Judge Ralph C. Hofer, Case 21GDCV01392 2022-08-12 Tentative Ruling

Plaintiff Filaip Patatanian alleges that since 2001, plaintiff has owned a unit of real property on Liberty Avenue in Glendale. Plaintiff alleges that in 2018, defendants Athas Corporation Group, MTC Financial, Inc., and Shellpoint Mortgaging Servicing took part in a mortgage transaction involving the subject property. The FAC alleges that the mortgagee, Doe 1, falsely assumed the identity of plaintiff, and forged plaintiff’s signature on the documents in the transaction, including the property deed and mortgage contract documents. The transaction was executed, and the mortgage granted, and Doe 1 received the money secured by the mortgage, with each defendant profiting from the transaction.

The FAC alleges that Doe 1 holds no interest in the property, but plaintiff is the true owner of the property, and defendants are seeking to hold plaintiff liable for the mortgage by foreclosing on the subject property. Plaintiff alleges causes of action for fraud, quiet title and declaratory relief, and two causes of action for negligence.

CCP § 473 (a)(1) provides that “The court may..., in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading...” The court’s discretion should usually be exercised liberally to permit amendment of pleadings. Nestle v. City of Santa Monica (1971) 6 Cal.3d 920, 939. This is especially true where the motion to amend is timely made and the granting of the motion will not prejudice the opposing party. Morgan v. Superior Court (1959, 2nd Dist.) 172 Cal.App.2d 527, 530.

“"[T]he trial court has wide discretion in allowing the amendment of any pleading [citations], [and] as a matter of policy the ruling of the trial court in such matters will be upheld unless a manifest or gross abuse of discretion is shown. [Citations.]" (Bedolla v. Logan & Frazer (1975) 52 Cal. App. 3d 118, 135-136 [125 Cal. Rptr. 59].)”

In this case, plaintiff indicates that the amendment is necessary to reflect new information learned through the investigation and discovery conducted by plaintiff, including the deposition of the loan broker, Amy Kalolgeras, and responses to document requests and subpoenas. Plaintiff indicates that new parties involved in the transaction have been identified, which should be included in this matter so that the respective liabilities arising from the transaction can be determined in this single action. The declaration also indicates that the new defendants are liable to plaintiff on grounds of “tort of another.” [Decl., para. 13]. It appears from the red-lined version submitted that new defendants are added, including escrow defendants, and that the pleading is clarified with respect to allegations against defendants previously added by Amendments to Complaint substituting certain true names of defendants for Does 1 through 4. The fraud cause of action from the FAC is split into two fraud causes of action in the proposed SAC, one for intentional misrepresentation, and one for concealment. It appears that the amendments are necessary to include all potentially culpable parties in this action. The matter appears to be still in the discovery phase, and plaintiff appears to be diligently pursuing investigation and discovery into what would naturally be a matter where information concerning the alleged conduct of and denial or cover up of an identity theft situation could be difficult to obtain. The trial date is not until May of 2023, and no obvious prejudice appears to any of the current or new defendants.

This also appears to be a case where the complaint was drafted and filed in haste in response to a scheduled foreclosure sale, in order to pursue a temporary restraining order, the FAC was filed the following day, in connection with the ex parte proceeding to obtain the TRO, and the parties spent the early part of this litigation dealing with the OSC re preliminary injunction. In this type of case, it would be understandable that more specific facts would be uncovered once discovery was pursued in earnest.

Defendant Athas Capital Corporation (“Athas”) has filed an opposition to the motion, arguing that while counsel for plaintiff indicates that the legal theories underlying the SAC have not changed as compared to the FAC and that only the “new defendants” are liable to plaintiff on the grounds of “tort of another,” the prayer for relief specifically seeks damages in the amount of attorney fees and costs to remove the lien created by the conspiracy of “Athas,” in effect, damages pursuant to the “tort of another” theory. [SAC, pp. 10-11]. Defendant argues that the new theory of recovery should be denied as to defendant Athas because it does not apply to Athas here, and defendant would be prejudiced by being forced to expend more in fees and costs to extricate itself from this baseless lawsuit.

It is recognized that a court is permitted to deny leave to amend based on the merits of a pleading only if it is clear as a matter of law that there is no liability. Pomona College v. Superior Court (1996, 2nd Dist.) 45 Cal.App.4th 1716, 1721. Even where the proposed legal theory is a novel one, “the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings.” Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048, quoting California Casualty Gen. Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 281. Here, where the trial date is not until next May, and may be further continued, if necessary, there is sufficient time for defendant to challenge this aspect of the pleading through demurrer or motion to strike, or other dispositive motion. Any demurrer would follow a required meet and confer between the parties, which in this case could clarify whether the prayer is intended to be directed to defendant Athas or only to the new defendants.

To the extent defendant Athas argues that it would be prejudiced by having to clarify this legal point in this matter and spending fees and costs to do so, the expense to meet a new issue raised by amendment is not the type of prejudice which would warrant denying leave to amend in its entirety. The attorney fees prayer at issue is also not an issue which would eliminate the entire action as brought against this defendant.

There is no prejudice urged by defendant Athas which is the type of prejudice which would ordinarily justify denying leave to amend, such as loss of evidence which due to the delay has been destroyed, cannot be recollected, or cannot be replaced. It has been held, for example, that it is not an abuse of discretion to deny leave to amend where a plaintiff knew for several months of the facts underlying the claim but failed to amend until after summary judgment had been entered against it (Fisher v. Larsen (1982) 138 Cal.App.3d 627, 649), or where there is a strong showing that dilatory amendment is the result of “legal gamesmanship.” Green v. Rancho Santa Margarita Mortgage Co. (1994) 28 Cal.App.4th 686, 693. There are no facts showing such gamesmanship here or advantage gained by plaintiff over defendant in this matter by failing to include the theory in the FAC.

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