Judge: Joseph Lipner, Case: 20STCV00173, Date: 2024-08-27 Tentative Ruling

Case Number: 20STCV00173    Hearing Date: August 27, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiff Morris Matloubian (“Plaintiff”) moves to vacate the voluntary April 22, 2022 dismissal of Defendant Superior Home Design, Inc. (“Superior”) from this action. Plaintiff separately moves for leave to file a second amended complaint.

The Court GRANTS Plaintiff’s motion to vacate the dismissal of Superior.

            The Court GRANTS Plaintiff’s motion for leave to amend to assert Plaintiff’s breach of fiduciary duty claim against Superior. The Court DENIES Plaintiff’s motion for leave to amend to assert a new cause of action for violation of Penal Code, section 496. The Court CONTINUES Plaintiff’s motion for leave to amend with respect to the remaining amendments to allow Plaintiff to provide the Court with a redlined version of the complaint and to explain those changes.

Background

Plaintiff filed this action on January 2, 2020 against Defendants Superior, Zahal Mansur (“Zahal”), Michal Mansur (“Michal”) (collectively with Zahal Mansur, the “Mansurs”) (collectively with Superior, “Defendants”) (the Court uses the parties’ first names for clarity only and means no disrespect). The Complaint raised claims for (1) breach of fiduciary duty; and (2) accounting.

On June 25, 2020, the Court granted Defendants’ motion for judgment on the pleadings as to the Complaint. The Court denied leave to amend as to Plaintiff’s claim for breach of fiduciary duty as against Superior. The Court granted leave to amend for Plaintiff’s breach of fiduciary duty claim against the Mansurs and Plaintiff’s accounting claim against both Defendants.

Plaintiff filed the First Amended Complaint (“FAC”) on July 27, 2020, raising claims for (1) breach of fiduciary duty (against the Mansurs only); and (2) accounting.

On April 22, 2022, Plaintiff voluntarily dismissed Superior from this action without prejudice.

On June 7, 2022, the Court granted the Mansurs’ motion for summary judgment.

Plaintiff appealed both the order granting summary judgment and the order granting judgment on the pleadings.

On March 25, 2022, the Court of Appeal reversed both orders. The Court of Appeal ordered the Court to vacate both orders and issue new orders denying both the motion for judgment on the pleadings and the motion for summary judgment. Remittitur was filed with the Court on June 5, 2024.

In the appeal, Defendants argued that the Court of Appeal lacked jurisdiction because Plaintiff had voluntarily dismissed Superior from the action, and a voluntary dismissal is not ordinarily appealable. (Remittitur at p. 8.) The Court of Appeal found that the order granting judgment on the pleadings and Plaintiff’s voluntary dismissal collectively gave rise to a final, appealable judgment in favor of Superior. (Remittitur at pp. 8-9.) The Court of Appeal found that Plaintiff’s dismissal of the breach of fiduciary claim against Superior was “not really voluntary” because judgment had already been granted on that claim. (Remittitur at p. 10.) “[M]any courts have allowed appeals by plaintiffs who dismissed their complaints after an adverse ruling by the trial court, on the theory the dismissals were not really voluntary, but only done to expedite an appeal. (Gutkin v. University of Southern California (2002) 101 Cal.App.4th 967, 974–975; see Remittitur at p. 9.)

On July 5, 2024, Plaintiff moved to vacate his dismissal of Superior from the action and for leave to file a second amended complaint. On July 18, 2024, Defendants filed an opposition. On July 25, 2024, Plaintiff file a reply.

On July 2, 2024, Plaintiff withdrew his motion for leave to amend, but not his motion to vacate dismissal.

On August 1, 2024, the Court continued Plaintiff’s motion to vacate dismissal from August 1, 2024 to August 27, 2024. The Court ordered that Plaintiff may file an updated motion for leave to amend and set the motion for hearing on August 27, 2024.

On August 5, 2024, Plaintiff filed an amended motion for leave to file a second amended complaint, with the hearing set for September 19, 2024. On the same day, Plaintiff filed an amended notice and motion to vacate dismissal, with the hearing date listed for September 19, 2024.

On August 14, 2024, Defendants filed an opposition to Plaintiff’s amended motion for leave to amend. On the same day, Defendants filed a separate opposition to Plaintiff’s amended motion to vacate dismissal.

On August 20, 2024, Plaintiff filed a reply in support of his motion for leave to amend.

Discussion

Vacate Dismissal

            “A court has inherent power to exercise reasonable control over all proceedings connected with the litigation before it[.]” (Mowrer v. Superior Court (1969) 3 Cal.App.3d 223, 230.) “Courts have the inherent power to create new forms of procedure in particular pending cases. ‘The ... power arises from necessity where, in the absence of any previously established procedural rule, rights would be lost or the court would be unable to function.’ [Citation.]” (James v. Superior Court (1978) 77 Cal.App.3d 169, 175.) “This right is codified in Code of Civil Procedure section 187 which provides that when jurisdiction is conferred on a court by the Constitution or by statute ‘... all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.’ ” (Ibid, quoting (Code Civ. Proc., 187.)

            The effect of the Court of Appeal’s order is that proceedings must continue as to Plaintiff’s breach of fiduciary duty claim against Superior. Any other reading would make little sense. The Court of Appeal would not have intended to reverse judgment in Superior’s favor on that claim, only to have proceedings end against Superior because Plaintiff dismissed his remaining claims against Superior to expedite appeal. To vacate the dismissal of Superior is simply to give effect to the Court of Appeal’s existing order.

            The Court therefore vacates its dismissal of Superior from this action.

Leave to Amend

A complainant may obtain leave from the trial court to amend their pleading beyond the number of amendments allowed under Code of Civil Procedure section 472 (a) by filing a noticed motion. (Cal. Rules of Court, Rule 3.1324.) The motion must be accompanied by a 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) why the request was not made earlier.¿(Cal. Rules of Court, Rule 3.1324 (b).)

“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 or pretrial conference order.”¿(Code Civ. Proc., § 576.) In the absence of a showing of prejudice from the opposing side, the trial court ordinarily lacks discretion to deny a motion to amend a pleading. (Honig v. Financial Corp. of America (1992) 6 Cal.App.4th 960, 965.)

            Plaintiff seeks leave to amend to once again raise his breach of fiduciary duty claim against Superior, to add a new cause of action for violations of Penal Code, section 496, and to make a laundry list of other changes.

            The basis for adding Superior back as a defendant to the breach of fiduciary duty claim is already clear from the Remittitur and the surrounding circumstances – the judgment on that claim against Superior was reversed, so Plaintiff’s First Amended Complaint, which dropped that claim against Superior in reliance on the Court’s judgment, may be amended.

            The declaration of John R. Walton explains that the factual allegations underlying the amendments were discovered in discovery shortly before the Court granted summary judgment. Plaintiff seeks to add additional allegations based on statements made by the Court of Appeal in its opinion. Following remittitur, the further delay was explained by the parties’ efforts to engage in mediation to resolve Plaintiff’s claims. The Court is inclined to agree; however, it is unclear exactly what changes are being made because Plaintiff has not provided a redlined version of the proposed Second Amended Complaint or stated, with specificity, what text is being added and deleted.

            Plaintiff does not have a valid basis to add a new cause of action under the Penal Code. Plaintiff admits that the new cause of action for violation of the Penal Code is based on the same underlying facts as the rest of his claims. Plaintiff therefore had access to those facts since the beginning of this litigation in January 2020. Plaintiff argues that the Court improperly prevented him from amending his complaint, but then clarifies that he refers to the Court’s limited grant of leave to amend in its order granting judgment on the pleadings. Plaintiff had plenty of opportunities throughout the life span of this case to amend in order to add his Penal Code claim.

            The Court grants Plaintiff’s motion for leave to amend to assert Plaintiff’s breach of fiduciary duty claim and the related accounting claim against Superior. The Court denies Plaintiff’s motion for leave to amend to assert a new cause of action for violation of Penal Code, section 496. The Court continues Plaintiff’s motion for leave to amend with respect to the remaining amendments.