Judge Peter A. Hernandez, Case 20PSCV00579 2022-09-07 Tentative Ruling

Judge: Peter A. Hernandez, Case: 20PSCV00579, Date: 2022-09-07 Tentative Ruling

Case Number: 20PSCV00579 Hearing Date: September 7, 2022 Dept: O

Cross-Complainant Randy Zhao’s Motion for Leave to File First Amended Cross-Complaint is GRANTED.

Background

This case arises from partnership disagreements and its alleged collateral consequences.

On September 3, 2020, Plaintiff Grace Zhang (“Zhang” or “Plaintiff”) filed suit against Defendant Randy Zhao (“Zhao”), Devon Ou (“Ou”), and Universal Realty, Inc. (“Universal”) for (1) Breach of Oral Partnership Agreement; (2) Breach of Fiduciary Duty of Loyalty; (3) Intentional Infliction of Emotional Distress; (4) Intentional Interference with Prospective Economic Relations; (5) Intentional Interference with Contractual Relations; (6) Dissolution of Partnership Pursuant to California Corporations Code §16801 et. seq.; (7) Dissolution of Corporation Pursuant to California Corporations Code §1800 et. seq.

On October 7, 2020, Defendant Zhao filed a Cross-Complaint against Plaintiff alleging (1) Breach of Fiduciary Duty; (2) Breach of Contract; (3) Intentional Interference with Prospective Economic Relations; (4) Breach of Covenant of Good Faith and Fair Dealing; and (5) Dissolution of Corporation pursuant to California Corporations Code §1800.

On January 27, 2021, Plaintiff filed a First Amended Complaint (“FAC”) adding Defendants Peter Quian (“Quian”) and Universal Elite (“Elite”), and adding causes of action for (8) Aiding and Abetting; (9) Unfair Business Practices; and (10) Injunctive Relief.

Motion for Leave to Amend Cross-Complaint

Legal Standard

CCP § 473(a)(1) states: “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.”

Judicial policy favors resolution of all disputed matters between the parties and, therefore, the courts have held that “there is a strong policy in favor of liberal allowance of amendments.” (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 296-97; see also Ventura v. ABM Industries, Inc. (2013) 212 Cal.App.4th 258, 268) [“Trial courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial where the adverse party will not be prejudiced.”].)

Pursuant to CRC 3.1324(a), a motion to amend must: (1) include a copy of the proposed amendment or amended pleading, which must be serially numbered; and (2) state what allegations are proposed to be deleted from or added to the previous pleading and where such allegations are located. CRC 3.1324(b) requires a separate declaration that accompanies the motion, stating: (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 reason why the request for amendment was not made earlier.

Discussion

Cross-Complainant Zhao moves to file a First Amended Cross-Complaint (“FACC”).

Zhao contends that this litigation involves a partnership dispute between Zhao and Zhang who are 50-50 co-owners of Universal. Zhao represents that after many attempts, Cross-Defendant’s deposition was taken on May 9, 2022. (Seyfnia Decl., ¶¶6-10.) At her deposition Cross-Defendant testified to certain facts that have necessitated the filing of the FACC. A large extent of Cross-Defendant’s testimony were unknown to Cross-Complainant and his attorney. (Id., at ¶11). Cross-Defendant’s deposition testimony revealed that she has been making unilateral decisions without consulting with Cross-Complainant and often against objections of Cross-Complainant related to management of Universal such as retaining attorney; unilaterally deciding whether to accept or reject settlement offers pertaining to Universal’s civil disputes; delegating material duties to “office managers”; Taking clients of Universal in as her own “origination deals” and realizing all commissions received from such Universal’s exclusively to herself; having recently established entities such as a property management company [Cross-Defendant testified at her deposition to be “Universal Management”] and realty company [Diamond Realty Corp] and usurping Universal’s resources including employees including Zoe Sun for the benefit of her own companies, amongst other things. Cross-Defendant’s unlawful actions giving rise to Cross-Complainant’s additional causes of action are set forth in the Proposed First Amended Cross-Complaint. (Motion, pp. 2-3.)

Based on the above, the proposed FACC contains additional allegations stemming from the deposition and adds six additional causes of action as follows: (6) Breach of Oral Contract, (7) Intentional Interference with Contractual Relation, (8) Intentional Interference with Prospective Economic Relations, (9) Negligent Interference With Prospective Economic Relations, (10) Indemnity, and (11) Declaratory Relief. The declaratory relief cause of action will concern an additional Cross-Defendant Re/Max, LLC d/b/a Re/Max California and Hawaii Region. The amendment is necessary and proper as it will allow Cross-Complainant to seek legal remedies against Cross-Defendant based on the facts and circumstances developed since the parties established their real estate business together. (Seyfnia Decl., ¶14.)

The Court finds that Cross-Complainant has complied with the requirements of CRC CRC 3.1324.

Cross-Defendant Zhang opposes the motion arguing that Zhao should have alleged these causes of action years ago when he filed the Cross-Complaint as the facts were already known to Zhao. Zhang admits that there are more details in the proposed FACC. Zhang also argues that Zhao seeks to double the causes of action and substantial discovery has already been conducted. Zhang provides no evidence to support these contentions, and in reply, Zhang points out that the facts giving rise to the filing of the FACC are based on Cross-Defendants wrongful actions that took place in 2022.

The Court notes that trial is set for April 11, 2023, thus there is time for the parties to conduct further discovery as to these additional claims and Cross-Defendant will not be prejudiced. Zhao promptly sought leave to amend the Cross-Complaint a couple months after the deposition of Zhang which led to the discovery of new facts. Based on the liberal policy to allow amendments, the motion is granted.