Judge: Mel Red Recana, Case: 22STCV12323, Date: 2024-05-29 Tentative Ruling

All rulings shown here are TENTATIVE ONLY, and thus oral argument WILL be heard. All Counsel are still required to attend.

Case Number: 22STCV12323    Hearing Date: May 29, 2024    Dept: 45

Superior Court of California

County of Los Angeles

Hearing Date:             May 29, 2024

Motion for Leave to File Amended Complaint:

Moving Parties:           Plaintiffs Alla Kutz and Igor Kutz

Responding Party:       Aykem, LLC (Non-Party)

Motion for Leave to Intervene:

Moving Party:             Aykem, LLC (Non-Party)

Responding Parties:    Plaintiffs Alla Kutz and Igor Kutz

The court considered the moving, opposition, and reply papers.

The court GRANTS Plaintiffs’ motion for leave to amend Complaint. The court orders Plaintiffs to file their First Amended Complaint within 10 days of the date of this ruling.

The court DENIES Aykem, LLC’s motion to intervene as moot.

Background

Plaintiffs Alla Kutz and Igor Kutz (“Plaintiffs”) filed this action on April 12, 2022, against defendants Mikhail Siretskiy; Big Block Realty, Inc.; Cangas Re LLC; and Cal West Escrow, alleging causes of action for (1) Breach of Contract; (2) Breach of Fiduciary Duty; (3) Negligence; (4) Fraud; (5) Constructive Fraud; and (6) Rescission.

This action involves the attempted sale of real property between former friends. The Complaint alleges defendant Siretskiy (“Defendant”) approached Plaintiffs with an investment opportunity. Plaintiffs owned property and were using it as an income producing property. They claim that Defendant told Plaintiffs that if they sold their property and purchased a portion of Defendant’s property, located at 5325 Cangas Drive in Agora Hills (“the Cangas Property”), Plaintiffs would be able to take advantage of a Tax Deferred Exchange pursuant to Section 1031 of the Internal Revenue Code ("1031 Exchange") and would also be able to get a more favorable return on their investment with the Cangas Property. (Compl., ¶ 14.)

Plaintiffs claim that they decided to sell their property as part of the 1031 Exchange. (Id., ¶ 16.) As a result, Plaintiffs had 45 days from December 22, 2020 (or until February 5, 2021), to identify “like-kind replacement properties,” and 180 days to consummate the purchase of such “replacement property” pursuant to the IRS rules and regulations for a successful 1031 exchange. (Id.)

The complaint further alleges that Plaintiffs and Defendant signed the Residential Purchase Agreement and Joint Escrow Instructions (“the agreement”) on January 14, 2021 for the purchase of the Cangas Property. (Id., ¶ 19.) Further, the complaint alleges that Defendant was acting as a dual real estate agent where he would represent both Plaintiffs and himself in the transaction. (Id., ¶ 17.) Pursuant to the agreement, Plaintiffs claim they were to purchase Defendants’ undivided 36% interest in the Cangas Property. The complaint further alleges that in reality, Defendant held no legal interest in the Cangas Property at the time he signed the agreement because on January 16, 2020, Defendant had quitclaimed the Cangas Property to an entity known as Cangas RE LLC. (Id., ¶ 23.)

Plaintiffs allege that the escrow company wrongfully released the Kutzs’ initial deposit of $349,000 to Defendant Cangas RE LLC despite the fact that the Purchase Agreement and Addendum No. 1 clearly identified Defendant Siretskiy as the seller and owner of the Cangas Property. (Id., ¶ 29.)

Plaintiffs claim that on May 26, 2021, two weeks after escrow was to close under the agreement, Defendant secretly took out a Deed of Trust and Assignment of Rents in the amount of $500,000 against the property, and that the lender on this Deed of Trust was Aykem, LLC, which is a real estate holding company. This Deed of Trust subordinates the interests of Plaintiffs. (Id., ¶ 33.)

The complaint further alleges that on or about June 16, 2021, Defendants did not close the escrow and convey the property to Plaintiffs on May 10, 2021, notwithstanding the parties' written and express instructions that it close on that date. (Id., ¶ 35.)

Plaintiffs allege they were ultimately required to pay $44,318 in taxes plus interest of $686.96 to the IRS, together with $22,921 to the California Franchise Tax Board, that they would not have incurred had the escrow closed as agreed to by Defendants under the 1031 exchange. (Id., ¶ 44.)

Plaintiffs allege that after the 1031 deadline passed, Plaintiffs requested that Defendant return their initial deposit in the amount of $349,000 and cancel the Note, but Defendant refused. (Id., ¶ 55.)

On April 24, 2024, Aykem, LLC filed a motion to intervene. Plaintiffs filed an opposition on May 9, 2024. Aykem filed a reply on May 13, 2024.

On May 6, 2024, Plaintiffs filed this motion for leave to file an Amended Complaint. Aykem, LLC filed an opposition on May 13, 2024. Plaintiff replied on May 21, 2024.

Request for Judicial Notice

Plaintiffs request judicial notice of: (1) a copy of the declaration of Aykem’s counsel; (2) Plaintffs’ opposition to Aykem’s ex parte application; and (3) a copy of the complaint in Siretskiy, et al. v. Aykem LLC, et al., Case No. 23SMCV04464.

Aykem requests judicial notice of: (1) Deed of Trust; (2) Trustee’s Deed upon Sale; and (3) Minute Order from Siretskiy v. Aykem in 23SMCV04464, dismissing some of the causes of action in that matter.

The requests are granted pursuant to Evidence Code section 452(d).

Legal Standard

The court may, in furtherance of justice, and on such terms as may be proper, allow a party to amend any pleading. (CCP §§ 473, 576.) Judicial policy favors resolution of all disputed matters between the parties and, therefore, leave to amend is generally liberally granted. (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) Ordinarily, the court will not consider the validity of the proposed amended pleading in ruling on a motion for leave since grounds for a demurrer or motion to strike are premature. (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048.)

The application for leave to amend should be made as soon as the need to amend is discovered. (See Cal. Rules of Court, Rule 3.1324(b)(3)-(4) [separate declaration accompanying the motion must specify when the facts giving rise to the amended allegations were discovered and why the request for amendment was not made earlier].) The closer the trial date, the stronger the showing required for leave to amend. (See Duchrow v. Forrest (2013) 215 Cal.App.4th 1359, 1377-78.)  If the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party, the court has the discretion to deny leave to amend. (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490.) Prejudice exists where the amendment would unreasonably delay trial, resulting in added costs of preparation and increased discovery burdens, or result in loss of critical evidence. (Miles v. City of Los Angeles (2020) 56 Cal.App.5th 728, 739; P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1345; Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448; Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488.)

Discussion

Plaintiffs move for leave to file an Amended Complaint to add Aykem LLC as a defendant, and to include him as a conspirator and aider and abettor under the second cause of action for breach of fiduciary duty, fourth cause of action for fraud, and fifth cause of action for constructive fraud. Plaintiffs also seek to add a cause of action under the Uniform Voidable Transactions Act, Civil Code section 3439, et seq. against Aykem and Defendant. Lastly, Plaintiff seek to clarify that they seek specific performance as an alternative remedy in connection with their first cause of action for breach of contract.

Plaintiffs contend that the evidence that Aykem was involved in the scheme to defraud Plaintiffs is compelling. Plaintiffs allege that Defendant agreed to sell Plaintiffs 36% of the Cangas Property for $756,000, had Plaintiffs deposit $349,000 with the escrow company, Cal West, and then had Cal West release that deposit to him, before recording the TIA memorializing Plaintiffs’ ownership interest in the Cangas Property. Then, Plaintiffs claim, before recording Plaintiffs’ ownership interest or closing the Cangas Property escrow (neither of which ever occurred), Defendant opened a new escrow with Cal West, to consummate the Aykem Loan, which Cal West did facilitate and close, taking on obvious liability that no innocent escrow agent would have ever assumed. Plaintiffs allege that predictably, Defendant made no loan payments, Aykem foreclosed and purported to wipe out Plaintiffs’ interest in the Cangas Property, acquired ostensible title, and then attempted to sell the stolen Cangas Property for a profit. Plaintiffs allege that now, after an apparent falling out, Defendant himself claims under penalty of perjury in a verified pleading that the Foreclosure Sale pursuant to which Aykem took title to the Cangas Property was “illegal,” “null,” and “void.” (Hayes Decl., ¶ 44; Exh. 5, Siretskiy v. Aykem, 7:20-27; 9:9-15.)

In opposition, Aykem contends Plaintiff’s motion should be denied because Plaintiffs are not allowed to amend a complaint by adding Aykem as a party pursuant to Code of Civil Procedure section 473(a)(1). Aykem argues that Section 473 allows amendment of a pleading to add or strike the name of a party or to correct a mistake in the name of a party, and has been construed only to allow correction of a reasonably obvious misnomer, not to allow a completely different name to be substituted. (Stephens v. Berry (1967) 249 Cal. App. 2d 474, 475; Kerr-McGee Chemical Corp. v. Superior Court, supra, 160 Cal. App. 3d at p. 599, fn. 3.)

It is true that “a person or entity may become a party defendant only in two ways: by being named as a defendant, or by being properly named and served as a fictitiously named defendant pursuant to section 474.” (Kerr-Mcgee Chemical Corp. v. Superior Court (1984) 160 Cal.App.3d 594, 597.) However, the cases Defendant cites concern substituting a defendant for a doe defendant (CCP § 474) after the statute of limitations has expired. Here, the complaint was only filed in April 2022, and it does not appear the statute of limitations has expired on the causes of action Plaintiffs seek against Aykem – the statute of limitations for these causes of action ranges from 3 to 4 years. Thus, if leave to add Aykem was not granted, Plaintiffs could simply file a complaint against Aykem.

            Based on the foregoing, in view of the well-established liberality with which amendments are to be allowed, the motion is granted. The court orders Plaintiffs to file their Amended Complaint, attached as Exhibit 1 to the declaration of Hayes within 10 days of the date of this ruling.

            As Aykem is made a party to this case by the granting of this motion, Aykem’s motion for leave to intervene is denied as moot.

            It is so ordered.

Dated: May 29, 2024

_______________________

MEL RED RECANA

Judge of the Superior Court