Filed 11/22/19 Callahan v. Rockzilla, LLC CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION ONE

C. RANDALL CALLAHAN et al.,

Cross-complainants and Appellants,

v.

ROCKZILLA, LLC,

Cross-defendant and Respondent.

A155553

(Napa County

Super. Ct. No. 26-66082)

The underlying action arises from allegations of misconduct and malfeasance between various entities related to the operation of a wine business and management of a commercial property. As relevant to this appeal, C. Randall Callahan and a company owned by him, Raja Development, Inc. (Raja Development) (jointly cross-complainants), filed a cross-complaint against Sarah and Ronald Ruggiero and their property management company (jointly the Ruggieros) alleging various acts of mismanagement while operating another company owned by Callahan, Jackson Street Wine Warehouse, LLC (Wine Warehouse). Approximately a year later, cross-complainants filed a first amended cross-complaint (FACC), which added new allegations regarding an allegedly fraudulent lease entered into between the Ruggieros and Rockzilla, LLC (Rockzilla) and sought to add Rockzilla as a Doe defendant.

Rockzilla filed a demurrer and motion to strike the FACC, which was granted by the trial court. Cross-complainants subsequently filed two motions for leave to amend, both of which were denied by the court. The trial court then dismissed the FACC as to Rockzilla.

On appeal, cross-complainants contend the claims against Rockzilla were filed within the applicable statutes of limitation, and the trial court abused its discretion in denying their motions for leave to amend and dismissing Rockzilla from the action. We disagree and affirm the trial court’s orders.

I. BACKGROUND

Callahan is the sole shareholder of Raja Development, which owns a multi-unit commercial property in Napa County (Property). Another of Callahan’s businesses, Wine Warehouse, is a tenant at the Property. Cross-complainants retained the Ruggieros to manage the Property on their behalf. Callahan later retained the Ruggieros to manage Wine Warehouse.

In 2006, the Ruggieros executed a 10-year lease with Rockzilla, which leased to Rockzilla a commercial unit at the Property (2006 lease). Two years later, in 2008, the Ruggieros and Rockzilla replaced the 2006 lease with a 25-year lease for the same commercial unit (2008 lease).

In 2015, Wine Warehouse filed a lawsuit against the Ruggieros. The complaint alleged the Ruggieros engaged in mismanagement and theft while operating Wine Warehouse, and asserted causes of action for actual fraud, conversion, breach of fiduciary duty, constructive fraud, and negligence. The Ruggieros denied the allegations in the complaint and filed a cross-complaint against Wine Warehouse and Callahan. The Ruggieros’ cross-complaint alleged Wine Warehouse was inadequately capitalized, and Callahan improperly comingled assets and used Wine Warehouse assets for other purposes. It asserted cross-claims for fraud, constructive fraud, negligent misrepresentation, slander, and nonpayment of wages.

In October 2016, Callahan and Raja Development filed a verified cross-complaint against the Ruggieros pursuant to a stipulation between the parties. The cross-complaint alleged the Ruggieros engaged in misconduct while both managing Wine Warehouse and serving as agents for Raja Development, including entering into a fraudulent lease with Wine Warehouse, secretly arranging for Wine Warehouse to pay Sarah Ruggiero a salary, failing to maintain necessary insurance for Wine Warehouse, and deleting financial data from Wine Warehouse’s servers. Based on these allegations, the cross-complaint asserted causes of action for breach of fiduciary duty, negligence, constructive fraud, and financial elder abuse.

In August 2017, cross-complainants filed the FACC, which added Rockzilla as a new cross-defendant. The FACC alleged in part that both the 2006 lease and the 2008 lease were executed without Raja Development’s authority. It further alleged the Ruggieros and Rockzilla conspired to harm cross-complainants when they executed the 2008 lease because it provided a “new rental rate [for Rockzilla] [that] was at least 50% below market.” Based on these new allegations, the FACC asserted claims for breach of fiduciary duty, conversion, financial elder abuse, and rescission/restitution against Rockzilla.

In March 2018, Rockzilla filed a demurrer and motion to strike the FACC. As relevant to this appeal, Rockzilla argued it was improperly added as a Doe defendant because cross-complainants were aware Rockzilla was a commercial tenant at the Property and the claims against it do not relate back to the original cross-complaint.

Cross-complainants opposed the demurrer and motion to strike. Cross-complainants argued they were only aware of the 2006 lease and not the “unauthorized” 2008 lease and the alleged conspiracy, and the FACC contained sufficient facts to support the claims against Rockzilla. Cross-complainants also claimed Rockzilla’s relation-back argument was improper because the facts upon which a statute of limitations defense would rest have not been, and need not be, pled.

The trial court granted Rockzilla’s motion to strike the FACC. The trial court focused on whether the claims against Rockzilla related back to the original cross-complaint. Inherent in this analysis, although not directly addressed, is the assumption the statute of limitations had run on these claims. The court held the original cross-complaint did not encompass the claims alleged against Rockzilla, explaining: “The FACC focuses entirely on the Ruggieros and Crown Realty as property managers and real estate agents for Mr. Callahan and Raja [Development] and their alleged breach of their duties in that capacity and associated fraudulent conduct. The claims asserted against Rockzilla, LLC in the FACC seek to hold Rockzilla, LLC accountable for conspiring with . . . the Ruggieros when they purportedly entered into a below-market, 25-year lease in 2008.” The court thus concluded the relation-back doctrine did not apply and it would be inappropriate to substitute Rockzilla as a Doe defendant. The court did, however, grant cross-complainants “the opportunity to file a Motion for Leave to Amend Cross-Complaint to substitute Rockzilla as a Doe defendant.”

Cross-complainants subsequently filed two motions: a motion for leave to file a second amended cross-complaint, and a motion for leave to amend the cross-complaint to substitute Rockzilla as a Doe defendant. The moving papers for these motions included a proposed second amended cross-complaint (proposed SACC). The motions argued the claims were timely, cross-complainants did not improperly delay filing the motions, Rockzilla would not be prejudiced by the filing, and denial of the motions would require cross-complainants to file a separate, duplicative lawsuit against Rockzilla. Cross-complainants also asserted “No statute of limitation has run on [Raja Development’s] and Callahan’s claims against Rockzilla.”

Rockzilla opposed both motions. Rockzilla argued the motions must fail for the same reason the court struck the FACC—namely, that the proposed SACC is not based on the “same general set of facts” as the original cross-complaint and the claims in the original cross-complaint do not encompass the allegations against Rockzilla. Rockzilla further argued in part (1) cross-complainants were aware of the 2008 lease because they used it in 2013 to secure a line of credit; (2) claims related to the 2008 lease were barred by the statute of limitations; and (3) Rockzilla would be prejudiced because relevant parties and documents were no longer available. Rockzilla also asserted cross-complainants failed to identify and explain the proposed amendments as required by California Rules of Court, rule 3.1324(b).

The trial court denied both motions for leave to amend. The court first noted cross-complainants failed to comply with California Rules of Court, rule 3.1324 because they failed to provide the necessary supporting declaration regarding when the allegations were first discovered. Next, the court found the proposed Doe amendment “suffers from the same problem as the previously stricken [FACC]: the allegations do not arise from the same set of facts that were in the original Cross-Complaint.” The court also explained Rockzilla did not hide the lease because cross-complainants relied on the lease in 2013 to obtain a line of credit. In light of these new facts and because Callahan was not ignorant of the facts establishing the alleged claims against Rockzilla, the court concluded the relation-back doctrine did not apply, Rockzilla would be prejudiced if the claim proceeded because a key witness had died, and any attempt to amend would be futile.

Rockzilla subsequently sought an order dismissing the FACC with prejudice as to Rockzilla, which the court granted. Cross-complainants timely appealed.

II. DISCUSSION

On appeal, cross-complainants do not challenge the trial court’s rulings that Rockzilla does not qualify as a Doe defendant and their claims against Rockzilla do not relate back to the original cross-complaint. Rather, cross-complainants contend (1) the FACC did not need to relate back to the original cross-complaint to overcome the statute of limitations defense, and (2) denial of leave to amend constituted an abuse of discretion. We disagree.

A. Standard of Review

“A motion to strike, like a demurrer, challenges the legal sufficiency of the complaint’s allegations, which are assumed to be true.” (Blakemore v. Superior Court (2005) 129 Cal.App.4th 36, 53.) “We review an order granting a motion to strike for abuse of discretion.” (Ruiz v. Musclewood Investment Properties, LLC (2018) 28 Cal.App.5th 15, 24.) If the order is within the bounds of reason it must be upheld. (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 957.)

When contesting the legal sufficiency of a complaint’s allegations, a defendant may assert a statute of limitations defense “ ‘if the complaint shows on its face that the statute bars the action.’ ” (Cf. E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315 (E-Fab) [demurrer].) “The application of a statute of limitations based on facts alleged in the complaint is a legal question subject to de novo review.” (Gilkyson v. Disney Enterprises, Inc. (2016) 244 Cal.App.4th 1336, 1340.) However, “[t]he fact that we examine the complaint de novo does not mean that plaintiffs need only tender the complaint and hope we can discern a cause of action. It is plaintiffs’ burden to show either that the demurrer was sustained erroneously or that the trial court’s denial of leave to amend was an abuse of discretion.” (Keyes v. Bowen (2010) 189 Cal.App.4th 647, 655.)

B. Waiver of Issues on Appeal

As an initial matter, Rockzilla contends cross-complainants’ arguments that the claims against Rockzilla were filed within the applicable statutes of limitation were not presented to the trial court. Rockzilla thus claims cross-complainants waived their arguments.

“An appellate court ordinarily will not consider arguments made for the first time on appeal” unless “the new argument raises a pure issue of law on undisputed facts.” (C9 Ventures v. SVC-West, L.P. (2012) 202 Cal.App.4th 1483, 1491–1492.) Here, however, the arguments were presented to the trial court and are properly considered on appeal.

The statute of limitations argument was raised before the trial court, both in connection with Rockzilla’s motion to strike the FACC and cross-complainants’ motions for leave to amend. Rockzilla’s demurrer to the FACC discusses both the applicable statutes of limitations and the delayed discovery rule. In opposition, cross-complainants argued the FACC was not required to allege facts regarding the timeliness of its claims because the running of the statute of limitations did not “appear ‘clearly and affirmatively’ from the face of the complaint.” Rockzilla’s reply again discussed these issues in a section entitled, “The VFACC [(Verified FACC)]Was Filed Past the Statute of Limitations as to Rockzilla, and There is No Commonality.”

Likewise, cross-complainants’ motions for leave to amend asserted the proposed amendment was “timely brought” and “[n]o statute of limitations has run on [cross-complainants’] claims against Rockzilla.” In opposition, the Ruggieros and Rockzilla argued the new claims in the proposed SACC are “barred by the applicable statutes of limitation.” Rockzilla further emphasized in its opposition that cross-complainants “have repeatedly chosen to NOT plead their claims according to requirements of law, including the specific pleading requirements for delayed discovery . . . .” While the trial court did not directly address these arguments in its orders, the issue was sufficiently raised to preserve it for appeal.

C. Order Granting Rockzilla’s Motion to Strike the FACC

Cross-complainants argue the trial court erred in striking the FACC because it stated valid claims for relief that were not time barred. In response, Rockzilla contends damages accrued when the 2008 lease was executed, Callahan ratified the 2008 lease when he pledged it as collateral for a new loan, it would be prejudiced by Callahan’s “tardy” motion for leave to amend, and the FACC fails to state a claim against Rockzilla.

1. Accrual of Claims Against Rockzilla

As relevant to this appeal, the FACC asserts two causes of action against Rockzilla: (1) breach of fiduciary duty, and (2) rescission/restitution. Cross-complainants assert the cause of action for breach of fiduciary duty did not accrue until 2016, when the original lease term should have expired, and the cause of action for rescission did not accrue until cross-complainants discovered the existence of the 2008 lease.

a. Breach of fiduciary duty

The parties both acknowledge “[w]hen damages are an element of a cause of action, the cause of action does not accrue until the damages have been sustained.” (See City of Vista v. Robert Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 886.) Here, the FACC asserted a claim for breach of fiduciary duty, which requires a showing of damage. (Tribeca Companies, LLC v. First American Title Ins. Co. (2015) 239 Cal.App.4th 1088, 1114 [“ ‘ “The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.” ’ ”].) Cross-complainants argue they could not have incurred damages prior to 2016 because Rockzilla was paying the same rent they otherwise would have paid under the prior 2006 lease. Cross-complainants contend they only began incurring harm in 2016 when the lease should have expired and, presumably, they were entitled to collect a higher rent. We disagree.

As an initial matter, we note the FACC does not contain any facts evidencing the rent under the 2006 lease was the same as that paid under the 2008 lease. To the contrary, the FACC refers to the 2008 lease’s rental rate as “the new rental rate” and alleges it “was at least 50% below market, for the next 25 years . . . .” The FACC also states Rockzilla and the Ruggieros “conspired . . . to convert from [Raja Development] a fair market rent for the premises Rockzilla leased” and “depriv[ed] [Raja Development] of the reasonable rental value of the premises leased by Rockzilla.” Read together, these allegations imply the 2008 lease imposed a new rental rate that was lower than that under the 2006 lease, and the FACC sought damages for the entire 25-year period of the 2008 lease.

Moreover, even if the 2006 and 2008 leases imposed the same rental rate, cross-complainants conveniently ignore the additional 15 years of exclusive possession granted to Rockzilla under the 2008 lease. “A leasehold estate gives the lessee the exclusive possession of the premises against all the world, including the owner, for the term of the lease.” (Avalon Pacific—Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC (2011) 192 Cal.App.4th 1183, 1190.) And our California Supreme Court has long held wrongful deprivation of possession constitutes damages. (See, e.g., Warburton v. Doble (1869) 38 Cal. 619, 621.) While execution of the 2008 lease may not have altered immediate possession of the unit, it did deprive cross-complainants of possession for an additional 15 years. Accordingly, cross-complainants would have incurred damages in 2008 when the lease was executed pursuant to the allegations in the FACC.

b. Rescission/restitution

The parties argue extensively about when cross-complainants discovered the 2008 lease. However, this disagreement is irrelevant. On review of a motion to strike, the complaint’s allegations are “assumed to be true.” (Blakemore v. Superior Court, supra, 129 Cal.App.4th at p. 53.) The FACC asserts cross-complainants were unaware of the 2008 lease and only discovered it “within the three years prior to filing this [FACC]”—i.e., sometime after August 2014. We must assume that allegation to be true for purposes of our analysis.

Neither party specifies whether this claim is subject to the three-year statute of limitations for “An action for relief on the ground of fraud or mistake” (Code of Civ. Proc., §338, subd. (d)), or the four-year statute of limitations for “An action upon any contract” (§ 337, subd. (a)). However, both statutes state the limitations period does not run “until the discovery by the aggrieved party of the facts constituting the fraud or mistake.” (§§ 337, subd. (c), 338, subd. (d).)

“[U]nder the delayed discovery rule, a cause of action accrues and the statute of limitations begins to run when the plaintiff has reason to suspect an injury and some wrongful cause, unless the plaintiff pleads and proves that a reasonable investigation at that time would not have revealed a factual basis for that particular cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 803 (Fox).) “[P]laintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.” (Id. at p. 808.) “Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, . . . it is clear that the plaintiff must go find the facts; she [or he] cannot wait for the facts to find her [or him].” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1111.) “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his [or her] claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’ ” (Fox, at p. 808.) In assessing the sufficiency of the allegations of delayed discovery, the burden is on the plaintiff to “ ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’ ” (Ibid.)

On its face, the FACC demonstrates its claims against Rockzilla would be barred without delayed accrual of the statute of limitations. Cross-complainants filed the FACC in 2017, approximately nine years after Rockzilla entered into the 2008 lease and well after any statute of limitations would have run. In order to avoid the statute of limitations, cross-complainants must justify application of the delayed discovery rule. However, the FACC fails to specifically plead facts in support of the delayed discovery rule.

While the FACC states cross-complainants discovered the 2008 lease “only within the three years prior to filing this [FACC],” it does not set forth the manner of discovery. Nor does the FACC state why cross-complainants were unable to have discovered the 2008 lease earlier. Likewise, the declaration supporting cross-complainants’ motion for leave to amend was required to specify “When the facts giving rise to the amended allegations were discovered; and [¶] . . . The reasons why the request for amendment was not made earlier.” (Cal. Rules of Court, rule 3.1324(b)(3), (4).) However, the declarations submitted by cross-complainants did not contain this information.

The FACC does, however, state the Ruggieros entered into the prior 2006 lease with Rockzilla “without [Raja Development’s] authority to do so.” The FACC thus indicates cross-complainants were aware the Ruggieros were entering into leases with tenants, allegedly without cross-complainants’ authorization. The FACC is silent as to what steps cross-complainants took to investigate or address this conduct, and why such an investigation would not have ultimately revealed the 2008 lease. Accordingly, the FACC did not allege sufficient facts to support the delayed discovery rule.

2. Doe Amendment

When the statute of limitations has not expired, a Doe amendment should be treated as an amendment naming the Doe defendant as a regular defendant. To do otherwise “would elevate form over substance and ignore common sense.” (Davis v. Marin (2000) 80 Cal.App.4th 380, 387 [because the applicable statute of limitations had not yet expired when the plaintiff filed the amendment, “[t]he question of whether or not the amendment ‘related back’ to the date the complaint was filed was irrelevant”].) Here, however, the allegations in the FACC indicate the statute of limitations expired. The Ruggieros and Rockzilla executed the lease at issue in 2008. The claims against Rockzilla in the FACC are subject to either three- or four-year statutes of limitation. (See § 338, subd. (d) [three-year statute of limitations for “An action for relief on the ground of fraud or mistake”]; § 337, subd. (a) [four-year statute of limitations for “[a]n action upon any contract”]; American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1479 [“The statute of limitations for breach of fiduciary duty is three years or four years, depending on whether the breach is fraudulent or nonfraudulent.”].) Accordingly, the claims against Rockzilla would have run in 2011 or 2012. The FACC was not filed until 2017, well after the time the statutes of limitation would have run. Because the FACC did not adequately allege delayed discovery and the statute of limitations thus expired, cross-complainants were required to follow the procedures for properly adding Rockzilla as a Doe defendant.

As an initial matter, we note cross-complainants do not contest the trial court’s holding that Rockzilla was not a proper Doe defendant. They concede the court’s holding “was a discretionary ruling supported by substantial evidence [and] it cannot be overturned on appeal.”

Nor have cross-complainants explained why Rockzilla was a proper Doe defendant. A defendant may be sued by fictitious name “[w]hen the plaintiff is ignorant of the name of a defendant.” (§ 474.) “ ‘[T]he relevant inquiry when the plaintiff seeks to substitute a real defendant for one sued fictitiously is what facts the plaintiff actually knew at the time the original complaint was filed.’ ” (Fuller v. Tucker (2000) 84 Cal.App.4th 1163, 1170.) The parties disagree as to when cross-complainants discovered the 2008 lease. Rockzilla contends cross-complainants were aware of the lease in 2013 because it was used as collateral for a loan. Cross-complainants assert they only discovered the 2008 lease in 2015, when a copy was provided to them by Rockzilla during an unrelated dispute. Regardless, either date advanced by the parties—2013 or 2015—was prior to the filing date of the original cross-complaint in 2016. Accordingly, cross-complainants were aware of the allegedly unauthorized 2008 lease and Rockzilla’s tenancy prior to filing the original cross-complaint. Rockzilla thus was not a proper Doe defendant because it, and the 2008 lease, were known to cross-complainants at the time they filed the original cross-complaint.

D. Motion for Leave to File Proposed SACC

A trial court’s decision to deny a motion for leave to amend is typically reviewed for abuse of discretion. (Levy v. Skywalker Sound (2003) 108 Cal.App.4th 753, 770.) However, the legal sufficiency of a proposed amended complaint is a question of law reviewed de novo. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) “ ‘[G]reat liberality should be exercised in permitting a plaintiff to amend . . . .’ [Citations.] ‘If there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.’ ” (Sanai v. Saltz (2009) 170 Cal.App.4th 746, 768; see Fox, supra, 35 Cal.4th at p. 810.) Still, it is the cross-complainants’ burden to show a reasonable possibility of successful amendment. (Hendy v. Losse (1991) 54 Cal.3d 723, 742.) “ ‘If the plaintiff does not proffer a proposed amendment, and does not advance on appeal any proposed allegations that will cure the defect or otherwise state a claim, the burden of proof has not been satisfied.’ ” (Placer Foreclosure, Inc. v. Aflalo (2018) 23 Cal.App.5th 1109, 1117.) In this instance, cross-complainants have not carried that burden.

While cross-complainants submitted a proposed SACC as part of their motions for leave to amend, that proposed pleading was insufficient to allege valid causes of action against Rockzilla. While the proposed SACC provides slightly more detail regarding the delayed discovery of the 2008 lease than what is contained in the FACC, it again falls short. The proposed SACC asserts the Ruggieros “hid” the 2008 lease, and cross-complainants only discovered the 2008 lease around October 2015 when a copy was provided to them by Rockzilla during a dispute over utility payments. The proposed SACC, however, fails to allege specific facts evidencing cross-complainants’ inability to discover the 2008 lease earlier despite reasonable diligence. Instead, the proposed SACC, like the FACC, alleges the Ruggieros entered into Rockzilla’s prior 2006 lease “without . . . authority to do so,” and cross-complainants discovered the 2006 lease in late 2007 or early 2008. The SACC also alleges cross-complainants terminated the Ruggieros’ involvement in Wine Warehouse and management of the Property around August to October 2013 due to the mismanagement concerns outlined in the proposed SACC. Cross-complainants do not identify when they first discovered the Ruggieros’ alleged mismanagement of the Property. Nor do they explain what reasonable investigation they undertook upon discovering the initial unauthorized 2006 lease or the alleged mismanagement, and why such investigations would not have uncovered the 2008 lease. In fact, cross-complainants acknowledge they requested, and the Ruggieros provided them with, a copy of the 2008 lease at some point prior to October 11, 2013. Accordingly, the trial court did not err in denying cross-complainants’ motion for leave to amend because the proposed SACC failed to allege the required facts to employ the delayed discovery rule.

E. Order Dismissing the FACC as to Rockzilla

Having concluded the trial court did not abuse its discretion in denying cross-complainants’ motion for leave to amend, the trial court also did not err in dismissing Rockzilla from the action.

Pursuant to section 581, subdivision (f)(3) the court “may dismiss the complaint” when “a motion to strike the whole of a complaint is granted without leave to amend and either party moves for dismissal.” We review a trial court’s dismissal of an action under section 581 for abuse of discretion. (Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 612 (Leader).) “[T]he reviewing court will disturb the ruling only upon a showing of a ‘ “ ‘clear case of abuse’ ” ’ and a ‘ “ ‘miscarriage of justice.’ ” ’ [Citations.] Discretion is abused only when, in its exercise, the trial court ‘ “exceed[ed] the bounds of reason, all of the circumstances before it being considered.” ’ ” (Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1282.)

Undoubtedly, cross-complainants may have been able to amend their pleading to adequately assert facts supporting application of the delayed discovery rule. However, “ ‘[a] litigant does not have a positive right to amend his pleading after a demurrer thereto has been sustained. “His leave to amend afterward is always of grace, not of right. [Citation.]” [Citation.]’ [Citation.] . . . [¶] . . . Assuming proper notice, the trial court has wide discretion in determining whether to allow the amendment, but the appropriate exercise of that discretion requires the trial court to consider a number of factors: ‘including the conduct of the moving party and the belated presentation of the amendment.’ ” (Leader, supra, 89 Cal.App.4th at pp. 612–613, italics omitted.)

Here, the trial court not only found the proposed SACC defective but also concluded allowing the amended claims to proceed would be prejudicial to Rockzilla because a key witness, Robert Miller, had died. “ ‘ “[E]ven 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; Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487 [trial court may deny leave to amend when amendment would prejudice the opposing party].) As relevant here, the proposed SACC asserted Miller was an agent and cofounder of Rockzilla, as well as a cofounder of Wine Warehouse. The proposed SACC further alleged Miller and Ronald Ruggiero opened a secret account in the name of Wine Warehouse, which Miller used to steal money from Wine Warehouse and pay to Rockzilla. This payment to Rockzilla, along with execution of the 2008 lease, was made to avoid Rockzilla “ ‘bring[ing] charges’ ” against Miller based on his alleged theft from Rockzilla. The proposed SACC also identified Miller as a coconspirator to the breach of fiduciary duty claims.

While cross-complainants now argue Miller was not a viable witness and may not have been aware of the 2008 lease, these assertions are unsupported by the record. Nor do they undermine the proposed SACC’s allegations regarding Miller. The proposed SACC directly connects the allegations against Rockzilla to the alleged unlawful conduct by Miller. Accordingly, we cannot say the trial court abused its discretion in concluding Rockzilla would be prejudiced if cross-complainants were allowed to bring these claims against Rockzilla. We thus affirm the order dismissing Rockzilla from the action.

In sum, the trial court did not err in striking the FACC because (1) the causes of action accrued in 2008, when Rockzilla and the Ruggieros executed the lease; (2) the FACC did not adequately allege facts to support delayed discovery of the 2008 lease and its claims against Rockzilla; and (3) Rockzilla did not qualify as a Doe defendant because cross-complainants were aware of Rockzilla and the 2008 lease at the time they filed the original cross-complaint. Likewise, the trial court did not err in denying cross-complainants’ motions for leave to amend because the proposed SACC, like the FACC, failed to allege specific facts supporting delayed discovery of the claims against Rockzilla. Finally, the trial court did not abuse its discretion in dismissing Rockzilla from the action because it concluded allowing the claims to proceed would prejudice Rockzilla due to the death of a key witness, and the allegations in the proposed SACC support this conclusion.

III. DISPOSITION

The trial court’s orders striking the FACC, denying cross-complainants leave to amend, and dismissing the FACC as to Rockzilla are affirmed. Rockzilla may recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

 

____________________________

Margulies, J.

We concur:

_____________________________

Humes, P. J.

_____________________________

Banke, J.

A155553

Callahan v. Rockzilla, LLC