Quizon v. Izkina, LLC, et al.

The CC alleges that Izkina was then forced to hire a new contractor on May 5, 2025, and incur unnecessary expenses. (CC, P. 18.) The CC sets forth four causes of action for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) intentional misrepresentation, and (4) negligent misrepresentation.

On January 13, 2026, the parties engaged in an unsuccessful mediation. (Thai Decl., P. 7.) On January 14, 2026, Suretec filed an answer to the FAC generally denying the allegations therein and setting forth 14 affirmative defenses. On January 21, 2026, counsel for Key Zone requested that Izkina stipulate to the filing of a second amended complaint (SAC). (Thai Decl., P. 7.) On February 18, 2026, Key Zone filed an answer to the CC generally denying the allegations therein and setting forth 29 affirmative defenses.

On February 18, 2026, Plaintiff filed this motion for leave to file a SAC, which seeks to add a sixth cause of action (COA) for fraud against Izkina. (Thai Decl., Ex. 3.) The proposed fraud COA alleges that Key Zone was required to submit its invoices under the Contract to Izkina, who would then submit these invoices to PDG for payment from the lender (Meadows). (SAC, P.P. 42-46.) The fraud COA alleges that Izkina engaged in a scheme to abscond with the construction funds for its own use by secretly forging Key Zone's signature on payment forms submitted to PDG and using the disbursed funds for Izkina's own purposes rather than paying Key Zone's invoices. (SAC, 48.)

The SAC alleges that this forgery scheme was not disclosed to Key Zone and that Izkina affirmatively misrepresented to Key Zone that Key Zone's invoices were being processed for payment. (SAC, P.P. 49-50.) As alleged in the SAC, Key Zone was unaware that Izkina intended to fraudulently take these funds for its own use rather than paying Key Zone's invoices. (SAC, P. 51.) Had Key Zone known about this forgery scheme and Izkina's intentional misrepresentations about the invoices upon which Key Zone relied, the SAC alleges that Key Zone would not have continued working under the Contract. (SAC, P.P. 51-52.)

Izkina opposes Key Zone's motion for leave to file the SAC on the grounds that (1) Izkina would be prejudiced due to Key Zone's unreasonable delay and (2) the proposed fraud COA is futile because it is based on the same facts as the breach of contract COA.

Analysis

"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 ...." (Code Civ. Proc., Sec. 473.) Leave to file an amended pleading is routinely granted absent unusual circumstances so that cases may be heard on their merits. (See Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) "Indeed, 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. [Citation.] [A]bsent a showing of prejudice to the adverse party, the rule of great liberality in allowing amendment of pleadings will prevail." (S.C. v. Doe 1 (2025) 115 Cal.App.5th 365, 376, internal quotation marks omitted.)

As to Izkina's prejudice argument, the parties do not dispute that the proposed fraud COA largely arises out of the same transactions already at issue in this action. Izkina argues that Key Zone was aware of the facts pertaining to the proposed amendments in November or December 2025, but delayed filing a formal motion to amend until February 18, 2026. The Court finds these circumstances do not support a finding of unfair prejudice. This action is set for trial on November 4, 2026, and it appears that Key Zone acted with reasonable diligence. (Thai Decl., P.P. 2-7.) Izkina will not be deprived of a fair opportunity to defend itself in this action.

As to the futility argument raised by Izkina, "when one party commits a fraud during the contract formation or performance, the injured party may recover in contract and tort." (Harris v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 78.) "A Plaintiff may assert a fraudulent concealment cause of action based on conduct occurring in the course of a contractual relationship if the elements of the claim can be established independently of the parties' contractual rights and obligations, and the tortious conduct exposes the Plaintiff to a risk of harm beyond the reasonable contemplation of the parties when they entered into the contract."

Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 38.) "The guiding and distinguishing principle is this. If the alleged breach is based on a failure to perform as the contract provides, and the parties reasonably anticipated and allocated the risks associated with the breach, the cause of action will generally sound only in contract because a breach deprives an injured party of a benefit it bargained for. However, if the contract reveals the consequences were not reasonably contemplated when the contract was entered and the duty to avoid causing such a harm has an independent statutory or public policy basis, exclusive of the contract, tort liability may lie." (Id. at p. 27.)

Here, the proposed SAC alleges that Defendants committed multiple instances of fraud by way of forgery during the performance of the contract, absconding with the funds from the lender by forging Key Zone's signature on payment forms. The Court does not find that the proposed amendments are futile on their face in the context of the liberal standard favoring amendment. Izkina can raise its defenses regarding its futility arguments in a responsive pleading or as otherwise allowed under the Code of Civil Procedure. This will allow these issues to be addressed on their merits. For all these reasons, the Court will grant Key Zone's motion for leave to file the SAC.

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