Opinion
B226980
02-10-2012
PACIFIC MERCANTILE BANK, Plaintiff and Respondent, v. JOHN BOYD DESIGNS, INC., et al., Defendants and Appellants.
Brentwood Legal Services and Steven L. Zelig for Defendants and Appellants. Frandzel Robins Bloom & Csato, Thomas M. Robins, III, Hal D. Goldflam and Brad R. Becker for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC416217)
APPEAL from a judgment of the Superior Court of Los Angeles County, Ronald M. Sohigian, Judge. Affirmed.
Brentwood Legal Services and Steven L. Zelig for Defendants and Appellants.
Frandzel Robins Bloom & Csato, Thomas M. Robins, III, Hal D. Goldflam and Brad R. Becker for Plaintiff and Respondent.
Appellants John Boyd Designs, Inc.(JBD), JEBoyd, LLP (JEBoyd), John Boyd (Boyd), Maria E. Boyd aka Elizabeth M. Boyd, International Wood Processors, Inc. (IWP) and John Olsen (Olsen) appeal (1) judgment entered in favor of Pacific Mercantile Bank (PMB) in PMB's action on a promissory note, and (2) denial of leave to file their first amended cross-complaint. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
1. Background
Boyd is president of JBD, a California corporation and furniture manufacturer that operated out of premises located on Mettler and Crocker Streets in Los Angeles (Property). JEBoyd, a limited partnership of which Boyd is one of the general partners, owns the Property.
On January 4, 2005, JBD and PMB entered into two loan agreements that were secured by JBD's personal property. The first loan in the principal sum of $1.5 million was entered into pursuant to a business loan agreement and was evidenced by a Note and a commercial security agreement (Loan 1). The loan amount was later increased to $2 million. The second loan was in the principal sum of $781,000 was entered into pursuant to a business loan agreement and was evidenced by a note and a commercial security agreement (Loan 2). Boyd issued guarantees to PMB for these loans, and JEBoyd gave the bank a trust deed on the Property as security for Boyd's guaranty of Loan 1 (collectively loan documents).
The trust deed is not at issue in this appeal. As discussed post, the trust deed was the subject of PMB's fourth cause of action in its operative second amended complaint for judicial foreclosure against JEBoyd. PMB dismissed its fourth cause of action against JEBoyd before entry of judgment.
Beginning January 20, 2005, PMB and JBD modified the terms of both Loan 1 and Loan 2 in numerous particulars. Pursuant to these modifications, the due dates of Loan 1 and Loan 2 were extended to June 30, 2009 and September 1, 2009, respectively.
Sometime in late 2007 or early 2008, the Los Angeles Unified School District (LAUSD), in connection with its plans to build a new school near the site of JBD's operations, began to conduct environmental studies of the area in connection with its preparation of an Environmental Impact Report (EIR) pursuant to the California Environmental Quality Act (CEQA). The LAUSD's study indicated that JBD posed a "potentially significant acute health risk and odor impact[] to students and staff at the proposed school. Mitigation measures have been recommended that, if adopted and implemented by the business owner, would reduce the acute health risks to a less-than-significant level. Alternatively, these risks would be eliminated by moving the emissions source. This may be accomplished through change in the business operations at the facility or relocation of the business."
According to JBD, LAUSD agreed to relocate JBD because JBD had "grandfathered" permits allowing it to produce otherwise unlawful emissions. However, LAUSD allegedly later decided not relocate JBD, and in connection with its EIR for the project, adopted a mitigation plan that included installing equipment at JBD to reduce emissions, and otherwise imposed duties upon JBD that JBD contended would not allow it to operate.
On June 11, 2008, LAUSD commenced an eminent domain action against JBD. PMB was named as a defendant in that action. In June 2008, JEBoyd and PMB discussed the impact of the eminent domain action on JBD and JBD (1) agreed to sell the property, (2) agreed JBD would repay the funds due to PMB from the proceeds of the eminent domain action, and (3) PMB would loan JBD $300,000 from an existing credit line. This agreement was memorialized in an email from JBD to PMB dated June 12, 2008.
On July 6, 2008, the parties stipulated for the appointment of a receiver and for a preliminary injunction in aid of the receiver. The receiver, Robb Evans & Associates, LLC, was empowered to take possession of JBD's business premises and take possession of all of PMB's collateral securing JBD's obligations to PMB. The court ordered appointment of the receiver on July 6, 2008.
The trust deed pursuant to which the receiver was appointed is not at issue in this case.
In August 2008, the parties further agreed that (1) PMB would extend another $2 million line of credit to JBD, (2) the interest rate would increase, and (3) all of PMB's loans to JBD would be paid off from the proceeds of the eminent domain action. This agreement was memorialized in an email from PMB to JBD dated August 1, 2008.
In September 2008, JEBoyd entered into an agreement with Pacific Charter Schools to sell the property for $8 million pursuant to PMB's demand that it do so.
In May 2009, JBD advised PMB that LAUSD's estimated clean-up costs were between $5.8 million and $12.7 million, and these costs affected JBD's ability to sell the property. JBD needed PMB's assistance to conduct an environmental analysis of the property to clear the "cloud" LAUSD has placed on the property. At this time, PMB advised JBD that the eminent domain action could take years to litigate; LAUSD's claims of environmental problems at the property could make it difficult to sell; PMB would be sending a notice of default on the loans; and the parties should discuss liquidation of accounts receivable and inventory. After meeting, the parties agreed that the property would be sold through a listing rather than a foreclosure; if JBD agreed to appointment of a receiver, no foreclosure would take place; and the property would be sold by the receiver as soon as possible after an environmental analysis.
On July 2, 2009, the parties entered into a "Forbearance Agreement and Release" (Forbearance Agreement) pursuant to which JBD acknowledged that as of June 29, 2009, JBD owed PMB $2 million plus accrued interest of $23,333.33 on Note 1 and $381,000 plus accrued interest of $2,074.33 on Note 2, that such obligations were immediately due and payable in full, and reaffirmed the obligations of the loan documents for both loans.
The Forbearance Agreement's recitals provided that "[JBD] has defaulted in its obligations to [PMB] under the Loan Documents by, inter alia, [JBD's] ceasing of operations and business (the "Existing Default"). As a result of the Existing Default, [PMB] has elected to declare the outstanding indebtedness under the Loan Documents due and payable." One of the covenants of the Forbearance Agreement provided, "This Agreement is, in part, a reaffirmation of the obligations and indebtedness of [JBD] and [Boyd, as guarantor], and each of them, to [PMB] as evidenced by the Loan Documents. Therefore, [JBD] and [Boyd], and each of them, represent and warrant, covenant and agree, that except as specified herein, all of the terms and conditions of the Loan Documents are in full force and effect, without waiver or modification of any kind whatsoever."
Under the Forbearance Agreement, PMB agreed to forbear from enforcing the terms of Boyd's guaranty of both loans and commencing foreclosure proceedings on the deed of trust for a period of six months. Nowhere did the Forbearance Agreement contain any covenant that PMB would wait for the eminent domain proceeds before prosecuting its action on the loans. Rather, forbearance was specifically limited to (1) enforcement of Boyd's guarantees, and (2) foreclosure of the deed of trust, whether judicially or nonjudicially. The Forbearance Agreement provided that in the event of default, PMB could proceed immediately to enforce its rights under the loan documents for both notes, which included proceeding against JBD's personal property.
To Boyd's knowledge, at no time did PMB put the property up for sale or list it with a real estate agent. PMB never obtained an environmental report.
JBD also claimed that during the summer of 2009, Todd Wohl, an agent of PMB, came out to the property to survey the assets in connection with the receivership, and told Boyd a foreclosure would not occur and the receiver would list the property for sale when the building was cleaned up and the machinery sold. Wohl and Boyd discussed a $150,000 Rhodes finishing conveyor that Boyd claimed was leased and in which PMB did not have a security interest. Wohl nonetheless sent the conveyor to a scrap yard. Boyd also asserted that the receiver undervalued JBD's assets, failed to properly liquidate the fixtures and equipment, failed to maintain the property, and had an inadequate marketing plan.
2. The Parties' Pleadings
On June 22, 2009, PMB filed its complaint against JBD for breach of note, claim and delivery, appointment of a receiver, and injunctive relief; on July 6, 2009, PMB filed its first amended complaint against JBD and JEBoyd alleging five causes of action (breach of note (Loan 1); breach of note (Loan 2); claim and delivery; judicial foreclosure (against JEBoyd, the owner of the Property); and for appointment of receiver and injunctive relief. On January 6, 2010, JBD filed its answer to the complaint, asserting 23 affirmative defenses. On March 12, 2010, PMB filed its operative second amended complaint (SAC) stating the same five causes of action.
3. PMB's Motion for Summary Adjudication of the First Three Causes of Action of the SAC
On April 29, 2010, PMB moved for summary adjudication on the first three causes of action of its SAC (for breach of both notes and for claim and delivery), claiming it was entitled to judgment as a matter of law. In support, PMB's evidence established that Boyd admitted executing both notes and related loan documents; Boyd admitted defaulting on both notes; the notes had not been paid; and the PMB was owed $2,184,694.44 on Loan 1 and $411,141,33 on Loan 2 with interest thereon. PMB also argued it was entitled to claim and delivery of JBD's personal property collateral pursuant to the security agreement securing both notes.
Larry Mazo, PMB's vice president and special assets manager, submitted a declaration stating that he joined PMB in July 2009 and was responsible for the administration, monitoring, and collections due to PMB from JBD. Mazo was one of PMB's custodian of records pertaining to PMB's loans to JBD.
JBD's opposition argued PMB's motion was based on inadmissible evidence because Mazo's declaration lacked foundation (personal knowledge). JBD submitted the declarations of Boyd and John Olsen (chief financial officer of JBD) and contended those declarations established triable issues of fact existed because PMB foreclosed prematurely on the collateral, has not sold the collateral, and failed to address JBD's affirmative defenses, including that PMB caused or contributed to its damages by failing to mitigate its damages. JBD filed 73 objections to PMB's supporting declarations on the grounds of lack of foundation, hearsay, improper opinion, and relevance grounds.
In his deposition, Mazo testified that he reviewed the JBD loan documents "possibly once;" the loan documents were prepared prior to his employment at PMB.
In reply, PMB filed 93 objections to JBD's evidence filed in support of its opposition to PMB's motion for summary adjudication.
On June 11, 2010, before PMB's summary adjudication motions had been heard, JBD filed a first amended cross-complaint without obtaining leave of court. The first amended cross-complaint named, for the first time, PMB as a cross-defendant.
4. Hearing on PMB's Summary Judgment Motion
At the initial hearing held June 14, 2010, the court overruled all of JBD's evidentiary objection except for No. 53. The court found Mazo's declaration sufficiently set forth a foundation for the business records. The matter was continued to June 17, 2010 to permit the court to rule on PMB's objections and the merits of the motion.
At the continued hearing June 17, 2010, the court sustained all of PMB's evidentiary objections except for Nos. 6, 7, 8, 11, 13, 71, and 81. Turning to the merits of PMB's motion, the court rejected JBD's argument that PMB was required, as part of its burden on summary judgment, to negate JBD's affirmative defenses. The court found that JBD's contention that PMB was preventing it from paying down the indebtedness by improper disposition of JBD's equipment and inventory was supported by inadmissible evidence, and thus JBD had not raised a triable issue of fact. The court granted summary adjudication on the issue of whether it was entitled to judgment on the first and second causes of action (for the indebtedness on Loan 1 and Loan 2), and granted summary judgment on PMB's cause of action for claim and delivery of JBD's personal property based upon the security agreements. The court further ordered that the receiver remain in possession of the collateral until it was disposed of and a final accounting was made and approved. PMB agreed to dismiss its remaining causes of action for judicial foreclosure and appointment of a receiver.
On June 20, 2010, the court issued its order in which it found for PMB in the amount of $2,381,000 plus interest, and granted PMB the right to claim and delivery and immediate possession of the collateral. The court found PMB's evidence established conclusively that the loans were due and payable and in default, and that pursuant to the terms of the security agreements, PMB was entitled to possession of the collateral. The court found the recitals of the Forbearance Agreement conclusively established the loans were due and payable, the loans were in default, and this gave PMB the right to commence an action thereon.
5. JBD's Ex Parte Application to File First Amended Cross-complaint
On June 23, 2010, JBD moved ex parte for leave to file its first amended cross-complaint, arguing that it could file an amended complaint as a matter of right pursuant to Code of Civil Procedure section 472, and that policy favored granting leave to amend prior to trial. PMB opposed, arguing that the cross-complainants had not sought leave of court to file and serve the first amended cross-complaint as required by section 428.50, subdivisions (b). In October 2009, the court set trial to commence on July 26, 2010.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
The court heard PMB's motion to strike JBD's first amended cross-complaint on shortened notice on June 29, 2010, and granted the motion on the grounds it did not comply with section 436, subdivision (b) as not being in conformity the laws of the state because it was not filed in compliance with section 428.50, subdivisions (a) and (b).
DISCUSSION
JBD argues triable issues of fact exist principally with respect to PMB's modification of the loan agreements, its failure to properly market the collateral or mitigate its damages, and its attempts to prevent performance or otherwise fabricate breaches of the loan agreements, thereby precluding summary judgment. JBD also contends PMB's reply to its opposition to summary adjudication improperly included new documents, PMB improperly withheld key discovery, the trial court erred in failing to grant JBD a continuance of the motion, and the trial court erred in striking JBD' first amended cross-complaint.
I. STANDARD OF REVIEW
"[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) "Once the [movant] has met that burden, the burden shifts to the [other party] to show that a triable issue of one or more material facts exists as to that cause of action." (§ 437c, subd. (p)(1); Aguilar, at p. 850.) A triable issue of material fact exists where "the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Aguilar, at p. 850.) Where summary judgment has been granted, "[w]e review the trial court's decision de novo, considering all of the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports." (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)
II. JBD'S DEFENSES DO NOT RAISE A TRIABLE ISSUE OF FACT
The parties do not dispute that JBD breached the loan agreements. The elements of a breach of contract claim are the existence of a contract, the plaintiff's performance or excuse for nonperformance, the defendant's breach, and resulting damages. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) JBD admits that it is indebted to PMB on both loans, that it defaulted on the loans, and that it executed the document giving PMB a security interest in its fixtures and equipment.
As a consequence, the burden shifted to JBD to rebut PMB's showing by establishing that triable issues of fact existed with respect to one of its affirmative defenses. As a general rule, an affirmative defense constitutes "new matter" that is an independent reason the plaintiff should not be able to recover on its claims. As explained in Walsh v. West Valley Mission Community College Dist. (1998) 66 Cal.App.4th 1532, "'Under Code of Civil Procedure section 431.30, subdivision (b)(2), the answer to a complaint must include "[a] statement of any new matter constituting a defense." The phrase "new matter" refers to something relied on by a defendant which is not put in issue by the plaintiff. [Citation.] Thus, where matters are not responsive to essential allegations of the complaint, they must be raised in the answer as "new matter." [Citation.] Where, however, the answer sets forth facts showing some essential allegation of the complaint is not true, such facts are not "new matter," but only a traverse. [Citation.]' [Citation.]" (Id. at p. 1546, italics omitted.)
JBD raised numerous affirmative defenses in the trial court. On appeal, its brief focuses on the following areas where it contends triable issues exist:
1. Prevention of Performance. JBD argues PMB engaged in conduct that effectively prevented performance by JBD, as set forth in the Boyd and Olsen declarations. JBD does not elaborate on the evidence in those declarations establishing excuse of its performance, but our review of those declarations shows that JBD asserted PMB failed to put the property up for sale and failed to prepare an environmental report. JBD further contends PMB fabricated breaches by making a number of false promises and assurances, and then reneged on them.
Where one party to a contract prevents the performance of another, the other party's nonperformance does not constitute breach. (See, e.g., Hines v. Kukes (2008) 167 Cal.App.4th 1174, 1184-1185.) Here, JBD's claim fails as a matter of law because in the Forbearance Agreement, JBD admitted that it was in breach of the loan agreements. In that agreement, PMB only agreed to forebear from executing on Boyd's guarantees and from foreclosing on the real property. Nowhere does the Forbearance Agreement preclude PMB from suing on the notes, or foreclosing on the personal property collateral securing those notes.
2. Mitigation. JBD contends triable issues exist whether PMB failed to mitigate its damages by failing to take all steps to secure "'just compensation'" from LAUSD in the eminent domain action and by failing to market the property, including the real estate, and to respond to individuals interested in purchasing such property.
"A plaintiff cannot be compensated for damages which he [or she] could have avoided by reasonable effort or expenditures. [¶] . . . [¶] The doctrine does not require the injured party to take measures which are unreasonable or impractical or which would involve expenditures disproportionate to the loss sought to be avoided or which may be beyond his [or her] financial means." Reasonableness is evaluated in light of the situation at the time of the loss. (Green v. Smith (1968) 261 Cal.App.2d 392, 396.)
We interpret JBD's first argument not as a mitigation argument, but as an argument that because the purported loan modifications stated that PMB would be paid from the proceeds of the eminent domain action, PMB was precluded from suing on the notes or looking to the personal property collateral. However, the Forbearance Agreement, entered into after the purported loan modification agreements, by its terms does not require PMB to forbear from taking action on its personal property collateral. Thus, this mitigation argument fails.
JBD's second argument that the receiver and/or PMB failed to properly account for, value, or dispose of the personal property collateral also fails because it is an attack on the conduct of the receiver, who is not an agent of PMB but a fiduciary serving the interests of both parties. "A receiver is an officer or representative of the court appointed to manage property that is the subject of litigation. [Citation.] The receiver is not an agent of either party to the action. The receiver represents all persons interested in the property. [Citations.] In other words, a receiver acts as a fiduciary on behalf of both parties as a representative and officer of the court." (Security Pacific National Bank v. Geernaert (1988) 199 Cal.App.3d 1425, 1431-1432.) "Property in receivership remains under the court's control and continuous supervision . . . ." (City of Santa Monica v. Gonzalez (2008) 43 Cal.4th 905, 930.)
4. Modification. JBD contends PMB entered into at least three modifications of the loan documents in June 2008, August 2008 and May 2009 pursuant to which it promised to list the Property for sale in a normal manner, pursue its claims in the eminent domain action, loan JBD $300,000 from an existing line of credit, extend the $2 million credit line, and if JBD stipulated to the appointment of a receiver, PMB would assist in an environmental study and sell the property without foreclosure. JBD contends PMB breached these modifications because it never obtained an environmental report, never listed the Property for sale, did nothing to pursue its rights in the eminent domain action, and failed to respond to the inquiries of potential buyers.
These arguments lack merit because even if we were to conclude the purported modifications were valid, they were superseded by the Forbearance Agreement which was executed after the purported loan modifications JBD relies on. The Forbearance Agreement's recitals and reaffirmation state that "all of the terms and conditions of the Loan Documents are in full force and effect, without waiver or modification of any kind whatsoever." Thus, PMB had no contractual obligation to list the Property for sale or wait for the proceeds of the eminent domain action. To the extent the purported modifications represent new or different agreements than those embodied in the loan documents and reaffirmed in the Forbearance Agreement, JBD fails to show from its conclusory allegations of wrongdoing how it has been harmed by PMB"s failure to obtain an environmental report or list the property, which was the subject of eminent domain proceedings, for sale. In any event, at issue on summary adjudication were PMB's claims on the notes and for foreclosure of personal property, rendering these arguments by JBD irrelevant.
5. Excuse. JBD argues its performance was excused because PMB failed to fulfill its obligations, thereby excusing JBD. In particular, JBD contends PMB failed to mitigate its damages, promised not to foreclose but agreed to sell the property according to normal marketing procedures, and otherwise made numerous promises and assurances to JBD. Excuse is a defense to a claim for breach of contract. (See, e.g., Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Here, however, JBD's arguments amount to nothing more than a reiteration of its arguments that the purported modifications were valid and operated to preclude PMB from suing on the notes or foreclosing on the personal property collateral. Such conduct was expressly permitted by the Forbearance Agreement.
6. Estoppel. JBD argues factual issues exist whether PMB forfeited, waived or is otherwise estopped to assert the alleged breaches based on its conduct in entering into the loan modifications and other representations it made to JBD.
We disagree. Equitable estoppel requires a showing that: "'"(1) the party to be estopped must be apprised of the facts; (2) he [or she] must intend that his [or her] conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he [or she] must rely upon the conduct to his [or her] injury."'" (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 987.) Here, any reliance by JBD on the purported loan modifications is misplaced, as the Forbearance Agreement conclusively gave PMB the right to sue on the notes and otherwise foreclose on the personal property collateral, the only two issues set forth in the complaint.
7. Promissory Estoppel. JBD contends triable issues of fact exist whether PMB is promissorily estopped from asserting breach because JBD relied on numerous promises PMB made, relying on Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1041 (Garcia).
California has adopted the Restatement view of promissory estoppel claims. (Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 310.) "The elements of a promissory estoppel claim are '(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.'" (U.S. Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 905.)
In Garcia, supra, 183 Cal.App.4th 1031, an action for wrongful foreclosure based in part upon a theory of promissory estoppel, the plaintiffs' property was in foreclosure, but they arranged an extension of the trustee's sale with their lender based upon their representation they would cure the default with proceeds of a refinance of another property owned by the plaintiffs. (Id. at p. 1035.) The lender represented the foreclosure sale would be postponed to August 30 and that the parties would "'see where [they] are after that'" and that the property would not go to foreclosure. (Ibid.) Nonetheless, the bank foreclosed on the property on August 30, although the plaintiffs had received the proceeds of their refinance. (Id. at pp. 1035-1036.) Garcia found the plaintiffs presented sufficient evidence of reliance to create issues of fact whether the bank was promissorily estopped from proceeding with the foreclosure sale. (Id. at pp. 1038-1044.)
Garcia could not be more different that the instant case. Here, JBD cannot establish reliance on any of the purported modifications because the later-executed Forbearance Agreement establishes the parties agreed the loan documents were in full force and effect, JBD was in default under the loans, and PMB was not waiving any rights it had under the agreements to enforce the notes.
7. Premature Foreclosure. JBD contends PMB commenced foreclosure actions in June 2008 when PMB told JBD the property would have to be sold and PMB would not renew the loans and that this was before any default or the actual foreclosure commenced in January 2010. JBD's argument lacks merits because the June 2008 discussion between the parties, as well as the foreclosure, relate to the Property secured by the trust deed, thereby rendering JBD's arguments irrelevant for purposes of PMB's claim on the notes and right to possession of the personal property collateral.
III. REQUEST FOR CONTINUANCE
JBD contends it was significantly prejudiced by PMB's "discovery gamesmanship," namely its failure to produce persons for deposition until the eve of discovery cut-off and producing Mazo, who had no personal knowledge of the loan documents, for deposition. In its opposition to PMB's motion, JBD requested a continuance to permit it to conduct additional discovery, arguing that PMB had withheld key discovery. JBD contends the deposition of Ed Tapiro, the loan officer who was at PMB and is no longer in the bank's employment, as well as other individual officers who interacted with Boyd and Olson, is required to establish its affirmative defenses. The court denied the motion, finding that the facts JBD hoped to discover would not change the outcome of the summary judgment motion, and that PMB's supplemental declaration of Hal Goldflam, a PMB officer, established no discovery gamesmanship had taken place.
Section 437c, subdivision (h) provides that "[i]f it appears from the affidavits submitted in opposition to a motion for summary judgment . . . that facts essential to justify opposition may exist but cannot, for reasons stated, then be presented, the court shall deny the motion, or order a continuance to permit affidavits to be obtained or discovery to be had. . . . The application to continue the motion to obtain necessary discovery may also be made by ex parte motion at any time on or before the date the opposition response to the motion is due." (§ 437c, subd. (h).) "The statute mandates a continuance of a summary judgment hearing upon a good faith showing by affidavit that additional time is needed to obtain facts essential to justify opposition to the motion. [Citations.] Continuance of a summary judgment hearing is not mandatory, however, when no affidavit is submitted or when the submitted affidavit fails to make the necessary showing under section 437c, subdivision (h). [Citations.]" (Cooksey v. Alexakis (2004) 123 Cal.App.4th 246, 253-254.) "A declaration in support of a request for continuance under section 437c, subdivision (h) must show: '(1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts. [Citations.]' [Citation.]" (Id. at p. 254.)
Here, JBD reaffirmed, in the Forbearance Agreement, that it was in default under both loans, and that PMB had a security interest in JBD's personal property, and thus JBD's liability was not in dispute; what was in dispute was whether its affirmative defenses created a triable issue of fact. The purposed modifications of the loan documents were superseded by the Forbearance Agreement; in any event, that agreement did not prevent assertion of PMB's rights under the notes or to the personal property collateral, thereby rendering the proposed discovery irrelevant. Thus, even assuming JBD's allegation so discovery gamesmanship are true, the additional discovery would not have changed the outcome of the summary judgment.
IV. PMB'S REPLY TO SUMMARY JUDGMENT
Finally, JBD argues that PMB improperly included documents in its reply to JBD's opposition, including a new declaration and additional evidence in contravention of section 437c, which makes no provision for additional evidence in reply documents.
In general, the moving party on summary judgment may not rely on new evidence filed with its reply papers. (San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 316.) However, the trial court has discretion to consider new evidence in reply papers if the opposing party has an opportunity to respond. (Plenger v. Alza Corp. (1992) 11 Cal.App.4th 349, 362, fn. 8.)
Here, although the admission of PMB's reply evidence may have been improper, even if its admission and consideration was error, JBD fails to make any argument that such error was prejudicial. Without a showing of prejudice, JBD's argument fails. "'No judgment shall be set aside, or new trial granted, in any cause . . . for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice."' (In re Jesusa V. (2004) 32 Cal.4th 588, 624.)
V. WITHHOLDING OF KEY DISCOVERY
JBD complains that PMB belatedly produced Mazo for deposition, although Mazo had no knowledge of any of the underlying loan transactions prior to his hire by PMB in July 2009; further, PMB did not produce individual officers of PMB until the week before discovery cutoff, and a key loan officer (Ed Tapiro) was no longer in PMB's employment. JBD contends this discovery would have established PMB did enter into the modifications described by Boyd and Olson; JBD is excused due to PMB's failure to perform; and PMB failed to mitigate.
We disagree. JBD asserts this evidence was crucial to its affirmative defenses. However, for the reasons discussed ante in relation to JBD's affirmative defenses, any error in the omission of this discovery cannot create a triable issue of fact because JBD's affirmative defenses have no merit as a matter of law.
VI. STRIKING OF FIRST AMENDED CROSS-COMPLAINT
JBD argues the trial court improperly struck its first amended cross-complaint, but does not explain why the trial court's action was in error.
Pursuant to section 436, a trial court "may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: [¶] . . . [¶] (b) Strike out all or any part of any pleading not filed in conformity with the laws of this state, a court rule, or an order of the court." (§ 436, subd. (b).) The statutory language demonstrates that we review the court's ruling for abuse of discretion. Abuse of discretion requires reversal only where the trial court's ruling is arbitrary, capricious, and beyond the bounds of reason. (Tudor Ranches, Inc. v. State Comp. Ins. Fund (1998) 65 Cal.App.4th 1422, 1431; Walker v. Superior Court (1991) 53 Cal.3d 257, 272.) The trial judge's exercise of discretion is guided, however, by fixed legal principles. "'The scope of discretion always resides in the particular law being applied, i.e., in the "legal principles governing the subject of [the] action . . . . " Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an "abuse" of discretion.'" (Department of Parks & Recreation v. State Personnel Bd. (1991) 233 Cal.App.3d 813, 831.)
The language of section 428.50 provides that an amended cross-complaint may be filed without leave of court only where it is filed against a party to the complaint or cross-complaint before such party's answer to the complaint is filed, or if the cross-complaint names a new party who is not already a party to the action, where the court has not set a date for trial. (§ 428.50, subds. (a), (b).) All cross-complaints not filed within this time frame require leave of court. (§ 428.50, subd. (c).) Thus, the trial court was within its discretion in striking JBD's first amended cross-complaint as being improperly filed without leave of court because Boyd's amended cross-complaint sought to add PMB, who was a party, after Boyd's answer was filed. (§ 428.50, subd. (a).)
Section 428.50 provides in full: "(a) A party shall file a cross-complaint against any of the parties who filed the complaint or cross-complaint against him or her before or at the same time as the answer to the complaint or cross-complaint. [¶] (b) Any other cross-complaint may be filed at any time before the court has set a date for trial. [¶] (c) A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action."
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DISPOSITION
The judgment is affirmed. Respondent is to recover its costs on appeal.
NOT TO BE PUBLISHED.
JOHNSON, J. We concur:
MALLANO, P. J.
CHANEY, J.