Judge: Mark A. Young, Case: 20SMCV01575, Date: 2022-08-23 Tentative Ruling
Case Number: 20SMCV01575 Hearing Date: August 23, 2022 Dept: M
CASE NAME: Holmby Westwood Property Owners Association v. Focus Line LLC
CASE NO.: 20SMCV01575
MOTION: Motion for Leave to Amend
HEARING DATE: 8/23/2022
BACKGROUND
On October 20, 2020, Plaintiff Holmby Westwood Property Owners Association (“HWPOA”) filed the instant action against Defendant Focus Line LLC. The operative complaint states two causes of action for: (1) Breach of Covenants, Conditions and Restrictions (“CC&Rs”); and (2) Declaratory Relief. Plaintiff alleges that Focus violated the CC&Rs on August 12, 2020, by demolishing an existing single-family residence on the subject Property without first obtaining approval from the Architectural Committee and/or the HWPOA, as required by the 1975 Extension and the Guidelines. Further, Plaintiff alleges that the Project does not comply with the setback requirements of the CC&Rs.
On January 29, 2021, Focus filed a cross-complaint against HWPOA. Focus alleges that HWPOA advised it that the plans for the Property would be approved if they obtained the written approval of a majority of homeowners subject to the CC&Rs within a 500’ radius of the Property. Focus obtained such approval. Focus further asserts that the restrictions that only allows the CC&Rs to be terminated by a 50% majority vote within a six-month window every 20 years, and that any other amendment must have a 75% supermajority vote, are unenforceable. Focus obtained signatures to terminate the operative 1975 extension. The operative First Amended Cross Complaint (FACC) alleges four causes of action for breach of contract, promissory estoppel, and declaratory relief.
On July 26, 2022, Plaintiff filed the instant motion for leave to amend to file a proposed First Amended Complaint (FAC). Defendant opposes.
Legal Standard
If a party wishes to amend a pleading after an answer has been filed, or after a demurrer has been filed and after the hearing on the demurrer, or if he or she has already amended the pleading as a matter of course, the party must obtain permission from the court before amendment. (CCP §§ 473(a)(1), 576.)
Motions for leave to amend the pleadings are directed to the sound discretion of the court. “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . ..” (CCP § 473(a)(1); see CCP § 576.) Policy favors liberally granting leave to amend so that all disputed matters between the parties may be resolved. (See Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) Absent prejudice to the adverse party, the court may permit amendments to the complaint “at any stage of the proceedings, up to and including trial.” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761 [internal quotes omitted].) Where leave is sought to add entirely new claims, the court may grant leave to amend if the new claims are based on the same general set of facts, and the amendment will not prejudice the opposing party. (Austin v. Massachusetts Bonding & Ins. Co. (1961) 56 Cal.2d 596, 600-602; Glaser v. Meyers (1982) 137 Cal.App.3d 770, 777 [holding trial court did not abuse its discretion in permitting amendment of complaint, which originally alleged constructive eviction, to allege retaliatory eviction where the new claim was based on the same general set of facts].)
Although denial is rarely justified, a judge has discretion to deny leave to amend if the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party. (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530; Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490). An opposing party is prejudiced where the amendment would necessitate a trial delay along with a loss of critical evidence, added preparation expense, increased burden of discovery, etc. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488 [leave properly denied where plaintiff sought leave on the eve of trial, nearly two years after the complaint was originally filed and gave no explanation for the delay which prejudiced defendant who did not discover or depose many of the witnesses who would support the new allegations and had not marshaled evidence in opposition of the new allegations].)
Procedurally, a motion for leave to amend must state with particularity what allegations are to be amended. Namely, it must state what allegations in the previous pleading are proposed to be deleted and/or added, if any, and where, by page, paragraph, and line number. (CRC, Rule 3.1324(a)(2)-(3).) The motion must be accompanied by a 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. (CRC, Rule 3.1324(b).) The motion must also be accompanied by the proposed amended pleading, numbered to differentiate it from the prior pleadings or amendments. (CRC, Rule 3.1324(a)(1).) It is within the court’s discretion to require compliance with Rule 3.1324 before granting leave to amend. (Hataishi v. First American Home Buyers Protection Corp. (2014) 223 Cal.App.4th 1454, 1469.)
Analysis
Plaintiff meets the procedural requirements. Plaintiff seeks leave to file the FAC to add a cause of action for cancellation of instrument regarding Defendant’s purported Termination Agreement, which necessitates adding 48 new parties as defendants. Plaintiff reasons that the proposed defendants are proper parties since their real property interests are be affected by the Termination Agreement. (The Court notes that no authority presented suggests that these defendants must be “necessary” parties as defined by Civil Code section 389.)
Plaintiff provides that in late April 2022, Defendant produced documents in response to a demand for production and produced, for the first time, a copy of the November 30, 2020, recorded purported Termination Agreement. (Bryn Decl., ¶ 13, Ex. 3.) Prior to bringing this motion, the parties attempted to resolve this action at a MSC, but to no avail. (Id., ¶¶ 14-15.) The parties also met and conferred regarding the amendment. (Id., ¶ 17.) Thus, counsel provides the effect of the amendment, the necessity of the amendment, and when the facts giving rise to the amendment were discovered, and why the request for amendment was not made earlier. A redlined copy is attached.
In opposition, Defendant argues that 20 months have passed since the Termination Agreement was recorded in the public records on November 20, 2020, and 14 months have passed since Focus filed the FACC referencing the Termination Agreement. Defendant contends that this constitutes unreasonable delay. Defendant, however, provides no evidence that it gave notice of the recordation to Plaintiff in November 2020. As to the FACC, Defendants do reference an agreement alleging that Defendants “obtained signatures from other homeowners to terminate the 1975 Extension, which have been recorded with the Los Angeles County Recorder’s Office.” (FACC ¶20.) The FACC alleges that such an agreement is attached as Exhibit B, but it is admittedly not attached. (FACC ¶ 21.) Notably, none of the FACC’s causes of action request termination on this basis. (See FACC, Prayer.)
Given the vague nature of this allegation, and its apparent tangential nature to the cross-complaint itself, it was not unreasonable for Plaintiff to delay seeking leave to amend until the production of the Termination Agreement. As noted, this occurred in April 2022, with meet and confer efforts following. Thus, Plaintiff’s delay upon discovery of the Termination Agreement was reasonable. Further, there is no apparent prejudice caused by this delay. Thus, the Court concludes that Plaintiff acted with reasonable diligence in requesting leave to amend. Accordingly, the Court is inclined to grant leave to allow the addition of the cancellation cause of action.
However, the Court is wary of adding 48 additional defendants, which will likely cause delay. Plaintiff’s suggestion that many of these proposed defendant will permit their default to be entered is entirely too speculative for the Court to seriously consider. Moreove, the Termination Agreement is somewhat a tangential issue. While the Termination Agreement would technically go to the enforceability of the CC&Rs in the underlying actions, the Termination Agreement is not central to the disputes outlined in the Complaint and FACC.
The Court will discuss with counsel how to proceed on this action at the hearing. Some of the issues the Court wants to discuss at the hearing are: (1) whether the addition of 48 additional defendants just three months before trial would prejudice defendants through vastly increased discovery burdens and delaying of the trial for a substantial period of time, especially in light of the tangential nature of this issue; (2) whether leave should be denied and Plaintiff may file a new action to cancel the instrument; (3) whether additional briefing is warranted on the issue of the propriety of adding these 48 new defendants as direct defendants to the cancellation cause of action or only joining signatory v. non-signatory defendants; (4) permitting defendants to file a new complaint to enforce the termination agreement as a class action matter and following the class action rules (California Rules of Court, rule 3.760 et seq.); and (5) whether the Court should designate this matter as a complex case within the meaning of California Rules of Court, rule 3.400(a).