Judge: Mark H. Epstein, Case: 20SMCV01761, Date: 2023-03-22 Tentative Ruling

Case Number: 20SMCV01761    Hearing Date: March 22, 2023    Dept: R

The matter is here for a final status conference and motion for judgment on the pleadings (really the latter, it would appear).  The FSC order was given on May 17, 2021.  However, while some FSC materials have been filed, for the reasons discussed below the court believes that the case NOT READY FOR TRIAL. 

That said, the Yermians have sought to continue the trial and amend the complaint.  The remaining parties oppose the motion to continue.  That is discussed below.

The first question is the MJOP.  The remaining defendants (the court views the Yermians as de facto plaintiffs) seek judgment on the theory that the sole cause of action (collection on the debt) has been extinguished by virtue of the debt being assigned to the Yermians, who defendants contend are debtors and primary obligors at that.  In a prior motion, the court concluded that assigning a debt to a co-obligor does, in effect, extinguish the debt to a degree.  If the co-obligor paid money to acquire the debt, the court concluded that the co-obligor could seek contribution from the remaining co-obligors or, if the other obligors were more primary debtors, perhaps indemnity.  While the case law suggested that the debt instrument survived for such a purpose, the court held that even if it did, the amount that could be sought was still limited to contribution or indemnity.  In other words, it may be that the Yermians can sue on the original debt, but their recovery would be limited to contribution or indemnity as to amount.

The Yermians oppose the motion by contending that it goes beyond the pleadings, which, to an extent it does.  To recap just a bit, the original plaintiff was the landlord.  The Yermians were the original tenants.  (Actually, various entities were also involved, but for simplicity’s sake, the court just refers to the Yermians for this purpose.)  The Yermians then sold their leasehold to the Aisatou parties.  Because the landlord’s consent was required, however, the sale was not quite a clean sale.  Rather, the Yermians agreed to remain on the contract in some capacity.  The Yermians assert that they are nothing more than guarantors, and relatively remote ones at that (because the landlord agreed to seek enforcement in a particular order, and the Yermians were late on the list).  Ultimately, the new tenants defaulted on the lease and they, along with the Yermians (and the various party-related guarantors) were sued.  The Yermians ultimately settled with the landlord, although the court is not aware of the terms.  As part of that settlement, the landlord assigned its claim to the Yermians (which is why they are really plaintiffs).  The Yermians assert that they are really guarantors, and, as guarantors, they are entitled at least to a full indemnity by the primary obligors rather than mere contribution.

The contract at issue is internally inconsistent.  On the one hand, there is certainly language by which one could view the Yermians as guarantors.  After all, they sold their tenancy and any recovery was to be enforced against them only if others failed to pay.  That certainly seems more like a guaranty than a regular co-obligation.  On the other hand, the operative agreement does not release the Yermians from their direct contractual duties.

The court agrees with defendants that the Yermians, even if they are guarantors, cannot sue on the original debt as if they were the landlord.  Rather, for the reasons in the court’s prior order, they can at most sue for 100% of that which they paid to the landlord.  However, the language in the documents here is unclear as to whether the Yermians are mere guarantors or are still co-obligors.  If the latter, then their remedy is for a just proportion of the amount that they paid, not 100% of it.  And in any event, this is not a proper MJOP.  The facts asserted in the motion go well beyond anything in the complaint or any cross complaint currently on file.  As such, the matter cannot be adjudicated by what is essentially a pleading motion.

The bottom line is that the MJOP fails.  The Yermians’ claim is certainly not extinguished in its totality.  They can likely sue “on the debt” per the case law extant, even though it is not quite as if they are fully in the landlord’s shoes.  (By way of example, if the Yermians paid 75% of the total debt to settle the case, then that is the most they are entitled to recover under indemnity or the fair share of the other debtors under contribution, but not the 100% of the debt amount in any event.)  The current pleadings do not properly represent the parties nor do they allege the assignment.

So the MJOP is DENIED.  The Yermians are given 30 days’ leave to file an amended cross-complaint in which they more accurately set forth what they are seeking to recover and under what legal theory.  The trial date is VACATED.  A TSC will be set in approximately 75 days by which time, hopefully, the pleadings will be settled and will accurately reflect the state of play.

That essentially MOOTS the bulk of the ex parte application.  However, leave to amend is LIMITED to accurately pleading the new state of affairs, but not to allege new causes of action other than for contribution or indemnity (whether directly or under the contract).  There is to be no unjust enrichment cause of action.  The theory of unjust enrichment is that the remaining defendants have been enriched because the Yermians paid all or some of the debt.  That is what indemnity and contribution are for.  If the Yermians can make out either claim, then they are made as whole as the law allows.  If not, there is no “unjust” enrichment by definition.  As to alter ego, that opens a huge discovery can of worms at a time when the discovery cut off has come and gone.  It would be prejudicial to the remaining defendants to allow an amendment now.  Nor have the Yermians explained how they were diligent on the alter ego theory.  (Of course, the good news for them is that they can seek alter ego liability even post judgment, should they prevail.)  The court will discuss at the status conference whether any limited discovery is required.  For example, the court could well understand how discovery concerning the settlement would be appropriate.