Judge Walter P. Schwarm, Case 30-2020-01124778 2022-09-27 Tentative Ruling

Judge: Walter P. Schwarm, Case: 30-2020-01124778, Date: 2022-09-27 Tentative Ruling

Motion No. 1:

Defendant’s (American Financial Center, Inc.) Motion for Monetary Sanctions Pursuant to C.C.P. Section 128.7 Against Plaintiff Anh Thy Song Nguyen, Trustee of Mother Nature Trust, and Its Counsel, Andrew Smits (Motion), filed on 5-26-20 under ROA No. 148, is DENIED.

Code of Civil Procedure section 128.7 states in part, “. . . (b) By 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. [¶] (c) If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence [¶] (1) A motion for sanctions under this section shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). Notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees. . . . [¶] (d) A sanction imposed for violation of subdivision (b) shall be limited to what is sufficient to deter repetition of this conduct or comparable conduct by others similarly situated. Subject to the limitations in paragraphs (1) and (2), the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorney's fees and other expenses incurred as a direct result of the violation.”

Peake v. Underwood (2014) 227 Cal.App.4th 428, 448 (Peake), explains, “As with Rule 11 (28 U.S.C.) sanctions, Code of Civil Procedure section 128.7 sanctions should be ‘made with restraint’ [citation], and are not mandatory even if a claim is frivolous. [Citations.] Further, when determining whether sanctions should be imposed, the issue is not merely whether the party would prevail on the underlying factual or legal argument. Instead, courts should apply an objective test of reasonableness, including whether ‘any reasonable attorney would agree that [the claim] is totally and completely without merit.’ [Citations.] Thus, the fact that a plaintiff fails to provide a sufficient showing to overcome a demurrer or to survive summary judgment is not, in itself, enough to warrant the imposition of sanctions. [Citations.] [¶] Because our adversary system requires that attorneys and litigants be provided substantial breathing room to develop and assert factual and legal arguments, sanctions should not be routinely or easily awarded even for a claim that is arguably frivolous. Courts must carefully consider the circumstances before awarding sanctions.”

“Under Code of Civil Procedure section 128.7, a court may impose sanctions for filing a pleading if the court concludes the pleading was filed for an improper purpose or was indisputably without merit, either legally or factually. [Citation.] The court here imposed sanctions based on its finding that the claims were legally and factually frivolous. A claim is factually frivolous if it is ‘not well grounded in fact’ and it 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.’ [Citation.] In either case, to obtain sanctions, the moving party must show the party's conduct in asserting the claim was objectively unreasonable. [Citation.] A claim is objectively unreasonable if ‘any reasonable attorney would agree that [it] is totally and completely without merit.’ [Citations.]” (Id., at p. 440.)

Kumar v. Ramsey (2021) 71 Cal.App.5th 1110, 1120-1121 (Kumar), states, “ ‘A court has broad discretion to impose sanctions if the moving party satisfies the elements of the sanctions statute.’ [Citation.] Like its federal counterpart, however, rule 11 of the Federal Rules of Civil Procedure (28 U.S.C.), section 128.7 should be utilized only in ‘the rare and exceptional case where the action is clearly frivolous, legally unreasonable or without legal foundation, or brought for an improper purpose.’ [Citation.] ‘Because our adversary system requires that attorneys and litigants be provided substantial breathing room to develop and assert factual and legal arguments, [section 128.7] sanctions should not be routinely or easily awarded even for a claim that is arguably frivolous’ [citation], and instead ‘should be “made with restraint.” ’ [Citation.] Indeed, even if a plaintiff could not successfully defend against either demurrer or summary judgment, that alone is insufficient to support the sanction of dismissal. [Citation.]” (Footnotes 8 and 9 omitted.)

Optimal Markets, Inc. v. Salant, (2013) 221 Cal.App.4th 912, 920–921 (Optimal Markets), provides, “The primary purpose of the statute is deterrence of filing abuses, not to provide compensation for those impacted by those abuses. ‘While section 128.7 does allow for reimbursement of expenses, including attorney fees, its primary purpose is to deter filing abuses, not to compensate those affected by them. It requires the court to limit sanctions “to what is sufficient to deter repetition of [the sanctionable] conduct or comparable conduct by others similarly situated.” (§ 128.7, subd. (d).)’ [Citations.]”

Kojababian v. Genuine Home Loans, Inc. (2009) 174 Cal.App.4th 408, 422 (Kojababian) provides, “Section 128.7, subdivision (c) authorizes the imposition of sanctions upon a finding of a violation of subdivision (b) as follows: ‘If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence.’ (Italics added.) [¶] Under the explicit language of subdivision (c), the trial court retains the discretion, upon the finding of a violation of subdivision (b), to determine whether a sanction is warranted in the first instance; and, if so, the type and amount of sanctions warranted. Thus, the trial court only exercises its discretion whether to impose a sanction, when there has been a violation of section 128.7, subdivision (b). ‘ “ ‘ “ ‘To be entitled to relief on appeal from the result of an alleged abuse of discretion it must clearly appear that the injury resulting from such a wrong is sufficiently grave to amount to a manifest miscarriage of justice.’ ” ’ ” ’ [Citation.] Section 128.7, subdivision (c) does not require the imposition of monetary sanctions upon the finding of a violation of section 128.7, subdivision (b); rather, it gives the trial court discretion to impose sanctions based on such a finding.”

The Notice of Motion requests an order “. . . awarding monetary sanctions in favor of AFCI and against Plaintiff . . . and its counsel of record, Andrew Smits, in the amount of the total attorneys’ fees incurred by AFCI in defending this frivolous lawsuit . . . .” (Motion; 2:5-8 (Italics and underscore in Motion.).) Defendant bases the Motion “. . . upon the facts that the original and First Amended Complaints . . .” were “not warranted by existing law, because the facts readily available to Plaintiff and Mr. Smits establish that Plaintiff did not rely on any representation or conduct of AFCI in entering the challenged purchase and sale transaction . . . and . . . Plaintiff’s operative pleading against AFCI lacks any factual support.” (Motion; 3:3-10 (Italics in Motion.).)

Plaintiff (Anh Thy Song Nguyen, Trustee of the Mother Nature Trust) filed the initial Complaint on 1-15-20 under ROA No. 2. The Complaint alleged the following causes of action against Defendant: Quieting Title, Declaratory Relief, and Unfair Business Practices. At the time Defendant filed this Motion, the operative Complaint was the First Amended Complaint (FAC) filed on 1-21-20 under ROA No. 16. The FAC alleged the following causes of action against Defendant: Quieting Title, Cancellation of Written Instruments, Declaratory Relief, and Unfair Business Practices. The operative complaint is the Third Amended Complaint (TAC) filed on 6-22-22 under ROA No. 795.

Although neither the original complaint nor the First Amended Complaint is the operative pleading, Defendant contends, “The Court can sanction Plaintiff . . . for her frivolous allegations in the Second and Third Amended Complaints, because in making the allegations, Plaintiff brazenly continued her conduct under the First Amended Complaint in seeking cancellation of AFCI’s Third Deed of Trust based on fraud.” (Defendant’s Response to Questions in September 13, 2022 Ruling on Motion for Sanctions Against Plaintiff and Its Counsel, Andrew Smits (Response) filed on 9-16-22 under ROA No. 891 Motion, 3:1-2.) Although Defendant attempts to narrow the Motion to the Cancellation of Written Instruments cause of action, the Notice of Motion seeks relief against Plaintiff for filing a frivolous lawsuit. Thus, the court construes the Motion as attacking all claims made in the Complaint and the FAC as identified in the Notice of Motion.

On 9-13-22, the court sustained Defendant’s Demurrer to Plaintiff Anh Thi Thy Song Nguyen, Trustee of Mother Nature Trust’s Third Amended Complaint to the fifth cause of action for Cancellation of Written Instruments in the TAC (9-13-22 Minute Order.) The court overruled the demurrer as to the causes of action for Quieting Title and Declaratory Relief causes of action contained in the TAC. (9-13-22 Minute Order)

As to the Quieting Title cause of action, the court’s 9-13-22 Minute Order states in part, “Code of Civil Procedure section 760.020, subdivision (a), states, ‘An action may be brought under this chapter to establish title against adverse claims to real or personal property or any interest therein.’ The parties do not appear to dispute that Defendant’s third deed of trust is a lien or an interest in the subject property. Since the TAC alleges fraud against other defendants that may support a determination as to the status of the title of the subject property, the TAC adequately pleads a quiet title cause of action against Defendant. A determination of the title of the subject property could affect Defendant’s interest in the property.”

As to the Declaratory Relief Cause of Action, the court’s 9-13-22 Minute Ordre states in part, “Since the TAC alleges fraud against other defendants that may support a determination as to the status of the title of the subject property, the TAC adequately pleads a declaratory relief cause of action against Defendant. The controversy regarding the status of the title could affect Defendant’s interest in the property.

Based on the above, Plaintiff’s lawsuit against Defendant is not objectively unreasonable within the meaning of Peake. Defendant has an interest in the property based on Defendant’s Third Deed of Trust under Code of Civil Procedure sections 760.020 761.020, subdivision (c). Code of Civil Procedure section 761.020, subdivision (c), states, “The complaint shall be verified and shall include all of the following: . . . [¶] (c) The adverse claims to the title of the plaintiff against which a determination is sought.” Under Code of Civil Procedure sections 760.020, 761.020, and Peake, the lawsuit against Defendant based on the Quieting Title and Declaratory Relief causes of action are legally and objectively reasonable.

Therefore, the court DENIES Defendant’s (American Financial Center, Inc.) Motion for Monetary Sanctions Pursuant to C.C.P. Section 128.7 Against Plaintiff Anh Thy Song Nguyen, Trustee of Mother Nature Trust, and Its Counsel, Andrew Smits filed on 5-26-20 under ROA No. 148.

Plaintiff is to give notice.

Motion No. 2:

Defendant’s (American Financial Center, Inc.) Motion for Monetary Sanctions Pursuant to C.C.P. Section 128.7 Against Michael A. Younge and the Law Office of Michael A. Younge, Counsel for Plaintiff (Motion), filed on 1-18-22 under ROA No. 633, is DENIED.

Primo Hospital Group, Inc. v. Haney (2019) 37 Cal.App.5th 165, 176-177 (Primo), explains, “Libarle may have presented Primo's claims to the court through his subsequent conduct in the proceedings, such as in opposition to the summary judgment motions, but the motion for sanctions that was served in September 2016 did not provide notice of specific conduct that violated the statute along with a safe harbor period to withdraw or correct the pleadings. To seek sanctions for conduct taken after the date of the motion served on Libarle, respondents were obligated to serve a new motion describing the sanctionable conduct to afford Libarle notice and the safe harbor period under the statute. [Citation.s] [¶] California case law supports our conclusion. In Optimal, supra, 221 Cal.App.4th at p. 917, 164 Cal.Rptr.3d 901, the plaintiff filed a case that was referred to binding arbitration. After the trial court stayed the action pending the conclusion of the arbitration proceedings, the plaintiff substituted new counsel. [Citation.] Some of the defendants who prevailed in the arbitration requested sanctions under section 128.7 against the new attorneys for advocating frivolous claims, which the trial court denied. [Citation.] The appellate court affirmed the order denying sanctions. [Citation.] Although the new attorneys became counsel of record after the complaint was filed, the Optimal court found the attorneys did not present the objectionable pleading to the court by signing, filing, submitting or later advocating it. [Citation.] The attorneys advocated the complaint to the arbitrator, but advocacy in arbitration did not constitute presentation of the claims ‘to the court’ as required under section 128.7. [Citation.] [¶] The advisory committee note to rule 11 as amended in 1993 (Advisory Com. Notes, 1993 amend. to Fed. Rules Civ. Proc., rule 11, reprinted at 28 U.S.C.A. (2008 ed.) foll. rule 11, pp. 10–11) explains the obligation of an attorney or unrepresented party under rule 11 as follows: ‘The rule continues to require litigants to “stop-and-think” before initially making legal or factual contentions. It also, however, emphasizes the duty of candor by subjecting litigants to potential sanctions for insisting upon a position after it is no longer tenable and by generally providing protection against sanctions if they withdraw or correct contentions after a potential violation is called to their attention. [¶] The rule applies only to assertions contained in papers filed with or submitted to the court. It does not cover matters arising for the first time during oral presentations to the court, when counsel may make statements that would not have been made if there had been more time for study and reflection. However, a litigant's obligations with respect to the contents of these papers are not measured solely as of the time they are filed with or submitted to the court, but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit. For example, an attorney who during a pretrial conference insists on a claim or defense should be viewed as “presenting to the court” that contention and would be subject to the obligations of subdivision (b) measured as of that time.’ The advisory committee note to rule 11 additionally states that ‘if evidentiary support [for an allegation made on information and belief] is not obtained after a reasonable opportunity for further investigation or discovery, the party has a duty under the rule not to persist with that contention. Subdivision (b) does not require a formal amendment to pleadings for which evidentiary support is not obtained, but rather calls upon a litigant not thereafter to advocate such claims or defenses.’ [Citation.]”

The Notice of Motion requests an order “. . . awarding monetary sanctions in favor of AFCI and against Michael Younge. . . in the amount of the total attorneys’ fees incurred by AFCI in defending this frivolous lawsuit . . . .” (Motion; 2:6-8 (Italics and underscore in Motion.).) The Notice of Motion states, “This Motion is brought because Mr. Younge has, since his appearance in this action as counsel for Plaintiff, failed to dismiss AFCI from the First Amended Complaint and has, instead, advocated the First Amended Complaint against AFCI, including but not limited to, by filing Plaintiff’s Opposition to Defendant American Financial Center Inc.’s Demurrer to First Amended Complaint, on June 2, 2021, and Plaintiff’s Opposition to Defendant American Financial Center Inc.’s Motion to Strike, also on June 2, 2021 . . . .” (Motion; 3:11-16.) Defendant contends that the FAC’s “. . . allegations of fraud and unfair business practices against AFCI are not warranted by existing law, because the facts made available to Plaintiff and Mr. Younge establish that Plaintiff did not rely on any representation or conduct of AFCI in entering the challenged purchase and sale transaction and that Plaintiff suffered no prejudice or harm from AFCI’s taking a deed of trust, months after the purchase and sale transaction, in third position, subordinate to Plaintiff’s second deed of trust, against the Subject Property; and (2) based upon the foregoing, Plaintiff’s operative pleading against AFCI lacks any actual factual support.” (Motion; 3:17-23.)

Although neither the original complaint nor the First Amended Complaint is the operative pleading, Defendant contends, “The Court can sanction Plaintiff (and her later attorney, Michael Younge) for her frivolous allegations in the Second and Third Amended Complaints, because in making the allegations, Plaintiff brazenly continued her conduct under the First Amended Complaint in seeking cancellation of AFCI’s Third Deed of Trust based on fraud.” (Defendant’s Response to Questions in September 13, 2022 Ruling on Motion for Sanctions Against Plaintiff and Its Counsel, Andrew Smits (Response) filed on 9-16-22 under ROA No. 891 Motion, 3:1-2.) Although Defendant attempts to narrow the Motion to the Cancellation of Written Instruments cause of action, the Notice of Motion seeks relief against Plaintiff for filing a frivolous lawsuit. Thus, the court construes the Motion as attacking all claims made in the Complaint and the FAC as identified in the Notice of Motion.

Therefore, the court DENIES Defendant’s (American Financial Center, Inc.) Motion for Monetary Sanctions Pursuant to C.C.P. Section 128.7 Against Michael A. Younge and the Law Office of Michael A. Younge, Counsel for Plaintiff filed on 1-18-22 under ROA No. 633.

Plaintiff is to give notice.