TENTATIVE RULING

After consideration of the briefing filed and oral argument at the hearing, Defendant Rehabbers Financial, Inc. d/b/a Aztec Financial, Inc.’s Motion for Leave to File Cross-Complaint is GRANTED.

Defendant Rehabbers Financial, Inc. d/b/a Aztec Financial, Inc. is ordered to formally file the proposed cross-complaint and declaration of Ani Grigoryan as Exhibit 1 within five (5) court days.

Counsel Defendant Rehabbers Financial, Inc. d/b/a Aztec Financial, Inc. to give notice.

STATEMENT OF THE CASE

This action arises out of alleged negligence and wrongful foreclosure. Plaintiffs Ingerson & Associates, Inc. and Greg M. Ingerson (collectively, “Plaintiffs”) bring suit against Defendants Rehabbers Financial, Inc. d/b/a Aztec Financial, Inc. (“Rehabbers”) and Joel D. Hoffman (collectively, “Defendants”) alleging the following causes of action:

1. Promissory Estoppel;

2. Violation Of California Civil Code Section 2924h;

3. Wrongful Foreclosure;

4. Violation Of California Civil Code Section 2943;

5. Unjust Enrichment; and

6. Negligence.

Defendant Rehabbers filed the instant Motion for Leave to File Cross-Complaint (the “Motion”).

GROUNDS FOR MOTION

Pursuant to Code of Civil Procedure sections 426.50 and 428.10, Defendant Rehabbers moves for an order granting it leave to file a cross-complaint against Plaintiffs and against Tyler Brooks Kimmel, as an individual and trustee of the Rose 22 Trust, dated March 19, 2018, on the ground that the proposed cross-complaint is compulsory, and that Defendant Rehabbers is acting in good faith.

DISCUSSION

A. Legal Standards

Code of Civil Procedure section 426.30 provides that:

(a) 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.

(b) This section does not apply if either of the following are established:

(1) The court in which the action is pending does not have jurisdiction to render a personal judgment against the person who failed to plead the related cause of action.

(2) The person who failed to plead the related cause of action did not file an answer to the complaint against him.

(Code Civ. Proc., § 426.30; see Code Civ. Proc., § 426.10(c) [“‘Related cause of action’ means a cause of action which arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.”].)

Code of Civil Procedure section 426.50 provides that:

A party who fails to plead a cause of action subject to the requirements of this article, whether through oversight, inadvertence, mistake, neglect, or other cause, may apply to the court for leave to amend his pleading, or 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 amend the pleading, or to file the cross-complaint, to assert such cause 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.

(Code Civ. Proc., § 426.50.)

Code of Civil Procedure section 428.10 provides that:

A party against whom a cause of action has been asserted in a complaint or cross-complaint may file a cross-complaint setting forth either or both of the following:

(a) Any cause of action he has against any of the parties who filed the complaint or cross-complaint against him. Nothing in this subdivision authorizes the filing of a cross-complaint against the plaintiff in an action commenced under Title 7 (commencing with Section 1230.010) of Part 3.

(b) Any cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party to the action, if the cause of action asserted in his cross-complaint (1) arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against him or (2) asserts a claim, right, or interest in the property or controversy which is the subject of the cause brought against him.

(Code Civ. Proc., § 428.10.)

Code of Civil Procedure section 428.50 provides that:

(a) A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint.

(b) Any other cross-complaint may be filed at any time before the court has set a date for trial.

(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.

(Code Civ. Proc., § 428.50.)

Leave of court is required to file a cross-complaint when the party seeking to file the cross-complaint has filed an answer. (Code Civ. Proc., § 428.50(a)-(c).) Cross-complaints may be either permissive or compulsory. (Crocker Nat. Bank v. Emerald (1990) 221 Cal.App.3d 852, 863–864; see Code Civ. Proc., §§ 428.10, 428.30 & 428.50.) “Permission to file a permissive cross- complaint is solely within the trial court's discretion.” (Id. at 864 (citing Orient Handel v. United States Fid. and Guar. Co. (1987) 192 Cal.App.3d 684, 701).) In contrast, cross-claims against complainants arising from the same transaction or series thereof, existing at the time of filing an answer, are compulsory. (See, e.g., Code Civ. Proc., §426.30(a); Al Holding Co. v. O’Brien & Hicks, Inc. (1999) 75 Cal.App.4th 1310, 1313-14; see also Weil & Brown, Civ. Pro. Before Trial (The Rutter Group 2011) ¶¶ 6:516, 6:511 and 6:581.) Leave to file compulsory cross-complaints “shall” be granted where moving parties acted in good faith. (Code Civ. Proc., § 426.50; Silver Organizations, Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98-99.)

“[W]hat constitutes ‘good faith’-or lack of it-under Code of Civil Procedure section 426.50 must be determined in light of and in conformity with the liberality conferred upon the trial courts by the section….” (Foot's Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 902.) The liberality principal “requires that a strong showing of bad faith be made in order to support a denial of the right to file a cross-complaint….” (Id.) That is, substantial evidence that a party has moved to file a compulsory cross-complaint in bad faith is required to support a denial of the right to file a cross-complaint. (Silver Organizations Ltd., supra, 217 Cal.App.3d at 99-100.)

“[D]elay only may constitute the requisite bad faith to preclude the granting of the request to file a cross-complaint when it appears that a delayed cross-complaint, if allowed, would work a substantial injustice to the opposing party and would prejudice that party's position in some way.” (Foot's Transfer & Storage Co., supra, 114 Cal.App.3d at 903; see Gherman v. Colburn (1977) 72 Cal.App.3d 544, 558-59 [stating that leave was properly denied when the defendant’s motion “was merely a tactical strategic maneuver to deprive plaintiffs of a right to a jury trial”].)

A cross-complaint against a third party is permissive, not mandatory, as defendants may wait and pursue their rights against third parties in subsequent, independent proceedings. (Insurance Co. of North America v. Liberty Mutual Ins. Co. (1982) 128 Cal.App.3d 297, 303; see Cal. Prac. Guide: Civ. Pro. Before Trial (The Rutter Group 2024) ¶ 6:544.)

“The reason for allowing cross-complaints is to have a complete determination of a controversy among the parties in one action, thus avoiding circuity of action and duplication of time and effort.” (City of Hanford v. Superior Court (1989) 208 Cal.App.3d 580, 587–588 (citing Currie Medical Specialties, Inc. v. Bowen (1982) 136 Cal.App.3d 774, 777; Sattinger v. Newbauer (1954) 123 Cal.App.2d 365, 369).)

B. Analysis

Here, Defendant Rehabbers filed an Answer on June 5, 2023, and the proposed cross-complaint attached to the declaration of Ani Grigoryan as Exhibit 1, (hereafter, the “Proposed Cross-Complaint”) seeks to assert cross-claims against Plaintiffs. Defendant Rehabbers must obtain leave to file a cross-complaint and has done so.

The Court agrees with Defendant Rehabbers that the cross-claims alleged in the Proposed Cross-Complaint arise out of the same transaction, occurrence, or series of transactions or occurrences as the causes of action alleged in Plaintiffs’ Complaint, namely, the alleged application, issuance, and repayment of the $1,400,000.00 loan by Defendant Rehabbers to Plaintiff ¿Ingerson & Associates, Inc., guaranteed by Plaintiff Greg Ingerson, for the purchase ¿of the real property located at 14701 Hartsook Street, Sherman Oaks, County of Los Angeles, California by Plaintiff ¿Ingerson & Associates, Inc.

The Court finds that the Proposed Cross-Complaint is compulsory and that leave to file the Proposed Cross-Complaint must be granted unless there is substantial evidence of bad faith by Defendant Rehabbers in bringing the Motion.

The Court does not find substantial evidence of bad faith.

Defendant Rehabbers contends that the Motion was brought in good faith, reasoning that it did not discover alleged facts giving rise to the Proposed Cross-Complaint until after the parties engaged in an early private mediation, namely, that Plaintiffs and Mr. Kimmel made certain misrepresentations/concealments of fact in loan applications, including that a lawsuit to which Plaintiff Greg Ingerson was a party (Case No. BC707536) was dismissed without prejudice on November 22, 2018 even though it was still pending, and failed to disclose an action by Plaintiffs against Mr. Kimmel (Case No. 19STCV32158). (Motion, pp. 3-8.)

Plaintiffs contend that the Motion is not in good faith because Defendant Rehabbers’s assertion that it “did not discover Ingerson’s and Kimmel’s misrepresentations until well after Ingerson filed his instant action, and after the parties engaged in an early private mediation” is false, reasoning that Case No. BC707536 was essentially inactive” and that by stating that it was dismissed without prejudice, “Ingerson made it clear that the matter was not fully resolved.” Plaintiffs further assert that Defendant Rehabbers was aware of Case No. 19STCV32158 because Plaintiff Greg Ingerson informed Defendant Rehabbers’s agent, Eric Lennstrom, of the lawsuit and sent a copy of the Complaint in October 2019. (Opposition, 2-5.)

The Court rejects Plaintiffs’ suggestions that the Motion must be denied on the basis that Defendant Rehabbers’s assertions are false. The Court agrees with Defendant Rehabbers that Plaintiffs’ attempts to dispute the truthfulness of the allegations in the Proposed Cross-Complaint do not compel the conclusion that the Motion was brought in bad faith. (See Reply, p. 2.) As stated above, “[t]he reason for allowing cross-complaints is to have a complete determination of a controversy among the parties in one action, thus avoiding circuity of action and duplication of time and effort.” (City of Hanford, supra, 208 Cal.App.3d at 587–588 (citing Currie Medical Specialties, Inc., supra, 136 Cal.App.3d at 777; Sattinger, supra, 123 Cal.App.2d at 369).) Thus, the veracity of the allegations in the Proposed Cross-Complaint can be litigated along with the allegations in the Complaint.

The Court notes that, while Plaintiffs argue that Defendant Rehabbers was aware of Case No. 19STCV32158 because Plaintiff Greg Ingerson informed Defendant Rehabbers’s agent, Eric Lennstrom, of the lawsuit and sent a copy of the Complaint in October 2019, (Opposition at pp. 5-6), the evidence cited by Plaintiffs only indicates that Plaintiff Greg Ingerson informed Mr. Lennstrom of “t¿he Complaint I had filed against Hernandez that was attached to the email,” but Hernandez is not a named defendant in Case No. 19STCV32158. (Greg M. Ingerson Decl., ¶¶ 22-26, Exs. H-M.) Moreover, the Court finds Plaintiffs suggestions that, by stating that Case No. BC707536 was dismissed without prejudice, “Ingerson made it clear that the matter was not fully resolved,” and that Case No. BC707536 was “essentially inactive” are insufficient to conclude that the instant Motion was not brought in good faith.

As stated above, the liberality principles applicable to Code of Civil Procedure section 426.50 requires a strong showing of bad faith, and the Court does not find that there has been any undue delay by Defendant Rehabbers in seeking to file the Proposed Cross-Complaint such as to result in a “substantial injustice” or prejudice to Plaintiffs. Other than arguing that the Motion is not “timely” and seeking to litigate the merits of the allegations in the Proposed Cross-Complaint, Plaintiffs fail to identify or specify how or in what manner they would be prejudiced. Trial is not scheduled until April 8, 2025, and Plaintiffs do not contend that they would be unable to adequately defend against the allegations. If the parties find that additional time is needed to complete all necessary discovery they may seek a trial continuance.

In sum, the Court finds that Plaintiffs fail to make “a strong showing of bad faith” and that Defendant Rehabbers are entitled to file the Proposed Cross-Complaint.

Accordingly, for all the foregoing reasons, the Motion is GRANTED. Defendant must separately file its proposed Cross-Complaint within five court days.

Defendant Rehabbers shall give notice unless the parties waive notice at the hearing.