Judge Randolph M. Hammock, Case BC685560 2023-05-08 Tentative Ruling

Plaintiff alleges the Keshet Inter Vivos Trust deposited $2,737,670.00 into bank accounts owned and controlled by Defendants based on the Trust’s belief that Defendants would use the funds in various investments for the Trust’s benefit. Plaintiff alleges Defendants later claimed the funds were repayments of loans that Defendants made to the Trust in prior years. The Trust demands repayment of the funds.

This is one of numerous actions between the parties. On October 15, 2019, the parties jointly stipulated to stay this action pending resolution of a separate case. The stay was lifted on September 19, 2022.

Plaintiff now moves for leave to file a First Amended Complaint. Defendant opposed. Plaintiff filed this motion as an ex parte application on April 19, 2023, and the motion was rescheduled as a noticed motion on shortened time to be heard on this date.

If a plaintiff wishes to amend a complaint after the answer has been filed or after the demurrer has been filed and after the hearing on the demurrer, or if he or she has already amended the complaint “of course,” permission of the court must be obtained before the amendment will be allowed. (CCP §§ 473(a)(1), 576.)

Motions for leave to amend the pleadings are directed to the sound discretion of the court. “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . . .” (CCP § 473(a)(1); see CCP § 576.) Policy favors liberally granting leave to amend so that all disputed matters between the parties may be resolved. (See Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) Absent prejudice to the adverse party, the court may permit amendments to the complaint “at any stage of the proceedings, up to and including trial.” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761 [internal quotes omitted].)

Although denial is rarely justified, a judge has discretion to deny leave to amend if the party seeking the amendment has been dilatory, and the delay has prejudiced the opposing party. (Morgan v. Sup.Ct. (1959) 172 Cal.App.2d 527, 530; see also Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490). An opposing party is prejudiced where the amendment would necessitate a trial delay along with a loss of critical evidence, added preparation expense, increased burden of discovery, etc. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486-488.

Ordinarily, the court will not consider the validity of the proposed amended pleading in ruling on a motion for leave since grounds for a demurrer or motion to strike are premature. The court, however, does have discretion to deny leave to amend where a proposed amendment fails to state a valid cause of action as a matter of law and the defect cannot be cured by further amendment. (See California Casualty General Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 281 (overruled on other grounds by Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390).)

Plaintiff moves for leave to file a First Amended Complaint. For context, there were multiple actions between these parties based on investment funds in dispute. The parties have called the instant action an accounting “catch-all” that could not be effectively tried until all competing claims between the parties were resolved in those other cases.

Between July 1, 2011 and September 30, 2014, KESHET caused a combined total of $2,737,670.00 to be deposited into the bank accounts owned and controlled by the RUBINSTEIN DEFENDANTS (the “SUBJECT FUNDS”) based on KESHET’s understanding that the RUBINSTEIN DEFENDANTS were allowing KESHET to hold its SUBJECT FUNDS in such bank accounts for use in various investments, business ventures and transactions for KESHET’s benefit.

However, in or about August 2017, the RUBINSTEIN DEFENDANTS repudiated this understanding between the parties and fact that the SUBJECT FUNDS belonged to KESHET and were deposited into such bank accounts for KESHET's benefit, and instead falsely claimed that the SUBJECT FUNDS were re-payments of loans that the RUBINSTEIN DEFENDANTS allegedly made to KESHET in prior years.

Therefore, KESHET now demands repayment of all the SUBJECT FUNDS based on its mistaken belief in reliance on RUBINSTEIN's false representations that the RUBINSTEIN DEFENDANTS would hold the SUBJECT FUNDS in their subject bank accounts on behalf of KESHET for KESHET's benefit.

Notably, on April 12, 2023, Defendants filed a Motion in Limine seeking to exclude evidence of certain transfers allegedly made to-or-from third parties. (See Motion 04/12/2023.) Defendants contend those transfers fall outside the scope of Plaintiff’s complaint, which only refers to the Rubinstein Defendant’s bank accounts.

A week later, on April 19, 2023, Plaintiff filed the instant motion as an ex parte for leave to amend the Complaint. Plaintiff seeks to make “minimal” changes that fall within “the same general facts” of the Complaint. (Mtn. 2: 16-17.) These include widening the scope to also cover “deposits into Defendants’ escrow or other accounts (as opposed to just its bank accounts)” and allegations “that Plaintiff paid money to third parties on Defendant’s behalf.” (Id. 5: 13-15.) Plaintiff contends there are no statute of limitations issues because any new allegations “relate back” to those in the Complaint.

The court would agree that the new allegations “relate to the same general set of facts” as those alleged in the Complaint. (Atkinson v. Elk Corp., (2003) 109 Cal. App. 4th 739, 761.) And while there would appear a reasonable dispute as to the relationship between Defendant and the third parties—and therefore whether Plaintiff can recover funds deposited with those third parties—the court need not address that issue now. Instead, the “better course of action” is to permit the amendment, “and then let the parties test its legal sufficiency in other appropriate proceedings.” (Atkinson v. Elk Corp. (2003) 109 Cal. App. 4th 739, 760.)

Neither can the court find Plaintiff dilatory in seeking leave to amend. While Plaintiff was undoubtedly aware of the transactions involving the third parties even before this action was filed, it appears more likely the dispute as to scope didn’t arise until more recently. The court therefore finds that Plaintiff timely sought leave to amend once the problem arose.

Finally, even if Plaintiff was dilatory, that delay has not unduly prejudiced Defendants. There appears to be little dispute that Defendants were aware of the transactions involving the third parties. But Defendants purportedly held the belief—perhaps justified—that those transactions were outside the scope of this action. Be that as it may, Defendants already possess most, if not all, of the information that might be brought into the scope of this case.

On this background, it is unlikely the new claims would materially expand necessary discovery in this case. To the extend it might, the formerly pending May 8, 2023, trial date has been vacated, leaving additional time to complete discovery, if necessary. (See 04/21/2023 Minute Order.) Finally, while the court appreciates Defendants’ desire to resolve the case and potentially offset any judgments already entered, this delay alone does not trump the liberal policy of amendment.

Defendants suggest that Plaintiff “try her luck with a new lawsuit.” (Opp. 6:4.) While that remains an option, part of the liberal policy permitting leave to amend is to “facilitate the interests of justice and resolve all disputed issues” between the parties. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 939 [emphasis added].) And of course, forcing Plaintiff to file a separate lawsuit would still cause a delay.

This conclusion is consistent with the “policy of great liberality in allowing amendments at any stage of the proceeding so as to dispose of cases upon their substantial merits.” (Bd. of Trustees v. Superior Ct. (2007) 149 Cal. App. 4th 1154, 1163.)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.