Judge: Salvatore Sirna, Case: 21PSCV01087, Date: 2023-01-18 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 the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 21PSCV01087    Hearing Date: January 18, 2023    Dept: G

Plaintiffs Dongjin Zhang and Ian Giant, Inc.’s Motion for Leave to File Second Amended Verified Complaint  

Respondent: NO OPPOSITION

TENTATIVE RULING

Plaintiffs Dongjin Zhang and Ian Giant, Inc.’s Motion for Leave to File Second Amended Verified Complaint is GRANTED and deemed filed as of this date.

BACKGROUND

This is a breach of contract action arising from a recycling venture. In March 2019, Dongjin Zhang (Zhang) agreed to become business partners with Sam Shang (Shang) in a recycling venture. On April 23, 2019, Shang formed CG Plastics LLC (CG Plastics) and assisted Zhang in forming Ian Giant, Inc. (Ian Giant) as Zhang’s investment company. On May 24, Zhang alleges Shang, without Zhang’s consent or approval, caused CG Plastics to enter into a lease agreement for a warehouse in Rancho Cucamonga. On June 28, Zhang alleges Shang told Zhang that the company needed an investment to pay expenses and that each of them needed to contribute $100,000. While Zhang subsequently wired $100,000 into CG Plastics’ bank account, Zhang alleges Shang never made a matching investment and only contributed $5,000.

Zhang then alleges Shang caused CG Plastics to hire an entity named Renova Environment LLC (Renova Environment) for consulting services that Shang had previous formed ten days earlier. On September 6, 2019, Zhang and Shang memorialized their previous oral agreement into an operating agreement for CG Plastics. Zhang then made subsequent investments of $150,000 on September 11, 2019; $150,000 on October 17, 2019; and $100,000 on November 29, 2019. Zhang alleges Shang only invested a total of $92,000 into CG Plastics. Shang also caused CG Plastics to enter into an amended lease with an increased security deposit of $120,000 and paid Renova Environment an additional $150,000 in fees and costs.

In February 2, 2020, Shang requested Zhang loan CG Plastics $125,000 for business expenses. After Zhang declines Shang’s request, Shang claimed CG Plastics needed to urgently pay expenses to prevent losses and convinced Zhang to make a loan of $100,000 on the condition that it would be repaid by February 28. On March 4, Shang reported to Zhang that CG Plastics received an eviction notice for its warehouse and would need to hire legal counsel to reclaim $360,000 in rental losses. On March 6 and March 10, Zhang requested repayment of the loan and Shang agreed to repay the loan by April 15. After Shang failed to repay the loan on April 15, Zhang was unable to contact Shang and discovered CG Plastics’ bank account had less than $3,000.

On December 30, 2021, Zhang, individually and on behalf of Ian Giant (collectively, Plaintiffs), filed a verified complaint against Shang; NP 8720 Rochester, LLC; CG Plastics; Renova Environment; and Does 1-10, alleging the following causes of action: (1) breach of contract, (2) breach of implied-in-fact contract, (3) breach of written contract, (4) breach of fiduciary duty, (5) negligent misrepresentation, (6) fraud, (7) unjust enrichment, (8) conversion, (9) accounting, (10) constructive trust, (11) resulting trust, (12) fraudulent conveyance, and (13) declaratory relief.

On March 25, 2022, Plaintiffs filed a First Amended Verified Complaint (FAC) against the same defendants except NP 8720 Rochester, LLC and alleged the following causes of action: (1) breach of contract, (2) breach of implied-in-fact contract, (3) breach of written contract, (4) breach of fiduciary duty, (5) negligent misrepresentation, (6) fraud, (7) unjust enrichment, (8) conversion, (9) accounting, (10) resulting trust, (11) fraudulent conveyance, and (12) declaratory relief.

On December 12, 2022, Plaintiffs filed the present motion. A hearing on the motion is set for January 18, 2023.  

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 of 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.)¿ 

ANALYSIS

Plaintiffs seek leave to file a Second Amended Complaint (SAC) that alleges derivative claims against the defendants. The court finds good cause to permit Plaintiffs leave to file a Second Amended Complaint (SAC).

Plaintiffs’ counsel provides that the effect of the amendment is to add a derivative complaint of Ian Giant on behalf of CG Plastic against Shang. (Maxwell Decl., ¶ 3.) Plaintiffs’ counsel argues this is necessary and proper because based on information provided in discovery, to include Shang’s deposition that concluded November 3, 2022 where Plaintiffs’ counsel learned that Shang injured CG Plastic with Shang’s conduct. (Maxwell Decl., ¶ 3.) Plaintiffs have also sent a demand letter to Shang pursuant to Corporations Code section 17501. (Maxwell Decl., ¶ 3-4.)

The court finds Plaintiffs’ counsel has submitted a declaration sufficient to support amendment and now considers any prejudice to Defendants. While the amendment will allege additional causes of action, the court notes a trial date has not yet been set. The court is also not in receipt of any opposition from defendants.

Accordingly, the court GRANTS Plaintiffs’ motion.

CONCLUSION

Based on the foregoing, Plaintiffs’ motion for leave to file a SAC is GRANTED.

The SAC, attached as Exhibit B to Plaintiffs’ counsel’s declaration, is deemed filed as of this date.