Judge Ralph C. Hofer, Case Number: 24GDCV00227, Date: 2024-07-19 Tentative Ruling

Plaintiff Central Lomita, Ltd. alleges that it is the landlord and owner of a commercial shopping center in Glendale, and leases each of the shopping center’s 26 units to different businesses, primarily offices and stores. Plaintiff alleges that plaintiff entered into a lease agreement in February of 2022 with defendant Vardan Stambulyan for the lease of unit 440, to take effect on March 1, 2022. The complaint alleges that prior to 2022, defendant was a tenant at the same unit 440 where he operated a business as an automobile leasing agent, but when entering into the 2022 lease agreement, defendant informed plaintiff that he was transitioning his business from automobile leasing to a home healthcare provider. Accordingly, defendant requested, and pursuant to that request, the new lease agreement authorized the use of the premises as follows: “3. USE. Lessee shall use the Premises for Home Healthcare and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Lessor.”

The complaint alleges that plaintiff has performed all of its obligations under the lease agreement, but that defendant has continuously and systematically breached his obligations and duties under the lease agreement, by, among other things, illegally and without authorization using or permitting the use of a significant portion of unit 440 to operate a 24 hour gym, fully stocked with unauthorized large gym equipment, and operating 24 hours a day, seven days a week. It is also alleged that defendant took various steps to conceal the 24 hour gym, by providing a separate entrance in the back of the unit, causing the gym equipment to be delivered in the middle of the night, and entering into an arrangement with the operator of the gym without a written agreement for sublease, occupancy, or operation of the gym, so that there would be no paper trail. The complaint alleges this conduct is fraudulent and also resulted in the violation of laws, regulations and legal obligations to regulatory and governmental agencies. It is also alleged that during the operation of the gym, nighttime burglaries at the other units have been reported.

Plaintiff further alleges that defendant made unauthorized internal and external alterations, and signage without the written consent of plaintiff, allowed the use of the premises by other business occupants, separate from the gym, in return for illegal payments, allowed cars to illegally park in the shopping center parking lot, which was reserved solely for tenant’s customers, and otherwise interfered with the rights of other lessees or occupants of the building, and exposed them to increased safety and hazard risks.

(c) A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.”

In this case, defendant seeks to file a cross-complaint against plaintiff, to allege that plaintiff is in breach of the subject lease agreement, and that plaintiff through its conduct has caused substantial harm to defendant and his business.

Specifically, defendant as cross-complainant intends to allege that defendant agreed to lease additional space which adjoined his original unit and shared the same entrance room, with the understanding that defendant could sublease the additional space, because it would be easier for defendant than for plaintiff to seek out and arrange a subtenancy for an adjoining business, and that with the advance permission of defendant, then being run by Paul Barsamian, defendant subleased the space to a third party, Jaime Aviles, for personal training and one-on-one training and exercise sessions for Aviles’ clients. Defendant intends to allege that in September of 2023, Paul Barsamian informed defendant he wanted to retire, and that Daron Barsamian would be taking over management and operation of the subject property, and that thereafter Daron Barsamian informed defendant he was not allowing any sublease of the unit, as a result of which defendant requested that Aviles vacate the premises, with defendant paying Aviles to help him move out, but nevertheless, plaintiff demanded that defendant also vacate the subject premises, and ultimately filed this lawsuit.

Since the proposed cross-complaint is directed at a party who filed the complaint against defendant, the cross-complaint should have been filed before or at the same time as the answer, but was not filed with the answer, which was filed on March 12, 2024.

“Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.”

“A party who fails to plead a cause of action subject to the requirements of this article, whether through inadvertence, mistake, neglect, or other cause, may apply to the court for leave ...to file a cross-complaint, to assert such cause at any time during the course of the action. The court, after notice to the adverse party, shall grant, upon such terms as may be just to the parties, leave to ...file the cross- complaint if the party who failed to plead the cause acted in good faith. This subdivision shall be liberally construed to avoid forfeiture of causes of action.”

In order to deny the filing of a pleading or amended pleading in such a case, the trial court must find that substantial evidence supports a finding that the moving party acted in bad faith. Silver Organization, Ltd v. Frank, (1990) 217 Cal.App.3d 94, 97-99.

Defendant argues that the proposed cross-complaint sets forth causes of action against plaintiff which arise out of the same transaction, occurrence or series of transactions or occurrences as the case brought against defendant, as both plaintiff’s complaint and defendant’s proposed cross-complaint relate to alleged breaches of the subject lease and any interpretation of the lease.

Defendant argues he has acted in good faith here, as defendant did not file a cross-complaint earlier as he honestly believed that the parties could have settled the matter, but that during settlement negotiations, plaintiff continued to act in bad faith and engage in tortious conduct. Defendant also indicates that the case is relatively new, a trial date has not been set, so plaintiff will have sufficient time to investigate and conduct discovery on the cross claims. Defendant also indicates that other than written discovery propounded by plaintiff, no other discovery has been completed, and no depositions have been taken. Defendant also argues that the cross claims proposed are all brought within the applicable statutes of limitations.

The opposition argues that there is substantial evidence in this case that bad faith exists, arguing that defendant’s intent is to bring frivolous claims, attack plaintiff’s protected activities and disrupt and suppress plaintiff’s rights. The argument appears to be primarily that the proposed cross-complaint pertains to plaintiff initiating and exercising legal rights and rights to petition once plaintiff discovered defendant’s allegedly egregious misconduct as a tenant. The opposition then argues essentially that plaintiff’s version of events is undeniable and supported by evidence, and that it is clear defendant’s intent in bringing the cross-complaint is to lessen his liability. If this were the standard for a finding of bad faith, virtually every cross-complaint would be motivated by bad faith.

It is not clear that the allegations defendant has asserted are frivolous, as many of the allegations appear somewhat consistent with the account of events in the complaint. To the extent defendant wants to pursue the position that the cross-complaint is an attempt to interfere with plaintiff’s rights to petition, or are insufficiently stated, or are knowingly not based in good faith on facts, or that defendant has destroyed evidence relevant to this case, plaintiff may pursue such positions on their merits in appropriate procedures after the cross-complaint is permitted to be filed.

The opposition actually supports the argument in the moving papers that plaintiff’s delay in seeking to file the compulsory cross-complaint was due to defendant’s belief that the matter would be resolved by settlement, as the declaration in opposition details settlement discussions taking before and up to the end of April, 2024, and the beginning of May, 2024. [Barsamian Decl., paras. 19-23]. Although counsel’s failure to timely file a cross-complaint for this reason may be characterized as neglectful on the part of counsel, it does not rise to the level of bad faith.

“The legislative mandate is clear. A policy of liberal construction of section 426.50 to avoid forfeiture of causes of action is imposed on the trial court. A motion to file a cross-complaint at any time during the course of the action must be granted unless bad faith of the moving party is demonstrated where forfeiture would otherwise result. Factors such as oversight, inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless accompanied by bad faith.”

Here, the opposition does not establish circumstances suggesting bad faith, and this circumstance is not a situation where defendant will have obtained any strategic advantage by the delay in seeking very early on in the litigation to formalize these defenses in case affirmative relief against the complaint is warranted. There is no substantial evidence supporting a finding of bad faith, as required. See Silver Organizations, at 99 (holding in connection with a bad faith finding, “it is our view that substantial evidence must support the trial court’s decision.” (italics in original)).

Overall, this is a compulsory cross-complaint, and if it is not permitted to be filed there would be a forfeiture of defendant’s affirmative claims against plaintiff. In addition, even if the cross-complaint were not compulsory, the court has a strong interest in having all claims determined together, rather than having defendant file a separate action, which may ultimately be consolidated with this action in the future, while the time would be better spent moving forward in discovery and addressing the merits of the parties’ claims.

Defendant and Cross-Complainant Vardan Stambulyan is ordered to efile a separate signed copy of the cross-complaint submitted as Exhibit A, deleting the “Proposed” designation, by close of business this date and the cross-complaint will be deemed served on the current parties as of the efiling of the pleading.

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