Really? Interesting, I'd never heard of this. I don't speak Spanish, but all the material I've read indicated that de-lateralized /ʎ/ merges with /ʝ/, not with [j].
This supposedly happens in the more southerly regions of the Andes, or so I've read. (Regions more towards the north that keep /ʎ/ distinct have it as [ʎ].)
