Winick Corp. v. County Sanitation Dist. No. 2

• Decision Date: 26 September 1986
• Citation: 230 Cal.Rptr. 289,185 Cal.App.3d 1170
• Court: California Court of Appeals Court of Appeals
• Parties: WINICK CORPORATION, Plaintiff and Appellant, v. COUNTY SANITATION DISTRICT NO. 2 OF LOS ANGELES COUNTY, Defendant and Respondent. B013479.

Page 289

230 Cal.Rptr. 289

185 Cal.App.3d 1170

WINICK CORPORATION, Plaintiff and Appellant, v. COUNTY SANITATION DISTRICT NO. 2 OF LOS ANGELES COUNTY, Defendant and Respondent.

B013479.

Court of Appeal, Second District, Division 7, California.

Sept. 26, 1986.

As Modified Oct. 15, 1986.

Haight, Dickson, Brown & Bonesteel, Roy G. Weatherup, Hall R. Marston, Robert M. Dato, and Jose H. Garcia, Santa Monica, Golde, Higer, Silver & Wagner and David J. Golde, Sherman Oaks, for plaintiff and appellant.

Knapp, Marsh, Jones & Doran, and Jeffrey R. Graves, Los Angeles, for defendant and respondent.

ADLER, ^* Associate Justice.

Respondent and defendant, County Sanitation District No. 2 of Los Angeles County (District) was granted summary judgment (Code Civ.Proc., § 437c) against plaintiff and appellant Winick Corporation (Winick) on the ground that plaintiff's complaint presented no triable issues of fact and had no merit. This appeal is from that portion of the summary judgment which granted the District's request for sanctions against Winick in the form of attorney's fees pursuant to Code of Civil Procedure sections 128.5 and 437c, subdivision (i). ¹ We affirm.

FACTS

The District is a public agency organized and operating pursuant to Health and Safety Code sections 4700 et seq. The underlying litigation involves the District entering into a construction contract for "effluent filters" with Hydro-Mechanical Co. (Hydro) for work at its San Jose Creek Plant. Hydro obtained a performance bond for materialmen and laborers from Safeco Insurance Company of America (Safeco). Hydro entered into a subcontract with Winick for labor and materials for the electrical portion of the project.

On October 26, 1979, Winick filed a stop notice on the District pursuant to Civil Code section 3179. The stop notice claimed $175,000 was owed by Hydro and asked that sufficient funds be withheld from Hydro to satisfy the claim. Although Winick had properly served the stop notice, it was directed to "County Sanitation Districts," a misnomer. The District had already received six other stop notices and an abstract of judgment from other creditors of Hydro's, and the amount of their claims exceeded the contract balance payable to Hydro. The Sanitation District acting under Civil Code section 3186 withheld all funds due Hydro.

On January 7, 1981, Hydro served the District with two releases of stop notices and four stop notice release bonds. One of these bonds covered Winick's stop notice. The surety was the General Insurance Company of America. The bond also refers to the respondent, obligee on the bond, as "County of Los Angeles Sanitation Districts," a misnomer. However, following receipt of these release bonds, the District continued to withhold Hydro's funds, due to remaining claims unrelated to the stop notice--a judgment creditor, the Internal Revenue Service and Safeco. After the District filed its notice of completion of March 13, 1981, the District filed an interpleader action to resolve these remaining claims.

On May 14, 1981, Winick filed its action against Hydro, Safeco and the District to recover amounts owed by Hydro. On May 21, 1981, Jeffrey R. Graves, attorney for the District, sent a letter to William D. Eisner, Winick's first attorney, informing him that the District had accepted a Stop Notice Release Bond from Hydro. The letter further explained that pursuant to Civil Code section 3196 and Cal-Pacific Materials Co. v. Redondo Beach School Dist. (1979) 94 Cal.App.3d 652, 156 Cal.Rptr. 590, Winick's sole remedy was against the release bond written by General Insurance Company of America.

Mr. Graves then received a letter from Mr. Eisner which stated that he had sent the information to his client for a decision regarding the District's dismissal.

On June 9, 1981, instead of dismissal, the District was given an open extension of time to answer or otherwise plead.

The case remained dormant for the next year, until Mr. Graves contacted Mr. Eisner, and was advised that Lipofsky & Lande was Winick's new attorney. On January 19, 1983, Mr. Graves sent Judy Meyer of Lipofsky & Lande copies of the Stop Notice Release Bond, and explained that Winick's sole remedy was against the release bond. Again, the case remained dormant for over one year, until May 22, 1984, when Mr. Graves was informed that the open extension was revoked, and the District would have to appear. Once again, Mr. Graves explained to Ms. Meyer that Winick had no cause of action against the District, and asked for dismissal. Ms. Meyer merely indicated that Lipofsky & Lande was in the process of substituting out, and that she wanted the case at issue when that occurred.

On June 1, 1984, Mr. Graves sent Ms. Meyer a letter confirming an extension of time to appear. The letter set forth in detail the facts and law compelling dismissal, and a warning that a motion for summary judgment would follow with possible sanctions against Winick and its counsel.

The District filed its answer on June 18, 1984, and Ms. Meyer moved to withdraw as Winick's counsel the next day.

On October 23, 1984, Mr. Graves once again assumed the initiative by contacting Mr. David Golde, Winick's recently substituted counsel. For the fifth time, Mr. Graves requested that the District be dismissed, and once again Winick's attorney requested additional time to review the request.

Having received no response, on December 6, 1984, the District filed its motion for summary judgment and for award of attorney's fees and expenses. Mr. Golde then wrote to Mr. Graves, and conceded that no cause of action exists against a public entity when funds are released pursuant to a Stop Notice Release Bond. However, Golde explained that no dismissal would be forthcoming, until the misnomer on the bond was corrected to reflect the true name of the District. Winick then formally opposed the motion for summary judgment on two grounds: (1) The misnomer of the District on the bond, and (2) the funds owing to Hydro had not been released to Hydro after the bond was accepted.

The court granted the motion for summary judgment, and found the issues raised by Winick had "no merit," that "Winick's tactics and actions were not based on good faith, were frivolous, and caused unnecessary delay." The court ordered Winick to pay $4,343 in attorney's fees for drafting the answer and motion for summary judgment. The court's order set forth in detail the conduct and circumstances justifying the sanctions.

Winick does not appeal the order granting summary judgment and dismissal of the District from the suit, but only the court's order imposing sanctions.

STANDARD FOR REVIEW

Appellant urges this court to apply an improper standard of review. Appellant argues, without citation of any authority, that the proper standard of appellate review requires this court to consider the record on appeal to determine if appellant's conduct meets the standards of frivolousness. The logical result of applying this standard would cause an appellate court to use its own independent judgment in deciding whether trial court sanctions should be imposed.

Appellant's argument is totally without merit. On appeal, a judgment or order of the trial court is presumed correct, and all presumptions are indulged in to support it. (Walling v. Kimball (1941) 17 Cal.2d 364, 373, 110 P.2d 58; 9 Witkin, Cal.Procedure (3d ed. 1985) Appeal, § 268, pp. 276-277.) Where the trial court is vested with discretionary powers, the test is abuse of discretion. (Brown v. Newby (1940) 39 Cal.App.2d 615, 618, 103 P.2d 1018.) The test on appeal is whether the trial court has abused the broad discretion to justify our interference with a sanction award. (Atchison, Topeka & Santa Fe Ry. Co. v. Stockton Port Dist. (1983) 140 Cal.App.3d 111, 117, 189 Cal.Rptr. 208; Luke v. Baldwin-United Corp. (1985) 167 Cal.App.3d 664, 668, 213 Cal.Rptr. 654.)

Where the issue on appeal is whether the trial court has abused its discretion, the showing necessary to reverse the trial court is insufficient if it presents facts which merely afford an opportunity for a different opinion:

"An appellate tribunal is neither authorized nor warranted in substituting its judgment for the judgment of the trial judge. 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; ..." (Brown v. Newby, supra, 39 Cal.App.2d at p. 618, 103 P.2d 1018; emphasis added.)

THE SANCTIONS

Recent statutory changes have broadened the power of trial courts to award sanctions, including attorney's fees for "tactics or actions not based on good faith which are frivolous or which cause unnecessary delay." (Code Civ.Proc., § 128.5.) More specifically, such sanctions can be applied in summary judgment proceedings, where a party files an affidavit in bad faith. (Code Civ.Proc., § 437c, subd. (i).)

Trial courts are empowered to supervise the orderly conduct of the court's business and to guard against inept or unnecessary procedures which tend to delay or hinder its proceedings. (People v. Mattson (1959) 51 Cal.2d 777, 792, 336 P.2d 937; Ellis v. Roshei Corp. (1983) 143 Cal.App.3d 642, 648-649, 192 Cal.Rptr. 57.) An attorney has an obligation to respect the legitimate interests of fellow members of the bar, the judiciary, and the administration of justice. (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 647, 183 Cal.Rptr. 508, 646 P.2d 179.) While the fervor of zealous counsel should not be deterred, we must recognize the real fear that irresponsible litigants may abuse their right of access to the judicial system. (Id., at pp. 648, 651, 183 Cal.Rptr. 508, 646 P.2d 179; Ellis v. Roshei Corp., supra, 143 Cal.App.3d 642, 649, 192 Cal.Rptr. 57.) Here, the sanction of imposing attorney's fees is the sole means the District may be protected from bad faith litigation,...