Case Name: Robert M. Granum II v. Willoughby, Stuart, Bening & Cook, et al.

Case No.: 16CV304336

(1) General Demurrer to Second Amended Complaint
(2) Defendant Willoughby, Stuart, Bening & Cook’s Demurrer to Plaintiff Robert M. Granum II’s Second Amended Complaint
(3) Plaintiff’s Motion for Leave to File a Third Amended Complaint

Factual and Procedural Background

On or about February 2, 2011, Deer Crest Associates I, L.C. (“Deer Crest”) sued Granum Partners for breach of a written guaranty in Santa Clara County Superior Court, case number 1-11-CV-193356 (“Underlying Action”). (Second Amended Complaint (“SAC”), ¶6.) Deer Crest owned a condominium project in Utah. (Id.) Pursuant to a July 1, 2005 construction contract between Deer Crest and Silver Creek Development Group, LLC (“Silver Creek”), Silver Creek agreed to perform certain construction of the condominium project. (Id.) Granum Partners executed a written guaranty guaranteeing to Deer Crest that Silver Creek would complete construction for a price not to exceed $1,588,926.45. (Id.)

In October 2005, Silver Creek discovered an error by Deer Crest’s architects which delayed construction eight months until June 2006. (SAC, ¶7.) During the delay, prices for materials increased. (Id.) On December 6, 2006, Silver Creek notified Deer Crest of a proposed increase in price, but Deer Crest denied the request and terminated Silver Creek on February 5, 2007 without giving Silver Creek or Granum Partners an opportunity to mitigate. (Id.) Deer Crest hired another contractor to complete construction. (Id.)

On February 2, 2011, Deer Crest sued Granum Partners as guarantor for $483,300.59 in purported cost overruns. (SAC, ¶8.) On or about November 4, 2012, Granum Partners moved for summary judgment. (SAC, ¶9.) On May 3, 2013, the trial court granted summary judgment in favor of Granum Partners on the ground that the action was barred by the statute of limitations. (Id.) Deer Crest subsequently appealed and the Court of Appeal affirmed in a written opinion issued November 19, 2015. (SAC, ¶10.)

At the commencement of the Underlying Action, attorneys in Utah, but licensed in California, represented Granum Partners. (SAC, ¶11.) On or about April 20, 2012, the Utah firm hired defendant John Bradley (“Bradley”) as local counsel. (Id.) On or about September 14, 2012, Bradley became sole counsel of record for Granum Partners in the Underlying Action. (Id.)

Bradley agreed to represent Granum Partners on the appeal by Deer Crest but insisted Granum Partners also retain an appellate lawyer to assist/ consult. (SAC, ¶15.) On or about September 15, 2013, Granum Partners retained Ellyn Nesbit (“Nesbit”) of defendant Willoughby, Stuart, Bening & Cook (“WSBC”) to assist and consult Bradley in defense of the appeal. (SAC, ¶¶15 – 16.) Bradley allowed Nesbit to assume control of the appeal. (SAC, ¶18.) Nesbit performed work on the appeal without control or oversight by Bradley. (Id.) Nesbit did not communicate regularly with Granum Partners. (Id.)

Plaintiff Robert M. Granum II (“Granum”) is the assignee of any and all of the claims of Granum Partners against defendants WSBC and Bradley arising out of or with respect to legal services rendered. (SAC, ¶3.)

On December 22, 2016, Granum commenced the instant action by filing a complaint against defendants WSBC and Bradley. On January 10, 2017, Granum filed a first amended complaint (“FAC”). On March 6, 2018, Granum sought and obtained leave of court to file a SAC. On March 15, 2018, Granum filed the SAC which now serves as the operative pleading. The SAC asserts causes of action against defendants WSBC and Bradley for:

(1) Breach of Contract
(2) Breach of Contract [versus WSBC]
(3) Breach of Implied Covenant of Good Faith and Fair Dealing
(4) Breach of Fiduciary Duty

On April 16, 2018, defendant Bradley filed the first of three motions now before the court, a demurrer to plaintiff Granum’s SAC.

On April 19, 2018, defendant WSBC filed the second motion now before the court, a demurrer to plaintiff Granum’s SAC.

On May 4, 2018, plaintiff Granum filed the third motion now before the court, a motion for leave to file a third amended complaint (“TAC”).

I. Plaintiff Granum’s motion for leave to file a TAC is GRANTED.

Motions for leave to amend are directed to the discretion of the court. “The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading . . .” (Code Civ. Proc., §473, subd. (a)(1).) The law generally favors amendments on the basis that cases should include all disputed matters between parties and be decided on their merits. However, if the party seeking amendment has been dilatory and the delay has prejudiced the opposing party, the judge has discretion to deny leave to amend. (See Hirsa v. Sup. Ct. (1981) 118 Cal.App.3d 486, 490.)

“If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion.” (Morgan v. Super. Ct. (1959) 172 Cal.App.2d 527, 530.)

Plaintiff Granum seeks leave to amend the pleading to substitute Granum Partners as the named plaintiff and to add a cause of action for professional negligence. Plaintiff Granum contends there is no prejudice to defendants as the substitution of Granum Partners aims to cure the defect for which defendants have filed their respective demurrers. Plaintiff Granum asserts he has made known his intention to seek such leave during meet and confer efforts with defendants. Plaintiff Granum argues additionally that the addition of a cause of action for professional negligence is of no prejudice since defendants have consistently argued that the pleading is essentially one for legal malpractice.

In opposition, defendant Bradley contends the amendment should not be allowed because it will result in a sham pleading. “Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment. [Citations and footnote omitted.] A noted commentator has explained, ‘Allegations in the original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation in the amended pleading. The policy against sham pleadings requires the pleader to explain satisfactorily any such omission.’” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425 – 426.)

Defendant Bradley explains that the reason plaintiff Granum’s SAC is subject to demurrer is because Granum has alleged that he is an assignee of Granum Partner’s claims and claims for legal malpractice are not assignable. Defendant Bradley argued in his demurrer that the gravamen of all plaintiff Granum’s claims is legal malpractice. Therefore, it is Bradley’s contention that plaintiff Granum lacks standing.

Defendant Bradley contends the proposed TAC remains defective because Granum Partners has not explained how it reacquired standing having assigned its claims against WSBC and Bradley to plaintiff Granum. Absent an allegation explaining how it reacquired its claims from Granum, Bradley contends Granum Partners lacks standing to pursue the TAC. The court agrees with defendant Bradley that the proposed TAC does not adequately explain omission of the allegation concerning assignment. However, this alone is not enough to deny leave to amend since the defect is curable.

Alternatively, defendant Bradley argues Granum Partners should not be allowed to amend because a claim for legal malpractice is barred by the one year statute of limitations pursuant to Code of Civil Procedure section 340.6.

“[T]he failure of a proposed amendment to state facts sufficient to constitute a cause of action or defense may support an order denying a motion to amend. [Citation.] That rule would find its most appropriate application … in cases in which the insufficiency of the proposed amendment is established by controlling precedent and where the insufficiency could not be cured by further appropriate amendment.” (California Casualty Gen. Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280–81 (disapproved on other grounds in Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 407, fn. 11.))

Bradley contends the statute of limitations for any claims against him would have commenced no later than February 24, 2016 as that is the date he substituted out from representing Granum Partners. Bradley acknowledges the complaint in this action was filed within one year on December 22, 2016, but by individual plaintiff Granum. Granum Partners only now seeks to substitute as plaintiff, more than two years after the statute of limitations commenced on February 24, 2016. Bradley argues the relation back doctrine does not apply to save Granum Partners’ belated substitution.

“But a new plaintiff cannot be joined after the statute of limitations has run where he or she seeks to enforce an independent right or to impose greater liability upon the defendant. In such cases, the amended complaint does not relate back to the filing of the original.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2018) ¶6:755, p. 6-203 citing Bartalo v. Superior Court (1975) 51 Cal.App.3d 526, 533; Quiroz v. Seventh Ave. Ctr. (2006) 140 Cal.App.4th 1256, 1278.)

Here, Granum Partners is not seeking to enforce an independent right, but rather seeks to assert the same right that it purportedly assigned to plaintiff Granum. Whether it was a tactical decision or otherwise, Granum Partner’s substitution for plaintiff Granum does not impose any greater liability against the defendants. Whether the claims are asserted by Granum Partners directly or by an assignee, the claims involve the same set of circumstances, the same injury, and refer to the same instrumentality. Consequently, the relation back doctrine applies and the statute of limitations pursuant to Code of Civil Procedure section 340.6 does not serve to bar Granum Partners’ claim(s).

Accordingly, plaintiff Granum’s motion for leave to file a third amended complaint is GRANTED. To the extent Granum Partners is substituted as the plaintiff, Granum Partners must affirmatively allege a factual basis for its standing to now pursue the claims and explain any omission of paragraph three from the SAC.

II. Defendants WSBC and Bradley’s demurrers to the SAC are MOOT.

In light of the court’s ruling above allowing plaintiff leave to file a TAC, defendants WSBC and Bradley’s demurrers to the SAC are MOOT.