Judge: Michael E. Whitaker, Case: 23SMCV04908, Date: 2024-06-04 Tentative Ruling

Case Number: 23SMCV04908    Hearing Date: June 4, 2024    Dept: 207

TENTATIVE RULING

MOTION

            This case arises from a dispute concerning an alleged Ponzi scheme to defraud Plaintiffs.  Plaintiff Gar Lee (“Lee”) moves for leave to amend the complaint to add a cause of action for quasi contract seeking restitution on behalf of all Plaintiffs and against Defendants Ron Appel, Kristine Taylor Appel, Kristine Taylor Philanthropies, and Seagate Holdings, Inc. 

            Lee’s motion is unopposed.

LEGAL STANDARD

Amendments to Pleadings: General Provisions

            Under Code of Civil Procedure section 473, subdivision (a)(1), “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.”

            To wit, without notice to the other party the Court has wide discretion to allow either party (i) to add or strike the name of a party or (ii) to correct a mistake in the name of a party or a mistake in any other respect “in furtherance of justice” and “on any terms as may be proper.” (See Code Civ. Proc., § 473, subd. (a)(1); see also Marriage of Liss (1992) 10 Cal.App.4th 1426, 1429.) Alternatively, after notice to the other party, the Court has wide discretion to allow either party to amend pleadings “upon any terms as may be just.” (See Code Civ. Proc., § 473, subd. (a)(1). Similarly, Code of Civil Procedure section 576 states “Any judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading or pretrial conference order.”

            Judicial policy favors resolution of all disputed matters between the parties and, therefore, leave to amend is liberally granted. (Berman vs. Bromberg (1986) 56 Cal.App.4th 936, 945; Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488-489 [this has been an established policy in California since 1901] (citing Frost v. Whitter (1901) 132 Cal. 421, 424; Thomas v. Bruza (1957) 151 Cal.App.2d 150, 155).) The Court of Appeal in Morgan v. Superior Court held “If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion.” (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530, citations omitted.) Moreover, “it is an abuse of discretion for the court to deny leave to amend where the opposing party was not misled or prejudiced by the amendment.” (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048 [opposing party did not establish harm by the delay in moving to amend the complaint].)

            “The court may grant leave to amend the pleadings at any stage of the action.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2023) ¶ 6:636 (hereafter Weil & Brown).) Denial of a motion to amend is rarely justified if the motion is timely made and granting the motion will not prejudice the opposing party. (Id. at ¶ 6:639, citations omitted.) However, 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. (Id. at ¶ 6:655, citations omitted. Absent prejudice, any claimed delay alone is not grounds for denial. “If the delay in seeking the amendment has not misled or prejudiced the other side, the liberal policy of allowing amendments prevails. Indeed, it is an abuse of discretion to deny leave in such a case even if sought as late as the time of trial. (Id. at ¶ 6:653 (citing Higgins v. Del Faro (1981) 123 Cal.App.3d 558, 564-565).) “Prejudice exists where the amendment would result in a delay of trial, along with loss of critical evidence, added costs of preparation, increased burden of discovery, etc. . . . But the fact that the amendment involves a change in legal theory which would make admissible evidence damaging to the opposing party is not the kind of prejudice the court will consider.” (Weil & Brown, supra, at ¶ 6:656, citations omitted.)

            “Even if some prejudice is shown, the judge may still permit the amendment but impose conditions, as the Court is authorized to grant leave ‘on such terms as may be proper.’” (Weil & Brown, supra, at ¶ 6:663, citation omitted.) For example, the court may cause the party seeking the amendment to pay the costs and fees incurred in preparing for trial. (Id. at ¶ 6:664 (citing Fuller v. Vista Del Arroyo Hotel, 42 Cal.App.2d 400, 404).)

California Rules of Court, rule 3.1324: Procedural Requirements

            Pursuant to California Rules of Court, rule 3.1324(a), a motion to amend a pleading before trial must:

“(1) Include a copy of the proposed amendment or amended pleadings, 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.”

            In addition, under Rule 3.1324(b), a motion to amend a pleading before trial must be accompanied by a separate declaration that specifies the following:

“(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.”

DISCUSSION

            Plaintiff has included a copy of the proposed amended complaint, and has stated what allegations are to be added by page, paragraph, and line number.  In support of the Motion, Plaintiff provides the Declaration of Luke Manzo, which provides, in relevant part:

Effect of Amendment, CRC 3.1324(b)(1):

4. The proposed amendment shall add a cause of action for Quasi Contract Seeking Restitution and an updated prayer for relief.

5. The proposed amendment shall also add facts and allegations in support of those causes of action, but which are based on and related to the same facts in the original complaint.

[…]

Why the Amendment is Necessary and Proper, CRC 3.1324(b)(2):

7. The proposed amendment is necessary for Plaintiff to assert all applicable causes of action against Defendant based on the facts available to it. The proposed amendment is proper because all causes of action are within their respective statute of limitations.

8. Since the causes of action are within their respective statute of limitations, Plaintiff could file a distinct suit alleging these causes of action independently. However, judicial policy favors resolution of all disputed matters between the parties in the same lawsuit, and a Court’s discretion is usually exercised to liberally permit amendment of the pleadings. (See Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939; Mabie v. Hyatt (1998) 61 CA4th 581, 596, (citing text); Howard v. County of San Diego (2010) 184 CA4th 1422, 1428)

(Manzo Decl. ¶¶ 4-5, 7-8.) 

            The Court finds Lee’s request procedurally improper for two reasons.  First, the motion is brought only on behalf of Lee, but the proposed amendment seeks to assert this new cause of action on behalf of all Plaintiffs.  Lee does not have standing to assert to amend the complaint on behalf of the other Plaintiffs.

            Second, the Manzo declaration does not specify when the facts giving rise to the proposed amendment were discovered or the reasons why the request was not made sooner, as is required by Rule 3.1324(b). 

CONCLUSION AND ORDER

            For these reasons, the Court denies Lee’s motion for leave to amend the complaint on procedural grounds without prejudice. 

            The Court orders Lee to provide notice of the Court’s ruling and file the notice with a proof of service forthwith.

DATED:  June 4, 2024                                   ___________________________

                                                                  Michael E. Whitaker

                                                                  Judge of the Superior Court