Alex Pananides et al vs Hamish Marshall et al

Case Number

23CV02089

Case Type

Hearing Date / Time

Fri, 02/16/2024 - 10:00

Nature of Proceedings

CMC; Motion for Leave; Motion for Protective Order

Tentative Ruling

(1)       For the reasons set forth herein, the motion of plaintiffs for leave to file a second amended complaint is granted. On or before February 23, 2024, plaintiffs shall file and serve their second amended complaint in substantially the same form as attached to their motion for leave.

(2)       As set forth herein, by the granting of leave to file a second amended complaint, the demurrer to the first amended complaint is moot and ordered off calendar.

(3)       For the reasons set forth herein, the motion of defendant for a protective order is denied. Plaintiffs’ request for an award of monetary sanctions is denied.

Background:

On May 12, 2023, plaintiffs Alex Pananides, individually and as trustee of the Alexander Nicholas Pananides Trust Dated October 31, 1979, PFH Holdings, LLC, Patrick Smith, individually and as trustee of the Patrick N. Smith Revocable Living Trust Dated January 30, 1995, and the Patrick N. Smith 2004 Living Trust U/T/D October 7, 2004, Restated October 6, 2009, SLO Holdings, LLC, and SFH 2000 Trust, LLC, (collectively, Plaintiffs) filed their original complaint in this action. The original complaint asserted causes of action for breach of contract and for implied indemnity arising out of the financing of a hotel project.

On July 21, 2023, without any response having been filed, Plaintiffs filed their first amended complaint (FAC). The FAC asserts three causes of action: (1) breach of contract (Contribution and Indemnity Agreement); (2) breach of contract (FATCO Indemnity Agreement); and (3) implied indemnity.

On September 1, 2023, defendant Hamish Marshall, individually and as trustee of the Hamish S. Marshall and Julia Marshall 2003 Trust, Dated July 31, 2000, filed a demurer to the FAC. (Note: Defendant Marshall is sued in two capacities. The court refers to Marshall in his individual capacity as “Marshall” and in his capacity as trustee as “Trust.” The court refers to Marshall in both capacities (or where the particular capacity is not identified) as “Defendant.”) The demurrer was originally noticed for hearing on December 1, 2023, but was subsequently continued to this hearing date.

On November 21, 2023, Defendant filed his motion for protective order. The motion seeks to stay the deposition of Defendant until all pleadings are at issue.

On November 29, 2023, Plaintiffs filed their motion for leave to file a second amended complaint.

The demurrer and both motions are opposed.

Analysis:

(1)       Motion for Leave to Amend

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.” (Code Civ. Proc., § 473, subd. (a)(1); accord, § 576.)

“[T]he court’s discretion will usually be exercised liberally to permit amendment of the pleadings. [Citations.] The policy favoring amendment is so strong that it is a rare case in which denial of leave to amend can be justified. [Citation.] ‘Leave to amend should be denied only where the facts are not in dispute, and the nature of the plaintiff’s claim is clear, but under substantive law, no liability exists and no amendment would change the result.’ [Citation.]” (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.)

The proposed second amended complaint (PSAC) makes a number of changes relative to the FAC. The PSAC reframes the second and third causes of action, making the second cause of action a claim for contribution and making the third cause of action for breach of fiduciary duty and breach of the covenant of good faith and fair dealing. (Foley decl. re Motion for Leave, ¶¶ 4, 5, 27, 35 & exhibits A, B.) The PSAC also adds further factual detail, including adding allegations responding to Defendant’s demurrer to the FAC. (Id. at ¶¶ 28-35.)

There is no obvious prejudice to Defendant in allowing this amended pleading. The only responsive pleading that has been filed is the instant demurrer to the FAC. No trial date has been set. Defendant does not argue prejudice by allowing the amendment as such, but instead argues that the PSAC fails to state valid causes of action. (See Vaillette v. Fireman’s Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685.)

The FAC alleges liability based upon a complex set of background facts. Defendant asserts those facts are insufficient. Assuming that the court agreed, because this is Defendant’s first demurrer, the court would ordinarily grant leave to amend as to all causes of action where there is any reasonable possibility of curing the defects in the pleading. Plaintiffs intend by their PSAC to address defects asserted by Defendant. Under these circumstances, the better course of action is to allow the amendment and let the parties test the legal sufficiency in other procedurally appropriate proceedings. (See Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 760.)

The court will therefore grant the motion for leave to amend.

Plaintiffs request that the court deem the PSAC filed and served as of the date the motion is granted. Difficulties arise in that procedure, most particularly being that the court’s docket would not have an entry for the SAC and the information about filing and service would be scattered about the court’s file. The court will instead order that the SAC be filed and served as a separate document.

(2)       Demurrer to FAC

The granting of leave to file a SAC as discussed above moots the demurrer to the FAC. The demurrer will therefore be ordered off calendar, without prejudice to being reset for hearing in the event Plaintiffs fail to file their SAC pursuant to the leave granted.

(3)       Motion for Protective Order

Plaintiffs served a notice of deposition on Marshall on November 7, 2023, for a deposition to occur on November 21, 2023. (Kuzmich decl., ¶ 7 & exhibit A.) The deposition did not take place and, instead, Defendant filed this motion for a protective order. Defendant moves for a protective order staying the deposition of Marshall or any other deposition of Defendant until all pleadings are at issue, all parties who are named in Plaintiffs’ ultimate complaint and Defendant’s anticipated cross-complaint have appeared in this action, and after the completion of a mechanic’s lien action pending in San Luis Obispo County Superior Court. (Notice, at pp. 2-3.)

“Before, during, or after a deposition, any party, any deponent, or any other affected natural person or organization may promptly move for a protective order. The motion shall be accompanied by a meet and confer declaration under Section 2016.040.” (Code Civ. Proc., § 2025.420, subd. (a).)

“The court, for good cause shown, may make any order that justice requires to protect any party, deponent, or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense. This protective order may include, but is not limited to, one or more of the following directions: [¶] … [¶] (2) That the deposition be taken at a different time. [¶] … [¶] (5) That the deposition be taken only on certain specified terms and conditions.” (Code Civ. Proc., § 2025.420, subd. (b)(2), (5).)

Defendant argues that taking the deposition of Defendant now would cause undue burden and expense because new parties either in the SAC or in Defendant’s anticipated cross-complaint would be entitled to take the deposition of Defendant, thus requiring an additional deposition session of Defendant. (Kuzmich decl., ¶ 6; see Code Civ. Proc., § 2025.290, subds. (a), (b)(6) [limiting deposition to seven hours, but not applying to new parties].) Plaintiffs argue that much of Defendant’s argument is now moot because the November deposition did not take place and will not take place until after the determinations made in these rulings; but in any case, discovery should proceed in the ordinary course because the identified new parties are all affiliated with existing parties.

“Pleading deficiencies generally do not affect either party’s right to conduct discovery [citation] and this right (and corresponding obligation to respond) is particularly important to a plaintiff in need of discovery to amend its complaint [citation].” (Mattco Forge, Inc. v. Arthur Young & Co. (1990) 223 Cal.App.3d 1429, 1436, fn. 3.)

The balance required to resolve this motion is to weigh the importance of prompt discovery from a principal witness against the expense and burden of a likely second session of a deposition of the same witness later. The outcome of the mechanic’s lien action does not figure much into this balance. The evidence regarding the mechanic’s lien action is limited, but it is clear that the outcome of that case could not have issue preclusive effect until it is final for purposes of appeals. (Franklin & Franklin v. 7-Eleven Owners for Fair Franchising (2000) 85 Cal.App.4th 1168, 1174.) There is no evidence that the mechanic’s lien case would be final and preclusive for a considerable time yet. Moreover, it is speculative as to whether the trial result of the mechanic’s lien action would substantially limit the scope and duration of that deposition.

The current state of the pleadings in this action demonstrates that the pleadings will not likely be settled for some time. As noted in Defendant’s reply, the filing of a second amended complaint by the leave granted in this ruling allows Defendant to demur, further putting off the time when an answer and anticipated cross-complaint will be filed. There is similarly no guaranty that if a cross-complaint is filed the response would not be a demurrer entailing additional delay before the pleadings are settled as among the parties now appearing in this action. To be effective in the manner argued by Defendant, Marshall’s deposition would need to be delayed for a considerable period of time. On the other hand, an early deposition may be useful in advancing the litigation.

Against the usefulness of an early deposition is weighed the burden of a potential second session of Marshall’s deposition. Although a second session of a deposition is by its nature a burden, that burden is not a heavy one. The litigants are sophisticated parties addressing claims arising from a complex business transaction. Litigation necessarily involves some burden. (West Pico Furniture Co. of Los Angeles v. Superior Court (1961) 56 Cal.2d 407, 418 [“some burden is inherent in all demands for discovery”].) On the evidence presented by the parties, the court is not persuaded that the burdens inherent in the potential for a second or subsequent session of Marshall’s deposition outweigh the benefits of avoiding delay in this discovery or that those burdens would result in an injustice.

Accordingly, after considering all of the evidence and arguments of the parties, the court determines that a protective order as requested by this motion is not warranted. The motion will therefore be denied.

Notwithstanding denying the motion, the court finds that Defendant acted with substantial justification in making this motion. The court will deny Plaintiffs’ request for monetary sanctions. (Code Civ. Proc., § 2025.420, subd. (h).)