Case Number: EC068217 Hearing Date: August 02, 2019 Dept: A

Liu v Yung

Motion for Leave to File a Cross-Complaint

Calendar:

15

Case No.:

EC068217

Hearing Date:

August 02, 2019

Action Filed:

May 31, 2017

Trial Date:

Not Set

MP:

Defendant Tin Y. Yung

RP:

Plaintiffs Tien Kuang Liu; Frank Zeng; Charlie Chi-Jen Yu; Peter Yungching Shay; Philip Luc; Jack C. Lee

ALLEGATIONS:

This action arises from a purported plan for real estate development which from the onset turned into a fraudulent, continuing conversion scheme. Plaintiffs Amancio Mora (“Mora”) and Peter Shay (“Shay”) allege that they made $100,000 and $150,000 capital contributions, respectively, in an investment plan by Hsuch-Hui “Andy” Liu to create a real estate development along Eloise Street in Pasadena. The proposal included, among other things, details that: Defendant Tin Y. Yung (“Yung”) would be the manager of an investment company, Enterprise Realty Investment and Development Group, LLC (“ERI”) would be paid management fees, and Defendant Pasadena Officotel Enterprises, LLC (“POE”) would be organized later as an investment company and would own the Eloise Properties.

Plaintiffs allege that Yung and ERI failed to disclose or concealed information that the property was being purchased in Yung’s own name, that there were insufficient funds to purchase the properties, neither Yung nor ERI provided funds or capital contributions to POE, Yung and ERI failed to sell the property for significant profits, failed to hold meetings to keep Plaintiffs informed about the development, and Yung failed to inform Plaintiffs that he was involved in litigation regarding the property.

The first amended complaint (“FAC”), filed October 4, 2018, alleges causes of action for: (1) Breach of Contract; (2) Negligence; (3) Fraud; (4) Breach of Fiduciary Duties; (5) Conversion; (6) Aiding and Abetting Fraud; (7) Aiding and Abetting Conversion; (8) Civil Conspiracy; (9) Intentional Interference with Prospective Economic Advantage; (10) Accounting; (11) Declaratory Relief; and (12) Judicial Dissolution.

PRESENTATION:

Yung filed the instant motion on July 11, 2019, seeking leave to file a Cross-Complaint. Plaintiffs Tien Kuang Liu (“Lui”); Frank Zeng (“Zeng”); Charlie Chi-Jen Yu (“Yu”); Shay; Philip Luc (“Luc”); and Jack C. Lee (“Lee”) opposed the motion on July 24, 2019. The Court has not received a reply brief.

RELIEF REQUESTED:

Yung moves for leave to file a Cross-Complaint on compulsory counter-claims.

DISCUSSION:

Standard of Review – Compulsory Cross-Complaint – Parties to an action that fail to pleas causes of action for any cause may seek the court’s leave to file amend their pleading, file a cross-action or assert such unstated causes of action, when the application is made in good faith. Code of Civ. Proc. §426.50. Pursuant to California’s liberal standards, and policy of adjudicating causes of action on their merits, the appropriate standard for a court to grant leave to file a compulsory cross-complaint is that such a “motion to file a cross-complaint at any time during the course of action must be granted unless bad faith of the moving party is demonstrated.” Silver Orgs. v. Frank (1990) 217 Cal. App. 3d 94, 99. The purpose for the liberal standards for allowing cross-complaints is because the failure of a defendant to raise a compulsory counterclaim serves as a bar to future litigation on that claim. See, e.g., AL Holding Co. v. O’Brien & Hicks, Inc. (1999) 75 Cal. App. 4th 1310 (Pursuant to Code of Civ. Proc. § 426.30, defendant had demurred on the ground that the cause of action was barred because the plaintiff never raised it in a compulsory cross-complaint in a prior action instituted by defendant.). The existence of bad faith “involves a factual inquiry into the [moving party’s] subjective state of mind: Did he or she believe the action was valid? What was his or her intent or purpose in pursuing it? A subjective state of mind will rarely be susceptible of direct proof; usually the trial court will be required to infer it from circumstantial evidence.” People v. Superior Court (Sokolich) (2016) 248 Cal. App. 4th 434, 447.

Plaintiffs opposition focusses on Yung’s failure to demonstrate good faith behavior. Opposition, 4:19-7:9. As stated above, objective good faith is not the standard, as the deprivation of the right to access the courts is the result of a granted opposition to a compulsory cross-complaint, the opposing party must demonstrate bad faith in the moving party’s motion. To the extent that Opposing Plaintiffs argue that Yung’s motion is made in bad faith, they argue that (1) the instant motion was filed 2 years after the lead case was filed and 19 months after his Answer, and (2) that Yung’s behavior in discovery precipitated the instant motion when he was required to submit signature pages together with certain documents. Opposition, 7:17-26. In light of the three separate actions ultimately resulting in consolidation, the Court considers that some delay is insufficient to demonstrate bad faith. To the extent that the Opposing Plaintiffs argue that bad faith should be inferred from Yung’s actions in discovery, the Court considers that the Opposing Plaintiffs have not cited to any motion practice involving such purported abuses, which would generally be the proper remedy for discovery abuse – not the denial of access to the courts on potentially valid claims. As it stands, nothing in the record indicates that Yung has filed the instant motion with the belief that the Cross-Complaint is invalid, or with evil intent.

The Court notes, however, that Yung has not submitted any proposed Cross-Compliant with the moving papers. Accordingly, the Court must continue the motion. CRC 3.1324.

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RULING:

Indicate a grant, but continue the motion to file proposed pleading.

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In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records.

ORDER

Defendant Tin Y. Yung’s Motion for Leave to File a Cross-Complaint came on regularly for hearing on August 02, 2019, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows:

The motion is: GRANT INDICATED, BUT CONTINUE WITH CROSS-COMPLAINT ORDERED FILED WITHIN 20 DAYS.

DATE: _______________ _______________________________

JUDGE