CHRISTIAN ANTHONY CARINO V. ART & ELEMENTS INC

Case Number

23CV01958

Case Type

Hearing Date / Time

Wed, 10/02/2024 - 10:00

Nature of Proceedings

Motion for Leave to File Cross-Complaint

Tentative Ruling

Eric Berg of Berg Law Group for Plaintiff Christian Anthony Carino

                                   

Jordan D. Hankey of Law Office of Jordan D. Hankey, PC for Defendant Jose Luis Esparza.

                                   

Clark H. Cameron of Humphry, Berger & Associates, LLP for Defendant and cross-complainant Hudson Insurance Company

                                   

Christian Bosuel of Bosuel Law Office for Defendant Art & Elements Inc.            

Defendant Hugo Garcia is in pro per.

           

RULING

For the reasons more fully articulated below, the motion is denied.

Background

On May 5, 2023, Plaintiff Christian Anthony Carino (Carino) filed a complaint against Defendants Art & Elements, Inc. (AEI), AEI’s CEO Hugo R. Garcia (Garcia), Jose Luis Esparza (Esparza), who provided architectural planning and design services to AEI and Garcia, and Hudson Insurance Company, which provided a licensing bond to AEI. The complaint relates to landscape design and construction services for which Carino contracted with AEI, through his agent and property manager, Devin Park, for Carino’s property at 226 Ortega Ridge Road in Santa Barbara. The first and second causes of action are alleged only against AEI, and state claims for breach of contract and negligence. They alleged that AEI breached its contractual obligations to Carino and negligently performed its work by failing to obtain construction permits prior to commencing work, using workers who were neither licensed contractors nor employees covered by workers’ compensation insurance, failing to complete work in compliance with the County’s building codes, regulations, and specifications, failing to complete all work for which it had been compensated, and failing to deliver beams that Plaintiff had specifically contracted for and substituting cheaper and insufficient beams.  

The third and fourth causes of action are alleged against AEI, Garcia, and Esparza, and seek damages for intentional and negligent misrepresentation, based upon alleged repeated representations that no construction permits were required for the work detailed in the initial contracts, that the work would be performed in compliance with County building codes, and that the cost of purchasing the beams would be $48,000.00, all of which were false. In fact, permits were required, the work was not performed in compliance with County codes, and the true cost of the beams delivered to Carino was only $13,400.00. The fifth and sixth causes of action are alleged against AEI and Garcia only, and state claims for unjust enrichment and money had and received, based upon payments made under the contracts for work that was not performed, and for the overcharge for the beams. The seventh cause of action is alleged only against Hudson.

Defendant Esparza answered the complaint in pro per on June 8, 2023. His answer expressly alleged that the statements set forth in ¶¶ 4, 25, 66, 67, and 84 (related to his alleged misrepresentations that no permits would be required) were false. He continued to represent himself in the action until attorney Christian Bosuel substituted in on his behalf on April 8, 2024. His current attorney, Jordan Hankey, substituted in for attorney Bosuel on July 3, 2024.

Less than two months later, attorney Hankey filed the current motion for leave to file a cross-complaint against Carino’s property manager, Devin Park, for equitable indemnity and contribution.

After a hearing held on April 10, 2024, on the motion by Defendant Art & Elements, Inc., the original trial date of July 31, 2024, was continued to December 4, 2024, and the Court on that date reserved for jury trial the dates of December 5-6, 9-10. 12-13, 16-17, and 19-20, 2024.

Motion

Defendant Esparza, through new counsel, has moved for leave to file a cross-complaint for equitable/comparative indemnity and contribution against Devin Park.

The motion is made under the authority of Code of Civil Procedure section 426.50, which authorizes the filing of compulsory cross-complaints against Plaintiffs, and Code of Civil Procedure section 428.10(b), which authorizes the filing of permissive cross-complaints against third parties.

The motion notes that causes of action for intentional misrepresentation and negligent misrepresentation are alleged by Carino against Esparza, and a necessary element Carino will need to prove is that he reasonably relied on the representations. Esparza contends that Park is liable to Plaintiff for the damages alleged in the complaint, and is therefore a necessary and indispensable party to the litigation.

It asserts that leave to file a cross-complaint may also be granted under Code of Civil Procedure section 428.50, at any time during the course of the action. It cites Silver Organizations Limited v. Frank (1990) 217 Cal.App.3d 94, in which the court of appeal found a trial court’s decision denying leave to file a cross-complaint to have been improper, since the attorney had acted in good faith and without a substantial showing of bad faith, and delay alone is not grounds for denial. Esparza contends that his attorney substituted in on July 3, 2024, and after reviewing file materials and interviewing witnesses identified claims for equitable indemnity and contribution against Park. The motion contends that since the case is still in its discovery stage, there would be no prejudice to Plaintiff in granting the motion.

Proposed cross-complaint The proposed cross-complaint is attached to the motion, alleging causes of action for equitable/comparative indemnity and contribution against cross-Defendant Devin Park. It alleges that a June 11, 2022, meeting occurred between Esparza, Devin Park, and Garcia, to determine whether any construction permits were required to perform the work detailed in the First contract. Esparza specifically stated that permits would need to be pulled if the retaining walls, measured form the top of the footer to the top of the retaining wall, exceeded 42 inches. Park disagreed and stated that the County required permits only if the retaining wall, measured from the bottom of the footer to the top of the retaining wall, exceeded 48 inches. Carino, because of Park’s agency relationship with him and because Park was the Manager of the Property, was aware that a permit would need to be obtained for any retaining wall on the property that exceeded 48 inches when measured from the bottom of the footer to the top of the retaining wall. Further, the scope of the work required movement of soil/land, and Esparza never rendered any opinions about whether permits would need to be pulled for the land work. Further, during meetings with Park and Garcia on August 12 and 22, 2022, Esparza never stated that permits would not be required for work at the property, and in fact acknowledged the need for permits for walls exceeding 4 feet. He also noted that the scope of the work was routinely changed by Carino and/or Park, which had the potential to render any of Esparza’s opinions moot. As a result, any alleged misrepresentation made by Esparza could not be reasonably relied upon by Carino, since Carino’s agent was fully aware of the need to pull permits, and routinely changed the scope of work at the property. The cross-complaint contends that any liability Esparza may incur with respect to Carino’s complaint will be the result of the active or primary negligence or fault of Park, and that Esparza should be entitled to apportionment, indemnity, and contribution from Park.

Opposition

Plaintiff Carino has opposed the motion. The opposition contends that the motion is untimely, particularly given that the underlying complaint alleged that Park at all times was Carino’s agent and property manager, with authority to act on Carino’s behalf. Given the agency relationship with Carino, the opposition contends that this is a compulsory cross-complaint, and is not timely. It should have been filed in April 2023, and not a year-and-a-half later and 2 months before trial. No showing of good faith has been made, as required by Section 426.50. While Esparza’s counsel may have acted diligently and in good faith, Esparza himself has not. Esparza was previously represented by attorney Bosuel who, on behalf of AEI, propounded written discovery upon Carino which Carino answered on April 6, making Esparza’s counsel aware of facts giving rise to the indemnity claim no later than that date. Counsel’s declaration that he was informed and believed that the cross-complaint was not earlier filed because of Esparza’s mistake, inadvertence, or neglect because he was unaware of the claims at that time lacks personal knowledge. If the failure is due to prior counsel’s mistake, that counsel should provide a declaration.

Carino further asserts that there is serious doubt whether Esparza needs the cross-complaint to obtain the relief he is seeking. Given the agency relationship, Esparza can argue at trial that Park’s acts and knowledge should be imputed to Carino, and that Plaintiff’s comparative fault based upon the acts of his agent should operate to reduce the damages at trial. This is exactly what he is seeking through the cross-complaint.

Finally, Carino asserts that granting the motion places him in a no-win situation. Esparza may argue that he is not seeking to continue trial, but since the court considers potential prejudice to Plaintiff by granting the relief, the motion places Carino in a bind. He would seek to file a demurrer, since he believes that comparative fault principles are unnecessary and would moot an indemnity claim against his agent. He must either choose between pursuing a demurrer and delaying the case and trial, or foregoing a challenge for the sake of preserving his trial date. Carino is ready to proceed to trial and does not want to bifurcate indemnity issues just to keep that date.

Reply

Esparza asserts that Carino misrepresents the meaning of Section 426.30 in claiming that the motion is untimely because the cause of action existed at the time Esparza served his answer, is without merit. Section 426.30 applies to causes of action a Defendant may have against a Plaintiff, and Esparza is suing a third party (Park) and not the Plaintiff.

Esparza argues that his motion is timely under Section 426.50, which permits a party to move for leave to file a compulsory cross-complaint at any time before trial and requires that the subdivision be liberally construed to avoid forfeiture of causes of action. Under Section 248.50, leave may be granted in the interest of justice at any time during the course of the action. The action is not being brought on the eve of trial and was filed 99 days prior to the trial date.

Esparza further re-argues that bad faith must be found in order to deny the motion, and delay is insufficient.

Finally, Esparza contends that the viability of his cross-complaint, and the need for him to file a cross-complaint, should not be considered in determining the outcome of the motion. He argues that “[t]he law is well settled regarding leave to file a cross-complaint and directs the Court to determine the existence of bad faith in bringing a motion for leave.” He contends that Carino has not identified any law that would authorize the court to deny the motion based on an evaluation of whether Esparza could obtain the same relief outside of the cross-complaint, and asserts it is inappropriate to do so.

He further contends that Carino’s contention is wrong, since theories of vicarious liability and comparative fault do not allow for recovery of litigation costs and fees, including attorneys’ fees, but they can be awarded under Code of Civil Procedure section 1021.6 in the claim for indemnity.

ANALYSIS

For the reasons which are articulated below, the motion will be denied.

A party against whom a cause of action has been asserted in a complaint or a cross-complaint may file a cross-complaint (a) against any of the parties who filed the complaint or cross-complaint against him, and/or (b) any cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party to the action, if the cause of action asserted in the cross-complaint (1) arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against him, or (2) asserts a claim, right, or interest in the property or controversy which is the subject of the cause brought against him. (Code Civ. Proc., § 428.10.)

If the Defendant’s cause of action against the Plaintiff is related to the subject matter of the complaint, it must be raised by cross-complaint, and the failure to plead it will bar Defendant from asserting it in any later lawsuit. (Code Civ. Proc., § 426.30; see AL Holding Co. v. O’Brien & Hicks, Inc. (1999) 75 Cal.4th 1310, 1313-1314.) A cross-complaint “is related to the subject matter of the complaint” if it arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action in the complaint. (Code Civ. Proc., § 426.10, subd.(c).) It is because of the dire consequences which could result if the Defendant does not bring a cross-complaint back against the Plaintiff which is related to the subject matter of the Plaintiff’s complaint against him or her, that such cross-complaints are characterized as “compulsory” cross-complaints.

Certainly, a Defendant is also free to bring a cross-complaint against the Plaintiff for any claim which he may have against the Plaintiff which is unrelated to the subject matter of the Plaintiff’s claim against him or her. Because there is no penalty imposed for the failure to bring the unrelated claim within the current action, and there is no bar to filing the unrelated claim as a separate action, such unrelated cross-complaints are characterized as “permissive” cross-complaints.

The only cross-complaints which are legally considered to be “compulsory” cross-complaints, are those which are alleged back against the Plaintiff and are related to the subject matter of Plaintiff’s complaint against the cross-complaining Defendant.

The cross-complaint which Defendant Esparza seeks leave to file is not alleged against the Plaintiff in this action, but rather is alleged against someone who is currently not a party to the action. As such, it is necessarily a “permissive” cross-complaint, and not a “compulsory” cross-complaint, since all cross-complaints against third parties are necessarily “permissive” cross-complaints only.

Significantly, the authorities upon which Esparza relies in contending that this Court must grant leave to permit him to file the cross-complaint, are largely authorities which address “compulsory” cross-complaints and not “permissive” cross-complaints, and therefore are completely inapplicable to Esparza’s motion or any standards this Court must use in evaluating whether to permit leave to file the cross-complaint at this late date.

This includes the Code of Civil Procedure section 426.30 provision requiring the subdivision related to compulsory cross-complaints be liberally construed to avoid forfeiture of causes of action, since there legally cannot possibly be a forfeiture of a cause of action for a permissive cross-complaint.

This also includes the rule set forth in Silver Organizations Limited v. Frank (1990) 217 Cal.App.3d 94, upon which Esparza has heavily relied for the proposition that the Court can only deny leave to file the cross-complaint upon a showing of bad faith by the party seeking such leave, regardless of how late in the case leave to file it is sought. Silver Organizations involved a Defendant who, right before the trial date, sought leave to file a cross-complaint against the Plaintiffs that was related to their claim against him, and therefore was legally considered to be a “compulsory” cross-complaint for which denial of leave would result in his forfeiture of the claim. It was under those circumstances that the court held that policy of liberal construction to avoid forfeiture of causes of action required that a trial court must grant a motion to file a compulsory cross-complaint at any time during the course of the action, unless the bad faith of the moving party is demonstrated, and that inadvertence, neglect, mistake or other cause were insufficient grounds to deny the motion unless accompanied by bad faith. It was precisely because the forfeiture of a cause of action would result, that bad faith was required.

That is clearly not the circumstance here, and both Section 426.50 and Silver Organizations, supra, have no application to the motion before the Court.

The only statutory provision regulating a Defendant’s filing of a permissive cross-complaint against a third party that was not filed either at the time Defendant’s answer was filed or prior to the time the court has set a date for trial, is that set forth in Code of Civil Procedure section 428.50(c), i.e., leave may be granted in the interest of justice at any time during the course of the action.

Consequently, in evaluating Esparza’s motion for leave to file this permissive cross-complaint against a third party, this Court must determine if permitting the cross-complaint to be filed is in the interests of justice, under the circumstances which currently exist—including the fact that the trial date is a mere 63 days away.

Defendant Esparza seeks to name as a cross-Defendant and bring into this action someone who is currently not a party to the action. While Mr. Park has been involved in the action as a result of his actions as an agent for Plaintiff Carino, his involvement has not related to any personal liability he might have. As a non-party being newly named as a party in the action, he would be entitled to respond to the cross-complaint in whatever manner he saw fit, including by demurrer or other responsive pleading, and should have an adequate opportunity to conduct any discovery he might believe would be warranted. This would necessarily involve vacating the current trial date and resetting it at least six months down the road.

While Defendant Esparza contends that there is no authority that would permit the Court to evaluate the viability of his claim for indemnity, or what he is achieving from seeking to bring Mr. Park into the action pursuant to a cross-complaint alleging causes of action for indemnity and contribution, the provision permitting the Court to determine whether the grant of leave is “in the interest of justice” provides precisely such authorization.

The underlying complaint identifies Mr. Park as the agent of Plaintiff Carino, and alleges that he at all times acted as Carino’s agent and the Manager of the Property at which the work was contracted to be performed. The proposed cross-complaint does not identify any conduct by Mr. Park that was taken in his personal capacity, or in any capacity other than as agent for Plaintiff Carino. As a result, any negligence or fault by Mr. Park will be legally attributable to the Plaintiff at the trial of this action and will necessarily result in a reduction of Esparza’s liability by the amount of such comparative fault. If that would occur, a separate cause of action for indemnity and contribution by Esparza against Park would be duplicative and legally impermissible, because he would have already achieved the entire offset from his own liability to which he might be entitled as a result of Park’s conduct, and any such separate cause of action for indemnity would seek a legally-impermissible double offset for such comparative negligence.

Further, to the extent that any true cause of action for indemnity or comparative fault might exist, such cause of action has not yet accrued, and will not accrue unless and until Esparza is found liable to Plaintiff Carino for damages. Consequently, there is no possibility that the denial of the motion for leave will cause any legally cognizable prejudice to Esparza, whether through forfeiture of a cause of action or otherwise. Rather, the only thing that granting leave to file the permissive cross-complaint will cause is considerable unnecessary delay in the resolution of this action.

Finally, the entire factual basis for the cross-complaint are Esparza’s contentions that he did not advise that no permits would be required, that he specifically stated that permits would need to be pulled if the retaining walls exceeded a specified height, that he never expressed any opinions with respect to whether permits would be required for the land work, and that because of Parks’ agency relationship with Carino, Plaintiff Carino was aware that a permit would be needed if the retaining wall exceeded a specified height. In his answer to Carino’s complaint, Esparza expressly denied the paragraphs of Carino’s complaint alleging that Esparza made misrepresentations about the necessity for permits. As a result, all such disputed facts necessary to Esparza’s claims about the making of misrepresentations, or whether any reliance on his representations was justifiable, are already before the court and will necessarily be resolved by the trier of fact in the trial of the main action.

For all of these reasons, the Court has determined that the interests of justice require that the motion for leave to amend be denied, and that the action as it currently exists be permitted to proceed to trial in December.