2012-00124071-CU-MC

Sharon Scofield vs. Jugjit S Johal

Nature of Proceeding:      Motion to File Third Amended Complaint

Filed By:   Walker, M. Henry

The motion of Plaintiff Sharon Scofield, individually and as Trustee of the Sharon
Scofield Family Trust, as Trustee of the Alice Scofield Family Trust, and as Executor
for the Estate of Alice Scofield (“Scofield”) for leave to file a third amended and
supplemental complaint (TAC”) is DENIED.

Scofield moves for leave to amend and supplement the operative Second Amend
Complaint (“SAC”).  Several Defendants oppose.  The court notes in this regard that
Defendants CVM Law Group LLP, Robert D. Collins, Peter Von Elten and Joseph D.
O’Neil have withdrawn their opposition.  The withdrawal is the result of these
defendants’ stipulation as to the proposed TAC’s scope.

In the SAC, Scofield summarizes the instant action as follows:

This complaint arises out of the wrongful taking of more than $1,700,000
from an elderly woman and her daughter by their attorney, his friends
and others in the fraudulent promotion and sale of investments in two
speculative business ventures created and controlled by them. The
ventures failed and defendant attorney, his law firm and colleagues
compounded the malfeasance by colluding to conceal the claims
Plaintiffs had against them and others, among other acts of fraud and
malpractice as more fully alleged below.

(SAC, ¶ 1.)  The referenced attorney is Defendant Jugjit S. Johal (“Johal”).
Other defendants include Johal’s former law firm, Hanson Bridgett LLP
(“Hanson Bridgett”); HLMS, LLC (“HLMS”); Real Estate Broker Mark
Zimmerman (“Zimmerman”); and Zimmerman Land Corporation (“ZLC”).
Scofield identifies several others as defendants in the SAC as well.

In the SAC, Scofield alleges, among other things:

Between 2002 and 2009, Johal represented Scofield and her then-frail, now
deceased mother.  Scofield and her mother sought to obtain secure
investments for their retirements years, and Johal was aware of their financial
goals.

In 2003, Johal, Zimmerman and others persuaded Scofield to use trust assets
to invest in Defendant Hammer Lane R.V. & Mini-Storage, LP (“Hammer Lane”),
an entity in which both men held interests.  Johal, Zimmerman and others
misrepresented the many risks associated with the investment, and they
profited from unconscionable terms associated with it.  They also concealed the
conflicts of interest inherent in the joint venture between them, on the one hand,
and their client Scofield, on the other.  The defendants induced Scofield to gift
and assign her interest (as trustee) in the investment to them.

In addition, in exercising a put/option agreement included as part of the
investment, defendants induced Scofield to release part of her interest in the
investment–acquired with cash–in exchange for an interest in another entity in
which Johal and others held interests.  Defendants embellished the other
entity’s value as a means to induce the exchange.  Then Johal, Zimmerman
and others induced Scofield to provide additional cash to invest in the second
entity.  Again, the inducement was accompanied by concealment of associated
risks and conflicts of interest. The investments encompassed the purported execution of various agreements
containing attorney fee-shifting provisions in case of resulting litigation.  Both
investments have resulted in Scofield suffering serious monetary losses.

Relevant to the instant motion are Scofield’s allegations that, leading up to and
during the course of litigation in a related case in which Scofield was a
defendant, Hammer Lane R.V. & Mini-Storage, LP et al. v. HLMS, LLC, Sac.
County Case No. 2008-23098 (“Related Case”), Johal advised her on litigation
tactics and strategies.  (He also advised her to make two loans to Hammer
Lane.)  The Related Case, which Scofield lost at trial and has taken up on
appeal, involved allegations that she, Johal and other limited partners in
Hammer Lane wrongfully attempted to removed Hammer Lane’s general
partner and replace it with HMLS, an entity controlled by Johal.  (See Stmt. of
Decision dated 05/13/13.)  As a result of her loss (along with Johal and others)
in the Related Case, there is a judgment against Scofield, jointly and severally,
for almost $700,000 in fees and costs.

By the TAC, Scofield seeks to make several amendments.  Among the
amendments sought is the addition of two new causes of action for equitable
indemnity and declaratory relief, i.e., the proposed fourteenth and fifteenth
causes of action.  These two causes of action contain Scofield’s allegations that
Johal, Zimmerman, ZLC and others are liable for some or all of the attorney’s
fees she is required to pay under the judgment in the Related Case.

The motion is denied for two reasons.  First, because the proposed Fourteenth
Cause of Action for Equitable Indemnity does not appear to have accrued, it
does not state a valid cause of action.  A cause of action for equitable indemnity
does not accrue until the putative indemnitee has made payment.  (See City of
San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 587-588 [citing
cases].)  Because Scofield does not allege that she has paid anything toward
the Related Case judgment, she has not alleged a valid cause of action.  (In
reaching this conclusion, the court expresses no opinion about the validity of
Scofield’s fifteenth cause of action for a declaration of rights and duties vis-à-vis
the Related Case judgment.)  In its discretion, a court may deny a motion for
leave to amend where the proposed causes of action are invalid.  (See
California Gen. Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280-281.)

Secondly, the proposed TAC is not a proper supplemental pleading.  As
Scofield observes, a supplemental complaint is the proper vehicle–not an
amended complaint–where amendments are based on facts that occurred after
the original complaint was filed.  (See Moving Memo. at 7:4-8.)  Because both
the proposed fourteenth and fifteenth causes of action are based on the Related
Case judgment, and because that judgment was entered after Scofield filed the
instant case, allegations relative to the Related Case judgment may only be
incorporated into the instant case by supplemental pleading.

On the other hand, a supplemental complaint may not introduce entirely new
causes of action.  (See Flood v. Simpson (1975) 45 Cal.App.3d 644, 647;
Gonzales v. Arbelbide (1957) 155 Cal.App.2d 721, 727.)  Rather, new
allegations in a supplemental complaint must be incorporated into existing
causes of action.             Both the proposed fourteenth and fifteenth causes of action are new causes of
action based upon events that occurred after this action was filed.  Accordingly,
they are not the proper subjects of a supplemental complaint, and the motion for
leave to amend is denied.

In denying the motion, the court expresses no opinion whether a narrower or
different proposed TAC would be allowed.

Because the court denies the motion for the reasons stated above, it does not
address the parties’ other arguments in support of or in opposition to the motion.

The court need not rule, and does not rule, on any objections to evidence.  The
court has relied only on admissible evidence in making its ruling.

The opposing defendants’ requests for judicial notice of court records are
GRANTED.

The minute order is effective immediately.  No formal order pursuant to CRC
3.1312 or further notice is required.