167 E. Williams v. Blessings CA6 ( 2014 )

Filed 6/12/14 167 E. Williams v. Blessings CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
167 E. WILLIAMS LLC, H038017
(Santa Clara County
Plaintiff and Respondent, Super. Ct. No. 1-10-CV176152)
v.
DEVINE BLESSINGS et al.,
Defendants and Appellants.
Appellants Devine Blessings, Thomas J. Spielbauer, Esq. and Douglas B. Allen,
Esq. (hereafter sometimes appellants) appeal from an order granting respondent 167 E.
Williams LLC’s (LLC) motion to compel further responses and denying appellants’ three
motions for protective orders. In that order, the trial court imposed monetary sanctions
against appellants in connection with LLC’s motion to compel further responses and one
of the motions for a protective order.
Appellants contend the trial court erred in that it: (1) lacked jurisdiction to make
the order because the time to bring a motion to compel further responses had lapsed; and
(2) the monetary sanctions imposed in connection with the motion for a protective order
were not apportioned nor was there an adequate attempt to meet and confer by LLC prior
to the hearing.
LLC has also filed a motion1 seeking sanctions against appellants on the grounds
the instant appeal is frivolous and was brought solely for the purpose of causing delay.
We disagree and will affirm the order. We will also deny LLC’s motion for
sanctions on appeal.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Events leading to the underlying action
On or about March 25, 2010, LLC acquired certain real property located at 167 E.
William Street (the Property) in San Jose, California, via a trustee’s sale, subject to a first
and second deed of trust. The second deed of trust was created in 2003 when Dennis S.
Spielbauer (brother to Thomas J. Spielbauer) borrowed $350,000 from Curtis L. Mitchell
and executed a promissory note (the Mitchell note), secured by a deed of trust on the
Property. By December 2009, Dennis had paid down the Mitchell note leaving a balance
due of $4,389.16.2 Approximately two weeks before LLC acquired the third deed of
trust, however, the Mitchell note and second deed of trust were assigned to Devine
Blessings, a corporation owned and controlled by Thomas.3
In April 2010, LLC entered into an agreement to sell the Property to a third party
and escrow was opened with Old Republic Title Company (Old Republic). LLC sent a
payoff demand to Devine Blessings seeking the amount due on the Mitchell note, which
(at that time) it believed was $4,389.16. In response, Devine Blessings sent Old Republic
a written payoff demand in the amount of $269,500, plus 10 percent interest from March
1
The motion was joined by one Mehreghan Loefti, who is presumably connected
to LLC in some undisclosed capacity. So far as we can tell from the record, Loefti is not
a party to the proceedings below nor is Loefti named in the instant appeal.
2
As discussed below, LLC subsequently determined the amount due on the
Mitchell promissory note at the time of the trustee’s sale was $7,152.03.
3
Thomas and Allen were counsel of record for Devine Blessings.
2
2010.4 LLC sought a detailed accounting of the written payoff demand, given the
discrepancy between the amount it believed was owed versus the amount claimed by
Devine Blessings. When that accounting was not provided, LLC again wrote to Devine
Blessings requesting a revised payoff demand which complied with Civil Code section
2943, and advising Devine Blessings that its “inaccurate, overstated payoff demand
jeopardized close of escrow” on the pending sale of the Property.
LLC’s second amended verified complaint lists the following causes of action: (1)
declaratory relief, seeking a declaration as to the amount owed on the Mitchell note; (2)
intentional interference with economic advantage; (3) negligent interference with
economic advantage; and (4) failure to provide an accurate payoff demand statement in
violation of the Civil Code.
B. The discovery disputes
As part of its discovery, LLC contacted Mitchell to determine what information
and documents he had regarding the Mitchell note he sold to Devine Blessings. On
November 7, 2011, apparently after learning that Mitchell had been contacted by LLC
and had provided it certain documents associated with the sale of the Mitchell note to
Devine Blessings, Allen wrote to Mitchell advising him that he was “in breach” of the
confidentiality provisions of the Mitchell note’s purchase and sale agreement. Allen
further demanded that Mitchell “defend and indemnify” Devine Blessings and Thomas in
the lawsuit brought by LLC and demand the return of the documents “produced in
violation of your contractual agreement.”
On November 16, 2011, Devine Blessings filed a motion for a protective order,
seeking to preclude LLC from “engaging in the following discovery: (1) All documents
related to the Mitchell Note, defined as the ‘promissory straight note dated June 16, 2003
4
The written payoff demand claimed $126,000 in “principal” and $143,500 in
“other.”
3
between Curtis L. Mitchell and Dennis Spielbauer.’ (2) All documents related to any note
or other obligation secured by a deed of trust on 167 E. William Street, San Jose,
California. (3) All documents related to any note or other obligation secured by a deed of
trust on 499 South 5th Street, San Jose, California. (4) All documents related to any
payoff demand related to any loan secured by either 167 E. William Street, San Jose,
California or 499 South 5th Street, San Jose, California. (5) All documents related to the
sale of the Mitchell Note. (6) All documents related to any assignment of the Mitchell
Note. (7) All documents related to any assignment of any deed of trust securing the
Mitchell Note. (8) All correspondence between Curtis Mitchell and his agents, attorneys,
employees, representatives, accountants, and any other persons acting on his behalf and
Thomas Spielbauer. (9) All correspondence between Mitchell and Devine Blessings.
(10) All documents showing payments made on the Mitchell Note. (11) All documents
reflecting the principal balance of the Mitchell Note at the time it was assigned to Devine
Blessings and (12) All documents related in any way to any note or deed or other secured
obligation of any kind that Mitchell transferred or assigned by any means to Devine
Blessings. (13) All documents related in any way to any note or deed or other secured
obligation of any kind that Curtis Mitchell transferred or assigned by any means to
Thomas Spielbauer. (14) All documents related in any way to any note or deed of trust or
other secured obligation of any kind that Curtis Mitchell transferred or assigned by any
means to Dennis Spielbauer. (15-17) All documents regarding any agreement between
Curtis Mitchell and Devine Blessings, Thomas Spielbauer and Dennis Spielbauer.”
Devine Blessings asserted several justifications for prohibiting discovery of these
documents, namely that they were not “relevant,” their production would violate “the
right of privacy” as well as Devine Blessings’ “[t]rade [s]ecrets.” Finally, the “disclosure
of such documents renders Curtis Mitchell in breach of his contractual obligation.” [Sic.]
The documents Mitchell produced indicated that, at the time the Mitchell note was
assigned to Devine Blessings, the principal balance was $7,152.03. Those documents
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further revealed that, at the same time it purchased the Mitchell note, Devine Blessings
had purchased a second promissory note from Mitchell related to property located at 484-
486 South 5th Street, San Jose, California (the South 5th note). The remaining principal
balance on the South 5th note was $118,847.97. Based on these documents, LLC
suspected that Devine Blessings had aggregated the principal amounts due on both the
Mitchell note and South 5th note to arrive at the $126,000 “principal balance” set forth in
its response to LLC’s payoff demand.
The documents provided by Mitchell also showed that Old Republic had handled
the escrow for the sale of the Mitchell and South Fifth notes. LLC issued a deposition
subpoena duces tecum to Old Republic for those records and testimony of Jean Peixotto,
the escrow officer who handled the transaction. Peixotto countersigned a letter written by
Mitchell and dated March 12, 2010,5 affirming that she witnessed Thomas’s refusal to
sign any documents showing the value of either of the two notes purchased by Devine
Blessings. According to the letter, Mitchell explained to Thomas that the purchase and
sale agreement prepared by him only indicated that the “notes were being purchased for
the sum of $126,000.” The documents Thomas refused to sign, which were attached to
the March 12, 2010 letter, set forth the present balance due on the Mitchell note
($7,152.03) and the South 5th note ($118,847.97). When asked why he would not sign
them, Mitchell wrote that Thomas replied, “I have my own reasons for not signing them.
I can’t tell you what they are, but they do not involve you.”
Dennis filed objections to the Old Republic subpoena, claiming production of
those documents would invade his privacy. Despite being advised that he had no basis
for objecting since he was not a party to the transaction, and therefore not a “consumer”
as defined by Code of Civil Procedure section 1985.3,6 Dennis refused to withdraw his
5
The document was signed by Mitchell and Peixotto on March 15, 2010.
6
Further unspecified statutory references are to the Code of Civil Procedure.
5
objection. LLC was forced to bring a motion to compel production of records and
testimony from Old Republic.
LLC also served special interrogatories on Devine Blessings, seeking responses to
questions about the amount owed on the Mitchell note and the components making up the
amount of the payoff demand submitted by Devine Blessings. Devine Blessings’ initial
responses were deemed insufficient by LLC, so its counsel wrote to Thomas7 trying to
arrange a time to meet and confer about those responses either by telephone or in person.
However, Thomas demanded that LLC put the deficiencies in writing to ensure a “written
record” and to avoid “misunderstanding.” LLC subsequently prepared a detailed letter
addressing why it believed the responses to special interrogatories Nos. 1, 4, 5, 7-10, 15-
17, 19 and 22 were deficient.
In its letter, LLC explained the deficiencies related to the following: (A) The
amount owed on the Mitchell note (special interrogatory (SI) No. 1); (B) the amount of
attorney fees claimed as part of the payoff demand (SI No. 4), and the components of the
payoff demand other than the principal balance, interest and attorney fees and costs (SI
No. 5); (C) the identification and hourly rate of persons who provided the claimed legal
service (SI Nos. 7 & 8); (D) a detailed explanation of the legal work performed with
respect to the Mitchell note, which were claimed to be recoverable on the payoff demand
(SI No. 9), and the date(s) such services were provided (SI No. 10); (E) the amount
Devine Blessings paid to acquire the Mitchell note (SI No. 15); (F) whether Devine
Blessings made any monetary advances to any borrower on the Mitchell note (SI No. 16);
(G) identification of the person(s) from whom Devine Blessings acquired the Mitchell
note (SI No. 17), as well as the current borrower on the Mitchell note (SI No. 19); and
(H) if the Mitchell note was acquired with other notes, identification of such other notes,
including the amount (SI No. 22).
7
Allen associated in as counsel of record sometime in October 2011.
6
After LLC sent this letter, Allen, who had recently associated in as cocounsel,
wrote to LLC indicating he would be out of town the following week, but would respond
to the meet and confer letter on his return. LLC requested, and was granted, an extension
of the deadline to file a motion to compel further responses. A second two-week
extension was subsequently granted by Allen. A few days later, Allen confirmed that
Devine Blessings would provide further responses to each of the special interrogatories
listed in LLC’s meet and confer letter (i.e., SI Nos. 1, 4, 5-10, 15-17, 19 & 22). Counsel
for LLC sent an e-mail to Allen asking for a date by which it could expect the further
responses as well as confirmation that “the deadline to move to compel as to any of the
interrogatories in this set will be extended to be 45 days from the date of service (plus
any days for mailing) following the service of the amended set.” Allen did not respond to
this e-mail.
Devine Blessings served its further responses on November 7, 2011. However,
upon reviewing the responses, LLC believed they remained deficient for the same
reasons raised in its initial meet and confer letter. In addition, Devine Blessings had
failed to provide any supplemental responses to SI Nos. 8, 9, 15 and 17. LLC raised
these issues with Devine Blessings in an e-mail and letter dated December 7, 2011. LLC
followed up with a second letter dated December 9, 2011, when it received no response
from Devine Blessings.
Devine Blessings responded by letter dated December 12, 2011, standing on its
objections and taking the position that, because it had not provided further responses to
SI Nos. 8, 9, 15 and 17, the date to bring a motion to compel on those interrogatories had
expired.
LLC moved to compel further responses to all the interrogatories covered in its
initial meet and confer letter, including the four to which Devine Blessings had failed to
provide supplemental responses.
7
Following a hearing, the trial court ruled against Thomas and Devine Blessings on
the two discovery motions at issue in this appeal, specifically, Devine Blessings and
Thomas’ motion for a protective order to limit discovery and LLC’s motion to compel
further responses to special interrogatories. The trial court awarded LLC monetary
sanctions totaling $10,013.25, consisting of $4,582 on LLC’s motion to compel further
responses and $5,431.25 on appellants’ motion for a protective order to limit discovery.
The monetary sanctions were ordered against “Devine [Blessings] and its attorneys.”
II. DISCUSSION
A. Standard of review
We review discovery orders for an abuse of discretion. (Sauer v. Superior Court
(1987) 195 Cal.App.3d 213, 228.) A trial court’s ruling on a discovery sanction is
reviewed for abuse of discretion, as well. (In re Marriage of Chakko (2004) 115
Cal.App.4th 104, 108.) Discretion is abused only when it can be shown that the trial
court has “exceed[ed] the bounds of reason, all of the circumstances before it being
considered.” (Loomis v. Loomis (1960) 181 Cal.App.2d 345, 348; Denham v. Superior
Court (1970) 2 Cal.3d 557, 566 (Denham).) “ ‘The burden is on the party complaining to
establish an abuse of discretion, and unless a clear case of abuse is shown and unless
there has been a miscarriage of justice a reviewing court will not substitute its opinion
and thereby divest the trial court of its discretionary power.’ ” (Denham, supra, at p.
566.)
B. The trial court had jurisdiction to rule on the motion to compel further
responses
Appellants argue the trial court lacked jurisdiction to rule on LLC’s motion to
compel further responses to four of the special interrogatories (Nos. 8, 9, 15 & 17).8
8
The trial court denied LLC’s motion to compel a further response to SI No. 17,
due to LLC’s “fail[ure] to include the text of [the special interrogatory] and Devine’s
response in a separate statement.”
8
Because Devine Blessings did not provide supplemental responses to those
interrogatories along with its other supplemental responses, the time to bring a motion to
compel on those particular interrogatories expired.
“On receipt of a response to interrogatories, the propounding party may move for
an order compelling a further response if the propounding party deems that any of the
following apply: (1) An answer to a particular interrogatory is evasive or incomplete. . . .
(3) An objection to an interrogatory is without merit or too general.” (§ 2030.300, subd.
(a).) “Unless notice of this motion is given within 45 days of the service of the verified
response, or any supplemental verified response, or on or before any specific later date to
which the [parties] have agreed in writing, the propounding party waives any right to
compel a further response to the interrogatories.” (Id., subd. (c).)
We decline to interpret this statute in the manner appellants urge. The statute
provides that the motion to compel must be made within 45 days of the service of the
response. Here, LLC’s meet and confer letter indicated that it deemed 13 of Devine
Blessings’ responses to be inadequate. Accordingly, those 13 responses were put at
issue, so to speak, and Devine Blessings was therefore obligated to respond, in some
manner, to the concerns raised in LLC’s meet and confer. Devine Blessings subsequently
warranted, in writing, it would provide further responses to all 13 interrogatories.
However, when it subsequently provided further responses to only nine, the time for LLC
to move to compel responses to any or all of the 13 interrogatories identified in its meet
and confer letter began to run on the date of that further response. Accepting appellants’
interpretation allows too much opportunity for gamesmanship, subverting one of the
basic purposes of discovery. (See Greyhound Corp. v. Superior Court (1961) 56 Cal.2d
355, 376 [by enacting discovery statutes, Legislature intended to take “ ‘game’ ” element
out of trial preparation].)
9
Consequently, we find the trial court did not act in excess of its jurisdiction in
considering LLC’s motion to compel further responses to the special interrogatories
Devine Blessings deliberately omitted from the additional responses it provided.
C. The trial court did not abuse its discretion in imposing sanctions
1. The motion for protective order
As detailed above, Devine Blessings and Thomas brought a motion for a
protective order seeking to preclude discovery of 17 categories of documents, many if not
all of which, go directly to the issues involved in the underlying litigation. In support of
this motion, Devine Blessings and Thomas averred that the documents were neither
relevant nor reasonably calculated to lead to the discovery of admissible evidence.
Even a cursory review of the listed categories belies that assertion. For example,
the motion sought to prevent production of “(1) All documents related to the Mitchell
Note [and] (2) All documents related to any note or other obligation secured by a deed of
trust on 167 E. William Street, San Jose, California, . . .” The entirety of this case
revolves around the Mitchell note. What was the amount (actually) due on that note
versus the amount Devine Blessings claimed was due? If LLC was precluded from
obtaining this evidence, what evidence in support of its claims could it hope to produce?
Appellants argue the sanctions imposed were improper because they were
requested in a joint opposition, and no effort was made by LLC to apportion the sanctions
between the two protective order motions. The trial court expressly denied LLC’s
request for sanctions in connection with the motion for a protective order to limit
discovery related to the Old Republic deposition subpoena duces tecum.
LLC’s opposition, which did address both of the motions for protective orders,
requested sanctions in the amount of $6,418.75, representing the attorney fees expended
in opposing the motions. Appellants cite no authority for their contention that the trial
court was precluded from awarding some portion of those fees to LLC in connection with
one of the motions, and denying the request for sanctions in connection with the other
10
motion. The amount awarded ($5,431.25) was less than that requested, and was the exact
amount identified in the declaration of LLC’s counsel, less an additional $987.50 which
counsel expected to bill for appearing at the hearing. We are in no position to second
guess the trial court’s determination that the sanctions imposed were reasonable under the
circumstances.
Accordingly, the trial court did not abuse its discretion in imposing monetary
sanctions in connection with the motion for protective order.
2. The motion to compel further responses
Appellants contend the trial court abused its discretion in imposing sanctions in
connection with LLC’s motion to compel further responses because: (1) one of the
interrogatories improperly sought to invade the attorney/client privilege obtained between
Thomas and Dennis; and (2) the order was based on LLC’s disagreement with the content
of the responses, not the lack of responses. We disagree.
In ruling on LLC’s motion, the trial court ordered Devine Blessings to provide
further responses to SI Nos. 1, 4-5, 8-10, 15-16 and 19. Again, even a brief review of the
initial and further responses provided to LLC justifies the trial court’s decision to impose
sanctions in connection with the motion to compel.
For example, in SI No. 1, Devine Blessings was asked to “[s]tate the exact amount
owed under the MITCHELL NOTE as of April 27, 2010.” Devine Blessings initially
objected, and indicated it could not answer because “the term ‘exact amount owed under
the MITCHELL NOTE’ renders this interrogatory vague, and ambiguous. Devine
Blessings does not understand if this interrogatory is requesting the amount which
defendant believes constitutes the balance of the note, or if this question requests the total
amount due to include not only the alleged principal of the note but includes as well the
interest, attorney fees, and costs.”
The further response to this interrogatory was, as follows: “Devine Blessings
objects that the term ‘exact amount owed under the MITCHELL NOTE’ renders this
11
interrogatory vague, and ambiguous. Devine Blessings does not understand if this
interrogatory is requesting the amount which defendant believes constitutes the balance
of the note, or if this question requests the total amount due to include not only the
alleged principal of the note but includes as well the interest, attorney fees, and costs.
Without waiving the foregoing objection Respondent further replies as follows: The
amounts owed are reflected in the ‘Written Payoff Demand Statement’ dated April 27,
2010, a copy of which is attached hereto.” The attached payoff demand statement was
the one which LLC contends was incorrect and improperly inflated.
Appellants argue that their answer to this (and apparently other similar
interrogatories) “was an honest statement of their claim, which included not only the
amounts previously claimed by Mr. Mitchell supplanted by the cost of the note
acquisition, but the additional claims by the new holder of the trust deed.” The problem
with this response is that SI No. 1 specifically asked what was due under the Mitchell
note, which was defined as “the Promissory Straight Note dated June 16, 2003 between
Curtis L. Mitchell and Dennis Spielbauer in the original principal amount of $350,000.”
LLC was not asking (in this interrogatory at least) what amounts appellants grafted onto
the Mitchell note, but rather what was due and owing on that specified note. Whether
appellants were justified in including in their payoff demand “not only the amounts
previously claimed by Mr. Mitchell supplanted by the cost of the note acquisition, but the
additional claims by the new holder of the trust deed” is a matter for trial. Their failure to
provide a straightforward response to this, and the other, special interrogatories to which
the trial court ordered further responses, is sufficient basis for an award of sanctions in
favor of LLC.
D. Motion for sanctions
California Rules of Court, rule 8.276(a), gives the appellate court the authority to
“impose sanctions . . . on a party . . . for: [¶] (1) Taking a frivolous appeal or appealing
solely to cause delay. . . .” Section 907 states that “[w]hen it appears to the reviewing
12
court that the appeal was frivolous or taken solely for delay, it may add to the costs on
appeal such damages as may be just.” An appeal should be held frivolous where it is
“prosecuted for an improper motive--to harass the respondent or delay the effect of an
adverse judgment--or when it indisputably has no merit--when any reasonable attorney
would agree that the appeal is totally and completely without merit.” (In re Marriage of
Flaherty (1982) 31 Cal.3d 637, 650.) “An appeal that is simply without merit is not by
definition frivolous and should not incur sanctions.” (Ibid.)
Although we have found the appeal to be without merit, we do not consider it
frivolous. There is no evidence that it was brought in bad faith. Given the amount of the
sanctions imposed and the bases for awarding those sanctions, it cannot be said that any
reasonable attorney would agree that this appeal should not have been pursued. While
the arguments raised, both here and below, were not particularly strong, we cannot say
that they were raised simply to harass respondents or delay an adverse judgment.
Therefore, the motion for sanctions is denied.
13
III. DISPOSITION
The order is affirmed. Respondent 167 E. Williams LLC’s motion for sanctions
for bringing a frivolous appeal is denied. Respondent is entitled to recover its costs on
appeal.
Premo, J.
WE CONCUR:
Rushing, P.J.
Elia, J.
14