Judge Mark A. Young, Case 22SMCV020063 2023-03-21 Tentative Ruling

Judge: Mark A. Young, Case: 22SMCV020063, Date: 2023-03-21 Tentative Ruling

Case Number: 22SMCV020063 Hearing Date: March 21, 2023 Dept: M

CASE NO.: 22SMCV020063

MOTION: Motion for Sanctions

HEARING DATE: 3/21/2023

Legal Standard

Code of Civil Procedure section 128.7 provides, that “[b]y presenting to the court, whether by signing, filing, submitting, or later advocating, a pleading, petition, written notice of motion, or other similar paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met:

(1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

(2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.

(3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.

(4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

(Code Civ. Proc., § 128.7(b).) Section 128.7(c) permits the court to impose sanctions if “after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated.” (See Eichenbaum v. Alon (2003) 106 Cal App 4th 967, 976.) In addition, section 128.7 does not require a finding of subjective bad faith. Instead, it requires only that the Court find that the conduct be objectively unreasonable. (In re Marriage of Reese & Guy (1999) 73 Cal. App. 4th 1214, 1221.)

A claim is factually frivolous if it is “not well grounded in fact” and is legally frivolous if it is “not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.” (Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 189–190.) In either case, to obtain sanctions, the moving party must show the party's conduct in asserting the claim was objectively unreasonable. (Ibid.) A claim is objectively unreasonable if “any reasonable attorney would agree that [it] is totally and completely without merit.” (Ibid.) However, “section 128.7 sanctions should be ‘made with restraint’ [Citation], and are not mandatory even if a claim is frivolous.” (Peake v. Underwood (2014) 227 Cal.App.4th 428. at 448.)

In addition to the above requirements, Code of Civil Procedure section 128.7(c)(1) requires that a motion for sanctions be made separately from other motions and that notice of the motion must be served, but not filed with the Court, unless, within 21 days after service of the motion, the challenged paper is not withdrawn. This 21-day time period is known as a "safe harbor" period and its purpose is to permit an offending party to avoid sanctions by withdrawing the improper pleading during the safe harbor period. (Li v. Majestic Industry Hills LLC (2009) 177 Cal. App. 4th 585, 591.) This permits a party to withdraw a questionable pleading without penalty, thus saving the court and the parties time and money litigating the pleading as well as the sanctions request. (Id.)

Analysis

Defendant Tom Block moves for an order imposing monetary and terminating sanctions against Plaintiff Sharon Azoulay and her attorney of record, Gary S. Saunders of Saunders & Associates, APC. On October 24, 2022, Plaintiff filed her complaint against Defendants Block and Novak asserting five causes of action for: (1) Violation of Business & Professions Code § 17200; (2) Violation of Civil Code § 2923.5; (3) Violation of Civil Code § 2923.6; (4) Quiet Title; and (5) Wrongful Foreclosure.

The complaint alleges that on June 24, 2004, a Grant Deed ("Grant Deed") was recorded on the Subject Property, 5240 Wilkinson Avenue, Valley Village, CA 90066, with Plaintiff as grantee. (Compl., ¶13, Ex. B.) On March 27, 2007, Plaintiff obtained a mortgage loan from Defendant Novak which was “memorialized with a Deed of Trust ("DOT") in the amount of $25,000.00 and was in fourth position.” (¶ 14, Ex. C, emphasis added.) The trustee was listed as SBS Trust Deed Network, with Novak listed as beneficiary. (Id.) Novak assigned the beneficial interest under the DOT to Block on July 24, 2017. (¶15, Ex. D.)

Plaintiff fell behind on her mortgage payments during 2021 and 2022. (¶ 16.) On April 13, 2022, a Notice of Default and Election to Sell Under Deed of Trust ("NOD") was recorded, alleging a default of $66,460.39 as of April 11, 2022. (¶ 18.) On July 20, 2022, a Notice of Trustee’s Sale was recorded, with an unpaid balance of $137,295.65. (¶ 19, Ex. G.) The sale took place on August 16, 2022. (¶¶ 19-20, 31, 35.) On October 5, 2022, a Trustee’s Deed Upon Sale (“TDUS”) was recorded, indicating that the subject property reverted to Block on August 16, 2022. (¶ 20, Ex. H.)

The Complaint offers the conclusion that Defendants have improperly conducted the foreclosure on the Subject Property based on the foregoing conduct. (¶¶ 21, 45.) Plaintiff was thereby denied the opportunity to pursue foreclosure prevention alternatives she would have qualified for had the Defendants contacted her to discuss alternatives to foreclosure prior to recording the Notice of Default. (¶ 31.) Specifically, defendants violated Civil Code §§ 2923.5, 2923.55, 2923.6 & 2924.17 by: a) failing to use reliable and competent evidence when recording title document, b) failing to use due diligence to contact borrower in order to assess the borrower's financial situation and explore options for borrower to avoid foreclosure; c) failing to offer alternatives to foreclosure when requested by plaintiff; d) falsely declaring that the mortgage servicer exercised due diligence in contacting Plaintiff to explore alternatives to foreclosure; and e) failing to make a written determination that Plaintiff was not eligible for a fourth lien loan modification. These violations form the basis of the Business and Professions Code section 17200 claim for unlawful, unfair and fraudulent business practices (¶24), and the claim for wrongful foreclosure (¶45). The quiet title cause of action claims that “Plaintiff is the legal owner and possessor of the Subject Property” without any further explanation. (¶¶38-41.)

Block argues that the filing and serving of Plaintiff’s Complaint was for the wrongful purpose of harassing him and needlessly creating costs of litigation. Indeed, the Complaint and opposition papers make it clear that Plaintiff’s claims are not supported by any non-frivolous argument, such as for the extension, modification, or reversal of existing law, or the establishment of new law. The claims are conclusively barred by the plain wording of the statutes cited by Plaintiff. The basis for the all the claims, including quiet title and wrongful foreclosure, is Civil Code sections 2923.5 and 2923.6, which are wholly inapplicable because those statutes apply only to first trust deeds. (See Civ. Code §§ 2923.5(f); 2923.6(j) [“This section shall apply only to mortgages or deeds of trust described in Section 2924.15”]; § 2945.15(a) [limits its application to first trust deeds for owner occupied property].) As noted, the pled DOT was in the fourth position. Moreover, these statutes would only provide a basis to stay the foreclosure proceeding, which has already occurred.

Plaintiff concedes Civil Code §§ 2923.5 and 2923.6 only apply to first trust deeds, and should not have been included as causes of action. Despite this concession, Plaintiff contends that the Fifth Cause of Action for Wrongful Foreclosure represents the gravamen of the action, and leave to amend should be granted. Plaintiff does not offer what facts or legal theories she could assert to save this claim for wrongful foreclosure. Aside from the cited statutory violations, Plaintiff does not state what wrongful acts were committed by Defendants. The Court notes that the Complaint does not even mention any basis for claims against Defendant Novak, who no longer had any interest in the Property or apparent involvement in the foreclosure.

Thus, the Court could infer that Plaintiff’s Counsel falsely certified that Plaintiff’s Complaint was not being filed for a wrongful purpose. Counsel is invited to address this issue – as to why the lawsuit was filed against this Defendant – and if any viable alternative theories of liability exist.

As to monetary sanctions, Block requests $4,800.00 in fees associated with this action, which consist of 9 hours spent reviewing the pleading, conducting research, and drafting the instant Motion; and an estimated 3 hours reviewing any opposition, preparing reply papers, and appearing in Court. (Kelley Decl., ¶ 3.) Counsel charges $400.00 per hour. (Id.) Based on the moving and reply papers, the Court finds that 12 hours on these papers would be unreasonably high. Further, lesser monetary sanctions in conjunction with terminating sanctions would be sufficient to discourage this behavior. Therefore, the Court finds that a reasonable sanction in this instance would be $2060.00 against counsel of record only.

As to terminating sanctions, the Court is inclined to dismiss the suit, either as a sanction or on its own motion for judgment on the pleadings.

Accordingly, Block’s motion is tentatively GRANTED.