Judge Margaret L. Oldendorf, Case 22AHCV00268 2023-03-30 Tentative Ruling

Judge: Margaret L. Oldendorf, Case: 22AHCV00268, Date: 2023-03-30 Tentative Ruling

This is a collection action. Defendants Edith Enterprise Ltd. and its owner Helen Young (jointly, Edith or Defendants) operate a business in Monterey Park, California. Edith had a line of credit with Citibank, referred to in the pleading as the “Business Loan.” From August 2011 through October 2020, Edith borrowed money on the $50,000 line of credit and made payments. The date of the last payment was October 25, 2020. In August 2021, Citibank sold its rights in the business loan to Plaintiff Cadlerock Joint Venture, L.P.

Cadlerock filed this action in May 2022. The complaint alleges that as of November 2021 there was an outstanding balance of $22,997.79 plus interest and late charges. It further alleges that prior to filing the lawsuit, Cadlerock corresponded with Edith about the loan. The correspondence is attached as Exhibit 4 to the Complaint; Edith’s response is at Exhibit 5. Edith explains that payments were being made by autopay for over 10 years but that on November 2, 2020, Citibank took the balance from the account ($31,396.50) and left the credit balance on the loan unpaid.

Edith filed an answer in July 2022 and now seeks leave to file a cross-complaint against Citibank. For the reasons that follow, the motion is granted.

In seeking leave to file a cross-complaint, Edith cites statutes governing both compulsory and permissive cross-complaints. Because the pleading Edith seeks to file brings in a third party rather allege claims against Cadlerock, it is permissive. If Citibank had not sold the loan to Cadlerock the cross-complaint would be compulsory, but since it did it is permissive. The analysis is therefore governed by Code Civ. Proc. §428.10, et seq.

A defendant may file a cross-complaint against a person not already a party to the action if the proposed cause of action arises out of the same transaction or occurrence as the cause brought against him. Code Civ. Proc. §428.10(b).[1]

Such cross-complaint may be filed any time before the court has set a trial date; otherwise, leave of court is required. Leave to file a cross-complaint may be granted at any time in the interest of justice.[2]

The issue to be decided on this motion is whether the claims Edith seeks to pursue against Citibank arise out of the same transaction or occurrence, or series of transactions or occurrences, as the claims brought against it. The evidence indicates that Edith had a business checking account with Citibank from which the monthly payments on the Citibank Business Loan were automatically made; until one day when Citibank moved all the money out of that account and closed it. The funds in that account would have been sufficient to cover the Business Loan, but were apparently not applied to that loan. To the extent Citibank wrongfully removed funds from Edith’s business account, thus making it unable to make monthly payments on the Business Loan, the proposed causes of action do arise out of the same transaction or occurrence or series of transactions or occurrences. In other words, Edith seems to be alleging that if Citbank had not wrongfully emptied that checking account Edith would not have defaulted on the loan and the monthly payments would have continued.

That the cross-complaint is based on the same series of transactions or occurrences is shown by the facts alleged in the proposed pleading:

¶7 From at least 2008 to 2020, Edith maintained a business checking account with Citibank for its business needs.

¶8 Sometime in 2011 Citibank offered Edith a business credit line and required Edith to designate its checking account to repay the credit line.

¶9 Once the credit line was approved, Edith made timely payments to the credit line and never missed a payment or made a late payment.

¶10 In around November 2020, Young discovered that Citibank unilaterally closed Edith’s checking account.

¶11 The entire checking account balance of $31,396.50 was zeroed out without explanation.

¶¶12, 13 Young attempted to contact Citibank regarding the missing funds without success, a process that was hampered by Covid concerns about in-person contact. Young honestly believed the money had been used to pay off the credit line.

Cadelrock opposes the motion on the basis that Edith was not diligent about seeking this relief. Even if Edith was less than diligent, it would be in the interest of justice to permit the filing of a cross-complaint here. Cadelrock is rightly concerned about delay but if Edith were to file a separate pleading and then do the work of having them related (and perhaps consolidated), the delay would be even greater. The interest of justice weighs in favor of permitting Edith to pursue these claims against Citibank; and judicial economy dictates that this occur by way of cross-complaint.

The motion by Defendants for leave to file a cross-complaint against Citibank is granted. The cross-complaint is to be filed within seven calendar days of today’s date and concurrently served on all current parties. Defendants are to file proof of service of the cross-complaint on Citibank within 30 days thereafter. Rule of Court 3.110(c).

[1] Code Civ. Proc. §428.10: A party against whom a cause of action has been asserted in a complaint or cross-complaint may file a cross-complaint setting forth either or both of the following:

(a) Any cause of action he has against any of the parties who filed the complaint or cross-complaint against him. Nothing in this subdivision authorizes the filing of a cross-complaint against the plaintiff in an action commenced under Title 7 (commencing with Section 1230.010) of Part 3.

(b) Any cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party to the action, if the cause of action asserted in his cross-complaint (1) arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against him or (2) asserts a claim, right, or interest in the property or controversy which is the subject of the cause brought against him.

[2] Code Civ. Proc. §428.50: (a) A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint.

(b) Any other cross-complaint may be filed at any time before the court has set a date for trial.

(c) A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.