Judge: Mel Red Recana, Case: 22STCV14851, Date: 2024-10-11 Tentative Ruling
Case Number: 22STCV14851 Hearing Date: October 11, 2024 Dept: 45
Hearing date: October
11, 2024
Moving Party: Plaintiff
NewDay Development Incorporated
Responding
Party: Defendants
Elyse R. Margolin, Jeffrey Sklan, Elyse R. Margolin, and Elyse R. Margolin
Trust
Motion for Leave
to File First Amended Complaint
The Court considered the moving, opposition,
and reply papers.
The motion is DENIED.
Background
On May 4, 2022, Plaintiff/Cross-Defendant
NewDay Development Incorporated (“Plaintiff”), a California-licensed
contractor, filed this action against Defendants/Cross-Complainants Jeffrey
Sklan, Elyse R. Margolin, and through a theory of alter ego, the Elyse R.
Margolin Trust (collectively “Defendants”), alleging the following causes of
action: (1) breach of written contract, (2) for labor and materials furnished,
(3) on open book account, and (4) foreclosure of mechanics lien. Plaintiff’s
allegations stem from a Home Improvement Contract (“Agreement”), dated July 10,
2018, by and between Plaintiff and the Owner of the Margolin/Sklan, for construction
services at 9487 Rembert Lane, Los Angeles, California 90210 (the “Subject
Premises”). (Complaint, ¶¶ 1, 10; Decl. of Maral Gasparian (“Gasparian Decl.”)
¶ 6.)
On June 13, 2022, Plaintiff/Cross-Defendant
filed an errata to the verified complaint, stating Plaintiff did not attach
Exhibit A as set forth in the complaint. On the same day, Plaintiff also filed a
notice of pendency of the action pursuant to Cal. Civ. Proc. § 405.20.
On June 27, 2022, Defendants/Cross-Complainants
filed an answer to the complaint, asserting a general denial and sixteen
affirmative defenses. On the same day, Defendants/Cross-Complainants filed a
cross-complaint for (1) breach of contract, (2) negligence, and (3) declaratory
relief against Plaintiff.
On July 5, 2022, Plaintiff/Cross-Defendant
filed an answer to the cross-complaint.
On July 3, 2024, Plaintiff/Cross-Defendant
filed the instant motion for leave to file first amended complaint.
On July 29, 2024, Plaintiff/Cross-Defendant
filed an ex parte application to advance the hearing or for an order
shortening time for the hearing on Plaintiff/Cross-Defendant’s motion for leave
to file the first amended complaint.
On July 30, 2024, the Court denied
Plaintiff/Cross-Defendant’s ex parte application and kept the hearing
for Plaintiff’s motion for leave to file first amended complaint on the
calendar for October 1, 2024, and continued the final status conference and
mandatory settlement conference for August 28, 2024, and the jury trial date to
September 8, 2024.
On September 17, 2024, Defendant/Cross-Complainant
filed an opposition to Plaintiff/Cross-Defendant’s motion for leave to file the
first amended complaint.
On September 23, 2024,
Plaintiff/Cross-Defendant filed a reply.
On October 1, 2024, on the Court’s own
motion, the hearing was continued to October 11, 2024.
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,
Rules 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.)
Procedural
Issues
Under CRC Rule
3.1324(a), a motion to amend a pleading shall (1) include a copy of the
proposed amendment or amended pleading, which must be serially numbered to
differentiate it from previous pleadings or amendments; (2) state what
allegations in the previous pleading are proposed to be deleted, if any, and
where, by page, paragraph and line number, the deleted allegations are located;
and (3) state what allegations are proposed to be added to the previous
pleading, if any, and where, by page, paragraph, and line number, the
additional allegations are located.
Under CRC Rule
3.1324(b), a separate declaration must accompany the motion and must specify
(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.
Even if a good
amendment is proposed in proper form, a long, unwarranted and unexcused delay
in presenting it may be a good reason for denial. In most cases, the factors for timeliness
are: (1) lack of diligence in discovering the facts or in offering the
amendment after knowledge of them; and (2) the effect of the delay on the
adverse party. If the party seeking the
amendment has been dilatory, and the delay has prejudiced the opposing party,
the judge has discretion to deny leave to amend. (Hirsa v. Superior Court (1981) 118
Cal.App.3d 486, 490.) Prejudice exists
where the amendment would require delaying the trial, resulting in loss of
critical evidence, or added costs of preparation such as an increased burden of
discovery. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471,
486-488.)
In
this case, Plaintiff’s motion to amend the complaint includes a copy of the
amended pleading, properly labeled as “First Amended Complaint”, as such, CRC
Rule 3.1324(a) is satisfied. (Declaration of Maral Gasparian (“Gasparian
Decl.”), Exhibit A.)
Defendants maintain Plaintiff’s motion
is defective under CRC Rule 3.1324(b) because its supporting declaration fails
to sufficiently identify the proposed allegations by page, paraph, and line
number. (Opposition, p. 4:20-25.) Instead, Plaintiff simply declares the
amendment is necessary “pursuant to Owner Defendants’ responses to discovery”
and Plaintiff’s “recent inspection of the property.” (Opposition, p. 4: 20-25.) Owner Defendants argue that Plaintiff does
not express which facts were learned due to this discovery and inspection to
support Plaintiff’s allegations that the nature and condition performed by
Plaintiff at the Subject Premises were changed due to considerable additional
work. (Opposition, pp. 4:25-5:5.)
The Court finds that Plaintiff has sufficiently
expressed the effect of the proposed FAC is to add new parties and new causes
of action related to the remodeling project; the necessity of the FAC is to apportion
damages and liability among the various subcontractors and vendors; and stating
that the facts supporting the amended allegations arose while engaging in
written discovery. Plaintiff also states that proposed Defendants’ refusal to
respond or accept its request to join the suit to indemnify or defend has
necessitated the amendment at this time. Despite Plaintiff’s failure to comply
with CRC Rule 3.1324(b), the Court reviews Plaintiff's motion on its merits.
Discussion
Motion
for Leave to Amend First Amended Complaint
Plaintiff NewDay Development
Incorporated (“Plaintiff”) moves for leave to file a First Amended Complaint
(“FAC”) to add eleven new parties and six new causes of action. Plaintiff
states that Defendants refused their request to stipulate amending the original
complaint. (Gasparian Decl. ¶ 10.) Specifically, Plaintiff seeks to file an FAC
adding the following defendants:
1.
BFS Group of California, LLC, dba Builders
Firstsource aka BMC,
2.
Donald E. Webster, Inc., dba Broken Drum
Installation,
3.
JGP, Inc.,
4.
Kaplan Electric Inc.,
5.
Kenneth Thomas Phillips,
6.
KPA Sheet Metal & Rain Gutters,
7.
M&M Plastering, Inc.,
8.
Pacific Title and Stone, Inc.,
9.
Ron Briant Heating and Air Conditioning,
10. Steven Koening Painting (collectively the
“Subcontractor Defendants”), and
11. The Kitchen Factory, as an additional named
Defendant.
(Gasparian Decl., ¶ 8.)
In the proposed FAC, Plaintiff also asserts
additional causes of action against the proposed Subcontractor Defendants and
Defendant The Kitchen Factory for: (5) negligence, (6) equitable indemnity, (7)
contribution, (8) apportionment of fault, (9) declaratory relief (Id., ¶
9), and two causes action for (10) fraud/fraudulent concealment/ false
pretenses/ fraud in the inducement, and (11) violation of Penal Code § 496
against Defendants. (Id.)
Plaintiff contends that Defendants,
in written discovery responses, alleged defects on the Subject Premises
performed "by Plaintiff and its subcontractors". (Motion, pp.
1:26-2:5.) Plaintiff asserts that following its own inspection of the Subject
Premises, it is evident that additional work was performed by other parties on
the Subject Premises. (Id., p. 2:5-9) Plaintiff maintains that leave to
amend the original complaint is necessary because it has received denials or no
responses to Tenders issued to its subcontractors, asking them to defend and
indemnify. (Id., p. 2:17-20.) The basis for Plaintiff's motion arises
from the "transaction" alleged in the original complaint, where
Plaintiff was to provide construction services to Defendants, who were to pay
for such services.
(Id.,
p. 7:3-8.) According to Plaintiff, the named Subcontractor Defendants were
vendors and service-providers to the Subject Premises. (Id., p. 7:8-10.)
Citing Code Civ. Proc. §426.50, Plaintiff
argues Defendants will not be prejudiced by the proposed amendment because
Plaintiff’s right to relief jointly and severally arises from the same
transaction or occurrence or share common questions of law and fact. (Id., p. 8:9-14.) Plaintiff argues that denying the proposed FAC would
result in severe prejudice to them, leaving them without the additional clarity
to determine liability and damages related to the construction services
performed on the Subject Premises. (Id. p. 8:15-21.) Lastly, Plaintiff
maintains that the FAC is not barred by the statute of limitations because the
claims relate back to the harms alleged and damages claimed in the original
complaint. (Id., p. 10:1-10.)
Defendants contend Plaintiff’s motion is an
improper request for the court’s reconsideration of Plaintiff’s two-year-old
complaint. Defendant argues that as the general contractor on the project,
Plaintiff’s knowledge of the proposed Subcontractor’s identities and
involvement in remodeling the Subject Premises dates back to the start of this
action. (Opposition, p. 5:12-16; Declaration of Aristotle Alsua (“Alsua Decl.”)
¶ 9.) Defendants, pointing to October 2022 and
February 2023 responses to Plaintiff’s discovery requests and argue it has been
over two years since Plaintiff began receiving relevant discovery and Plaintiff
fails to show why it could not seek amendment earlier. (Opposition, p. 6:1-14.)
The Court notes that the opposition papers are incorrectly paginated, as they
begin to renumber page “1” at what should be labeled as page 6. To avoid
confusion, the forthcoming citations follow what the correct pagination would
reflect. Owner Defendants also assert that they would be significantly
prejudiced because Plaintiff’s undue delay in bringing these claims, some
asserted in their cross-complaint against Plaintiff, would require reopening
discovery including depositions that would further postpone the trial. (Id.,
p. 6:15-22.) Defendants argue that Plaintiff would not be prejudiced if Plaintiff’s
motion is denied because contribution, defense, indemnity, and apportionment remain
available to Plaintiff in a separate proceeding that does not burden Defendants
with additional discovery efforts. (Id., p. 6:24-26.) Moreover, Defendant
contends that Plaintiff has proposed this FAC in bad faith because Plaintiff
misrepresents the facts obtained through Defendant’s proffered discovery
responses. (Id., p.7:2-9.)
Defendants also challenge the merits of
the proposed causes of action, arguing that the 5th through 10th
proposed causes of action are futile because Plaintiff lacks factual
allegations to justify granting leave to file a FAC. (Foxborough v. Van Atta,
(1994) 26 Cal.App.4th 217, 230-31.)
As to Plaintiff’s proposed 5th
cause of action for negligence, Defendant argues that Plaintiff’s motion lacks
a factual basis for alleging that the proposed Subcontractor Defendants’
conduct violated a duty. (Id., p. 8:23-9:3.) As to the 6th
through 8th causes of action for equitable indemnity, contribution,
and apportionment, Plaintiff has also allegedly failed to specifically allege how
it has incurred joint liability with the proposed Subcontractor Defendants. (Id.,
p.9:4-17.) Defendant maintains that the 9th cause of action for
declaratory relief is redundant and already addressed through other asserted
causes of action. (Id., p. 9:18-10:5.) Defendant also argues that Plaintiff’s lack of
specific facts alleged fail to satisfy the elevated pleading standard required
for fraud. (Id., p. 10:6-11.) Defendant argues that the final proposed
claim under Penal Code § 496 is inapplicable, as Plaintiff has not alleged that
the proposed Subcontractor Defendants caused criminal deprivation of property.
(Id., p. 10:11-21.)
In reply, Plaintiff argues (1) that filing
a new complaint, as Defendant suggests, is an inefficient use of judicial
resources, (2) without facts that Plaintiff acted in bad faith, under Code Civ.
Proc., §426.50, if Plaintiff is deemed negligent for failing to plead these
claims, the Court is required to grant leave to amend the pleading, (3) requiring
a party to conduct discovery does not constitute prejudice, and (4) Defendant’s
futility arguments inappropriately characterize this motion to file an FAC as a
demurrer, by prematurely testing the sufficiency of each allegation. (Reply, p.
1-3.) The Court agrees.
As to Defendant’s futility-based argument
for the proposed Violation of Penal Code §496 claim, Plaintiff cites Siry
Investment, LP v. Farkondehpour (2022) 13 Cal. 5th 333 and Jones v.
Barrett, No. 23-CV-1102-AGS-MMP. (S.D. Cal. Sept. 10, 2024) WL 4142676.) However,
Plaintiff declines to elaborate on the application of these cases to their attempt
to assert the eleventh cause of action. (Reply, p. 5:2-8.) Siry Investment,
LP stands for the proposition of treble damages where partnership funds
were diverted, and the Penal Code statute permitted the award of treble
damages. (Siry Inv., L.P., supra, (2022) 13 Cal. 5th 333, 513 P.3d 166.)
In the recently decided Jones case, the court declined to reach the
issue of whether diverted labor of a company’s employees would constitute
“property” under the statute, finding that the misappropriation of cash by a party
repeatedly failing to deposit cash receipts and doctoring QuickBooks records to
conceal the missed deposits is factually sufficient to state claim for receipt
of stolen property. (Jones v. Barrett, supra, 2024 WL 4142676, at
pp. 6-7.) In both instances, Plaintiff has failed to sufficiently allege that
the proposed Defendants conducted like actions.
The court agrees with Defendant that
Plaintiff has not met his burden of demonstrating that leave to amend should be
granted. The trial date is one year away, on September 8, 2025. There is
nothing in Plaintiff’s counsel’s declaration as to why these parties were not
identified sooner or where in the discovery process Defendant made allegations
as to Plaintiff and subcontractors. Plaintiff’s sole allegations of joint and
several liability with the proposed Defendants do not sufficiently show why the
amendment could not have been sought sooner for the addition of eleven new
parties and, therefore, fails to make the strong showing needed for leave to
amend at this late stage of litigation. Accordingly, the court finds this
motion should be denied as granting leave to amend will significantly prejudice
Defendant.
The court therefore DENIES Plaintiff’s motion
for leave to file a First Amended Complaint
It
is so ordered.
Dated: October 11, 2024
_______________________
MEL RED RECANA
Judge of the
Superior Court