Cenzone Tech. v. Kane-Berman

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CENZONE TECH., INC., Plaintiff, Cross-defendant and Appellant;

JUNG FU WU, Cross-defendant and Appellant, v. MARK KANE-BERMAN et al., Defendants, Cross-complainants and Respondents.

D079891

California Court of Appeals, Fourth District, First Division

May 23, 2023

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of San Diego County No. 37-2019-00029703-CU-BC-NC Cynthia A. Freeland, Judge. Affirmed.

Niddrie Addams Fuller Singh and Rupa G. Singh for Plaintiff Crossdefendant, and Appellant Cenzone Tech., Inc., and Cross-defendant and Appellant Jung Fu Wu.

Duckor Metzger &Wynne, Tony R. Skogen, Jr., and Cathleen G Fitch for Defendants, Cross-complainants and Respondents.

McCONNELL, P. J.

I INTRODUCTION

Plaintiff and cross-defendant Cenzone Tech, Inc. (Cenzone) appeals an order granting a motion for entry of judgment filed by defendant and crosscomplainant Mark Kane-Berman and cross-complainant Microbasics, LLC (Microbasics) under Code of Civil Procedure section 664.6. The trial court entered judgment after finding that the parties executed a valid settlement agreement resolving all causes of action between them, known and unknown. According to Cenzone, the settlement agreement was unenforceable because Cenzone never intended to settle causes of action that were known to the parties, but unasserted in their pleadings. Cenzone also argues the court erred by denying its motion for leave to amend its complaint to assert several new causes of action against Kane-Berman and Microbasics.

We conclude the trial court properly granted the motion for entry of judgment pursuant to the parties' settlement agreement, which clearly and unambiguously released all claims between the parties, known and unknown. Further, we conclude the court did not prejudicially err in denying Cenzone's motion for leave to amend its complaint. Therefore, we affirm the order denying Cenzone's motion for leave to amend its complaint and the order entering judgment pursuant to the parties' settlement agreement.

II BACKGROUND

1. The Pleadings

Dr. Jung Fu Wu is the president and founder of Cenzone, a manufacturer of livestock feed supplements. Mark Kane-Berman owns and operates Microbasics, a company in the same line of business.

On June 7, 2019, Cenzone filed a complaint asserting four causes of action against Kane-Berman and Kane-Berman dba Microbasics. In its first cause of action, Cenzone alleged it loaned nearly $488,000 to Kane-Berman to buy real property in Jerome, Idaho. Cenzone claimed Kane-Berman breached a promissory note memorializing the loan by failing to repay about $255,000 in principal and not making required interest payments. In its second and third causes of action, Cenzone averred that Kane-Berman agreed to buy livestock feed products from Cenzone, but failed to pay for the products in full. The fourth cause of action asserted that Cenzone provided livestock feed products to Kane-Berman on an open book account and he owed a balance on the account. Cenzone prayed for damages of about $446,000. Kane-Berman answered by generally denying Cenzone's allegations.

On February 14, 2020, Kane-Berman and Microbasics filed a crosscomplaint against Cenzone, Wu, and other cross-defendants. They asserted crossclaims for defamation, misappropriation of trade secrets, and goods and services rendered. Additionally, they requested declarations that they: (1) never agreed to the promissory note memorializing the loan for the acquisition of the Idaho property; (2) owed Cenzone no money under the promissory note; and (3) had sole ownership of the Idaho property.

2. Cenzone's Motion for Leave to Amend its Complaint

On October 21, 2020, Cenzone filed a motion for leave to amend its complaint by adding seven new causes of action against Kane-Berman and Microbasics. Cenzone requested leave to assert declaratory relief and fraudulent concealment causes of action based on allegations that Kane-Berman and Wu agreed to buy the Idaho property as equal partners, but Kane-Berman forged Wu's signature on documentation relating to the sale and, through this deceit, acquired sole title to the property. Cenzone also sought to pursue a cause of action for misappropriation of trade secrets. Finally, Cenzone sought leave to assert civil theft, unfair business practices, trade libel, and intentional interference with prospective economic advantage causes of action based on allegations that Kane-Berman disparaged Cenzone and its feed supplements to customers. The proposed amended complaint prayed for damages exceeding $10,000,000.

On January 7, 2021, Kane-Berman opposed Cenzone's motion for leave to amend its complaint. He argued Cenzone should not be allowed to assert the declaratory relief and fraudulent concealment causes of action because the allegations underlying those causes of action-i.e., the allegations that Kane-Berman forged Wu's signature to take sole title to the Idaho property- were fatally inconsistent with the original complaint's allegations that Wu loaned him money to buy the property.

On January 8, 2021, Cenzone filed a so-called amendment to its motion for leave to amend its complaint. Through the amendment, Cenzone sought to add two additional causes of action (for a total of nine new ones): (1) a cause of action that Kane-Berman conspired to misappropriate Cenzone's trade secrets; and (2) a cause of action for violations of 15 U.S.C. § 1125, based on Kane-Berman's allegedly false statements to Cenzone's customers.

On February 4, 2021, Kane-Berman opposed Cenzone's amended motion for leave to amend its complaint. He reiterated his contentions from the previously filed opposition and further argued that the proposed amendment would severely prejudice him. He argued he would suffer prejudice because: (1) the new causes of action would substantially enlarge the scope of the case; (2) the amendment would delay trial, set for July 16, 2021, because it would unsettle the pleadings and necessitate new discovery; and (3) Cenzone unduly delayed seeking amendment. On the issue of undue delay, Kane-Berman asserted Cenzone inexplicably waited fourteen months to pursue its proposed amendment, even though it was aware of the allegations underlying its new causes of action at the outset of the case.

On February 10, 2021, Cenzone filed a reply in support of its amended motion for leave to amend its complaint. It asserted there was no inconsistency between its claim that it loaned money to Kane-Berman to finance the acquisition of the Idaho property, on the one hand, and its claim that Wu and Kane-Berman agreed to take title to the property as equal partners, on the other hand. Further, it argued its failure to seek amendment earlier was "not due to a lack of diligence by Dr. Wu or Cenzone," but rather "due to concealment and malfeasance" by Kane-Berman.

On February 19, 2021, the court denied Cenzone's amended motion for leave to amend its complaint. The court found Cenzone was "partially dilatory in seeking leave to amend" because it "ha[d] at all times known, or should have known, of potential title issues" relating to the Idaho property. It also found Kane-Berman "recorded a special warranty deed" in 2013 reflecting that he took sole title to the property, and Cenzone, at a minimum, should have "discovered the title issue when it retained counsel in June 2019."

Further, the court found amendment was unwarranted because it would "undoubtedly" delay trial and severely prejudice Kane-Berman. The court reasoned the new causes of action would "entirely change the case's complexion," since they were "not even remotely related to the [initial] [c]omplaint's allegations." It found amendment would "substantially increase [Kane-Berman's] preparation costs and discovery burden[s]," and require "discovery from numerous third-party customers" and others. Additionally, the court predicted that amendment would result in various "procedural and dispositive motions" targeting the new causes of action. For all these reasons, the court denied Cenzone's motion to file an amended complaint.

3. The Mediation and Settlement Agreement

At the joint request of the parties, the court continued trial from July 16, 2021, until September 17, 2021, to give the parties an opportunity to mediate their dispute.

On June 23, 2021, the parties and their respective counsel participated in a one-day mediation with a mutually selected mediator. At the end of the mediation, the parties reached a settlement, which they memorialized in a one-page agreement entitled, "Memorandum of Understanding" (MOU). Wu executed the MOU on behalf of himself and Cenzone, while Kane-Berman executed the MOU on behalf of himself and Microbasics.

The MOU states the parties "agreed to settle all claims between them, known and unknown ...." Elsewhere, it provides that, "[e]ach party waives all claims, known and unknown, against all other Parties to the lawsuit." The MOU obligates the parties "to draft a long form settlement agreement based on" the MOU. However, it states that, "[i]n the event the parties are unable to agree on the final terms in a settlement agreement, [the] MOU will be enforceable and admissible in Court pursuant to Code of Civil Procedure section 664.6."

4. The Purported Cancellation of the Settlement Agreement

On August 10, 2021, Cenzone's counsel, Stephen C. Hinze sent a letter to Kane-Berman's counsel, Tony R. Skogen, which purportedly "cancell[ed] the settlement," on grounds that the parties never had a "meeting of the minds." Hinze stated that Cenzone never intended to release claims it knew of, but had not asserted in its complaint-i.e., it did not intend to release the claims that were the subject of its motion for leave to amend the...