Judge Salvatore Sirna, Case Number: 20PSCV00136, Date: 2025-01-14 Tentative Ruling

Judge: Salvatore Sirna, Case: 20PSCV00136, Date: 2025-01-14 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 20PSCV00136 Hearing Date: January 14, 2025 Dept: G

Defendants Gary Gang Guo and Sharon Ye’s Motion for Leave to Amend Answer to Plaintiff’s Second Amended Complaint

Respondent: Plaintiff Chuangwen Chen

TENTATIVE RULING

Defendants Gary Gang Guo and Sharon Ye’s Motion for Leave to Amend Answer to Plaintiff’s Second Amended Complaint is GRANTED. Defendants Gary Gang Guo and Sharon Ye are ordered to file the proposed Amended Answer to the Second Amended Complaint separately with the Court forthwith.

BACKGROUND

This is an action arising from alleged investment fraud. In 2011, Plaintiff Chuangwen Chen alleges Chen invested over one million dollars in an online retail business. In April 2017, Chen discovered Defendant Gary Gang Guo was allegedly misappropriating the business’s profits for Guo’s personal use.

On February 18, 2020, Chen filed a complaint against Guo and Does 1-20, alleging the following causes of action: (1) breach of fiduciary duty and (2) fraud.

On February 2, 2021, the court held a trial setting conference and scheduled a jury trial in present action for February 14, 2023.

On October 24, 2022, Chen filed a First Amended Complaint (FAC) against Guo, Sharon Ye, and Does 1-20, alleging the following causes of action: (1) breach of fiduciary duty, (2) fraud, and (3) conversion.

On January 3, 2023, Chen filed a Second Amended Complaint (SAC) against Guo, Ye, Fuller International Corporation (FIC), and Does 1-20, alleging the following causes of action: (1) breach of fiduciary duty, (2) fraud, (3) conversion, and (4) a claim pursuant to the California Uniform Voidable Transactions Act.

On January 17, 2023, the parties filed a stipulation to continue the trial date and the court set a new trial date for July 9, 2024.

On February 3, 2023, Guo filed a cross-complaint against Chen, FIC, and Roes 1-10, alleging the following causes of action: (1) breach of oral contract, (2) unjust enrichment, and (3) common counts for money had and received.

On March 20, 2024, the parties filed another stipulation to continue the trial date for an additional six months. On March 26, 2024, the court rejected the parties’ stipulation.

On April 29, 2024, Chen filed a motion to continue trial. The court granted Chen’s motion on May 22, 2024, and continued the trial date to November 5, 2024.

On October 4, 2024, the parties filed a stipulation to continue the trial date for another seven months. On October 15, 2024, the court rejected the parties’ stipulation. On October 23, 2024, the court revisited the parties’ stipulation and vacated the trial date.

On December 19, 2024, Guo and Ye filed the present motion. A hearing on the present motion is set for January 14, 2025, along with a motion to be relieved as counsel on February 5, 2025, and a further status conference re: discovery/trial setting conference on February 27, 2025.

ANALYSIS

Guo and Ye seek leave to file an amended answer to Chen’s SAC that pleads a fifteenth affirmative defense of illegality of contract. For the following reasons, the court GRANTS their motion.

Legal Standard

“A 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).) The court’s discretion will usually be exercised liberally to permit amendments of the pleadings. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 939.)¿“A motion to amend a pleading before trial must . . . [s]tate 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 [s]tate 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, rule 3.1324(a).)¿ The declaration must also specify the amendment’s effect, why it is necessary and proper, when the facts supporting the amended allegations were discovered, and why the request was not made earlier.¿ (Cal. Rules of Court, rule 3.1324(b).)

If the party seeking the amendment has needlessly delayed, and the delay has prejudiced the opposing party, the court has the discretion to deny leave to amend.¿ (See Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490.)¿ Prejudice exists where the amendment would require delaying the trial, resulting in loss of critical evidence, or added costs of preparation.¿ (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1448.)

Discussion

In this case, Guo and Ye’s counsel provides the effect of the proposed amended answer is to add a single affirmative defense of illegality of contract. (Sutton Decl., ¶ 5.) Their counsel states this amendment is necessary and proper because it is a valid defense and the facts giving rise to this defense were discovered during depositions taken on August and September of 2024. (Sutton Decl., ¶ 5.) Specifically, counsel states they discovered that Guo had promised to return Chen’s investment upon the issuance of the EB-5 visas which counsel suggests is a violation of federal immigration law. (Sutton Decl., ¶ 6.)

In opposition, Chen argues Guo and Ye failed to timely serve notice of the present motion. But when a party files an opposition or reply that addresses the merits, that party waives the right to challenge the notice of the respective moving papers or opposition. (See Carlton v. Quint (2000) 77 Cal.App.4th 844, 697-698.) Here, the court finds Chen has done so and has thus waived any objection on this ground. In arguing a party’s participation at a hearing after an objection does not constitute waiver, Chen cites Robinson v. Woods (2008) 168 Cal.App.4th 1258, 1266 (Robinson). Chen did more than object to untimely service at the hearing, however, as Chen has participated in briefing the merits of this motion.

Next, Chen argues Guo and Ye’s unreasonably delayed in making this amendment as they were aware of the alleged illegality of the parties’ agreement as early as 2021. Specifically, they point to purported discovery responses from Guo dated March 5, 2021, in which Guo states “he never promised return Plaintiff’s investment because it is illegal to do so under the laws of US, specifically as to EB-5 laws in that EB-5 investments are investments with risks.” (Opp., Ex. 2, p. 8:2-4.) But there are two issues with this exhibit. First, Chen has failed to provide a declaration that authenticates this exhibit. And second, while this discovery response is directed towards “RFA No. 6,” Chen has failed to provide a copy of this request for admissions which prevents the court from determining the context in which this statement was made.

Nonetheless, in a supplemental declaration, Guo essentially admits that “Plaintiff indeed requested and I agreed in or about 2011 that after Plaintiff obtained his US Permanent Residency, I would return the $500,000 that he invested in Fuller International Corporation.” (Guo Decl., ¶ 4.) Based on this admission, Guo was aware of the allegedly illegal agreement and did not first discover this agreement in depositions during the fall of 2024 as initially suggested by counsel. But even if Guo had unduly delayed in raising this affirmative defense, Chen cannot establish prejudice.

In arguing this amendment creates significant prejudice, Chen argues Chen will be required to expend additional time and resources addressing an irrelevant defense. But that argument contradicts itself. If this defense is irrelevant or relies on facts not alleged on the SAC as Chen claims, Chen will not need to expend additional time and resources addressing it as it can promptly be handled by a motion challenging its sufficiency. As for the claim that this amendment will delay trial preparation, case resolution, and potentially require additional discovery or pretrial motions, Chen fails to provide examples of how this amendment will do so. As a party to the alleged oral agreement, Chen is certainly aware of the facts surrounding whether Chen did or did not enter into to the agreement. Furthermore, it is unclear how a potential delay in trial preparation will prejudice Chen when Chen has repeatedly agreed to continuances of the trial date and even recently agreed to waiving the five-year statute. (See 10/23/2024 Minute Order.)

Accordingly, the court GRANTS Guo and Ye’s motion.

CONCLUSION

Based on the foregoing, Guo and Ye’s motion for leave to file an amended answer to the SAC is GRANTED and Guo and Ye are ordered to file the proposed amended answer to the SAC separately with the court forthwith.