Court Opinion

ID: 3168669
Source: CourtListenerOpinion
Date Created: 2016-01-11 23:01:54.872269+00
Date Added: 2024-06-11T11:57:13.796190
License: Public Domain

Filed 1/11/16 Crawford v. Elegant Angel CA2/4
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                 DIVISION FOUR

JIM CRAWFORD et al.,                                                    B261897

         Plaintiffs and Appellants,                                     (Los Angeles County
                                                                        Super. Ct. No. BC550028)
         v.

ELEGANT ANGEL, INC. et al.,

         Defendants and Respondents.

         APPEAL from an order of the Superior Court of Los Angeles County, Elizabeth
Allen White, Judge. Reversed.
         Blut Law Group, Elliot S. Blut, Sara V. Katz for Plaintiffs and Appellants.
         Law Office of Anja Reinke, Anja Reinke for Defendants and Respondents.
                                    INTRODUCTION

       Plaintiffs and appellants Jim and Wendy Crawford (collectively, plaintiffs) sued
defendants Elegant Angel, Inc. and Patrick Collins, Inc. (collectively, defendants) for
breach of contract and promissory estoppel, alleging that defendants failed to honor an
agreement to either sell their business to plaintiffs or pay them $200,000 for their efforts
to improve the business. The trial court sustained defendants’ demurrer to the first
amended complaint with leave to amend. Rather than amend the existing causes of
action, plaintiffs decided to proceed on a second amended complaint with three new
claims and an additional defendant; therefore, they timely filed a motion requesting leave
to file their proposed second amended complaint. The trial court, however, granted
defendants’ ex parte application to dismiss the action pursuant to Code of Civil Procedure
section 581, subdivision (f)(2),1 based on plaintiffs’ failure to file an amended complaint
within the allotted time period. Plaintiffs appeal from the judgment entered pursuant to
that dismissal, arguing that the court abused its discretion in dismissing their case and
refusing to consider their motion for leave to amend. We agree and therefore reverse the
dismissal.
                     FACTUAL AND PROCEDURAL HISTORY
       Plaintiffs filed their complaint on July 1, 2014 and their first amended complaint
(FAC) on July 15, 2014. The FAC alleged causes of action for breach of contract and
promissory estoppel against defendants. According to the FAC, defendants own an adult
industry production company called Elegant Angel Productions (the business). In August
2013, plaintiffs entered into a written contract with defendants for the purchase of the
business. Plaintiffs alleged “[i]n reliance on the Contract,” they operated the business for
ten months, “providing services and management that improved” the business. The
contract allegedly provided that plaintiffs would receive $200,000 or the “last fifty
features” produced by defendants as payment for their services in the event there was

       1
       All further statutory references are to the Code of Civil Procedure unless
otherwise stated.

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“any delay” in their purchase of the business. Plaintiffs alleged that defendants refused to
complete the payment due under the contract and “refused to comply with [their]
obligations under the terms of the Contract.”
       The FAC attached as an exhibit a written agreement on Elegant Angel letterhead,
purportedly signed and notarized by plaintiffs and by Patrick Collins on behalf of
defendants. In contrast to the allegations of the FAC, the written document stated that
plaintiffs were “strongly interested in buying” the business “for a to be determined
amount,” noted various contingencies related to the ongoing “divorce proceedings
between Patrick Collins and Cindy Collins,” stated that it was “understood by all parties,
that currently Jim and Wendy Crawford are operating the company at no cost to the
company and are doing this so they can ascertain a separate evaluation of said company,”
and provided for the $200,000 payment if the “parties decide that they want to proceed
with the purchase of [the business] and anything interrupts the finalization of the intent of
both parties.”
       Defendants demurred to the FAC, arguing that the written contract was “too
indefinite to enforce” and that plaintiffs failed to allege sufficient facts to support either
cause of action. Plaintiffs filed an opposition and a motion for leave to file a second
amended complaint, seeking to add causes of action for breach of oral contract, unjust
enrichment, and quantum meruit. They argued that because of the infirmities in the
written contract drafted by “Defendant Collins,” plaintiffs “need to include the oral part
of the contract separately and include equitable causes of action.” Plaintiffs’ motion for
leave to amend was set for hearing on December 24, 2014.
       The trial court sustained the demurrer on November 4, 2014, with 20 days leave to
amend. The parties waived notice of the order sustaining the demurrer, thus the deadline
for plaintiffs to amend their complaint pursuant to the court’s order fell on November 25,
2014. (§ 472b) Rather than filing an amended complaint, on November 19, 2014

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plaintiffs filed and served a second motion for leave to file a second amended complaint.2
This time, plaintiffs’ proposed second amended complaint (SAC) omitted both of the
original causes of action and instead alleged claims for fraudulent inducement, breach of
oral contract, and quantum meruit; the proposed SAC also added Patrick Collins as an
individual defendant. In their motion, plaintiffs argued that the “information gleaned”
from depositions taken in the case “changed the framing of Plaintiffs’ case and made it
clear that a Second Amended Complaint is needed” in order to reflect the oral promises
allegedly made by Collins to plaintiffs. Plaintiffs attached a copy of their proposed SAC
to their motion and asked that it be “deemed filed and served as of the date the motion is
granted.” The motion was set for hearing on January 20, 2015.
       On December 10, 2014, defendants filed an ex parte application to dismiss the
FAC with prejudice and enter judgment in their favor. Defendants argued that dismissal
was warranted pursuant to section 581, subdivision (f)(2) because plaintiffs failed to file
an amended complaint within the time allowed by the court to do so. Plaintiffs opposed
the ex parte application the same day, contending that they had “diligently pursued the
case” but the “amendments that the Crawfords need require leave to amend.” Thus,
plaintiffs argued that they were procedurally required to move for leave to amend their
complaint, and did so within the 20 days allotted by the court.
       The court heard argument and then granted the ex parte application on December
10, 2014.3 The FAC was thereby dismissed with prejudice and judgment was entered in
favor of defendants. The trial court also vacated the hearing date for plaintiffs’ pending
motion for leave to amend. Plaintiffs timely appealed from the judgment.4

       2
         Plaintiffs subsequently took the December 24, 2014 hearing date for their first
motion for leave to amend off calendar.
       3
         There are no transcripts of the hearings on defendants’ demurrer or their ex parte
application.
       4
         Following dismissal, plaintiffs filed their proposed SAC as a new action.
However, both parties have contended that this appeal is not moot, as defendants have
purportedly argued below that part or all of the second action should be barred by res
judicata based on the proceedings in the instant case. We do not reach that issue here,
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                                       DISCUSSION
       Plaintiffs’ sole argument on appeal is that the trial court abused its discretion by
dismissing the action and refusing to rule on their motion for leave to file the SAC. They
do not, as defendants contend, challenge the underlying ruling sustaining the demurrer to
the FAC, nor do they ask us to decide whether the court should have granted their motion
and allowed them to file the SAC. We agree that this appropriately frames the scope of
our review in this case.
       Pursuant to section 581, subdivision (f)(2), the court “may dismiss the complaint”
when “after a demurrer to a complaint is sustained with leave to amend, the plaintiff fails
to amend it within the time allowed by the court and either party moves for dismissal.” A
defendant may seek dismissal following a plaintiff’s failure to amend by way of an ex
parte application. (Cal. Rules of Court, rule 3.1320(h).) We review a decision to grant or
deny a party’s request to dismiss pursuant to section 581, subdivision (f)(2), for abuse of
discretion. (See Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603,
612; Contreras v. Blue Cross of California (1988) 199 Cal.App.3d 945, 948.)
       Plaintiffs contend that it was an abuse of discretion for the trial court to dismiss
their complaint for failure to amend when they had timely filed a motion seeking leave to
file their proposed SAC. We agree. Plaintiffs here took the appropriate steps under the
rules to place their proposed amended complaint before the court. Given plaintiffs’
representation that they no longer believed their original causes of action were viable
based on the court’s ruling on the demurrer and facts developed during discovery,
plaintiffs could not have, in good faith, simply filed an amended complaint with those
causes of action. (See §128.7 (pleading must contain claims “warranted by existing law”
and allegations that have “evidentiary support”); Peake v. Underwood (2014) 227
Cal.App.4th 428, 441 [“even though an action may not be frivolous when it is filed, it
may become so if later-acquired evidence refutes the findings of a prefiling investigation
and the attorney continues to file papers supporting the client’s claims”].) As defendants

and leave for the trial court the decision of how best to manage the two pending actions
upon remand.
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acknowledge, the court granted leave to amend only as to those existing causes of action,
it did not “grant Plaintiffs permission to add any new causes of action.” “Following an
order sustaining a demurrer . . . with leave to amend, the plaintiff may amend his or her
complaint only as authorized by the court’s order. [Citation.]” (Harris v. Wachovia
Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) As such, plaintiffs were required to
seek leave to file their proposed SAC, as it contained new claims and added a defendant.
(See ibid. [“The plaintiff may not amend the complaint to add a new cause of action
without having obtained permission to do so, unless the new cause of action is within the
scope of the order granting leave to amend.”]; People ex rel. Department of Public
Works. v. Clausen (1967) 248 Cal.App.2d 770, 785 [leave to amend complaint does not
constitute leave to amend to add new defendant].) Plaintiffs properly sought leave by
filing their motion within the time allowed by the court to amend their complaint.
Indeed, had plaintiffs simply filed their proposed SAC without seeking leave to do so, the
SAC could have been subject to a motion to strike. (See § 436, subdivision (b).)
       Moreover, plaintiffs attached their proposed SAC to their motion for leave to
amend, timely served it on defendants, and requested that, in the event the court granted
their motion, the SAC be deemed filed and served as of that date. As such, there was
nothing further plaintiffs were required to do in order to place their proposed new
pleading before the court and to provide defendants with notice of its contents. This case
thus stands in contrast to those cited by defendants, which involved untimely conduct by
plaintiffs in attempting to amend a complaint. (See Leader, supra, 89 Cal.App.4th at pp.
613-615 [no error in denial of untimely motion for leave to amend], Harding v. Collazo
(1986) 177 Cal.App.3d 1044, 1054 [affirming dismissal following failure to timely
amend].) Nor have defendants suggested any prejudice or undue delay as a result of
plaintiffs’ attempts to amend the complaint, given the preliminary stage of the
proceedings here.5 Where a plaintiff fails to amend a pleading to state a cause of action

       5
        Defendants’ argument that plaintiffs failed to “exhaust their remedies” by seeking
various forms of relief before the trial court prior to appeal lacks citation to any authority
and is not persuasive.
                                              6
against a defendant, that failure is treated as “an admission that plaintiff has stated the
case as strongly as he can and there are no facts that could be alleged to cure the defect,”
thereby warranting dismissal with prejudice under section 581. (Cano v. Glover (2006)
143 Cal.App.4th 326, 329-330.) Here, on the other hand, plaintiffs timely contended that
they could cure the defects in their prior complaint, but needed leave of the court to do
so.
       The court and defendants were clearly aware of plaintiffs’ desire to amend the
complaint and their belief that additional leave of court was required—the court noted in
the minutes of the hearing on defendants’ demurrer that plaintiffs’ first motion for leave
was pending, and then vacated the hearing date for plaintiffs’ second motion for leave in
its dismissal order. It is unclear from the limited record before us whether the trial court
failed to consider plaintiffs’ arguments or believed it lacked the discretion to deny the ex
parte application based on section 581. Either way, the court abused its discretion by
dismissing this action under the circumstances. (See, e.g., Contreras, supra, 199
Cal.App.3d at p. 948 [trial court had discretion to grant or deny motion to dismiss for
failure to timely amend and was not required to “dismiss the action first then vacate the
order of dismissal pursuant to Code of Civil Procedure section 473”].)
       This result comports with our strong policies favoring liberal amendment of
pleadings, disposition of cases on their substantial merits, and resolution of all disputed
matters between the parties in the same lawsuit. (See, e.g., Douglas v. Superior Court
(1989) 215 Cal.App.3d 155, 158 [“California courts have ‘a policy of great liberality in
allowing amendments at any stage of the proceeding so as to dispose of cases upon their
substantial merits where the authorization does not prejudice the substantial rights of
others.’ [Citation.]”] Morgan v. Superior Court of Los Angeles County (1959) 172
Cal.App.2d 527, 530 [“it is a rare case in which ‘a court will be justified in refusing a
party leave to amend his pleading so that he may properly present his case’”].) We do
not reach the question of whether the trial court should have granted plaintiffs’ motion for
leave to file their proposed SAC; we simply conclude that the trial court should have

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decided the merits of that motion, rather than dismissing this action prematurely based on
a purported technical violation.
                                     DISPOSITION
       Reversed and remanded for proceedings consistent with this opinion. Plaintiffs
are awarded their costs on appeal.

             NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                      COLLINS, J.

We concur:

EPSTEIN, P. J.

WILLHITE, J.

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