2016-00199413-CU-PN

Wei Liu vs. U.S. Bank National Association

Nature of Proceeding: Motion for Sanctions

Filed By: Abbott, Thomas N.

Defendants’ Motion for Sanctions is GRANTED. C.C.P., sec. 128.7. A continued hearing on the amount of the monetary sanctions to be awarded is calendared for Wed., Jan. 31, 2018. Plaintiffs’ cross-request for imposition of sanctions is DENIED.

Defendants U.S. Bank N.A., Not In Its Individual Capacity, But Solely As Trustee For The RMAC Pass-Through Trust, Series 2011-D (“US Bank”); RMAC Trust Series 2012 -5 (“RMAC”); Rushmore Loan Management Services, LLC (“Rushmore”); and Dakota Asset Services, LLC (“Dakota”) (collectively, “Moving Defendants”) move for an order imposing joint and several monetary sanctions against Plaintiffs Wei Liu and Bin Xia, individually and Bin Xia as Guardian Ad Litem for Hayden Liu and Amberlin Liu (collectively, “Liu”), and their counsel, the United Law Center, pursuant to Code of Civil Procedure section 128.7. Additionally, Defendants move for non-monetary sanctions in the form of dismissal of this lawsuit.

The Court finds that Defendants have complied with section 128.7(c)(1)’s “safe harbor” service requirement, by serving the original version of the motion on plaintiffs at least 21 days prior to filing this motion in Court, thus giving Liu and their counsel the

required opportunity to withdraw this improper lawsuit. (Abbott Dec., para. 3).

On August 25, 2016, Plaintiffs filed their unverified complaint alleging eight causes of action: the 1st for fraudulent concealment; conspiracy to commit fraudulent concealment; the 2nd for negligent misrepresentation; the 3rd for professional negligence – Civ. Code, sec. § 2079; the 4th for breach of fiduciary duty; the 5th for constructive fraud; the 6th for professional negligence – Bus. & Prof Code § 7196; the 7 th for breach of contract and the 8th for private nuisance – Civ. Code § 3479.

Defendants Rushmore Loan and Dakota Asset filed their Answer on October 24, 2016, asserting, inter alia, a 7th affirmative defense of waiver.

Defendant U.S. Bank and RMAC filed their Answer on Jan. 3, 2017 asserting, inter alia , a 7th affirmative defense of waiver.

On Sept. 13, 2017, moving defendants each substituted in new counsel of record.

On October 13, 2017, counsel for moving defendants filed a Petition to Compel Arbitration. On Dec. 7, 2017, this Court granted Defendants U.S. Bank’s, RMAC; Rushmore and Dakota’s Petition to Compel Arbitration. The Court ordered the arbitration with moving parties to be stayed until after the trial of the action as to the Security Pacific defendants.

Plaintiffs Liu entered into a written contract to purchase real property located at 2351 Pez Vels Place, in Gold River, from Seller US Bank, acting as Trustee.

On October 27, 2014 plaintiffs and Seller executed a Residential Purchase Agreement (“RPA”) for the property (Compl., Exh. H) together with Defendants’ Counteroffer/ Addendum (“C/A”) (Compl., Exh. I) wherein they agreed to the following waiver:

“Buyer waives any claims or losses relating to environmental conditions affecting the property, including but not limited to, mold…”

Liu initialed each page of the C/A, which also notified Liu that US Bank as Trustee acquired the property as a result of foreclosure and “is not familiar with the condition of the property…” (Compl., Exh I, ¶ 11)

California courts have held that a general release can be completely enforceable and act as a complete bar to all claims (known or unknown at the time of the release) despite protestations by one of the parties that he did not intend to release certain types of claims. (San Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1053.)

Plaintiffs here had ample notice of the environmental conditions before they signed the waiver. On Oct. 5, 2014, Liu inspected the property and noticed an odor, fogged windows and window tracks filled with black material. (Compl., ¶ 17.) On Oct. 6, 2014, Lui executed the RPA, which provided for 49 days before close of escrow.(Compl., ¶ ¶ 22, 50.) On Oct. 8, 2014, Liu received a pest clearance report prepared by HardRock Termite Control in July 2014, on behalf of Seller, disclosing excessive moisture damage. On Oct.15, 2014, Liu inspected the property a second time again noticed an odor, fogged windows and window tracks filled with black material. (Compl., ¶ ¶ 29-30.)

The Liu Declaration reiterates the allegations of the complaint, and reflects that plaintiffs’ realtor made representations and assurances upon which the plaintiffs relied. Further, Liu admits they carefully reviewed the July 2014 HardRock report and noted the disclosure of excessive moisture damage in the real property. (Liu Dec., ¶ ¶ 10-20)

Plaintiffs attempt to blame Seller’s agent, Warren Adams, alleging that his inspection disclosure and visual inspection of the property did not mention any environmental conditions. However, under Civil Code, sec. 1102.2(c), US Bank as Trustee was exempt from the disclosure requirements on transfer of real property as it had acquired the real property at a foreclosure sale.

By signing an express waiver of all claims or losses relating to environmental conditions affecting the property, including mold, Plaintiffs Lui are barred from prosecution of this action for claims or losses due to mold.

C.C.P., sec. 128.7 is modeled after F.R.Civ.Pro., Rule 11. Federal Rule 11, per 1993 Amendment Committee Notes provides that “The court has available a variety of possible sanctions to impose for violations, such as striking the offending paper; issuing an admonition, reprimand, or censure; requiring participation in seminars or other educational programs; ordering a fine payable to the court; referring the matter to disciplinary authorities.” (See also, Weil & Brown (TRG 2017), California Civil Procedure Before Trial, sec. 9:1215.)

The motion for imposition of sanctions, jointly and severally, against Plaintiffs Wei Liu and Bin Xia, individually and Bin Xia as Guardian Ad Litem for Hayden Liu and Amberlin Liu (collectively, “Liu”), and their counsel, the United Law Center, for violation of Code Civ. Proc., § 128.7(b) is granted. The Court finds that the claims and other legal contentions in the Complaint against the moving defendants are not warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law. (Id.)

In the exercise of its discretion, the Court finds that the most meaningful sanction here is the nonmonetary sanction of striking the offending paper, the complaint, as against moving defendants. Monetary sanctions in the amount of attorneys’ fees are also awarded.

Plaintiffs have been given notice and a reasonable opportunity to withdraw their complaint but have failed to do so. The Court determines that subdivision (b) has been violated, therefore the Court grants the motion for imposition of an appropriate monetary sanction, jointly and severally, upon the law firm and plaintiffs that are responsible for the violation and the dismissal of the action as to the moving defendants.

Plaintiffs’ cross-motion for imposition of monetary sanctions is denied.

Although there has been a delay in filing this motion since the initial service of the complaint, the Court finds that new counsel for the moving parties have been diligent in filing the motion two months after they substituted in to represent the moving defendants.

The Court does not find the declaration of attorney Abbott that “as of Nov. 6, 2017, Defendants have incurred $42,602.25 in attorney fees and $2,825.52 in costs for a total of $45,427.77” to be a sufficient basis for the award of monetary sanctions to defense counsel. The Court requires that a further declaration be filed by defense counsel attaching itemized billing records (redacted as necessary) reflecting the dates, time and nature of the work performed by identified defense counsel.

The Court will not consider an award for attorney fees incurred by prior defense counsel in the preparation of the Answers, nor by current defense counsel for the motion to compel arbitration. The award of reasonable attorneys’ fees shall be limited to fees incurred in the preparation of this motion and any other expenses incurred as a direct result of the violation. (C.C.P., sec. 128.7(c)(1), Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 977.)

Moving party shall file and serve by email or overnight mail its declaration with billing records not later than 4 pm Wed., January 17, 2018. Any opposition to that declaration and billing records shall be filed and served by email or overnight mail not later than 4pm Wed., Jan. 24, 2018. A continued hearing on the amount of the sanctions to be awarded is calendared for Wed. Jan. 31, 2018.

The complaint against moving defendants shall be dismissed at that time.