Case Name:   First Korean Christian Church v. Korean Evangelical Church of America, et al.

 

Case No.:       1-13-CV-256556

 

Motion by Plaintiff First Korean Christian Church of San Jose for Leave to File First Amended Complaint

Demurrer to Complaint by Defendant Korean Evangelical Church of America

Motion to Strike Complaint by Defendant Korean Evangelical Church of America

 

Plaintiff First Korean Christian Church of San Jose (“FKCC”) alleges that in 1991 it purchased commercial real property located at 1145 East Arques Avenue in the city of Sunnyvale (“Property”) to operate its church.  (Complaint, ¶1.)  In June 2008, FKCC agreed to become a member church of defendant Korean Evangelical Church of America (“KECA”). (Complaint, ¶14.)  As a condition to membership, KECA required FKCC to add KECA on title to the Property.  (Id.)  On August 15, 2008, FKCC added KECA as a tenant in common by executing a quitclaim deed.  (Id.)  KECA agreed to remove itself from title to the Property upon demand by FKCC. (Complaint, ¶15.)

 

In June 2008, prior to adding KECA to title, FKCC began the process of refinancing the Property.  (Complaint, ¶17.)  The refinance loan closed on October 30, 2008, with FKCC and KECA entering into a loan agreement.  (Complaint, ¶18.)  The loan terms included a five-year fixed rate of 6.5%, subject to an increase in October 2013.  (Complaint, ¶¶18 – 19.)  FKCC paid all the loan/property tax payments and ownership/maintenance expenses relating to the Property. (Complaint, ¶¶25 – 27.)  KECA did not contribute anything.  (Complaint, ¶28.)

 

The loan matured on October 31, 2013, and as part of the maturity, a balloon payment of $700,151.86 became due.  (Complaint, p. 2, lines 16 – 17.)  Since April 2013, FKCC attempted to refinance the loan, but KECA refused to execute documents necessary to refinance. (Complaint, p. 2, lines 19 – 21.)  Despite demands by FKCC, KECA refused to remove itself from title to the Property as previously agreed. (Complaint, ¶29.)

 

On November 21, 2013, plaintiff FKCC filed a complaint against defendant KECA, asserting 15 causes of action.  On January 24, 2014, defendant KECA filed a motion to disqualify plaintiff FKCC’s counsel.  On January 27, 2014, defendant KECA filed a demurrer and motion to strike plaintiff FKCC’s complaint with a hearing date set for March 6, 2014.

 

On February 25, 2014, the court granted defendant KECA’s motion to disqualify.  To allow plaintiff FKCC time to secure a new attorney, the court continued the hearing on defendant KECA’s demurrer and motion to strike to March 25, 2014.  On March 25, 2014, the court continued the hearing on defendant KECA’s demurrer and motion to strike to April 29, 2014.

 

On April 28, 2014, plaintiff obtained new counsel and filed a substitution of attorney. On April 29, 2014, the court continued the hearing on defendant KECA’s demurrer and motion to strike to June 5, 2014.  On June 5, 2014, the court again continued the hearing on defendant KECA’s demurrer and motion to strike to July 10, 2014.  On June 11, 2014, the court granted plaintiff FKCC’s ex-parte application for an order shortening time to hear a motion for leave to file first amended complaint, setting the hearing for July 10, 2014. Plaintiff filed its motion for leave to file a first amended complaint on June 11, 2014.

 

Motion for Leave to File First Amended Complaint

 

“Code of Civil Procedure section 472 grants a plaintiff the right to file an amended complaint in response to a demurrer at any time before the hearing on the demurrer.  ‘[T]he purpose of the statute permitting amendments as of right before an answer is filed or a demurrer is ruled upon is to promote judicial efficiency and reduce the costs of litigation.’ [Citation.]” (People ex rel. Strathmann v. Acacia Research Corp. (2012) 210 Cal.App.4th 487, 505 – 506.) Plaintiff FKCC did not employ this rule, instead opting to file the present motion for leave.

 

In any case, “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.” (Code Civ. Proc., §473, subd. (a)(1).)  “[T]he court’s discretion will usually be exercised liberally to permit amendment of the pleadings. [Citations.]  The policy favoring amendment is so strong that it is a rare case in which denial of leave to amend can be justified. [Citation]  ‘Leave to amend should be denied only where the facts are not in dispute, and the nature of the plaintiff’s claim is clear, but under substantive law, no liability exists and no amendment would change the result.’ [Citation.]” (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.)

 

In opposition, defendant KECA contends the court should exercise its discretion by denying plaintiff FKCC leave to amend.  Defendant KECA contends the claims in the FAC are barred by the statute of frauds and/or contains sham pleading.  “Ordinarily, the judge will not consider the validity of the proposed amended pleading in deciding whether to grant leave to amend.  Grounds for demurrer or motion to strike are premature.  After leave to amend is granted, the opposing party will have the opportunity to attack the validity of the amended pleading.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2014) ¶6:644, p. 6-165 citing Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048.) “The judge undoubtedly has discretion to deny leave to amend where a proposed amendment fails to state a valid cause of action or defense.” (Id. at ¶6:645, pp. 6-165 to 6-166.)  “Such denial is ‘most appropriate’ where the pleading is deficient as a matter of law and the defect could not be cured by further appropriate amendment.”  (Id. at ¶6:646, p. 6-166.)  “The judge also has discretion to deny leave where the proposed amendment omits or contradicts harmful facts pleaded in the original pleading … unless a showing is made of mistake or other sufficient excuse for changing the facts. Absent such a showing, the amended pleading may be treated as sham.” (Id. at ¶6:648, p. 6-166 citing Vallejo Develop. Co. v. Beck Develop. Co. (1994) 24 Cal.App.4th 929, 946.)

 

Here, it does not appear that the alleged agreement is governed by the statute of frauds. Specifically, Defendant relies upon Civil Code section 1624, subdivision (a)(3) which renders the following agreements subject to the statute of frauds: “An agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein; such an agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent is in writing, subscribed by the party sought to be charged.”  The alleged agreement here does not involve the leasing or sale of real property or an interest therein.

 

Furthermore, Defendant contends the FAC contains sham allegations.  “Under the sham pleading doctrine, allegations in an original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.)   Here, however, Defendant KECA uses the term, “sham,” loosely to refer to factual allegations that KECA does not believe to be true or finds lacking in specificity.  The proper procedure to assert these arguments is in a subsequent denial or motion for summary judgment/ adjudication.  The court does not deem the allegations in the FAC to be “sham.” Accordingly, plaintiff FKCC’s motion for leave to file [a] first amended complaint is GRANTED.

 

Demurrer/ Motion to Strike

 

Consequently, Defendant KECA’s demurrer to the complaint and motion to strike portions of the complaint are rendered MOOT. (See Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1054—“The filing of the first amended complaint rendered the defendant’s demurrer moot since an amendatory pleading supersedes the original one, which ceases to perform any function as a pleading.” (Citations and punctuation omitted.))