Llamas v. Diaz, s. G005421

• Decision Date: 14 March 1990
• Docket Number: G006470 and G006473,Nos. G005421,s. G005421
• Court: California Court of Appeals Court of Appeals
• Parties: Aydel R. LLAMAS, et al., Plaintiffs and Appellants, v. Alicia DIAZ, aka Alicia Jason et al., Defendants and Respondents, Southern Pacific Title Company et al., Defendants and Appellants.

Page 427

267 Cal.Rptr. 427

218 Cal.App.3d 1043

Aydel R. LLAMAS, et al., Plaintiffs and Appellants, v. Alicia DIAZ, aka Alicia Jason et al., Defendants and Respondents Southern Pacific Title Company et al., Defendants and Appellants.

Nos. G005421, G006470 and G006473.

Court of Appeal, Fourth District, Division 3, California.

March 14, 1990.

Certified for Partial Publication. ¹

[218 Cal.App.3d 1044] Rashida Jaffer, Anaheim, for plaintiffs and appellants.

William E. Gummerman, Huntington Beach, for defendant and appellant Southern Pacific Title Co.

William A. Hinz for defendants and appellants Duskin and Francis Keller.

Michael J. Molloy, Riverside, for defendant and respondent Diaz Enterprises.

Carlos A. Cuesta, Fullerton, for defendants and respondents Francis and Alicia Jason.

OPINION

SONENSHINE, Associate Justice.

Aydel, Jaime and Cain Llamas appeal the dismissal of their causes of action against the defendants after the court granted a nonsuit at the close of plaintiffs' case. ² The Llamases contend the evidence was sufficient to allow them to proceed and they were generally denied a fair trial. They also object to (1) sanctions imposed upon them for failure to appear at a deposition, and (2) the issuance of a protective order in response to their request for production of documents. Southern Pacific Title Company (SoPac) and Keller appeal the denial of their posttrial request for sanctions.

I

Only those facts pertinent to the published portion of this opinion will be presented here. In 1978 Aydel Llamas purchased a residence in Santa Ana from Duskin Keller. The sale was consummated through the auspices of real estate agent Alicia Jason, who also loaned Aydel cash toward the down payment. The amount was later memorialized by a promissory note and third trust deed on the property. Payments on Keller's note, secured by a second trust deed on the property, were erratic. He first instituted foreclosure proceedings in October 1979; the action was subsequently cancelled.

In 1981, Keller again began foreclosure through SoPac, as trustee. In November Jason paid the amounts in default to Keller. She then initiated her own foreclosure through SoPac in December. The Llamases failed to timely reinstate the loan or purchase at the sale.

In May 1982, the Llamases filed suit against SoPac and Jason, claiming fraud in the foreclosure process. By amended complaint, Keller and Jason were included as defendants in causes of action for fraudulent failure to disclose.

The matter proceeded to trial. At the close of plaintiffs' case, motions for nonsuit by Jason, Keller and Diaz were granted as to those causes of action relating to the original sale of the residence. The court found no evidence to support the claims of fraud and negligence. Following further testimony from a SoPac officer, SoPac and Jason moved for, and were granted, nonsuit on the foreclosure-based causes of action.

In October, SoPac and Keller filed motions for sanctions, requesting costs and attorney fees pursuant to Code of Civil Procedure section 128.5. Although noting it found the Llamases' action "frivolous and totally without merit," the court stated "the motions must regrettably be denied." SoPac and Keller appeal.

II-VIII ^*

IX

APPEAL OF POST-TRIAL SANCTIONS

SoPac and Keller moved for sanctions, including costs and attorney fees, pursuant to Code of Civil Procedure section 128.5, ⁷ contending the entire action was frivolous and totally without merit. After a hearing, the court denied the motion. It agreed section 128.5 could be applied to an entire action (Lesser v. Huntington Harbor Corp. (1985) 173 Cal.App.3d 922, 930, 219 Cal.Rptr. 562), but stated "[t]he dilemma which confronted the court is whether the bad faith required before sanctions may be imposed is to be decided by an objective or a subjective standard."

The court then concluded "plaintiffs' action was frivolous and in bad faith as defined by an objective standard. However, after observing plaintiffs' counsel during many days of trial and hearing, the court is in doubt that Ms. Jaffer pursued the action in subjective bad faith--for a wrongful and dishonest purpose. Although the court and plaintiffs' counsel could not have had more divergent opinions about the quality of plaintiffs' evidence, it did appear that plaintiffs' counsel sincerely believed that there was a basis for recovery."

We understand the court's concern. Our review of the record indicates Ms. Jaffer's presentation below was exasperating in the extreme. She was ill-prepared and consistently failed, despite assistance by the court, to present legally acceptable evidence to support her clients' claims. This resulted in a case that, as presented, was utterly meritless. The court noted in its order of dismissal, it had discounted the building code violations issue due to the passage of time and "the confused evidence submitted by plaintiffs [which] resulted in testimony with no probative value." Concerning the negligence count against Jason, the court noted there might possibly have been some negligence on her part for "failing to obtain a lower price from Mr. Keller, but there was no testimony as to any standard within the industry or as to whether defendant Jason's conduct was negligent under the circumstances." (Emphasis added.) ⁸

SoPac and Keller contend that once the court determines an action is frivolous and totally without merit on an objective basis, no consideration of subjective motive or purpose is necessary. Section 128.5 provides a trial court may, in its discretion, "order a party, the party's attorney, or both to pay any reasonable expenses, including attorney's fees, incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay," (§ 128.5, subd. (a).) Subdivision (b)(2) of the section states: " 'Frivolous' means (A) totally and completely without merit or (B) for the sole purpose of harassing an opposing party."

Here, the court found the action was frivolous in the sense of being totally and completely without merit. But the statute has the additional requirement the frivolous action be a "bad-faith action[ ] or tactic[ ]...." (Emphasis added.) And the court specifically found plaintiffs' counsel "sincerely believed there was a basis for recovery," negating any subjective bad faith.

Appellate courts which have addressed the requirements of the statute are not in harmony. Some are content with the imposition of sanctions where an "action was prosecuted for an improper motive or the action undisputedly has no merit." (Winick Corp. v. County Sanitation Dist. No. 2 (1986) 185 Cal.App.3d 1170, 1180, 230 Cal.Rptr. 289, emphasis added.) Others recognize the need to identify both a frivolous action and its institution or continuation in bad faith. (See Abbett Electric Corp. v. Sullwold (1987) 193 Cal.App.3d 708, 712, 238 Cal.Rptr. 496, and cases cited therein.)

Our study of the legislative history of section 128.5, from its inception in 1981, through two amendments, in 1984 and 1985, convinces us there must be an assessment of subjective bad faith in addition to finding a particular action or tactic was frivolous. ⁹ As originally proposed, Senate Bill No. 947, 1981-82 Regular...