Eichenbaum v. Alon

• Decision Date: 04 March 2003
• Docket Number: No. B158073.,B158073.
• Court: California Court of Appeals Court of Appeals
• Parties: Yossi EICHENBAUM, Plaintiff and Appellant, v. Bila ALON, as Trustee, etc., Defendant and Respondent; Scott Lee Shabel et al., Objectors and Appellants.

131 Cal.Rptr.2d 296

106 Cal.App.4th 967

Yossi EICHENBAUM, Plaintiff and Appellant, v. Bila ALON, as Trustee, etc., Defendant and Respondent;

Scott Lee Shabel et al., Objectors and Appellants.

No. B158073.

Court of Appeal, Second District, Division 8.

March 4, 2003.

Law Offices of Scott Lee Shabel and Scott Lee Shabel, Los Angeles, for Plaintiff and Appellant and for Objectors and Appellants.

Beck, De Corso, Daly & Kreindler, Joel T. Kornfeld, Los Angeles, Edward E. Alon and Maryann R. Marzano, for Defendant and Respondent.

COOPER, P.J.

In this appeal from an order imposing sanctions under Code of Civil Procedure section 128.7 (undesignated section references are to that code), we hold that the plaintiffs voluntary dismissal of his action with prejudice, after defendant's motion for sanctions had been filed and taken under submission, did not deprive the trial court of authority to grant the motion and impose sanctions on plaintiff and his attorneys (appellants), for presenting an improper amended complaint. Because the sanctions order was both authorized and not an abuse of discretion, we affirm it.

FACTS

Plaintiff, Yossi Eichenbaum, filed his first amended complaint in the underlying action¹ against the Alon-Eichenbaum Limited Partnership (partnership) and Barry Alon, who with plaintiff had been a general partner in the partnership upon its formation in 1986. As here relevant, the first amended complaint alleged that Barry Alon had transferred his 40 percent general partner's interest to plaintiff in 1992, but in 1998 had disclaimed the transfer, on grounds that it had not been approved by a majority of the partnership, as the partnership agreement allegedly required, and that a critical document reflecting the transfer had been altered. Plaintiff sought declaratory relief as to his ownership of Barry Alon's interest, as well as other relief from the partnership.

Barry Alon died shortly after the first amended complaint was filed. Plaintiff thereafter filed a request to enter Barry Alon's default. In response, defendant-respondent Bila Alon (defendant), Trustee of the Alon Family Revocable Trust (trust), filed a motion to be substituted in Barry Alon's place, with a showing that before his death he had transferred all of his interest in the partnership to the trust. The court ordered the substitution, and the default was set aside by stipulation. Concurrently, the court sustained defendant's demurrer to the first amended complaint, granting plaintiff leave to amend to allege that Barry Alon's assignment to him had been oral, not written, and had been appropriately approved "by a majority, as required by the partnership agreement."

Plaintiff filed a second amended complaint (SAC), which named as defendants not only the partnership and defendant, but also the deceased Barry Alon. Defendant demurred to the SAC, urging that plaintiff had inadequately alleged both the claimed oral contract and approval of the transfer by a majority of the partnership in accordance with the partnership agreement. (Plaintiff had alleged simply that "The Partnership approved the transfer. . . .") The court agreed, and sustained the demurrer, with leave to amend. Simultaneously, it granted defendant's motion to strike all language from the second amended complaint that continued to name Barry Alon as a defendant. The court made this order "without leave to amend."

In a third amended complaint, plaintiff nevertheless again named Barry Alon as a defendant. Plaintiff refashioned his claims against "defendant Alon," first alleging breach of an oral contract by both Barry Alon and defendant, and then seeking declaratory relief. Defendant again demurred and moved to strike the references to Barry Alon. The court sustained the demurrer and granted the motion. The court held that the cause of action for breach of oral contract was defective because plaintiff had not alleged that defendant was successor in interest to Barry Alon's personal agreements. Furthermore, the claim was barred by the statute of limitations (Code Civ. Proc., § 339, subd. 1) because the first alleged breach, in 1998, had occurred more than two years before the filing of even the second amended complaint (in which plaintiff had first claimed an oral agreement). The declaratory relief claim once more failed sufficiently to allege that the transfer had been accomplished in compliance with partnership agreement requirements, including that appropriate amendments to that agreement be filed. The court once more granted leave to amend.

Plaintiff then filed a verified fourth amended complaint (FAC), for fraud and declaratory relief, which precipitated the sanctions motion presently at issue. The FAC named as defendants the partnership, defendant, and Barry Alon. The fraud cause of action, asserted solely against Barry Alon, alleged that he had transferred his interest in the partnership to plaintiff in 1992, with approval of a partnership majority. Barry Alon had represented he would transfer his interest to plaintiff in exchange for extinguishment of a debt. The representation was false, but in reliance on it plaintiff forwent Barry Alon's debt. Barry Alon repudiated his transfer in 1998, after plaintiff could no longer sue on the debt. Defendant was alleged to have joined in this repudiation. The cause of action also averred that plaintiff had complied with all requirements of the partnership agreement respecting the transfer. In this regard, plaintiff specifically alleged that the requirements for majority approval and amendment of the partnership agreement that the court had previously identified did not apply to the transfer to him. The FAC's second cause of action sought a declaration of plaintiffs ownership of the transferred share of the partnership, and his entitlement to an appropriate share of its profits and distributions.

Defendant responded to the FAC with a demurrer, a motion to strike (again concerning the inclusion of Barry Alon as a defendant), and two motions for sanctions. The first such motion, pursuant to section 177.5, requested that plaintiff and his attorneys each be ordered to pay the County of Los Angeles $1,500, for having violated the two prior court orders striking from the pleadings references to Barry Alon as a defendant.² The second motion, under section 128.7, asserted that plaintiff and his attorneys had violated subdivisions (b)(1), (b)(2), and (b)(3) of that statute ³ by submitting the FAC, in that it (1) included Barry Alon as a defendant; (2) sought punitive damages against that decedent; (3) asserted causes of action against him, including the entirely new one for fraud, which had been filed without leave of court; (4) failed to allege — as plaintiff was incapable of alleging — compliance with the partnership agreement; and (5) falsely alleged (to defeat the statute of limitations) that plaintiff had had no knowledge of the alleged falsity of Alon's transfer until 1998, whereas Alon's lawyer had notified plaintiff in 1996 that Alon denied the transfer. Defendant requested an award of attorney fees and costs, from plaintiff and his attorneys, both for the sanctions motion and for the demurrer and motion to strike the FAC, at that point totaling $2,268 and $4,056 respectively.

The section 128.7 motion was hand-served on plaintiff on December 7, 2001. Plaintiff did not withdraw or correct the FAC within the next 30 days, the "safe harbor" period then provided by section 128.7, subdivision (c)(1), and defendant then filed the notice of motion.⁴ Both sanctions motions were heard on January 29, 2002. The court granted the motion under section 177.5, and took the section 128.7 motion under submission.

On February 11, 2002, shortly before the scheduled hearing date of defendant's demurrer and motion to strike, plaintiff filed a request for dismissal of the FAC, without prejudice. The court accordingly placed the demurrer and motion to strike off calendar, as moot.⁵ The court then ordered further briefing concerning whether, in view of the voluntary dismissal, it possessed jurisdiction to grant the section 128.7 motion. On February 25, 2002, during the briefing process, plaintiff filed a request for dismissal of the FAC with prejudice, which was entered that day.

Following briefing, the court on March 11, 2002 granted the motion for sanctions under section 128.7. In an extensive minute order, the court ruled that the FAC violated section 128.7, subdivision (b) in the several respects defendant had assigned. Among other things, the court found that plaintiffs persistence in summarily asserting that the transfer to him had been approved by the partnership majority without alleging the necessary facts, amounted to an argument that the court's previous rulings were wrong, which should not have been asserted in an amended pleading. As for the amount of sanctions, the court found that $2,268 (as claimed before the supplemental briefing) constituted reasonable attorney fees and costs for the sanctions motion, but that only $2,000 (as opposed to the $4,056 claimed) was reasonable with respect to the demurrer and motion to strike. The court found that "these sanctions will deter Plaintiff and Plaintiffs counsel from a repetition of their conduct." (See § 128.7, subd. (d).)

Finally, the court held that the voluntary dismissals of the action had not deprived it of authority to impose sanctions. The court noted that "The Plaintiff and his counsel did not utilize the safe harbor period to withdraw the [FAC] and avoid sanctions. Instead, they opposed all of Defendant's motions and demurrer . . ., putting the Defendant through the time and expense of replying to the oppositions and attending the hearings on the motions for sanctions. . . ."

DISCUSSION

We initially address certain issues of appellate jurisdiction, which defendant raises. Section 904.1, subdivisions (a)(11) and (12), authorizes appeals from orders directing parties or...