Judge: Mark A. Young, Case: 24SMCV00354, Date: 2024-12-11 Tentative Ruling
Case Number: 24SMCV00354 Hearing Date: December 11, 2024 Dept: M
CASE NAME: Van Lokeren
Construction Inc. v. Kunkle, et al.
CASE NO.: 24SMCV00354
MOTION: Motion
for Leave to Amend (First Amended Cross-Complaint)
HEARING DATE: 12/11/2024
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.) Leave of
court is required to file a compulsory cross-complaint when it is not filed
before or at the same time as the answer. (CCP § 428.50(a), (c).) Where a party
seeks leave to file a compulsory cross-complaint, whether due to oversight,
inadvertence, mistake, neglect, or other cause, leave must be granted anytime
during the course of litigation so long as the defendant acted in good faith.
(CCP § 426.50.) Leave should be liberally granted to avoid forfeiture of causes
of action. (Ibid.)
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.)
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].)
When considering a motion for
leave to assert a compulsory cross claim, “[f]actors such as oversight,
inadvertence, neglect, mistake or other cause, are insufficient grounds to deny
the motion unless accompanied by bad faith.” (Silver Organizations Ltd. v.
Frank¿(1990) 217 Cal.App.3d 94, 99.) “[The] principle of liberality
requires that a strong showing of bad faith be made in order to support a
denial of the right to file a cross-complaint under this section.” (Foot's
Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897,
902.) To establish bad faith, the opposing party must show “actual or
constructive fraud, or a design to mislead or deceive another, or a neglect or
refusal to fulfill some duty or some contractual obligation, not prompted by an
honest mistake ..., but by some interested or sinister motive[,] ... not simply
bad judgment or negligence, but rather ... the conscious doing of a wrong
because of dishonest purpose or moral obliquity; ... [bad faith] contemplates a
state of mind affirmatively operating with furtive design or ill will.” (Id.
at 100.) While the good faith requirement gives courts a “modicum of
discretion,” the law strongly favors granting leave. (Sidney v. Superior
Court (1988) 198 Cal.App.3d 710, 718.)
Analysis
Defendants/Cross-Complainants Golden Blue Builders Group Inc. and Justin Kunkle
move for leave to amend the cross-complaint to assert compulsory cross-claims against
Plaintiff Van Lokeren Construction, Inc. (CCP §§ 426.50, 473(a)(1).)
On January 24, 2024, Plaintiff filed
its complaint against Defendants asserting claims for: (1) Intentional
Interference with Contractual Relations; (2) Intentional Interference with
Prospective Economic Advantage; (3) Conversion; (4) Civil Theft; (5) Fraud; and
(6) Accounting. The gist of the complaint involves a dispute over construction
services provided at a residential property (the “Property”) on which both
Plaintiff and Golden Blue Builders Group Inc. (“GBBG”) worked (the “Project”).
The complaint alleges that Plaintiff acted as the general contractor on the
Project and that GBBG provided project management services, and that GBBG, and
its principal, Justin Kunkle (“Kunkle”), failed to perform their duties on the
Project. Plaintiff further claims Project funds were misappropriated by
Defendants. Defendants answered on February 28, 2024.
On October 18, 2024, Defendants
filed the operative cross-complaint, which excluded Plaintiff from the
pleading. The cross-complaint claims: (1) Breach of Joint Venture Agreement
(against Tom Van Lokeren); (2) Breach of Fiduciary Duty (against Tom Van
Lokeren); (3) Aiding and Abetting Breach of Fiduciary Duties (against Ron
Bernards, Ali Salour, and Stonemark); (4) Interference with Contract (against
Ron Bernards, Ali Salour, and Stonemark); and (5) Accounting (against Tom Van
Lokeren). Each of the claims arise from the same transaction and occurrences
alleged in the complaint, i.e., construction operations and management at the
subject Property. Defendants now propose a first amended cross-complaint (“FACC”).
(Grant Decl., ¶¶ 9-11; Exs. B-C.) A week after filing the cross-complaint,
Defendants/Cross-Complainants moved for leave to file the proposed FACC. They
seek to add Plaintiff as a Cross-Defendant to the Breach of Joint Venture
Agreement, Breach of Fiduciary Duty and Accounting causes of action. (See FACC
pp. 15-19.)
The Court finds no significant
delay in bringing this cross-claim against Plaintiff by Defendants. Defendants
should have brought this cross-claim against Plaintiff at the time of answering
or at least when filing the initial cross-complaint. Defendants’ counsel
explains that after they substituted into this case in September 2024, they discovered
the factual bases underlying the crossclaims, and diligently sought a
stipulation from Plaintiff to agree to the filing. (Grant Decl., ¶¶ 4-6.) Defendants
explain that they could not obtain Plaintiff’s consent to file a
cross-complaint against it. Not wanting to delay further, they filed the
cross-complaint without Plaintiff as a cross-defendant.
This record does not suggest any
bad faith on their part. Critically, Plaintiff notice of the crossclaims before
the initial cross-complaint was filed. Thus, Defendants only delayed 8 months,
at most, in bringing the crossclaims. This delay was insubstantial, as the case
is still at the outset, and there is ample time to take discovery and to prepare
a defense. Thus, Plaintiff has experienced no prejudice as a result from any
delay. Conversely, Defendants would be severely prejudiced by denial, as they would
forfeit their substantive claims against Plaintiff. (See CCP § 426.30(a)
[failure to plead compulsory claims in a cross-complaint bars later suit].)
Plaintiff badly asserts bad faith,
arguing that the claims are “malicious” and “frivolous” and designed to
“sabotage Van Lokeren Construction Inc.’s relationship with the owner of a
project.” Plaintiff fails to substantiate any such claims with sufficient evidence
or argument. Plaintiff does not explain this unsubstantiated intent to disrupt Plaintiff’s
business relationship with the owner of the project shows that the claims are
meritless. Plaintiff only notes that the original complaint alleges that Tom
Van Lokeren was in a joint venture, but now adds Van Lokeren Construction, Inc.
as a Cross-Defendant on the alleged ground that Van Lokeren Construction, Inc.
was in a joint venture without removing Tom Van Lokeren as a cross-defendant.
Plaintiff’s point is not well-taken. This neither suggests bad faith, nor contradicts
the prior pleading. Van Lokeren and Van Lokeren Construction could, as a matter
of fact, be in a joint venture with the other Defendant(s) and/or each other. Plaintiff’s opposition therefore fails to identify
any bad faith or prejudice they would suffer as a result of granting leave to
amend.
Accordingly, the motion is GRANTED. The FACC shall be filed as a separate
document by December 12, 2024.