Filed 9/12/19 Avalanche Funding, LLC v. Swickard CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Lassen)

—-

AVALANCHE FUNDING, LLC,

Plaintiff and Appellant,

v.

TIM SWICKARD et al.,

Defendants and Respondents.

C083954

(Super. Ct. No. 59930)

This case involves an underlying dispute over grazing rights on rangeland in Lassen County, but the contentions in this appeal arise from an order sanctioning Avalanche Funding, LLC for bad faith and frivolous litigation conduct pursuant to Code of Civil Procedure section 128.5. Avalanche Funding now contends the trial court erred in (1) applying an incorrect legal standard in imposing the sanctions, (2) finding that its claims were completely without merit against defendants Mapes Ranch, Inc. (Mapes Ranch), Five Dot Land and Cattle Co. and Tim Swickard (collectively the Mapes Ranch defendants), (3) sanctioning it for exercising its right to dismiss the action, (4) imposing sanctions based on alleged discovery abuses, and (5) awarding sanctions without proof that the expenses claimed were incurred as a result of sanctionable conduct.

Finding that Avalanche Funding has not established a clear abuse of discretion, we will affirm the trial court’s order. We deny Avalanche Funding’s request for judicial notice as the document of which we are asked to judicially notice is not relevant to our review. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2; Huitt v. Southern California Gas Co. (2010) 188 Cal.App.4th 1586, 1605, fn. 10.) We also deny Avalanche Funding’s request to strike the respondent’s brief and consider certain arguments asserted by the Mapes Ranch defendants where supported by documents in the appellate record. (Cal. Rule of Court, rule 8.204(e)(2)(C); Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1258, fn. 12.) In addition, we deny the Mapes Ranch defendants’ summary request for sanctions on appeal. (Okasaki v. City of Elk Grove (2012) 203 Cal.App.4th 1043, 1045, fn. 1.)

BACKGROUND

Mapes Ranch sold certain real property in Lassen County to Norman Rice in 1993. A promissory note was secured by a deed of trust in favor of Mapes Ranch. Paragraph 3.02(c) of the sales contract provided that Rice granted Mapes Ranch the right to use the property for livestock so long as Mapes Ranch held the deed of trust. After the deed of trust was re-conveyed to Rice, Mapes Ranch would have the right of first refusal to continue livestock activities on terms to be agreed upon by Mapes Ranch and Rice, and Rice would have an option to purchase all future grazing rights from Mapes Ranch. Paragraph 5.06 of the sales contract required any amendments to the contract to be in a writing signed by Mapes Ranch and Rice.

The following year, Mapes Ranch granted the same real property to Rice and his wife Gloria. The grant deed reserved to Mapes Ranch the right to use the property for feeding, pasturing, maintenance and production of livestock. Mapes Ranch and Rice also agreed to a reservation of grazing rights. It provided that Mapes Ranch reserved the right to use and enjoy the property for livestock, and it gave Rice the exclusive option to purchase all grazing rights reserved by Mapes Ranch. The reservation provided that it superseded all prior related understandings between the parties.

Rice sold the property to Syed Arif in 1996. More than a decade later, in a letter of understanding, Mapes Ranch agreed that Arif succeeded to Rice’s rights under the reservation. That same year, Arif and Syeda Begum signed a commercial promissory note agreeing to pay Avalanche Funding a specified amount. Arif and Begum executed a deed of trust in favor of Avalanche Funding. That deed of trust was subject to permitted exceptions, including the unrecorded reservation in favor of Mapes Ranch. Avalanche Funding claims Arif and Begum defaulted on their note.

John O’Brien, counsel for Avalanche Funding, and Timothy Swickard, counsel for Mapes Ranch, exchanged letters and e-mails about Mapes Ranch’s interest in the property before Avalanche Funding filed the lawsuit that is the subject of this appeal. In those prelawsuit communications, Mr. O’Brien asserted that, pursuant to the sales contract between Mapes Ranch and Rice, Mapes Ranch no longer had any grazing rights in the property because it no longer held a deed of trust on the property. Mr. O’Brien repeatedly claimed that the deed of trust in favor of Mapes Ranch had been released. He later provided Mapes Ranch with a copy of what he represented was a deed of reconveyance. But that deed was signed by Hansen Cattle Company and not one of the Mapes Ranch defendants. Mr. O’Brien subsequently asserted that the letter of understanding between Arif and Mapes Ranch could not create a reservation in perpetuity and, in any event, did not bind Avalanche Funding.

Avalanche Funding filed a complaint against Arif, Begum, Tim Swickard, Mapes Ranch, Five Dot Cattle Company and others. Among other things, the complaint alleged that the Mapes Ranch defendants might claim an interest in the property pursuant to the reservation and sought a declaration that those defendants had no existing interest in the property. It also sought a decree that Avalanche Funding’s interest in the property was senior to the defendants’ interests.

At one point in the proceedings, the trial court asked the parties to provide evidence that the reservation of grazing rights was in Avalanche Funding’s chain of title. Counsel for the Mapes Ranch defendants provided the trial court with a copy of the reservation and a title report and title policy referring to the reservation of grazing rights. The trial court sustained a demurrer to the amended complaint with leave to amend. Eight days later, Avalanche Funding filed a request for dismissal of the complaint without prejudice.

The Mapes Ranch defendants moved for sanctions against Avalanche Funding pursuant to section 128.5. They argued, among other things, that the action by Avalanche Funding against the Mapes Ranch defendants utterly lacked merit and was filed in bad faith because Avalanche Funding and its attorneys filed and prosecuted the action even though they knew Mapes Ranch owned grazing rights that were a permitted exception in the Avalanche Funding deed of trust. The trial court granted the Mapes Ranch defendants’ sanctions motion. It ordered Avalanche Funding to pay sanctions in the sum of $27,253.51, which consisted of $25,000 in attorney’s fees and $2,253.51 in costs.

STANDARD FOR REVIEW

We review an award of section 128.5 sanctions for abuse of discretion. (Wallis v. PHL Associates, Inc. (2008) 168 Cal.App.4th 882, 893 (Wallis).) “ ‘Discretion is abused whenever, in its exercise, the [trial] court exceeds the bounds of reason, all of the circumstances before it being considered. . . .’ ” (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.) We presume the trial court’s order is correct. (Id. at p. 564.) We do not independently determine whether the challenged conduct was frivolous or in bad faith, and we may not substitute our judgment for the judgment of the trial court. (Sabek, Inc. v. Engelhard Corp. (1998) 65 Cal.App.4th 992, 1001.) Unless the complaining party shows a clear case of abuse and that there has been a miscarriage of justice, we will not disturb the trial court’s exercise of discretion. (Denham, at p. 566.)

DISCUSSION

I

Avalanche Funding contends the trial court applied an incorrect legal standard in imposing sanctions under section 128.5. We disagree.

The version of section 128.5 that governs this appeal was enacted in 2014. (Stats. 2014, ch. 425, § 1 [effective Jan. 1, 2015, to Aug. 6, 2017].) Former subdivision (a) provided in pertinent part: “A trial court may order a party, the party’s attorney, or both to pay the 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.” (Stats. 2014, ch. 425, § 1.) “Actions or tactics” included the filing and service of a complaint and the making or opposing of motions. (Stats. 2014, ch. 425, § 1 [former § 128.5, subd. (b)(1)].) “Frivolous” meant totally and completely without merit or for the sole purpose of harassing an opposing party. (Stats. 2014, ch. 425, § 1 [former § 128.5, subd. (b)(2)].)

Under the relevant version of the statute, an objective standard applies to determine whether an action or tactic is made in bad faith and is frivolous. (San Diegans for Open Government v. City of San Diego (2016) 247 Cal.App.4th 1306, 1311, 1318, superseded by statute on another point as stated in Nutrition Distribution, LLC v. Southern SARMs, Inc. (2018) 20 Cal.App.5th 117, 130 (San Diegans for Open Government).) An action is totally and completely without merit and thus frivolous under section 128.5 when no reasonable attorney would have believed there was any merit to the action. (San Diegans for Open Government, at p. 1319; Gerbosi v. Gaims, Weil, West & Epstein, LLP (2011) 193 Cal.App.4th 435, 450; Wallis, supra, 168 Cal.App.4th at p. 893; In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1168.) That determination is made by examining whether the factual allegations of the claim had evidentiary support. (San Diegans for Open Government, at p. 1319.) When an action utterly lacks merit, the trial court may infer that the action was taken in bad faith. (In re Marriage of Drake, at p. 1169.)

A subjective standard applies to whether the sole purpose of an action is to harass an opposing party or an action is solely intended to cause unnecessary delay. (Chitsazzadeh v. Kramer & Kaslow (2011) 199 Cal.App.4th 676, 684.) Subjective motivation can be inferred from the absence of any arguable merit in the action. (Ibid.; In re Marriage of Drake, supra, 53 Cal.App.4th at p. 1169.) “ ‘Whether sanctions are warranted depends on an evaluation of all the circumstances surrounding the questioned action.’ ” (Wallis, supra, 168 Cal.App.4th at p. 893.)

Here, the trial court determined that the actions or tactics described in the motion for sanctions filed by the Mapes Ranch defendants fell within the meaning of section 128.5. In addition, the trial court found that the Avalanche Funding deed of trust contained a permitted exception for grazing rights in favor of Mapes Ranch and there was no evidence the grazing rights had expired. An action is totally and completely without merit and is sanctionable under section 128.5 where the plaintiff had no factual basis for instituting or maintaining the action against the defendant. (Muega v. Menocal (1996) 50 Cal.App.4th 868, 874-875; Dwyer v. Crocker National Bank (1987) 194 Cal.App.3d 1418, 1434-1435, 1438 (Dwyer); West Coast Development v. Reed (1992) 2 Cal.App.4th 693, 704 (West Coast Development); 580 Folsom Associates v. Prometheus Development Co. (1990) 223 Cal.App.3d 1, 22 (580 Folsom Associates); Bach v. McNelis (1989) 207 Cal.App.3d 852, 876-878; Frank Annino & Sons Construction, Inc. v. McArthur Restaurants, Inc. (1989) 215 Cal.App.3d 353, 359 (Frank Annino & Sons); Finnie v. Town of Tiburon (1988) 199 Cal.App.3d 1, 12-15.)

II

Avalanche Funding argues that even if the trial court applied the proper standard under section 128.5, no reasonable attorney would have found that its claims against the Mapes Ranch defendants completely lacked merit.

As we have explained, filing and serving a complaint containing factual allegations that have no evidentiary support is sanctionable under section 128.5. (580 Folsom Associates, supra, 223 Cal.App.3d at p. 22; Frank Annino & Sons, supra, 215 Cal.App.3d at p. 359.) Avalanche Funding’s pleadings alleged that the Mapes Ranch defendants had no current interest in the property and that Avalanche Funding’s interest in the property was senior to the interests of the Mapes Ranch defendants. By verifying the pleadings, Avalanche Funding’s manager declared under penalty of perjury that the allegations in the pleadings were true. (§ 446, subd. (a).) By signing and filing the pleadings, Avalanche Funding’s attorneys certified that to the best of their knowledge, information and belief, formed after an inquiry reasonable under the circumstances, the allegations and other factual contentions in the pleadings had evidentiary support. (§ 128.7, subd. (b)(3).) However, nothing in the record shows that Avalanche Funding had any evidence supporting its factual contentions.

Avalanche Funding’s deed of trust contained an express exception for the reservation. The deed of trust states the reservation is an unrecorded agreement that was disclosed in the grant deed from Mapes Ranch to Rice. Avalanche Funding’s counsel had a copy of the grant deed from Mapes Ranch to Rice before Avalanche Funding filed its complaint.

In construing a deed, as with other contracts, our goal is to effectuate the intent of the parties by looking first to the language of the document. (Willard v. First Church of Christ, Scientist (1972) 7 Cal.3d 473, 476; City and County of San Francisco v. Union Pacific R.R. Co. (1996) 50 Cal.App.4th 987, 994.) Further, we interpret a reservation in a grant deed in favor of the grantor. (Civ. Code, § 1069.) The language of the grant deed to Rice clearly created a reservation in the property for grazing in favor of Mapes Ranch. The reservation allowed Mapes Ranch’s interest in the property to pass to Rice, but reserved an interest for grazing purposes in Mapes Ranch. (Willard, supra, 7 Cal.3d at p. 476.)

The right to pasture cattle on land belonging to another has traditionally been characterized as a profit à prendre. (Hubbard v. Brown (1990) 50 Cal.3d 189, 199 (dis. opn. of Mosk, J.); 28A C.J.S. (2019) Easements, § 14; 10 Miller and Starr, California Real Estate (4th ed. 2018) § 34:4; 3 Tiffany, The Law of Real Property (3d ed. 1939) § 845.) “The French phrase ‘profit [á] prendre’ literally means profit to take.” (Lynch v. State Bd. of Equalization (1985) 164 Cal.App.3d 94, 102, fn. 4, italics omitted.) A profit à prendre refers to the “ ‘right to make some use of the soil of another, such as a right to mine metals, and it carries with it the right of entry and the right to remove and take from the land the designated products or profit and also includes right to use such of the surface as is necessary and convenient for exercise of the profit.’ ” (Kennecott Corp. v. Union Oil Co. (1987) 196 Cal.App.3d 1179, 1186; see 3 Tiffany, The Law of Real Property, supra, § 840.) When attached to another estate, a profit à prendre is in the nature of an easement. (3 Tiffany, The Law of Real Property, at § 840.) A profit à prendre may be created by words of reservation. (Id. at § 842.) Here, the grant deed to Rice created a profit à prendre in favor of Mapes Ranch by reservation.

Avalanche Funding argued that under the terms of the Contract of Sale between Mapes Ranch and Rice, the grazing rights reservation in favor of Mapes Ranch terminated when the deed of trust in favor of Mapes Ranch was re-conveyed to Rice. But the deed of reconveyance Avalanche Funding produced does not relate to the grant deed to Rice. Nothing in the record shows that Avalanche Funding had any evidentiary support for its claim that the grant deed in favor of Mapes Ranch had been re-conveyed. Moreover, the sales contract between Mapes Ranch and Rice permitted amendments so long as the amendment was in a writing signed by the parties. And Mapes Ranch and Rice subsequently signed the reservation, which did not require Mapes Ranch to hold the deed of trust to retain its rights under the grazing rights reservation.

Avalanche Funding further argued that the reservation was out of the chain of title. But that argument is also unsupported by the evidence presented to the trial court. The plain language of the grant deed to Rice shows that Mapes Ranch intended to reserve to itself grazing rights in the property. And the grant deed was recorded on the same date as the effective date of the reservation, further evidencing such intent.

In addition, Avalanche Funding argued the reservation did not create a legitimate property interest because it violated the Rule against Perpetuities. Not so. A profit à prendre may last indefinitely. (John W. Bruce and James W. Ely, Jr., The Law of Easements & Licenses in Land (2019) § 1:15; 4 Miller and Starr, California Real Estate (4th ed. 2018) § 12:36 [the rule against perpetuities does not apply to vested property interests]; see generally Gerhard v. Stephens (1968) 68 Cal.2d 864, 880-881 [a profit à prendre can “endure in perpetuity”]; Callahan v. Martin (1935) 3 Cal.2d 110, 114, 127-128 [assignment of interest in oil rights on assignor’s land created a profit à prendre, which in that case was intended to be a perpetual interest].) The rule against perpetuities does not apply to present profits á prendre because they are vested present interests. (Rousselot v. Spanier (1976) 60 Cal.App.3d 238, 240-241 [deed granting certain real property but reserving oil and gas rights, to expire in 20 years or later if production continued in paying quantities, did not violate the rule against perpetuities because the interest of the grantee vested immediately]; 70 C.J.S. (2019) Perpetuities, § 20; 3 Simes and Smith, The Law of Future Interests (3d ed. 2004) § 1248.)

Avalanche Funding fails to establish a clear abuse of discretion where the record before the trial court showed no evidentiary support for key allegations in Avalanche Funding’s pleadings against the Mapes Ranch defendants.

III

Avalanche Funding also urges that the trial court abused its discretion in sanctioning Avalanche Funding for exercising its right to dismiss its lawsuit.

A plaintiff may dismiss an action with or without prejudice, upon written request to the clerk at any time before the actual commencement of trial. (§ 581, subd. (b)(1); Groth Bros. Oldsmobile, Inc. v. Gallagher (2002) 97 Cal.App.4th 60, 66 [the right to voluntarily dismiss an action before commencement of trial is not absolute].) The Mapes Ranch defendants acknowledged in the reply to their motion for sanctions that Avalanche had a right to dismiss its lawsuit. They argued, however, that the dismissal raised an inference that Avalanche Funding and its attorneys knew their actions or tactics in the trial court were entirely without merit. We do not interpret the trial court’s sanctions order as punishment for Avalanche Funding’s exercise of its right to voluntarily dismiss its action or to file an action in federal court.

IV

Avalanche Funding argues the trial court abused its discretion in imposing sanctions based on alleged discovery violations.

Section 128.5 “shall not apply to disclosures and discovery requests, responses, objections, and motions.” (Stats. 2014, ch. 425, § 1 [former § 128.5, subd. (e)].) The Mapes Ranch defendants’ sanctions motion described the failure by Avalanche Funding to produce certain documents as part of an argument that Avalanche Funding and its attorneys knowingly omitted essential facts in its pleadings and other filings in the trial court. The Mapes Ranch defendants argued in the reply to their motion for sanctions that intentionally failing to plead such facts was sanctionable under section 128.5. The trial court sanctioned actions or tactics by Avalanche Funding that were in bad faith and totally and completely without merit; it did not impose sanctions as punishment for discovery abuses.

V

Avalanche Funding further claims the trial court abused its discretion in awarding sanctions when the Mapes Ranch defendants failed to prove that they incurred the claimed expenses as a result of sanctionable conduct.

A trial court has wide discretion in determining the amount of sanctions. (West Coast Development, supra, 2 Cal.App.4th at p. 699, fn. 3; Monex International, Ltd. v. Peinado (1990) 224 Cal.App.3d 1619, 1627.) In making such a determination, it “is not bound . . . by such traditional factors as hours consumed, statements mailed, results attained, and the like.” (Dwyer, supra, 194 Cal.App.3d at p. 1438.) An award of attorney’s fees under section 128.5 “is not the subject of a ‘strict accounting’ as might be required in other areas of the law” even though the trial court might be aided by such evidence. (Ibid.)

The Mapes Ranch defendants requested sanctions in the amount of $36,304.11. The request was supported by the declaration of its counsel. The trial court reduced the amount of sanctions to $27,253.51. Avalanche Funding fails to show that the amount awarded was an abuse of the trial court’s discretion.

DISPOSITION

The trial court’s order for sanctions under section 128.5 is affirmed. Respondents shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)

/S/

MAURO, J.

We concur:

/S/

ROBIE, Acting P. J.

/S/

HOCH, J.