Judge Peter A. Hernandez, Case Number: KC069375, Date: 2023-12-12 Tentative Ruling

Plaintiff Classic Maritime, Inc.’s Motion for Leave to File a Fourth Amended Verified Complaint is granted, in part, and denied, in part.

Under a contract of affreightment dated June 29, 2009 (the “2009 COA”), Limbungan Makmus Sdn Bhd (“Limbungan”) agreed to ship, and Plaintiff agreed to provide vessels to carry, 51 cargoes of iron ore pellets from Tubarao or Ponta Ubu I Braxil to Port Kelang or Labuan in Malaysia between 2009-2017. Limbungan’s obligations under the 2009 COA were guaranteed by its parent company, Lion Diversified Holdings BHD (“Lion”) pursuant to a written guarantee dated June 29, 2009 (the “2009 Guarantee”). On June 30, 2014, Plaintiff and Limbungan executed an Addendum No. 1 to the 2009 COA which increased the number of shipments to 59. Likom Caseworks USA (“Likom USA”) is a wholly-owned direct subsidiary of Likom Caseworks Sdn Bhd (“Likom Caseworks”) and a wholly-owned indirect subsidiary of Lion. Likom USA and Lion are alter egos and, along with Likom Caseworks and Likom de Mexico, S.A. de C.V. (“Likom Mexico”), operate as an integrated single enterprise.

By mid-2016, Limbungan had breached its obligations under the 2009 COA with respect to at least 4 “Index Shipments” and 3 “Scheduled Shipments,” which resulted in Plaintiff suing Limbungan and Lion in a case styled Classic Maritime Inc. v. Limbungan Makmur Sdn Bhd and Lion Diversified Holdings Bhd., Claim No. CL-2016-00421 (“English Action I”). On September 13, 2018, judgment was handed down in English Action I. On July 4, 2019, the Court of Appeal revised the lower court judgment in English Action I. The judgment in English Action I is now final.

Additionally, under the 2009 COA Limbungan was required to declare laycans for 16 “Unscheduled Shipments” as defined therein so that all of the Unscheduled Shipments fell in their entirety before December 31, 2017. Limbungan breached the 2009 COA by failing to declare laycans for 14 of the Unscheduled Shipments. Limbungan also made arrangements with third parties for the carriage of certain Unscheduled Shipments in violation of the 2009 COA. On May 30, 2018, Plaintiff filed a lawsuit against Limbungan and Lion regarding the “Unscheduled Shipments” in a case styled Classic Maritime Inc. v. Limbungan Makmur Sdn Bhd and Lion Diversified Holdings Bhd., Claim CL-2018-000352 (“English Action II”).

Also, Limbungan owes delay damages to Plaintiff in connection with a shipment it performed under the 2009 COA between June-October 2013, employing the vessel Mineral Kyushu.

On March 3, 2020, Plaintiff filed a Third Amended Complaint, asserting causes of action against Lion, Likom and Does 1-10 for:

On April 1, 2020, Lion filed a “Notice of Stay of Proceedings,” advising therein of its Chapter 15 filing on March 18, 2020. On December 15, 2020, the court ordered the action stayed as to Lion.

On August 25, 2023, Plaintiff filed an “Amendment to Complaint,” wherein Tan Sri Cheng Young Kim (aka Albert Cheng) was named in lieu of Doe 1.

On September 26, 2023, Plaintiff filed another “Amendment to Complaint,” wherein Cheng Yong Kim (aka Albert Cheng) was named in lieu of Doe 2.

On November 29, 2023, Plaintiff dismissed Tan Sri Cheng Young Kim (aka Albert Cheng) and Cheng Yong Kim (aka Albert Cheng), with prejudice.

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading…” (Code Civ. Proc., § 473, subd. (a)(1); and see § 576 [“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”].)

Courts must apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial, when no prejudice is shown to the adverse party. (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.) However, “even if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial. . . denial may rest upon the element of lack of diligence in offering the

amendment after knowledge of the facts, or the effect of the delay on the adverse party.” (Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 940.)

Also, “[a] motion to amend a pleading before trial must: (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.” (Cal. Rules of Court (“CRC”), rule 3.1324, subd. (a).)

Additionally, “[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.” (CRC Rule 3.1324, subd. (b).)

Plaintiff moves the court for an order granting it leave to file its proposed Fourth Amended Complaint (“4AC”).

Plaintiff represents that the 4AC “primarily seeks: (1) recognition that the English Action II has been reduced to Judgment; (2) to add a cause of action against defendant Likom USA for Actually Fraudulent Transfers under California’s Uniform Fraudulent Transfer Act (“UFTA”); and (3) to add an alternative cause of action against defendant Likom USA for Constructively Fraudulent Transfers under the UFTA.” (Motion, 2:11-15). Plaintiff also seeks to have the alter ego allegations in the former third cause of action moved into the second cause of action. (See Hansen Decl., ¶ 6(B).) The second cause of action is now also directed against Likom USA. (Id.)

Plaintiff has attached a redline copy reflecting the changes between the operative TAC and proposed 4AC. (Hansen Decl., ¶ 3, Exh. B). Plaintiff has also attached as Addendum I to the motion a listing or proposed deletions from, and proposed additions to, the proposed 4AC. The court determines that Exhibit B and Addendum I constitutes compliance with CRC Rule 3.1324, subdivision (a).

Plaintiff’s counsel has provided the court and opposing counsel with a declaration that sufficiently complies with CRC Rule 3.1324, subdivision (b).

Likom USA, in opposition, contends that the proposed third and fourth causes of action are time-barred. The statute of limitations on a fraudulent transfer claim is governed by Civil Code § 3439.09 which reads, in relevant part, as follows:

(a) Under paragraph (1) of subdivision (a) of Section 3439.04[1], not later than

Likom USA argues that the statute of limitations on the proposed third and fourth causes of action ran, at the latest, by December 3, 2022 (i.e., four years from December 3, 2018, which Plaintiff alleges was the closing date of the sale of Likom USA’s ownership interest in Likom Mexico’s shares, inventory and equipment; See proposed 4AC, ¶ 44). It argues that Plaintiff knew of the alleged transfer prior to the May 21, 2019 conference and received discovery relating to the sale of Likom Mexico on or about September 28, 2021. (Sparkman Decl., ¶¶ 2 and 3).

Plaintiff, in turn, cites to Cortez v. Vogt (1997) 52 Cal.App.4th 917, 920, which held that “where an alleged fraudulent transfer occurs while an action seeking to establish the underlying liability is pending, and where a judgment establishing the liability later becomes final, . . . the four-year limitation period, i.e., the language, ‘four years after the transfer was made or the obligation was incurred[]’ [is construed] to accommodate a tolling until the underlying liability becomes fixed by a final judgment.” Likom USA argues that Plaintiff “was already a judgment creditor of Defendant Lion” on December 3, 2018, that “[t]he entire premise of the present action is Plaintiff’s allegations that LIKOM is LION’s property pursuant to a theory of alter -ego and/or the integrated single entity theory and that, as such, Plaintiff should not be permitted to rely on Cortez to extend the statute of limitations. (Opp., 5:23-26).

Plaintiff, in turn, asserts that it did not become a judgment creditor as to the claims of English Action II (which was instituted on May 30, 2018) until March 11, 2020 (Houghton Decl., ¶¶ 3 and 4) and that, as such, the statute of limitations will not run until March 11, 2024 as to the “completely separate” claims of English Action II. Plaintiff’s counsel concedes that “while writing the Reply to the 1^st Motion to Leave to File FAC it was realized under the Third and Fourth Causes of Action for fraudulent transfers that the English Action I Judgment would not support those Causes of Action because it was time barred.” (Hansen Decl., ¶ 9(B) [Bold added].)

The court believes that the proposed third and fourth causes of action are time-barred. (See Cortez, supra, 52 Cal.App.4th at 937 [“In cases. . . where there is an alleged fraudulent transfer made during a pending lawsuit that will establish whether in fact, and the extent to which, a debtor-creditor relationship exists, we conclude the limitation period does not commence to run until the judgment in the underlying action becomes final”].) A debtor-creditor relationship was established, at the latest, when English Action I became final.

The court declines to address the relation back doctrine as to the aforesaid proposed fraudulent transfer causes of action, inasmuch as it was not raised by Plaintiff.

Likom USA does not appear to oppose any of the other amendments in Plaintiff’s proposed 4AC; as such, the court will deny the motion in part (i.e., as to Plaintiff’s request to add a third cause of action for Actually Fraudulent Transfers and a fourth cause of action for Constructively Fraudulent Transfers) and otherwise grant the motion.

Plaintiff’s counsel is instructed to file and serve a revised version of the proposed 4AC, omitting the third cause of action for Actually Fraudulent Transfers and fourth cause of action for Constructively Fraudulent Transfers within 10 days from the date of the hearing of the motion.

[1] Section 3439.04, subdivision (a)(1) reads: “(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:

(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.

[2] Section 3439.04, subdivision (a)(2) reads: “(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: . . . (2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either: (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. (B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.”

[3] Section 3439.05 reads as follows: “(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation. (b) A creditor making a claim for relied under subdivision (a) has the burden of proving the elements of the claim for relief by a preponderance of the evidence.”