Judge: Virginia Keeny, Case: 20VECV00119, Date: 2023-05-17 Tentative Ruling

Case Number: 20VECV00119    Hearing Date: May 17, 2023    Dept: W

HSIU-FANG LAI, et al. v. PARADISE LODGE WINNETKA, INC.

MOTION FOR ORDER GRANTING LEAVE TO FILE CROSS-COMPLAINT BY DEFENDANTS MULAN KUO AND MARTIN KUO

Date of Hearing:        May 17, 2023                         Trial Date:       October 23, 2023

Department:              W                                            Case No.:        20VECV00119

Moving Party:            Defendants Mulan Kuo and Martin Kuo

Responding Party:     No opposition.  

BACKGROUND

Plaintiffs allege they entered into a joint venture whereby Plaintiff Hsiu-Fang Lai, Defendant Pi Lien Fong, and Defendants Martin C. Kuo and Mulan Kuo each contributed $200,000 in exchange for a one-third ownership interest in the Motel. Plaintiffs further allege the Defendants managed the operations of the Motel to the exclusion of the Plaintiffs and as part of their misappropriation of the revenues generated by the business, the Defendants formed a number of business entities, including defendant entities Paradise Lodge Winnetka, Inc., 20128 Roscoe Boulevard, LLC, and Paradise Lodge General Partnership. Plaintiffs initiated this lawsuit on January 28, 2020.

On February 24, 2020, Plaintiffs Hsui-Fang Lai and Hsin-Hsiao (Scott) Wang filed a First Amended Complaint against Paradise Lodge Winnetka, Inc., 20128 Roscoe Boulevard, LLC, Paradise Lodge General Partnership, Pi Lien Fong, Ming-Hua Fong, Allison Baskett, and Mu-Lan Kuo Martin Kuo asserting causes of action for (1) Partition of Real Property; (2) Accounting; (3) Breach of Fiduciary Duty; (4) Breach of Partnership Agreement; (5) Declaratory Relief; and (6) Unjust Enrichment.

On April 20, 2020, default was entered against Defendants 20128 Roscoe Boulevard, LLC and Paradise Lodge Winnetka, Inc. On April 22, 2020 and April 23, 2020, default was entered against Defendants Paradise Lodge General Partnership and Pi Lien Fong respectively. The default was set aside on January 27, 2021.

On May 13, 2020, Defendants Paradise Lodge Winnetka, Inc.; 20128 Roscoe Boulevard, LLC; Paradise Lodge General Partnership; Pi Lien Fong; Minghua Fong; Ming-Hui Fong; Allison Baskett; Mu-Lan Kuo; and Martin Kuo filed an answer to the FAC.

[Tentative] Ruling

Defendants Mulan Kuo and Martin Kuo’s Motion for Order Granting Leave to File Cross-Complaint is GRANTED.

DISCUSSION

Defendants Mulan Kuo and Martin Kuo move the court for an order pursuant to Code of Civil Procedure § 426.50, granting the Kuos leave to file and serve a compulsory cross-complaint against Plaintiffs Hsiu-Fang Lai and Hsin-Hsiao (aka Scott) Wang and Defendants Ming-Hui Fong, Ming-Hua Fong, Allison Baskett and Paradise Lodge General Partnership. Kuo Defendants make the motion on the grounds the cross-claims are based on the same transactions and occurrences as the claims set forth in the First Amended Complaint (the “FAC”) – partition of the property located at 20128 Roscoe Blvd., Winnetka, CA 91306 (the “Property”) and accounting and declaratory relief regarding the partnership at issue and distributions by the partnership.

Where a defendant wishes to assert a “related cause of action” against plaintiff, it must do so in a cross-complaint. Failure to plead it will bar defendant from asserting it in a later lawsuit. (CCP § 426.10 [“‘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.”].) 

A cross-complaint against plaintiff may be filed as a matter of right if it is filed before or at the same time as the answer. (CCP § 428.50(a).) Otherwise, leave of court must be obtained. (CCP § 428.50(c).) Leave may be granted in the interest of justice at any time during the course of¿the action.¿(Id., § 428.50(c).) Indeed, where a cause of action would otherwise be lost, leave to amend is appropriate even if the party was negligent in not moving for leave to amend earlier.¿ “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.”¿ Silver Organizations, Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98-99 (Silver Orgs).¿[“Factors such as oversight, inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless accompanied by bad faith.”]; Sidney v. Superior Court (1988) 198 Cal.App.3d 710, 718 [a “strong showing of bad faith” is required].)  

The court finds the Kuo Defendants are entitled to file the proposed Cross-Complaint pursuant to Code of Civil Procedure section 426.50. Kuo Defendants seek to allege partition of real property, accounting, and declaratory relief all arising from the subject property and business agreement alleged in Plaintiff’s First Amended Complaint. As alleged in Plaintiff’s First Amended Complaint, Plaintiff Lai, Defendant Fong, and the Kuo Defendants each had a 1/3 interest in the business. The Kuo Defendants recently discovered, however, that, despite Lai and Mulan each holding a one-third ownership interest in the Partnership and despite the Agreement requiring equal distributions from the Partnership to each of the partners, Lai had received distributions from the Partnership in amounts in excess of Mulan. (Cross-Complaint ¶¶17-22.) The Kuo Defendants also note that although Plaintiffs have their own partition cause of action, Plaintiffs have stalled the claim for two years. Kuo Defendants contend Plaintiffs have been uncooperative in partition of the Property, causing unnecessary delay and expenses and the need for the Kuos to bring their own claim for partition. As a result, the present request has been made in good faith.

The Kuo Defendants Motion for Leave to File a Cross-Complaint is GRANTED.