Filed 7/31/20 Thomas v. Sea Breeze Venture LP CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

DONNA THOMAS et al.,

Plaintiffs and Appellants,

v.

SEA BREEZE VENTURE LP et al.,

Defendants and Respondents.

B297200

(Los Angeles County

Super. Ct. No. BC671103)

APPEAL from a judgment of the Superior Court of Los Angeles County, Susan Bryant-Deason, Judge. Affirmed.

Los Angeles Center for Community Law and Action, Tyler Anderson and Noah Grynberg for Plaintiffs and Appellants.

Pahl & McCay and Karen K. McCay for Defendants and Respondents.

____________________________

Plaintiffs and appellants (hereinafter appellants), a group of current and former tenants at an affordable housing complex owned by defendants and respondents, appeal from a judgment of dismissal resulting from an order sustaining a demurrer and striking appellants’ second amended complaint (SAC) as a sham pleading. The trial court issued its order on the SAC after it had granted summary judgment in favor of respondents on appellants’ first amended complaint (FAC). Appellants do not appeal the summary judgment ruling.

In this appeal, appellants contend the SAC was not a sham pleading and that it adequately alleged causes of action for common law negligence and statutory retaliation under Civil Code section 1942.5. In the alternative, they argue it was an abuse of discretion to deny leave to amend.

We conclude the trial court properly struck the SAC because appellants added new factual allegations to plead their negligence and retaliation claims, without providing any explanation for why these facts were not, or could not have been, previously alleged. We further conclude that no further opportunity to amend is warranted in this case.

We therefore affirm the trial court’s judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Although appellants do not appeal the trial court’s summary judgment ruling on the FAC, we rely on some of the documentation submitted by the parties during that phase of the litigation to provide a brief factual background for this appeal. This background has no bearing on the outcome of this court’s decision, which turns on the allegations pleaded on the face of each complaint.

I. Factual Background

A. Acquisition of Property

Respondent MRK Partners (MRK) is a multifamily real estate investment and asset management firm that specializes in the acquisition and rehabilitation of affordable housing. In late 2015 or early 2016, MRK identified a 92-unit apartment complex (the Property) in the City of Oxnard as a potential affordable housing project. At that time, there were no income or rent restrictions at the Property. MRK undertook the task of obtaining financing for the acquisition and rehabilitation of the property under the Low Income Housing Tax Credit (LIHTC) program. LIHTC’s are for new construction or projects that create affordable rental housing for low-income households. MRK sought to have the project financed with 4 percent tax credits. To obtain this type of credit, MRK had to first apply for tax-exempt bonds to be issued on its behalf, which would then allow a noncompetitive application for the tax credits.

In April 2016, MRK approached a former defendant in this matter, the California Municipal Finance Authority (CMFA), to apply for the issuance of bonds for the conversion of the apartment complex. On April 29, 2016, the CMFA unanimously approved a resolution to issue up to $17.5 million in bonds to MRK and its subsidiary, respondent Sea Breeze Venture (SBV).

The federal Tax Equity and Fiscal Responsibility Act (TEFRA) requires a public hearing be held before the actual issuance of tax-exempt private activity bonds. The purpose of the TEFRA hearing is to allow interested persons an opportunity to express their views for or against issuance of the bonds. In May 2016, Anthony Stubbs, a financial advisor with the CMFA, requested on behalf of MRK that the Oxnard City Council conduct a TEFRA hearing to approve issuance of the bonds.

The TEFRA hearing for the housing project was held by the Oxnard City Council on June 7, 2016. Prior to the hearing, a representative from the Oxnard Housing Department posed a series of questions to Stubbs via electronic mail, regarding MRK’s intentions for the property, including “how many units will be affordable and at what levels, and how will this be accomplished, since, as I understand the units are currently occupied?” Stubbs subsequently forwarded to the city the following response by MRK: “100% of the units will be restricted to 50% or 60% of Area Median Income. After closing, they will do income verifications to make sure tenants qualify. However, they have done preliminary reviews, and most current tenants already qualify.[ ] They do not anticipate that any tenants will be over the income limits.”

The representative from the city followed up with the following concern: “As a follow-up, please note that we are concerned about what would happen if a current tenant is over-income. I would expect our Council to want a guarantee that no such current tenants would be displaced. How would Sea Breeze propose to handle such a matter?” Stubbs forwarded the following response by MRK: “We don’t anticipate anyone over income. In the event that we do have an over income resident who is still occupying the unit at the time of construction commencement, we will relocate them in comparable properties within the immediate vicinity with rents that are equal to or less than their current rents. . . . Construction commencement is not expected until February 2017 which would give ample time to relocate any residents in the unlikely event that it is needed.”

On June 7, 2016, the City of Oxnard unanimously passed a resolution to approve the issuance by the CMFA of up to $17.5 million in tax-exempt revenue bonds to finance MRK and SBV’s acquisition of the Property.

On October 17, 2016, SBV closed escrow on the property and became the owner of the Sea Breeze Apartments.

B. Income Verification Process

Following SBV’s acquisition of the property, all existing residents were required to complete an income certification process compliant with the LIHTC program. AMC operated as SBV’s management company and led the income certification process. AMC hired the existing property manager, Janet Pintor, who is bilingual, to continue in her role as property manager.

On November 8, 2016, AMC held a meeting with residents, explaining how the certification process would work, what information was required, and what alternatives would be available if a household was not income-eligible. Ivonne Ayala, the compliance director for AMC, who was well-versed with the regulatory requirements of the low income housing program and fluent in English and Spanish, provided translation services at the meeting. Pintor and her supervisor, Shandy Ochoa, also attended this meeting. Following the group meeting, individual notices were sent to each household listing the financial information that was needed and scheduling an interview with management to provide the necessary information and proceed with the certification process.

In or around November 2016, a flyer was distributed by what was identified as the “Seabreeze Tenants Association Affiliated with the Los Angeles Tenants Union” that advised existing residents to not attend interviews or talk with management.

Nevertheless, several households participated in the income-certification process. Some tenants were qualified and signed fixed-term leases. Some units became vacant through natural attrition and were filled with new income-eligible families. Some residents, anticipating they were most likely over-income, voluntarily vacated the premises. Others were determined to be over-income after completion of the verification process, and SBV sought to terminate their tenancies. AMC had a budget to relocate the tenants who were determined to be over-income, and most tenants were offered between $500 and $1,000 to vacate their units. A flyer containing information on three nearby rental properties comparable to Sea Breeze Apartments was provided to tenants.

C. The Appellants

Appellants are 16 current and former tenants who occupied 10 units at the Property. They did not participate in the process to determine their income eligibility under the new affordability restrictions at the property until after steps were taken through the judicial process to terminate their tenancies.

By the end of 2017, eight of the 10 households were income qualified and living in renovated units at reduced rents pursuant to fixed-term leases, which included a “good cause for eviction” rider. As to the other two units, one household vacated with notice to management due to the lease expiration, while the other unit vacated without prior notice to management.

II. Procedural Background

A. First Amended Complaint

On August 8, 2017, appellants filed a FAC alleging two causes of actions against the CMFA and five causes of action against MRK and SBV. All causes of action turned on allegations that MRK and its subsidiary SBV made the following false and misleading statements to the City of Oxnard in seeking the city’s approval of the issuance of up to $17.5 million in tax bonds: (1) “That MRK had conducted a review of the income and financial information of current tenants at the Property prior to June 2016 and had determined that ‘most current tenants [at the Property] already qualify [to live in the new Sea Breeze housing project]’ ”; (2) “That MRK did not anticipate that any of the current tenants at the Property including [appellants], would exceed the income limits to live at the Property”; and (3) that “ ‘[i]n the event that [MRK] do[es] have an over income resident who is still occupying the unit at the time of construction commencement . . . we will relocate them in comparable properties within the immediate vicinity with rents that are equal to or less than their current rent.’ ”

Based on these representations, appellants alleged the following five claims against MRK and SBV: Negligent misrepresentation, fraud, violation of the Unfair Business Practices Act, breach of contract, and estoppel. The remaining two claims were brought on behalf of appellants as taxpayers against the CMFA and alleged that the misrepresentations ultimately caused the CMFA to commit “ultra vire” acts—i.e., the issuance of tax-free bonds without the prerequisite considerations and evaluations mandated by law.

The FAC alleged no causes of action arising out of the November–December 2016 certification process conducted by respondents, but generally alleged that all appellants, other than Donna Thomas, did not attend the income-certification meetings scheduled for them by management. The FAC alleged that appellants “reached out to Janet Pintor, with questions about what the November/December 2016 notices meant, since they had never previously been required to certify or verify the requested household income or personal financial information to any current or former owner or manager of the Property,” but that “neither Ms. Pintor nor anyone else associated with any of [respondents] materially responded to any of these questions.” Each of appellants, other than Ms. Thomas, therefore did not attend any of the meetings AMC scheduled for them, including “the final certification meeting” scheduled for “around the last week of December.” Thereafter, respondents “either threatened to serve or served each [appellant] with a 60-day notice terminating their tenancies at the Property.”

B. Trial court sustains respondents’ demurrer to third and fourth causes of action in FAC

On January 19, 2018, the trial court sustained respondents’ demurrer to the third and fourth cause of action for breach of contract and estoppel claims. The trial court ruled the FAC failed to state a breach of contract action because there were no pleaded facts showing the existence of a contract between respondents and the City of Oxnard. The court ruled the FAC failed to state a claim for promissory estoppel, explaining that such a claim requires reliance “by the party to whom the promise is made” and pointing out appellants failed to cite any authority suggesting otherwise.

In sustaining the demurrer as to the third and fourth causes of action, the trial court granted appellants 10 days’ leave to amend.

C. Appellants file “Notice of Non-Amendment” stating they intend to stand on remaining claims in the FAC

On January 29, 2018, appellants filed a “notice of non-amendment” stating “although the court granted [appellants] leave to amend the [FAC] during the hearing on demurer [sic] held on January 19, 2018, [appellants] have decided not to further amend and instead proceed on the claims for which the demurrer was overruled.”

The CMFA was officially dismissed as a party to the lawsuit on June 1, 2018. This left only three causes of action against MRK and SBV slated for trial in July 2018: Negligent misrepresentation, fraud, and violation of Business and Professions Code section 17200 et seq.

D. At final trial status conference trial court continues trial date to allow respondents to file motion for summary judgment on the FAC; appellants request permission to file SAC

On July 30, 2018, at the final status conference before the jury trial scheduled for August 8, 2018, respondents pointed out they had filed in limine motions, including a motion that any statements made by respondents to the city would be excludable as privileged. The trial court observed the case may be more appropriately adjudicated on a motion for summary judgment (MSJ) and granted respondents the opportunity to submit an MSJ on the remaining claims in the FAC. When appellants objected, the trial court responded, “That’s fine. You can oppose. Discovery is closed. . . . You have every deposition you need. You have every piece of discovery you’re going to get.”

Appellants’ counsel then requested the following: “We would ask since they’re being given the opportunity to brief a summary judgment motion that we also be given a briefing schedule to amend to allege common law negligence, an additional cause of action, no additional facts, just an additional cause of action under these facts for common law negligence.” (Italics added.) The court responded, “If you want to bring a motion to amend, you can bring a motion to amend. All right. Don’t forget to say why you didn’t bring it before today. Just go by the California Rule[s] of Court. After the summary judgment motion on which you’ve got is decided, then we’ll decide whether or not you get to have an amended complaint.”

On August 21, 2018, respondents filed their MSJ and supporting documentation.

E. While MSJ is pending, appellants file motion for leave to file SAC

1. Appellants’ motion for leave to file SAC and supporting declaration

On September 25, 2018, while the MSJ was pending, appellants filed a motion for leave to file an SAC adding two new causes of action for negligence and retaliation.

Although the proposed SAC retained the same facts previously pleaded under the “general allegations” section of the FAC, the SAC added new allegations in support of each new cause of action pleaded—identified below in italics:

Thus, in pleading the negligence action, the SAC alleged that respondents MRK and SBV, “by virtue of the landlord-tenant relationship” owed appellants “a duty to comply with ordinances, regulations, and other laws to ensure a stable living environment for [appellants] and their families.” Respondents breached this duty by “failing to conduct a review of existing tenants’ financial information prior to June 2016, failing to consider [appellants’] applications for affordable housing,[ ] failing to facilitate [appellants’] applications for affordable housing, including by failing to provide [appellants] with information regarding the certification process in their native languages[,] knowingly scheduling certification appointments with [appellants] that [appellants] could not attend, and pressuring [appellants] to accept ‘cash for keys’ agreements rather than honoring [appellants’] existing fixed-term tenancies.”

In pleading the retaliation action under Civil Code section 1942.5, which prohibits a landlord from retaliating against a tenant because the tenant has exercised his or her legal rights, the SAC alleged that appellants exercised their legal rights by (1) “ask[ing] for information regarding the income qualification process to be provided [to] them in Spanish”; (2) “ask[ing] for appointments to income certify that did not conflict with their work schedules”; and (3) “refus[ing] to vacate the Property and inform[ing] [respondents] that they had a legal right to stay.” (Italics added.) According to the SAC, respondents retaliated against [appellants] by (1) refusing these requests; (2) “offering them ‘cash for keys’ ”; (3) “[s]eeking to force [appellants] to vacate the Property through verbal threats and harassment”; (4) and “[r]efusing to consider applications submitted by [appellants] to live at the property.”

Notwithstanding the new factual allegations under each cause of action in the SAC, appellants’ counsel declared the following: “[T]he SAC contains no new allegations, and merely adds two new causes of action, . . . which are identical to the facts alleged in the FAC” and “were discovered prior to filing this lawsuit.” Counsel further declared that “[n]o new discovery is necessary in this case because no new facts are being alleged.”

In explaining why the amendment was not made earlier, counsel stated the following: “The reason for the instant motion is that during the Final Status Conference in this case, [respondents] raised the novel legal theory that the litigation privilege, Civil Code section 47(b), should be extended to cover statements made to legislative bodies pre-deliberation concerning matters of importance to the deliberation. . . . Having been confronted by this defense for the first time, [appellants], out of an abundance of caution, felt it necessary to bring the instant motion, even though [appellants] are confident that [respondents’] summary judgment motion is meritless.”

The supporting memorandum of points and authorities (P&A) filed by appellants with the proposed SAC pointed out that appellants had attached a “redline” of the FAC that “shows the Court exactly which changes to the FAC have been made by the SAC and confirms that no new facts have been alleged in the SAC.” The P&A further stated that “[b]ecause a party suffers no legally cognizable prejudice when no new facts are asserted in an amended complaint, the law requires court to grant such amendments,” that “[appellants] can assert claims for damages based on identical facts pled in the FAC under California’s common law negligence and statutory retaliation standards,” and that “it would be almost impossible for a party to assert a legally cognizable prejudice resulting from a late-amended complaint that merely asserts new causes of action, and not new facts.”

2. Respondents’ opposition to motion to file SAC and appellants’ reply

On October 9, 2018, respondents filed an opposition to [appellants’] motion for leave to file the SAC. In their opposition, respondents identified the new allegations pleaded in support of the negligence and retaliation claims and stated appellants gave an “entirely different reason in the FAC for why [appellants] did not attend the referenced certification meetings”—i.e., that the management failed to “materially respond to their questions.”

Citing cases, respondents pointed out that “[w]here a plaintiff has ‘all necessary information to include the appropriate allegations’ before filing the Complaint, but fails to do so within a reasonable time, this . . . unwarranted delay in presenting it may—of itself—be a valid reason for denial.”

Respondents pointed out that appellants “do not even attempt to offer any reason or rationalization for why these causes of action could not have been pled earlier—even at the time of the filing of the FAC” when appellants’ counsel declared that “all of the facts listed in support of the proposed SAC were available to [appellants] before the FAC was even filed.” According to respondents, appellants were “moving to amend now in order to disrupt [respondents’] MSJ and prevent the potential disposition of this case on the merits of the FAC.”

Appellants replied by stating they had “provided fulsome briefing in their Motion to Amend explaining why the instant motion was brought in a timely fashion.”

F. On November 5, 2018, trial court grants summary judgment on FAC in favor of respondents; on November 8, 2018, court allows appellants to file SAC

On November 5, 2018, the trial court granted respondents’ MSJ, disposing of all of appellants’ causes of actions in the FAC on the grounds that the FAC was based on alleged statements made by respondents to the City of Oxnard that are protected by the legislative privilege and that appellants failed to show any reliance on said statements.

The court then turned to appellants’ motion to file an SAC and ruled that it would allow the amendment, noting no prejudice would result from an amendment to add new legal theories arising out of the same set of facts. After respondents insisted appellants had shifted the narrative and raised concerns that discovery would have to be reopened again, the court commented: “I am troubled by this very late filing of this and the sort of grab aspect of it. It feels like, we didn’t do this. We’re going to do it now.” The trial court informed the parties that it would take the matter under submission and observed that “[m]uch of this can be dealt with on demurrer, but there’s also potential abatement issues and contradictory pleadings and sham. There’s all kinds of stuff that this sort of opens up. Believe me, I’m not excited about this at all, the whole concept of a new amended complaint.”

On November 8, 2018, the trial court issued a minute order, granting appellants’ motion for leave to amend the FAC and ordered the appellants to file the SAC. The court’s reasoning in the minute order was consistent with its tentative ruling delivered at the outset of the November 5 hearing.

G. Demurrer and motion to strike SAC

On December 21, 2018, respondents filed both a demurrer and a motion to strike the SAC. Respondents argued the SAC was sham pleading that was “inconsistent with and contrary to the allegations in [appellants’] [FAC]” and, alternatively, that the facts stated in the SAC were insufficient to constitute a cause of action for negligence or retaliation.

In contending the SAC was a sham, respondents asserted that appellants “did not suddenly discover new facts of which they were previously unaware, and there were no new developments in the case that spurred [appellants] to amend their complaint. [Appellants] instead amended their complaint for the second time solely because they knew [respondents] would prevail on their [MSJ]. . . . This new narrative includes causes of action for negligence and retaliation, which are based on new and different ‘facts’ that are entirely inconsistent with the allegations in the FAC. The sham pleading doctrine was created to address exactly this sort of gamesmanship.”

In opposing respondents’ demurrer and motion to strike, appellants argued respondents’ reliance on the sham doctrine was misplaced because the SAC allegations regarding the scheduling of certification appointments were “completely unrelated to the context in which [respondents’] fraudulent representations were made to the City of Oxnard,” and as such the two pleadings could not be deemed “inconsistent.”

In refuting respondents’ additional contention that the facts alleged in the SAC fail to state any viable claims, appellants stated the following: “[A]ll [appellants] also requested information regarding the certification process in Spanish, which would have included copies of the new lease agreements that they would be required to sign in order to remain at the Property. [Respondents] were required to provide these documents under Civil Code § 1632 in light of [appellants’] English-language abilities.”

H. At February 15, 2019 hearing on demurrer and motion to strike, court issues tentative ruling in favor of appellants

On February 15, 2019, the parties reconvened in court and the court read its tentative rulings to the parties. The court first concluded the SAC was not a sham pleading because the allegations were not “necessarily inconsistent” with those pleaded in the FAC. The court then proceeded to address whether the SAC stated claims for relief. The court concluded appellants had sufficiently alleged a claim for retaliation for exercising their rights under Civil Code section 1632. The court pointed out that under that section any subsequent changes to a document executed in a foreign language must also be provided in that language, and here “[appellants had been] provided their leases in Spanish.” In determining the SAC also sufficiently alleged a claim for negligence, the court referenced, inter alia, the SAC allegation that respondents failed to provide appellants with information regarding the certification process in their native languages.

Respondents pointed out the court appeared to be hinging its ruling largely on the premise that appellants had been provided their original leases in Spanish, but that this was neither alleged in the SAC nor true. The trial court asked appellants’ counsel, “I’m just looking to see where I got this that their leases were in Spanish. Were their leases in Spanish?” While appellants’ counsel had referred to section 1632 in his opposition, he admitted that the original leases were in English. The court noted appellants’ counsel did not speak up when it assumed the tenants’ leases had been executed in Spanish, and then sought to ascertain the basis for his reliance on Civil Code section 1632. The court observed, “You’re not certain, and you don’t know,” and “[t]his is going to be a mess. Think about what it is you are exactly saying to me before you say it.” Respondents’ counsel interjected, pointing out the court had previously granted appellants the opportunity to amend but stated “it would be more appropriate to address these issues on demurrer.” Respondents’ counsel also asserted “the court must recognize this is a change in the narrative.”

The court continued the matter to February 19, 2019, to allow for further consideration.

I. At February 19, 2019 hearing on demurrer, court sustains demurrer and strikes SAC as sham pleading

On February 19, 2019, the parties reconvened for final hearing on respondents’ demurrer and motion to strike. The court stated that after rereading the pleadings it agreed with respondents that appellants changed the narrative in their SAC.

Appellants’ counsel complained that respondents “are really trying to relitigate the motion for leave to amend.” Counsel further asserted: “I think it’s important the court recognize the demurrer standard, and the facts are presumed in the light most favorable to the [appellants] here. I would add we listed all these facts at length in the motion for leave to amend, which the court ultimately granted.”

The court responded: “I gave you an opportunity. That’s correct. I did. I look back on it and ask myself, why did you do that? I think the court was generous. I don’t think that the [SAC]—I just don’t think it gets there. It actually shows me that this should have been done in the underlying case, and it really doesn’t lie here.”

The court subsequently sustained the demurrer to the SAC causes of action without leave to amend, and in the alternative, granted respondents’ motion to strike the SAC—both on sham pleading grounds.

In its final order dismissing the SAC, the trial court reasoned: “[Appellants’] base[d] the SAC on new allegations regarding [respondents’] purported failure to provide information about the income qualification process in Spanish and failure to schedule income certification meetings that did not conflict with [appellants’] work schedules. . . . These allegations contradict the underlying basis of the FAC which was that [respondents] attempted to evict [appellants] without cause after the City of Oxnard approved the issuance of bonds to finance [respondents’] purchase of the subject property.”

The trial court also, however, reasoned that “[appellants’] theories of liability based on negligence and retaliation could and should have been alleged in the FAC. It is alleged that [respondents] breached the standard of care in the income certification process. However, the basis for these allegations existed in November 2016 when the original notices were sent out, before the original complaint was filed on August 4, 2017, and the [FAC] was filed on August 8, 2017. . . . [¶] . . . [Appellants] do not state in the SAC when the allegations regarding [respondents’] attempts to evict [appellants] were discovered.”

The court found that “[appellants] improperly changed their theory of liability in response to the granting of [respondents’] motion for summary judgment as to all causes of action in the FAC.”

The trial court entered its final judgment of dismissal in favor of respondents on April 11, 2019, based on its November 5, 2018 grant of summary judgment on the FAC and its order sustaining respondents’ demurrer to (and motion to strike) the SAC.

On April 24, 2019, appellants filed a timely notice of appeal, limited to the trial court’s “judgment of dismissal after an order sustaining a demurrer and granting a motion to strike.”

DISCUSSION

A. Relevant Legal Principles
B.
1. Standard of Review

When a trial court sustains a demurrer without leave to amend, reviewing courts use a de novo standard of review. (See Amid v. Hawthorne Community Medical Group, Inc. (1988) 212 Cal.App.3d 1383, 1386–1387 (Amid); Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 384–385 (Owens).) In cases where the trial court denies leave to file an amended complaint based on the sham pleading doctrine, the reviewing courts typically employ the abuse of discretion standard applicable to a trial court’s decision whether to permit amendment of a pleading. (See, e.g., Hendy v. Losse (1991) 54 Cal.3d 723, 742 (Hendy); Berman v. Bromberg (1997) 56 Cal.App.4th 936, 951(Berman).)

“On appeal from a judgment of dismissal entered after a demurrer has been sustained without leave to amend, . . . the appellate court must affirm the judgment if it is correct on any theory.” (Hendy, supra, 54 Cal.3d at p. 742; see State of California ex. rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 412 (Metz).) “An appellate court will not interfere with the denial of a motion to amend unless an abuse of discretion is manifest.” (American Advertising & Sales Co. v. Mid-Western Transport (1984) 152 Cal.App.3d 875, 878, 880.)

2. Sham Pleading Doctrine

“It is axiomatic that the function of a demurrer is to test the legal sufficiency of the pleading by raising questions of law. [Citation.] It is also well established that, when reviewing a judgment entered following the sustaining of a demurrer without leave to amend, the appellate court must assume the truth of the factual allegations of the complaint. [Citation.] However, an exception exists where a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings. [Citations.] In these circumstances, the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency. If he fails to do so the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.” (Owens, supra, 198 Cal.App.3d at pp. 383–384.)

“The purpose of the doctrine is to enable the courts to prevent an abuse of process.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751, citing Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408.) As such, “[a] court has inherent power by summary means to prevent an abuse of its process and peremptorily to dispose of sham causes of action.” (Amid, supra, 212 Cal.App.3d at p. 1391.)

3. Unwarranted Delay in Amending Pleadings

Courts generally apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial, when no prejudice is shown to the adverse party. (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.) However, “ ‘ “even if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial.” ’ ” (Huff v. Wilkins (2006) 138 Cal.App.4th 732, 746; Record v. Reason (1999) 73 Cal.App.4th 472, 486 (Record)). “[T]he denial may rest upon the element of lack of diligence in offering the amendment after knowledge of the facts, or the effect of the delay on the adverse party.” (Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 940 (Roemer); see Hulsey v. Koehler (1990) 218 Cal.App.3d 1150, 1159.) An appellant’s delay in bringing new allegations is unreasonable if the appellant fails to provide a valid explanation for why these new allegations were not previously pleaded. (Melican v. Regents of University of California (2007) 151 Cal.App.4th 168, 176 (Melican).)

B. The trial court’s judgment of dismissal can be affirmed on grounds of unreasonable delay

Appellants contend the trial court misapplied the sham pleading doctrine because the SAC allegations do not contradict the facts in the FAC. Respondents counter that the trial court properly dismissed the SAC as a sham pleading because it contradicted the narrative alleged in the FAC and because appellants pleaded the new narrative in an effort to evade the consequences of the prior summary judgment ruling.

Pursuant to Government Code section 68081, we offered the parties the opportunity to submit supplemental briefs on the question of whether the trial court’s judgment should be affirmed on the ground that appellants unreasonably delayed in presenting the new factual allegations pleaded in their SAC.

Both parties have submitted letter briefs on the issue and, after a brief discussion of the sham pleading doctrine, we proceed to the question of unreasonable delay.

1. The sham pleading doctrine does not apply

The new allegations in the SAC—that respondents refused to provide meeting notices in Spanish, knowingly scheduled meetings that conflicted with appellants’ schedules, and sought to force appellants to vacate the property through “verbal threats and harassment” are not necessarily inconsistent with the prior FAC allegations that appellants did not attend their certification meetings because their resident manager, Janet Pintor, did not “materially respond” to their questions as to why they were being asked to certify their income, since they had never had to do so before. Indeed, as the trial court well-explained in its tentative ruling wherein it deemed the sham doctrine inapplicable, it is at least possible that the tenants had multiple reasons for not attending the meetings, and also possible that management committed multiple wrongs toward the tenants. The cases upholding application of the sham doctrine based on contradictory allegations are more tightly drawn than this. (See, e.g., Smyth v. Berman (2019) 31 Cal.App.5th 183, 196 (Smyth) [plaintiff’s allegations in amended complaints—that 2011 lease (and, specifically, its right of first refusal) was still in effect in 2016 by virtue of an oral extension of lease in December 2015—deemed factually inconsistent with plaintiff’s prior allegation that his lease expired in 2015; because plaintiff “alternatively alleged no extension and then an extension,” he contradicted himself]; Womack v. Lovell (2015) 237 Cal.App.4th 772, 787 [denial in answer to cross-complaint that general contractor was licensed ignored as a sham in light of plaintiff’s complaint seeking recovery under general contractor’s license bond]; Amid, supra, 212 Cal.App.3d at p. 1390 [allegation of an oral nondisclosure term in a fifth complaint inconsistent with the allegations in four earlier complaints that there was no express nondisclosure term]); Owens, supra, 198 Cal.App.3d at p. 384 [plaintiff alleged in two successive complaints that he was injured in the street adjacent to the defendant’s supermarket and only alleged that he was injured on the defendant’s premises after it became apparent that the court did not accept plaintiff’s argument that the supermarket’s duty extended to the street].)

Accordingly, we do not affirm the trial court’s ruling on the basis of the sham pleading doctrine.

2. In presenting new allegations without explanation in their SAC, appellants engaged in unwarranted delay

a. The SAC added new foundational facts, not mere legal theories or interpretations

Citing Berman, supra, 56 Cal.App.4th at page 949, and JPMorgan Chase Bank, N.A. v. Ward (2019) 33 Cal.App.5th 678, 690, appellants argue that the amendments to the SAC merely involved changes to their legal “theory of liability.” However, as explained below, appellants’ reliance on these cases is misplaced.

In Berman, supra, 56 Cal.App.4th at page 949, the plaintiff acquired an interest in a limited partnership for $200,000 and later accepted a check for $30,000 that purported to be for the purpose of repurchasing that interest. (Id. at pp. 940–941.) The plaintiff initially alleged that he did not intend to surrender his interest in the partnership despite the $30,000 transaction. (Id. at p. 947.) In a later amended complaint, he alleged he did sell his partnership interest, but the sale violated the securities laws. (Ibid.)

On appeal, the court concluded the plaintiff’s initial allegation that he did not subjectively intend to sell his partnership interest did not contradict the contention that a sale in fact occurred. The court explained that whether a sale of a security had occurred was a conclusion of law and that a plaintiff is not precluded from “chang[ing] his legal theory of recovery and the legal conclusions he seeks to draw from underlying factual events.” (Berman, supra, 56 Cal.App.4th at pp. 948–949, italics added.)

Similarly, in JPMorgan Chase Bank, N.A. v. Ward, supra, 33 Cal.App.5th at page 690, the court concluded it would not violate the sham pleading doctrine to allow the plaintiff to amend its complaint by deleting a prior allegation that a trustee had “mistakenly” executed a trust deed in his individual capacity. (Id. at p. 692.) The court reasoned that “new counsel and further legal research presumably revealed the fallacy of the assumption that [the trustee’s] signature had to specify that he signed as trustee in the name of the Trust” and thus the prior allegation “is best read as a characterization of [the trustee’s] signature on the underlying [deed of trust], not as the assertion of a foundational fact that should bind plaintiff in all subsequent pleadings.” (Ibid., italics added.)

Unlike the plaintiffs in Berman and Chase, appellants here added new foundational facts in support of the legal theories pleaded in their SAC. Moreover, these new factual allegations were material and relevant to their newly stated causes of action. (See part B4, post; cf. Berman, supra, 56 Cal.App.4th at p. 949.)

b. Appellants provided no explanation for why the new factual allegations in their SAC were not previously pleaded

The sole reason cited by appellants in seeking their proposed amendment was that their SAC was prepared out of an “abundance of caution” in the event respondents prevailed on their MSJ—via the extension of the litigation privilege to legislative proceedings. This reason neither explains, let alone justifies, a belated insertion of new material facts. (See Huff v. Wilkins, supra, 138 Cal.App.4th at p. 746 [trial court properly denied plaintiff leave to amend complaint—sought three days before summary judgment—to add allegations of defendants’ recklessness or intentional conduct; though plaintiff explained he sought leave to amend “[i]in an abundance of caution,” he “failed to offer any explanation for his delay in seeking leave to amend”].) It does, however, show that the SAC was borne out of a desire to continue the litigation without running afoul of the litigation privilege. This motivation, in turn, explains the following events:

In the FAC, the sole legal wrong alleged to have been committed by respondents after the purchase of the property—and apart from the promises made to the city—was that respondents sought to evict some of the tenants prior to the expiration of their fixed-term tenancies under existing leases. The FAC, however, pleaded no causes of action arising out of this legal wrong because, as appellants were undoubtedly aware, any cause of action directly arising out of the eviction process—including the serving of termination notices—would be barred by the litigation privilege or subject to dismissal under the anti-SLAPP statute. (See part B4, post.)

Not so coincidentally, the new facts inserted under each new claim in the SAC target conduct that might potentially provide an independent basis for liability. After adding these allegations to the SAC, appellants made the following statement in the P&A in support of granting leave to amend: “Because [appellants] do not allege in the SAC or the FAC that the actual service of the eviction notices or the filing of the eviction action themselves give rise to liability, [respondents] cannot use the anti-SLAPP statute or litigation privilege to defeat [appellants’] claims.” Though the SAC and FAC are combined in this statement, it is only the SAC that alleges purported wrongs that appear outside of the eviction proceedings. (See part B4, post.)

At the final hearing on February 19, 2019, the court, upon having realized that the SAC had indeed changed the narrative, offered appellants a final opportunity to explain the change, pointedly asking, “[S]o then why wasn’t all of this brought up in the [FAC] if it really actually happened?” Appellants’ counsel responded that “[t]he primary purpose of this lawsuit originally was to preserve these tenants’ tenancy, the injunctive relief that we sought and the preliminary injunction that we received. When you look at the [FAC] and the original pleadings in this action, your honor, we were really trying to protect these tenants from the immediately negative consequence that they were suffering because of this company.” However, nowhere in this “response” did counsel acknowledge, let alone identify, any facts not known at the time of the FAC. Nor did counsel provide any justification for why any wrongs known at the time of the FAC were not pleaded in that complaint.

On appeal, appellants continue to assert that the facts pleaded in the SAC are “the same” and “identical” to those pleaded in the FAC. Appellants do at one point retreat from this position to concede that perhaps “a single” allegation was new or that “two new facts” appeared in the SAC, but only to make the point that the sham doctrine does not “prevent [appellants] from including any new facts in an amended pleading.”

This is true, but beside the point. That is, when new material factual allegations are pleaded in an amended complaint—contradictory or not—appellant must provide an explanation for their late appearance. (Cal. Rules of Court, rule 3.1324; Record, supra, 73 Cal.App.4th at pp. 478–479, 486–487.)

In their reply brief, appellants repeat the assertion that the “SAC and FAC were factually identical” but devote a substantial portion of their briefing to arguing respondents were well “aware” of the facts pleaded in the SAC as they emerged in some fashion during the voluminous discovery propounded in relation to the FAC. However, in so arguing, appellants put the proverbial cart before the horse.

If appellants’ counsel became aware of the new facts pleaded in the SAC during the discovery process, then it was his duty to say so. Had he so declared, the trial court could have scrutinized his claim and determined whether he provided good cause for the belated “discovery” of new facts. (See e.g. Record, supra, 73 Cal.App.4th at pp. 478–479, 486–487 [concluding plaintiff failed to show good cause for seeking belated amendment notwithstanding trial counsel’s declaration that new facts came to light during pre-trial discovery; court concluded plaintiff had knowledge of the circumstances on which he based the amendment on the day of injury].)

Instead counsel trumpeted his “factually identical” refrain throughout the SAC process. To allow a plaintiff to amend his complaint without any explanation for the insertion of new material facts, would allow plaintiff to unbind himself from the pleadings and continually move the target in response to unfavorable rulings. (Melican, supra, 151 Cal.App.4th at p. 176.)

Although the trial court cited the sham doctrine in its final ruling on the SAC, the majority of its reasoning centered around appellants’ failure to explain why they did not plead (or could not have pleaded) the facts alleged in the SAC at the time they filed their FAC. As explained below, such conduct is sufficient reason in and of itself to preclude an amendment—or, as the trial court did here, strike the SAC. (American Advertising & Sales Co. v. Mid-Western Transport, supra, 152 Cal.App.3d at p. 878 [noting that while a court may ordinarily be inclined to allow an amendment “to cure a mistaken or inadvertent allegation” it “is not required to accept an amended complaint that is not filed in good faith, is frivolous or sham”].)

c. No further prejudice need be shown

In their letter briefs, respondents reference the doctrine of “laches” and argue that if the SAC claims survive demurrer they will be significantly prejudiced by having to propound new discovery concerning the SAC allegations. Appellants, in their letter briefs, argue the trial court already determined no prejudice would result from the filing of an amendment that merely adds new legal theories, but also, as noted above, suggest no prejudice by arguing in other briefing that respondents were “aware” of the SAC facts through discovery propounded on the FAC.

While the prejudice from a delay in bringing suit—as contemplated by the affirmative defense of laches—involves the difficulty in defending against the merits of the action (such as destruction of evidence or loss of witnesses) (see Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 736), the prejudice caused by the inexplicable addition of new facts in an amended pleading—particularly in anticipation of an unfavorable ruling on the prior complaint—is inherent in the unwarranted delay itself. On this point, the following two cases are instructive.

i. Record, supra, 73 Cal.App.4th 472

In Record, the plaintiff sued defendant for negligence after he was injured falling off an inner tube being towed behind a boat driven by defendant. Almost two years after the complaint was filed, the trial court granted summary judgment, concluding that tubing qualifies as a sport subject to primary assumption of risk doctrine, and there were “ ‘no triable issue of fact as to primary assumption of risk.’ ” (Record, supra, 73 Cal.App.4th at p. 478.) In the plaintiff’s motion for leave to amend his complaint, heard at the same time as the summary judgment motion, counsel stated in his declaration that during pretrial discovery it was discovered that the plaintiff had asked the defendant to drive his boat slowly so he would not be hurt and that the defendant was aware of the plaintiff’s prior medical condition. (Ibid.) Thus, he wanted to add a claim that the defendant acted with intentional, willful, and reckless abandon while maneuvering the boat. (Ibid.). The trial court denied the motion “as being untimely and having no good cause.” (Ibid.)

On appeal, the court affirmed. The court first pointed out that “even if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial.” (Record, supra, 73 Cal.App.4th at p. 486.) The court then reasoned as follows: “[Plaintiff] had knowledge of the circumstances on which he based the amended complaint on the day he was injured, almost three years before he sought leave to amend.” (Id. at p. 486–487.) The court pointed out that this was not a circumstance where new events transpired after the filing of the complaint that gave raise to new causes of action, but that “[plaintiff’s] amendment arises from the same conduct as that in the original complaint.” (Id. at p. 487.)

ii. Melican, supra, 151 Cal.App.4th 168

In Melican, the plaintiffs (the family of the deceased) sued the University of California, Irvine for various claims arising from the alleged mishandling of cremated remains of the deceased’s body donated to the Willed Body Program (WBP) operated by the university. (Melican, supra, 151 Cal.App.4th at pp. 171–172.) At the summary judgment hearing, the plaintiffs dropped their claim that the family had arranged for the university to return the deceased’s remains to the family, and conceded his widow, who made the WBP donation, did not request the university return her husband’s remains. At the hearing, however, the plaintiffs orally moved to amend their complaints to add a new breach of contract claim alleging the university formed a new contract in September 1999 with the deceased’s son to return his father’s remains to the family. (Id. at p. 175.) The trial court denied them leave to amend. (Ibid.)

On appeal, the court upheld the denial of leave to amend, reasoning as follows: “[P]laintiffs were aware of the facts underlying the purported contract between (the deceased’s son) and (the University) from the time the agreement allegedly was formed. Consequently, this claim should have been pleaded when [the son] was added as a party to the action in January 2000. Yet, plaintiffs never sought to add the claim until they made their oral request during the summary judgment hearing over five years later. Plaintiffs proffer no explanation for this clearly unreasonable delay. It would be patently unfair to allow plaintiffs to defeat [the University’s] summary judgment motion by allowing them to present a ‘moving target’ unbounded by the pleadings.” (Melican, supra, 151 Cal.App.4th at p. 176, italics added.)

What Melican and Record illustrate is that the unexplained injection of new allegations made in anticipation of an unfavorable ruling poses similar concerns as the injection of contradictory allegations under such circumstances—that a plaintiff is seeking to plead around incurable defects and/or engaging in untruthful pleading. (Berman, supra, 56 Cal.App.4th at p. 946; Amarel v. Connell (1988) 202 Cal.App.3d 137, 144.) Under neither scenario does a defendant carry the burden of establishing prejudice from having to defend against the merits of the action. Instead, the prejudice is the abuse of process that results from continuing litigation after an unexplained (and unjustified) change in narrative. (See Payton v. CSI Electrical Contractors, Inc. (2018) 27 Cal.App.5th 832, 849 [citing Melican for the proposition that “[p]rejudice can include the time and expense” associated with requiring a defendant to “shoot at a ‘moving target’ ”].)

Under these circumstances, we cannot say that the trial court erred in striking the SAC. (People v. Oken (1958) 159 Cal.App.2d 456, 462 [“ ‘a court is not required to tolerate a purported amended complaint which fails to amend the previous pleading, is not filed in good faith, is filed in disregard of established procedural requirements, or is otherwise violative of orderly judicial administration’ ”].)

3. The trial court’s initial grant of permission to file the SAC does not preclude affirming its judgment on grounds of unwarranted delay

Throughout their briefs, appellants repeatedly point out that the trial court granted them leave to file the SAC, “ordered them to file the [SAC],” and argue that this court cannot affirm the trial court’s judgment on a ground upon which it did not rely. Not so.

First, this court can affirm the trial court’s judgment on any ground supported by the record, and respondents raised the issue of appellants’ unreasonable delay in the trial court. (Smyth, supra, 31 Cal.App.5th at p. 196; Metz, supra, 149 Cal.App.4th at p. 412 [“We may affirm a trial court judgment on any basis presented by the record whether or not relied upon by the trial court,” italics added].) Second, as noted earlier, the majority of the trial court’s reasoning in striking the SAC speaks to appellants’ failure to justify the delayed pleading of new allegations. Third, just as the grant of leave to amend does not include the right to plead inconsistent allegations that render the amendment a “sham,” such a grant also does not include the right to inject new factual allegations without acknowledgement or explanation—or to misrepresent the nature of the allegations proposed in the amendment. (Cf. Smyth, supra, 31 Cal.App.5th at p. 196 [rejecting argument that allegations in third amended complaint cannot fall under the sham doctrine because the trial court granted leave to amend].) In seeking leave to amend, appellants’ counsel repeatedly—both orally and in written declaration—represented to the court that the facts pleaded in the SAC were “identical” to the FAC. Once the court realized the deception, it expressed regret at having granted appellants permission to file the SAC. (Cf. Hulsey v. Koehler, supra, 218 Cal.App.3d at p.1159 [noting that in denying motion to amend answer as untimely, the trial court “impliedly found an unreasonable lack of diligence in the belated assertion of this defense” where “counsel’s excuse for this delay was simply that he discovered . . . a potential defense only two days before trial while reading the transcript of [plaintiff’s] deposition”].) In any event, we may affirm the trial court on any basis, and we do so here on the grounds of unwarranted delay. (Metz, supra, 149 Cal.App.4th at p. 412.)

4. No further opportunity to amend is warranted in this case

“[I]t is not an abuse of discretion to deny leave to amend where the plaintiff alleged facts in the original complaint that cannot, as a matter of law, give rise to a cause of action.” (Owens, supra, 198 Cal.App.3d at p. 384, fn. 3.) Nor is it an abuse of discretion to deny leave to amend where a plaintiff is aware of the circumstances supporting the amendment when he filed his original complaint. (Record, supra, 73 Cal.App.4th at pp. 486–487.) The burden is on the appellant “to demonstrate the manner in which the complaint might be amended.” (Hendy, supra, 54 Cal.3d at p. 742; see Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)

In light of the procedural posture of this case—and appellants’ contention (both here and below) that the SAC solely adds two new legal theories—we will assess whether the SAC, once stripped of any new allegations, sufficiently states causes of action for negligence and retaliation. Our resolution of this query will necessarily resolve the question of whether appellants should be granted any further opportunities to amend.

a. Litigation privilege and anti-SLAPP statute

Both the service of a notice terminating a tenancy and the prosecution of an unlawful detainer action, including any statements “clearly connected to and made in anticipation of the eviction action,” are protected actions by the litigation privilege and the anti-SLAPP statute. (See Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, 1489 (Feldman) [“Whether done maliciously or without reasonable grounds to believe that the [subtenants] were unlawful occupants of the premises, the statements were privileged”]; Action Apartment Assn. Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1243–1244.) As such, an appellant seeking to plead an action for retaliatory eviction under Civil Code section 1942.5 must identify “any action” or “any statements” that are “independent of the eviction litigation and the assertion of the right to occupy the apartment.” (Morrison v. Vineyard Creek L.P. (2011) 193 Cal.App.4th 1254, 1270 (Morrison).)

b. Statutory retaliation under Civil Code section 1942.5

In support of their statutory retaliation claim under Civil Code section 1942.5, the SAC alleges that respondents retaliated against appellants for exercising their legal rights. The SAC identifies the legal rights exercised by appellants as (1) “ask[ing] for information regarding the income qualification process to be provided them in Spanish”; (2) “ask[ing] for appointments to income certify that did not conflict with their work schedules”; and (3) “refus[ing] to vacate the Property and inform[ing] [respondents] that they had a legal right to stay.”

Allegations (1) and (2) are disregarded as not previously pleaded in the FAC, while allegation (3)—i.e., respondents sought to evict appellants because they refused to be evicted—does not identify a right independent of “the assertion of the right to occupy the apartment.” (See Morrison, supra, 193 Cal.App.4th at p. 1270.) Indeed to allow a retaliatory eviction claim based on this conduct would “render every unlawful detainer action subject to a cause for retaliatory eviction based solely on the tenant’s assertion, whenever made, that he or she had a right to remain in the premises.” (Feldman, supra, 160 Cal.App.4th at p. 1493.)

c. Negligence

The SAC alleged respondents breached their duty to appellants by: (1) “failing to conduct a review of existing tenants’ financial information prior to June 2016”; (2) “failing to consider [appellants’] applications for affordable housing, including by failing to provide [appellants] with information regarding the certification process in their native language”; (3) “knowingly scheduling certification appointments with [appellants] that [appellants] could not attend”; and (4) “pressuring [appellants] to accept ‘cash for keys’ agreements rather than honoring [appellants’] existing fixed-term tenancies.”

Allegations (2) and (3) are disregarded as not previously pleaded in the FAC, while allegation (1) cannot provide a basis for any relief because respondents purchased the property on October 14, 2016, and thus owed no duty to appellants at that time. The final allegation—that respondents offered tenants ‘cash for keys’—was only alleged to have occurred with one appellant in the FAC (see fn. 11, ante), and, in any event, appellants provide no authority that a landlord has a duty to refrain from such an offer.

d. Conclusion

We conclude that appellants, aware of the litigation and legislative privilege bars pending against their FAC, sought to plead new facts targeted at conduct “independent” of the eviction proceedings. Appellants then added facts from the FAC to give the appearance that their new legal theories were pleaded out of existing FAC facts.

In any event, given that the SAC, based on the facts pleaded in the FAC, cannot state viable claims for negligence and retaliation, no further amendments are warranted. (Owens, supra, 198 Cal.App.3d at p. 384; Record, supra, 73 Cal.App.4th at pp. 486–487.) The trial court properly exercised its discretion to deny appellants the opportunity to amend their complaint and continue their pleading abuses we have discussed above. (Roemer, supra, 44 Cal.App.3d at p. 940 [stating that “the objectionable subject matter of the amendment, the conduct of the moving party, or the belated presentation of the amendment” are appropriate considerations in determining whether proposed amendment should be permitted].)

DISPOSITION

The judgment is affirmed. Respondents are entitled to their costs on appeal.

NOT TO BE PUBLISHED.

LUI, P. J.

We concur:

ASHMANN-GERST, J.

HOFFSTADT, J.