Case Name: PE Real Estate Management Co., LLC v. Top Gun Industrial Finishing, Inc., et al.
Case No.: 16-CV-304700

Defendants Top Gun Industrial Finishing, Inc. and Michael B. Martinez (collectively, “Defendants”) move to file a first amended answer and for judgment on the pleadings as to the complaint (“Complaint”) filed by plaintiff PE Real Estate Management Co., LLC (“Plaintiff”).

I. Factual and Procedural Background

This is an action for breach of contract arising out of a rental agreement. According to the allegations of the operative Complaint, in June 2012, Plaintiff became the owner of an industrial office space located in Santa Clara (the “Property”). (Complaint, ¶ 6.) At the time of Plaintiff’s purchase of the Property, Defendants were an existing tenant and continued to rent space from Plaintiff under an oral month-to-month rental agreement. (Id.) In March 2013, Defendants breached the oral agreement by failing to pay rent and utilities owed. (Id., ¶ 7.) The breach continued from April 2013 through October 30, 2013, when Defendants vacated the Property. (Id.) Thereafter, Plaintiff incurred damages and additional expenses as a result of Defendants’ tenancy, including various repairs. (Id., ¶ 8.)

Based on the foregoing allegations, on December 30, 2016, Plaintiff filed the Complaint asserting the following causes of action: (1) breach of oral contract; (2) open book account; and (3) account stated. On March 13, 2017, Defendants filed their answers to the Complaint. On November 14, 2017, Defendants filed the instant motion for leave to file a first amended answer. (Code Civ. Proc., § 473, subd. (a)(1).) The following day, Defendants filed the motion for judgment on the pleadings (“JOP”) as to Plaintiff’s Complaint. (Code Civ. Proc., § 438.) Plaintiff opposes both motions.

II. Motion for Leave to File Amended Answer

With the instant motion, Defendants seek to amend their answer to add affirmative defenses and plead their statute of limitations affirmative defense with greater particularity. Prior to this point, Defendants purportedly tried, unsuccessfully, to get opposing counsel to agree to stipulate to Defendants’ filing an amended answer. This motion followed.

As a general matter, Code of Civil Procedure section 473 permits the court in its discretion to allow amendments to pleadings in the furtherance of justice. Ordinarily, courts should “exercise liberality” in permitting amendments at any stage of the proceeding. (Husley v. Koehler (1990) 218 Cal.App.3d 1150, 1159.) “In particular, liberality should be displayed in allowing amendments to answers, for a defendant denied leave to amend is permanently deprived of a defense.” (Id., citing Dunzweiler v. Superior Court (1968) 267 Cal.App.2d 569, 576.) Ultimately, whether an amendment should be allowed rests in the sound discretion of the court, which is to be more critical of proposed amendments to answers “when offered after long unexplained delay or on the eve of trial, or where there is a lack of diligence, or there is prejudice to the other party.” (Permalab-Metalab Equipment Corp. v. Maryland Cas. Co. (1972) 25 Cal.App.3d 465, 472 [internal citations omitted].)

Here, Defendants maintain that amendment is necessary to address issues not addressed by their prior counsel when he filed their initial answers. Plaintiff opposes Defendants’ motion based on the following reasons: (1) the motion fails to comport with California Rules of Court, rule 3.1324(a)(2) and (3); (2) the supporting declaration filed by Defendants’ counsel does not satisfy California Rules of Court, rule 3.1324(b); and (3) Defendants’ delay in seeking to amend, combined with their strategy of scheduling their JOP to be heard immediately after, will result in severe prejudice to Plaintiff.

The third argument out of the foregoing can be disposed of rather easily. It is not readily apparent to the Court how the scheduling of the JOP immediately after the motion for leave to amend will prevent Plaintiff’s case from being heard on the merits as he claims, particularly his argument relating to the merits that the claims are not time-barred due to Defendants’ alleged fraudulent concealment of those claims from Plaintiff. The scheduling of the motions does not prevent Plaintiff from arguing, in response to the JOP, that the Complaint can be amended to deal with any potential timeliness issues. Further, there is currently no trial date set in this action, and the Court does not find the time which elapsed between when new counsel entered into this action for Defendants (August 2017) and when the instant motion for leave to file an amended pleading was filed to evidence dilatory behavior on the part of Defendants. Consequently, there is no indication that Plaintiff would be prejudiced by the filing of an amended answer.

Turning to the first and second arguments raised by Plaintiff, California Rules of Court, rule 3.1324(a)(2) and (3) (“Rule 3.1324”) provide that a motion to amend a pleading before trial must state “which allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph, and line number, the deleted allegations are located” and “which allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located.” Subdivision (b) of Rule 3.1324 provides that a supporting declaration must accompany the motion to amend and must specify the following: the effect of the amendment, why the amendments are necessary and proper, when the facts giving rise to the amended allegations were discovered, and the reasons for why the request for amendment was not made earlier. While the Court acknowledges that there are slight deficiencies in Defendants’ supporting papers relative to the requirements articulated in Rule 3.1324(a)(2) and (3) and (b), it ultimately finds that Defendants’ have substantially complied with the foregoing by setting forth the additions and deletions within their supporting memorandum that they are seeking to make to their answer with an amended pleading and explaining why those changes were not made earlier. (See Def’s Memo. at 5:8-17.)

As the Court finds none of the three arguments submitted by Plaintiff in support of its opposition are meritorious, and considering the liberal policy of amendment, especially where no prejudice has been shown to exist, Defendants’ motion for leave to file a first amended answer is GRANTED.

III. Motion for Judgment on the Pleadings

With the instant motion for judgment on the pleadings, Defendants maintain that none of the claims asserted by Plaintiff in its Complaint are viable because they are all time-barred and therefore Defendants are entitled to judgment.

As set forth above, with its Complaint Plaintiff asserts a claim for breach of oral contract and two claims for common counts- open book account and account stated. The applicable statute of limitations for a cause of action for breach of an agreement not founded upon a written instrument is two years. (Code Civ. Proc., § 339(1).) When it comes to the latter two claims, common counts are merely pleading devices, and thus are subject to whatever statute of limitations governs the underlying claim in the lawsuit. (See, e.g., Iverson, Yoakum, Papiano & Hatch v. Berwald (1999) 76 Cal.App.4th 990, 996; see also Costerisan v. DeLong (1967) 251 Cal.App.2d 768, 769-771.) Here, that is the breach of contract claim, and thus the common counts are subject to the two-year limitations period proscribed by Code of Civil Procedure section 339(1). The limitations period for a cause of action “ordinarily commences when the obligation or liability arises ….” (Utility Audit Co. v. City of Los Angeles (2003) 112 Cal.App.4th 950, 962.) As applied here, that would be when Defendants allegedly breached the rental agreement between themselves and Plaintiff.

According to the allegations of the Complaint, Defendants initially breached the subject agreement on March 15, 2013 by failing to pay rent and utilities owed. (Complaint, ¶ 7.) Their final breach purportedly took place on October 30, 2013. (Id.) With the two-year limitations period, it follows that the last permissible date for Plaintiff to file claims based on Defendants’ alleged failure to pay rent (assuming no tolling or delayed discovery) was October 30, 2015. However, Plaintiff did not file the instant action until December 30, 2016, and thus, its claims appear to be time-barred.

In its opposition, Plaintiff insists, as it did in opposition to Defendants’ motion for leave to file an amended answer that the instant motion is procedurally improper due to Defendants having scheduled it to take place on the same day as the motion for leave to amend. Scheduling these motions to be heard in such a way, Plaintiff argues, deprives it of its statutory right to respond to the newly filed answer, e.g., demur or strike that pleading. Given the fact that Plaintiff had the ability to oppose the motion for leave to amend, and did in fact do so, and the fact that the Court will grant Plaintiff an opportunity to amend its pleading to address and correct the timeliness issue as it maintains that it can, the Court does not find the foregoing to be a persuasive reason to deny Defendants’ motion. Consequently, Defendants’ motion for judgment on the pleadings is GRANTED WITH 10 DAYS’ LEAVE TO AMEND.