Case Number: BC611130 Hearing Date: March 20, 2017 Dept: 37

CASE NAME: ABS-CBN Global Remittance, Inc. v. Island Pacific Supermarkets, Inc., et al.
CASE NUMBER: BC611130
HEARING DATE: 3/20/17
CALENDAR NUMBER: 7
DATE FILED: 1/22/16
TRIAL DATE: 8/22/17
NOTICE: OK
PROCEEDING: Motion for Leave to File First Amended Complaint
MOVING PARTY: Plaintiff ABS-CBN Global Remittance, Inc.
OPPOSING PARTY: Defendants Nino Jefferson Lim; Island Pacific Supermarkets, Inc.; Kababayan Development, Inc.; Island Pacific Enterprises, Inc.; Manila Bay Foods, Inc.; Vermont Seafood Market, Inc.; Mega Foods, Inc.; Azusa Supermarket, Inc.; Canoga Supermarket, Inc.; Island Pacific Distribution, Inc.; Island Pacific National City, Inc.; Island Pacific Oxnard, Inc.; San Jose International Market, Inc.; Island Pacific Pittsburg, Inc.
OPPOSING PARTY: Defendants Ryan Go and Fei Lu

COURT’S TENTATIVE RULING

The motion for leave to file the First Amended Complaint is granted in part and denied in part. As more fully set forth below, the motion is denied in the following two respects: (1) as to the assertion of the proposed sixth cause of action against Fei Lu, and (2) as to the addition of Elizabeth Lim. Apart from these two exceptions, however, the motion is granted. Counsel for Plaintiff to give notice.

STATEMENT OF THE CASE

The facts of the case are set forth in the court’s June 9, 2016 and June 16, 2016 rulings denying Defendants’ motions for judgment on the pleadings. Plaintiff alleges it conducts a money transfer business that operates on a brief delay between the time when, pursuant to its customers’ instructions, Plaintiff transfers money to its customers’ beneficiaries in the Philippines, and the time when Plaintiff collects repayment for the transfers from its customers. Plaintiff alleges it is a victim of fraud perpetrated by William Lim and his family, and the family’s business and corporate entities. Plaintiff alleges that it previously filed suit (Case No. BC571538) against William Lim’s son (Nathaniel Miave Jimenez) and DL Global Foods, Inc. (DL Global Foods), on the ground that Mr. Jimenez and DL Global Foods failed to pay for more than $2 million in funds advanced by Plaintiff. Plaintiff avers that the parties settled the lawsuit and that, when Mr. Jimenez and DL Global Foods defaulted on their obligations under the settlement agreement, it obtained a judgment in the amount of $1,708,832.05, as well as interest, attorney fees, and costs. This action arises out of events that have allegedly transpired since the entry of judgment in the prior action. Plaintiff filed this action on February 22, 2016, against five members of the Lim family and thirteen entities allegedly controlled by the Lim family (the Lim Entities), asserting causes of action for (1) fraudulent conveyance, (2) fraud, (3) aiding and abetting breach of fiduciary duty, and (4) conversion.

DISCUSSION

Plaintiff now moves for leave to file the First Amended Complaint (FAC). In response, Jefferson “Nino” Lim and the Lim Entities have filed an opposition. Ryan Go and Fei Lu have also filed their own opposition. Plaintiff has submitted a joint reply brief in response to both oppositions. Having considered the parties’ respective arguments, and for the reasons set forth below, the court grants the motion in part and denies it in part.

I. Applicable Legal Principles

The court may, in furtherance of justice, allow a party to amend any pleading upon any terms as may be proper. (Code Civ. Proc., §§ 473, subd. (a), 576.) California courts liberally exercise discretion to permit the amendment of pleadings in light of a strong policy favoring resolution of all disputes between parties in the same action. (Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939; Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.) Accordingly, requests for leave to amend generally will be granted unless the party seeking to amend has been dilatory in bringing the proposed amendment, and the delay in seeking leave to amend will cause prejudice to the opposing party if leave to amend is permitted. (Hirsa v. Superior Court (1981) 118 Cal.App.3d 486, 490.) Absent a showing of prejudice, delay in seeking to amend, by itself, generally will not justify a denial of leave to amend. (Higgins v. Del Faro (1981) 123 Cal.App.3d 558, 564-565.) Thus, the policy favors amendment in the absence of both unexcused delay and prejudice. The decision on a motion for leave is directed to the sound discretion of the trial court. (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2014) ¶¶ 6:637 et seq.)

II. Analysis

In the FAC, Plaintiff seeks to make three primary changes to the complaint. First, Plaintiff seeks to name Elizabeth Lim (the mother of brothers Nino Lim and Mr. Jimenez) as a defendant based on evidence that she was involved in the alleged fraud. Second, Plaintiff seeks to add a fifth cause of action for negligent hiring, supervision, and retention, as well as respondeat superior claims, against the Lim Entities based on evidence that Mr. Jimenez and Katherine Lim Go were employed by Island Pacific at the time they allegedly stole $2 million from Plaintiff and allegedly sent millions of dollars from the Island Pacific Cerritos location to other stores operated by the Island Pacific Defendants. Plaintiff contends that Mr. Jimenez and Ms. Go were previously involved in a Ponzi scheme, and that Ms. Go was previously involved in a scheme to defraud Wells Fargo that resulted in her becoming subject to millions of dollars in criminal and civil penalties and damages. Third, Plaintiff seeks to add a sixth cause of action for violation of Penal Code section 496 (i.e., receipt of stolen property) on the ground that documentary evidence shows members of the Lim family (e.g., Ryan Go and Fei Lu) and the Lim Entities received payments from Island Pacific Cerritos, which Plaintiff contends were stolen by Ms. Go and DL Global Foods.

Plaintiff contends that Defendants will not be prejudiced by the proposed amendments. Plaintiff notes that it provided Defendants with a copy of the proposed pleading on November 2, 2016, before any depositions had been taken, with a request that Defendants stipulate to avoid the filing of this motion. Plaintiff asserts that counsel for Ryan Go and Fei Lu initially expressed willingness to stipulate to the filing of the FAC, but that counsel for the Lim Entities and Nino Lim did not confirm they would not stipulate until January 3, 2017. Counsel apparently discussed the matter on January 27, 2017, at which point counsel for the Lim Entities and Nino Lim advised that his clients would consider stipulating to allow Plaintiff to amend. When Plaintiff did not hear back with respect to this conversation, Plaintiff filed the present motion on February 24, 2017. (Wald Decl. ¶¶ 3-8.) Plaintiff also contends that discovery is in its early stages (Kim Decl. ¶ 9), and notes that at the time of the hearing on the motion (i.e., March 20, 2017), trial remains five months away (i.e., August 22, 2017).

In their opposition, Nino Lim and the Lim Entities contend that the proposed amendments are either legally insufficient or based on facts Plaintiff has known for years, and that there is authority for the court to deny leave to amend on these grounds. For instance, they contend that Plaintiff has known Elizabeth Lim received unpaid remittances since the time she received them, and relying on Record v. Reason (1999) 73 Cal.App.4th 472, they argue Plaintiff’s delay in naming her as a defendant is inexcusable. (See id. at p. 487 [“appellant’s amendment arises from the same conduct as that in the original complaint”].) On this point, they also note that because Elizabeth Lim lives in the Philippines it will take Plaintiff some time to validly serve her the summons and complaint, and they argue this delay amounts to prejudice with trial five months away. They also contend that Plaintiff cannot reasonably allege Mr. Jimenez and Ms. Go engaged in the purported misconduct within the scope of their employment such that their alleged employers (i.e., Azusa and Kababayan) may be vicariously liable under the doctrine of respondeat superior. In addition, they contend that the proposed fifth and sixth causes of action, as alleged, would not withstand demurrer, and that because the time for filing a summary judgment motion is approaching, the present motion is an appropriate opportunity for the court to consider the merits of the proposed amendments.

Ryan Go and Fei Lu oppose the motion on a number of similar points. They contend that Plaintiff knew of the alleged improper transactions years ago and have delayed too long in seeking leave from the court with respect to the proposed amendments. They also contend that the amendments, like the entire complaint, are barred by the defense of unclean hands. This defense is based on the requirements imposed on agents of a money transmitter by the Financial Code, and the fact that the Department of Business Oversight, which oversees companies engaging in the money transfer business, determined that Plaintiff’s business practices were in certain respects deficient, particularly because Plaintiff’s agents did not timely transmit payments from its remitters. (See Rosen Decl., Exh. 1, pp. 169-170.) Like their co-defendants, they also contend that the proposed sixth cause of action fails to state sufficient facts because while receipt of stolen property is a specific intent crime (People v. Reyes (1997) 52 Cal.App.4th 975, 985), Plaintiff does not allege Defendants knew the money was stolen when they received it.

For her part, Fei Lu also notes that on February 22, 2017, she filed a motion for summary judgment or, alternatively, summary adjudication, which is currently scheduled to be heard on May 12, 2017. She argues that if the court were to permit the proposed amendments, she would be prejudiced by the potential for Plaintiff to argue that the motion is mooted or cannot be granted in light of the newly asserted sixth cause of action.

The motion requires a consideration of the position of the various defendants. Fei Lu demonstrates that she will be prejudiced by the addition of the sixth cause of action for receipt of stolen property in light of her pending summary judgment motion. Fei Lu’s motion was, of course, directed to the existing complaint. Given the nature of the case, Plaintiff might have included the new theory of liability in the initial complaint. At this point, however, if the motion for leave to amend were granted as to Fei Lu, her existing motion could be moot and even if not, if the motion were granted the new claim would mean that she would not be dismissed from the case. This amounts to prejudice, and the motion is therefore denied to the extent Plaintiff seeks to assert the sixth cause of action against Fei Lu. (See Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487 [“A different result is indicated ‘[w]here inexcusable delay and probable prejudice to the opposing party’ is shown”].)

Similarly, Plaintiff might have named Elizabeth Lim as a defendant in the initial complaint. As Defendants point out, the nature of Plaintiff’s business suggests that Plaintiff knew of Elizabeth Lim’s involvement at or near the time when she allegedly received the three unpaid remittances. Additionally, some of what Plaintiff describes as newly discovered evidence indicating Elizabeth Lim’s alleged liability consists of Plaintiff’s own documentary evidence, which it possessed before filing this lawsuit. (See Kim Decl., Exh. C [Plaintiff’s records showing three remittances to Elizabeth Lim in the amount of $2,990 on January 12, 2014; February 11, 2014; and April 1, 2015].) Plaintiff does not explain why Elizabeth Lim was not named a defendant in the initial complaint, and as Defendants point out, they will be prejudiced by the delay that will likely result in attempting to serve Elizabeth Lim in the Philippines. With trial only five months away, the delay caused by service attempts would be prejudicial, particularly since Plaintiff had records evidencing her Elizabeth Lim’s involvement before it filed suit. For these reasons, the motion is denied with respect to the addition of Elizabeth Lim. Additionally, the court notes that Plaintiff suggests it could simply file a new complaint against Elizabeth Lim. (Memorandum of Points and Authorities, p. 17:3-7.) This course would alleviate any prejudice to Defendants resulting from the additional delay bringing Elizabeth Lim into the case will likely cause.

Apart from these two instances, Defendants do not show prejudice sufficient to warrant denial of the other proposed amendments. While Defendants are correct that “the 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” (California Casualty Gen. Ins. Co. (1985) 173 Cal.App.3d 274, 280, emphasis added), however, “ ‘the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings’ ” (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048). Defendants’ remaining arguments are directed to the merits of the proposed amendments—i.e., whether Plaintiff states sufficient facts to support the proposed fifth cause of action for negligent hiring, supervision, and retention; the proposed claims for respondeat superior liability against the Lim Entities; and the proposed sixth cause of action for violation of Penal Code section 496. As Plaintiff points out in the reply, the court previously addressed some of Defendants’ arguments in ruling on the prior motions for judgment on the pleadings. In the event Defendants wish to challenge the proposed amendments on their merits, the proper procedure for doing so is by noticed motion at a later juncture.

Accordingly, the motion is denied in two respects—i.e., as to the assertion of the sixth cause of action against Fei Lu and as to the addition of Elizabeth Lim. Apart from these two exceptions, however, the motion is granted.
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1. Elizabeth Lim lives in the Philippines
2. Plaintiff contends that Mr. Jimenez was employed by Azusa Supermarket, Inc. (Azusa), and that Ms. Go was employed by Kababayan Development, Inc. (Kababayan).
3. “The complaint limits the issues to be addressed at the motion for summary judgment. The rationale is clear: It is the allegations in the complaint to which the summary judgment motion must respond.” (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1258.)
4. In the event the court were to deny the motion for summary judgment, it may entertain a motion for leave to amend to assert the proposed sixth cause of action against Fei Lu.
5. California Casualty was disapproved on other grounds by Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390.
6. The court notes Defendants’ point that although Plaintiff alleges that only Azusa and Kababayan were the respective employers of Mr. Jimenez and Ms. Go, Plaintiff nevertheless names all of the entity defendants with respect to the alleged respondeat superior liability. However, in light of the fact that Plaintiff also alleges that Defendants are the alter egos of one another, there may be a sufficient factual underpinning to support the amendments in this respect.
7. The court understands that Nino Lim and the Lim Entities plan to file motions for summary judgment. As to these planned motions, the court understands that the filing of an amended complaint could require an adjustment to the hearings dates for those motions. This matter can be addressed at the hearing.