Judge: Monica Bachner, Case: BC652020, Date: 2022-07-29 Tentative Ruling

Case Number: BC652020    Hearing Date: July 29, 2022    Dept: 71

 

 

 

 

Superior Court of California

County of Los Angeles

 

DEPARTMENT 71

 

TENTATIVE RULING

 

ESOS RINGS, INC.,

 

         vs.

 

JOSEPH PRENCIPE, et al.

 Case No.:  BC652020

 

 

 

 Hearing Date:  July 29, 2022

 

Defendant McLear US’s motion for leave to file a first amended answer to the second amended complaint is granted.

 

Defendant Joseph Prencipe’s motion for judgment is denied.

 

  1. Motion for Leave to File Amended Answer

     

    Defendant McLear & Co., Inc. (“Defendant” or “McLear US”) moves for leave to file an amended answer to the second amended complaint (“SAC”) of Plaintiff Esos Rings, Inc. (“Plaintiff” or “Esos Rings”).  McLear US moves to amend its answer to assert an additional affirmative defense of “a good faith transferee pursuant to C.C.P. §3439.08” to Plaintiff’s fraudulent transfer claim.

     

    Defendant filed the instant motion on March 29, 2022.  On June 8, 2022, Defendant filed a Notice of Non-Opposition to the motion indicating that counsel for Plaintiff had informed Defendant’s counsel that Plaintiff would not be opposing the motion.  

     

    C.C.P. §473(a)(1) provides, as follows:

     

    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.

     

    “Trial courts are vested with the discretion to allow amendments to pleadings ‘in furtherance of justice.’”  (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 488.)  Moreover, such amendments must be liberally permitted “at any stage of the proceeding.”  (Id. at 488-489.)

     

    A motion for leave to amend may be denied upon a showing that the moving party inexcusably delayed in bringing the motion and that the opposing party would be prejudiced by the amendment.  (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487.)

     

    Defendant’s original answer asserted a general denial and affirmative defenses for failure to state sufficient facts to constitute the causes of action, unclean hands, estoppel, waiver, unjust enrichment, material breach, failure/lack of consideration, offset, failure to mitigate damages, failure to fulfill condition precedent, consent/ratification, lack of standing, and privilege.  Defendant’s counsel, David Harford (“Harford”) declared that the Amended Answer was necessary as it will specially assert the fraudulent transfer defense that McLear was a good faith transferee for value under C.C.P. §3439.09, which had not been asserted in the November 26, 2018 Answer to the SAC prepared and filed by Defendant’s former counsel.  (Decl. of Harford ¶¶6-7.)  Defendant’s present counsel substituted into this action on February 7, 2020, after Defendant’s answer to the SAC had already been filed.  (Decl. of Harford ¶3.)  Defendant asserts Plaintiff will suffer no prejudice from the amendment because it only presents a single additional defense based on a legal theory and facts that have been known to all parties for years.  (Motion, pgs. 1-2, 10-11.) 

     

    The Court finds Plaintiff will not be unduly prejudiced by the Amended Answer.  Plaintiff has informed Defendant it does not intend to oppose the motion.  The trial date is set for October 24, 2022, and on July 26, 2022, Plaintiff filed a motion for leave to amend its SAC and file a proposed third amended complaint (“TAC”), which is currently set for February 23, 2022.  As discussed above, amendments must be liberally permitted “at any stage of the proceeding.”  (Id. at 488-489.) 

     

    Based on the foregoing, Defendant’s unopposed motion for leave to file an amended answer is granted.

     

  2. Motion for Judgment

     

    Defendant Joseph Prencipe (“Prencipe”) moves for judgment in his favor and against Plaintiff on all remaining causes of action asserted against him in the SAC pursuant to C.C.P. §631.8 and Orange County Water District v. Alcoa Global Fasteners (2017) 12 Cal.App.5th 252, 353-62 (“Orange County Water District”).  (Notice of Motion, pg. 1.)  Specifically, Defendant asserts the Court’s findings in the bench trial on the equitable claims that McLear US asserted against Plaintiff foreclose Prencipe’s liability on the 4th (fraud), 5th (actual fraudulent transfer), and 6th (breach of fiduciary duty) causes of action asserted against Prencipe in Plaintiff’s SAC.  (Motion, pgs. 1-2.)

     

    Background

     

    This case involves a dispute between two separate groups of parties over the rights to U.S. Pat. No. 9,313,609 (“the 609 Patent”), which was invented and owned by Prencipe. On February 27, 2017, Plaintiff filed its initial complaint against Prencipe and McLear US (collectively, “McLear Parties”) alleging they exploited the ‘609 patent and denied its assignment to Plaintiff, diminishing its value and preventing Esos from exploiting its rights.  On April 18, 2017, McLear Parties filed their initial cross-complaint against Plaintiff and Michelle Silverstein (“Silverstein”) (collectively, “Esos Parties”).  On October 26, 2018, Plaintiff filed the operative SAC, in which McLear, Ltd. (“McLear UK”) was also named as a defendant.

     

    On February 5, 2021, McLear US filed a first amended cross-complaint (“FACC”) against Esos Parties, and on June 30, 2021, McLear US filed its second amended cross-complaint (“SACC”).  On December 2, 2021, the Court overruled Esos Parties’ demurrer to the SACC’s 2nd (conversion) and 6th (breach of fiduciary duty) causes of action.  [The Court notes while Prencipe was initially a cross-complainant in McLear US’s cross-complaint, he was removed when McLear US filed its FACC, and is no longer a cross-complainant in the action.]  On April 5, 2021, the Court bifurcated the trial of this matter and set a bench trial of the parties’ non-jury claims for January 31, 2022.

     

    On November 9, 2021, the Court granted McLear Entities’ motion for evidence sanctions, joined by Prencipe.  Specifically, the Court ruled that McLear Entities and Prencipe were entitled to an evidence sanction prohibiting Esos Parties from introducing evidence supporting their claim that Exhibit D to the SAC is a true and correct copy of the Executed Second Assignment. 

     

    On December 17, 2022, the Court denied McLear Entities’ motion for summary judgment as to the SAC, but granted their motion for summary adjudication, in the alternative, as to all causes of action asserted against McLear Entities except the 5th (actual fraudulent transfer) cause of action.  In the same ruling, the Court denied Plaintiff’s motion for summary adjudication of its own 2nd (declaratory relief) and 3rd (quiet title in 609 Patent) causes of action in its SAC which were asserted against McLear Entities, Prencipe, and MTG.  On January 6, 2022, the Court denied Prencipe’s motion for summary adjudication of the 4th (fraud) and 6th (breach of fiduciary duty) causes of action asserted against him in the SAC of Plaintiff. On January 6, 2022, the Court also granted Prencipe’s oral motion for judgment on the pleadings as to the SAC’s 1st (breach of contract), 2nd (declaratory relief), 3rd (quiet title), and 7th (intentional interference with prospective economic relations) causes of action asserted against him. Accordingly, the operative SAC asserts causes of action for fraud and breach of fiduciary duty against Prencipe as well as a cause of action for actual fraudulent transfer against Prencipe and McLear Entities.

     

    On January 31, 2022, McLear Entities proceeded to trial on the equitable claims asserted in their SACC against Esos Parties on the 3rd (cancellation of instruments), 4th (quiet title), and 5th (declaratory relief) causes of action as well as Esos Parties’ defenses to these equitable claims including the 8th (unclean hands), 9th (estoppel) and 26th (quitclaim assignment) affirmative defenses.  A Court trial was held on January 1, February 2, 3, 4, and 8, 2022. After issuing a Tentative Statement of Decision and considering objections thereto, on June 9, 2022, the Court issued its Final Statement of Decision.  The Court ruled that McLear Entities prevailed on the three causes of action asserted against Esos Parties and that Esos Parties did not establish their affirmative defenses barred the equitable claims asserted against them. While the Statement of Decision discussed Prencipe and considered evidence relating to him in determining whether McLear Parties prevailed on their causes of action, he was not a party to the FACC itself and the Statement of Decision resolves equitable claims brought by McLear Entities and Esos Parties’ affirmative defenses to those claims. 

     

    Jury trial for the remaining legal claims in the operative SAC is set for October 24, 2022.  Specifically, the jury trial is to address the 4th (fraud) and 6th (breach of fiduciary duty) causes of action against Prencipe only as well as the 5th (actual fraudulent transfer) against Prencipe and McLear Entities. The trial will also address McLear Parties’ remaining 1st (breach of contract), 2nd (conversion), and 6th (breach of fiduciary duties) causes of action asserted against Esos Parties in the FACC.

     

    On July 7, 2022, Prencipe filed the instant motion for judgment.  On July 19, 2022, Esos Parties filed an opposition, and on July 22, 2022, Prencipe filed his reply thereto.  On July 26, 2022, Plaintiff filed a motion for leave to file a third amended complaint (“TAC”), which is currently set for hearing on February 23, 2023. Plaintiff moves for leave to add a claim for indemnification and contribution against Prencipe to be asserted by both Plaintiff and Silverstein as the Cross-Defendants subject to remaining FACC claims asserted by McLear US against Plaintiff and Silverstein.

     

    The Court notes, in opposition, Esos Parties acknowledge that unless the Statement of Decision, summary judgment, and/or evidentiary sanctions entered by the Court are appealed and reversed, Plaintiff’s claims for fraud (4th COA) and fraudulent transfer (5th COA) against Prencipe cannot be pursued at a jury trial due to the currently binding factual findings in the Statement of Decision.  (Opposition, pg. 2.)  However, Esos Parties argue that the motion should be denied as procedurally improper.    (Opposition, pg. 3.) 

     

    Motion for Judgment

     

    C.C.P. §631.8(a)-(b) provide as follows:

     

    After a party has completed [its] presentation of evidence in a trial by the court, the other party, without waiving [its] right to offer evidence in support of [its] defense or in rebuttal in the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh the evidence and may render a judgment in favor of the moving party, in which case the court shall make a statement of decision as provided in Sections 632 and 634, or may decline to render any judgment until the close of all the evidence. The court may consider all evidence received, provided, however, that the party against whom the motion for judgment has been made shall have had an opportunity to present additional evidence to rebut evidence received during the presentation of evidence deemed by the presenting party to have been adverse to [it], and to rehabilitate the testimony of a witness whose credibility has been attacked by the moving party. Such motion may also be made and granted as to any cross-complaint.

     

    If it appears that the evidence presented supports the granting of the motion as to some but not all the issues involved in the action, the court shall grant the motion as to those issues and the action shall proceed as to the issues remaining. Despite the granting of such a motion, no final judgment shall be entered prior to the termination of the action, but the final judgment in such action shall, in addition to any matters determined in the trial, award judgment as determined by the motion herein provided for.

     

    (Emphasis added.)

     

              C.C.P. §631.8(c) provides that if the motion is granted, unless the court in its order for judgment otherwise specifies, such judgment operates as an adjudication upon the merits.

     

              Prencipe is not entitled to move for judgment pursuant to C.C.P. §631.8. Based on the procedural posture of the case, discussed above, Prencipe was neither a cross-complainant nor cross-defendant in the FACC as to which the Court issued its Statement of Decision following the bench trial, and as such, he does not qualify as “the other party” for purposes of moving for judgment pursuant to this statute. 

     

              Based on the foregoing, Prencipe’s motion for judgment pursuant to C.C.P. §631.8 is denied. 

     

              In the alternative to moving for judgment pursuant to C.C.P. §631.8, Prencipe relies on California common law authority established in Orange County Water District, based on the Court’s inherent authority to consider and grant a motion for judgment as to pending jury trial claims based on findings the Court reached in a bench trial involving the same parties.  (Motion, pgs. 9-10; Reply, pgs. 3-4, citing Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1595 [“[The Court has] inherent power, separate from any statutory authority to control the litigation before [it] and to adopt any suitable method of practice, even if the method is not specified by statute or by the Rules of Court.”].) While Prencipe discusses Orange County Water District in his Notice of Motion and Motion, not until his reply does he argue it is a sufficient independent basis for moving for judgment based on the Court’s inherent powers, even if C.C.P. §631.8 is inapplicable.  (Reply, pgs. 2-3.)

     

              Prencipe is not entitled to an order entering judgment in his favor on the SAC filed by Plaintiff.  While Orange County Water District involved a bifurcated action in which statutory claims were addressed first in a bench trial, where remaining common law claims were to be asserted in a subsequent jury trial, it does is not analogous to the instant action so as to support the relief requested by Prencipe in the instant motion.  In Orange County Water District, the district (plaintiff) brought action against certain industrial sites’ owners and operators (defendants) for statutory claims (under the HSAA and County Water District Act) and common law claims (for negligence, nuisance, and trespass) relating to recovery of costs for a groundwater protection project (“Project”) at those industrial sites.  (Orange County Water Dist. v. Alcoa Global Fasteners, Inc., supra, 12 Cal.App.5th at 252.)  Following the initial bench trial on the district’s bifurcated statutory claims, the trial court found in favor of the owners and operators, declared that they were not responsible for costs for the Project, and subsequently granted a motion for judgment in favor of those owners and operators on the remaining common law claims asserted against them.  (Id.)  In ruling on the district’s appeal, the Court of Appeal held that the trial court’s decision to bifurcate trial and treat findings on equitable claims as binding on legal claims did not violate the district’s right to a trial by jury on its legal claims. (Id. at 353-359.)  Notably, the motion for judgment at issue in Orange County Water District was filed by the owners and operators of the sites, the defendants for both the equitable claims addressed in the bench trial and the legal claims yet to be addressed in the jury trial.  Prencipe’s discussion of the Orange County Water District omits the relationships of the various parties subject to the Court’s ruling therein.  Here, while the Statement of Decision considered evidence relating to Prencipe, he was not a named cross-complainant or cross-defendant in the addressed equitable claims, and as such, the Court declines to enter judgment in his favor on the claims asserted against him in the SAC.

     

              Based on the foregoing, Prencipe’s motion for judgment is denied. 

     

     

    Dated:  July _____, 2022

                                                                                                                           

    Hon. Monica Bachner

    Judge of the Superior Court