would be to accurately name GLA as a defendant, as well as the proposed amendments listed in her declaration.  (Id., ¶¶10-11, Ex. 6.) 

In opposition, PDS argues that CNA Partners is a different entity from PDS and that Plaintiff is now attempting to add GLA on the basis of alter-ego.  PDS argues that CNA Partners closed its doors and allowed its default to be taken, while PDS answered the complaint, it denies that any of its employees are employees of CNA Partners, and it wants its day in court for wrongly being brought into this action.  PDS argues that allowing amendment would cause delay by opening the door for additional discovery and would prejudice PDS by having it further litigate the action—particularly in light of the impending trial date of June 12, 2023 (a final status conference and mandatory settlement conference as set for June 1, 2023).  PDS also points out that GLA was not incorporated until September 30, 2021, which was after the policy periods and the alleged payment due dates of the two policies at issue in this action.  Additionally, it argues that GLA could not have been on the billing for labor utilized, GLA could not have been an agent/employee of PSD, GLA could not have been an entity written into the 2019 and 2020 contracts, GLA could not have breached the contracts by failing to make payment, and GLA could not be indebted to Plaintiff or unjustly enriched because it did not exist at that time the allegations of this action arose.  

While Plaintiff raises some suspicions that GLA may be an entity formed by the same individual at the same address as CNA Partners/PDS and that they perform the same type of work, Plaintiff has only provided speculative arguments that GLA is the alter ego of these other defendants.  There are no invoices, emails, documents, etc. showing that there was a unity of interest and ownership, a comingling of funds and other assets, or that GLA was merely a shell and conduit for CNA Partners/PDS’s affairs, etc.  Further, GLA was formed after the policies were entered, allegedly breached, and the payments were due.  

However, GLA may have a basis for a claim against GLA under successor liability.  “[A] successor company has liability for a predecessor's actions if: (1) the successor expressly or impliedly agrees to assume the subject liabilities … , (2) the transaction amounts to a consolidation or merger of the successor and the predecessor, (3) the successor is a mere continuation of the predecessor, or (4) the transfer of assets to the successor is for the fraudulent purpose of escaping liability for the predecessor's debts.”  (CenterPoint Energy, Inc. v. Superior Court (2007) 157 Cal.App.4th 1101, 1120.)  At this time, based on the declaration of counsel and the attached documents filed with the California Secretary of state, the Court cannot ascertain whether there was an express or implied agreement by GLA to assume CNA Partners and PDS’s liabilities and assets, or whether the transaction amounted to a consolidation or merger of the entities.  However, such facts may come to light upon discovery. 

Thus, the motion for leave to amend the complaint is granted.  “[T]he court's discretion will usually be exercised liberally to permit amendment of the pleadings.  The policy favoring amendment is so strong that it is a rare case in which denial of leave to amend can be justified.”  (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.)  This action was filed on December 20, 2021, such that this case has been pending for less than 2 years.  Although trial is currently set for June 12, 2023, the parties may seek a trial continuance to account for time for Plaintiff to serve GLA and conduct discovery if necessary.

CONCLUSION AND ORDER

Plaintiff Creditors Adjustment Bureau, Inc.’s motion for an order allowing Plaintiff to file a Second Amended Complaint is granted.  Plaintiff is ordered to electronically file a separate version of the Second Amended Complaint with the Court by this date following the hearing on the matter. 

Plaintiff shall provide notice of this order.