Filed 11/18/15 Price v. Vasquez CA1/4
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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

                                       FIRST APPELLATE DISTRICT

                                                 DIVISION FOUR


DARRON PRICE et al.,
         Plaintiffs and Appellants,
                                                                     A142602
v.
REBECCA VASQUEZ,                                                     (Contra Costa County
                                                                     Super. Ct. No. MSC13-02503)
         Defendant and Respondent.


                                                             I.
                                                INTRODUCTION
         Appellants Darron Price and his attorney Brendan Hallinan have filed two lawsuits
against respondent Rebecca Vasquez based upon the same alleged breach of contract.
This appeal arises out of the second lawsuit. On appeal, appellants claim the trial court
erred by imposing monetary sanctions against them, and by striking Price’s complaint
pursuant to Code of Civil Procedure section 128.7.1 We conclude that the trial court did
not abuse its discretion either in striking the complaint, which was barred by the court’s
dismissal of the first lawsuit, or by imposing sanctions. Accordingly, we affirm.
                                                            II.
                        FACTUAL AND PROCEDURAL BACKGROUND
         Price filed a complaint against respondent Rebecca Vasquez alleging breach of
contract and fraud and deceit (Price v. Vasquez (Super. Ct. Contra Costa County, 2013,


         1
             All further undesignated statutory references are to the Code of Civil Procedure.


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No. C13-01057) (Price I). The Price I complaint alleged that Vasquez, the owner of a
medical marijuana dispensary called the Holistic Healing Collective, entered into an
agreement with Price to invest in the business as an equal partner. A mutual friend,
Raudel Wilson, introduced Price and Vasquez and agreed to “write the business plan for
the operation of the business.” According to the complaint, the parties entered into a
written agreement, but Vasquez stole all copies of the agreement, so Price had no
documentation of the contract. Price asserted he invested more than $130,000 in the
Holistic Healing Collective.
       Vasquez filed a demurrer to the Price I complaint,2 arguing the complaint did not
state facts sufficient to constitute a cause of action. The demurrer contended that
appellants failed to provide a written contract or any factual details to support their
breach of contract claim, and that the terms of the purported contract were unenforceable
as a matter of law, citing Civil Code section 1667. The demurrer further asserted that
appellants failed to plead a valid fraud claim because the facts were not set forth with the
required specificity. Vasquez argued that given the absence of support for the claims, the
entire complaint should be dismissed without leave to amend.
       On August 13, 2013, the court issued a tentative ruling sustaining the demurrer
without leave to amend, and the matter was set for hearing on August 14, 2013. Neither
the tentative order nor the transcript of the hearing are included in the record on appeal.
On September 5, 2013, the court issued an order sustaining the demurrer without leave to
amend. The order stated: “Having considered the papers in support of the [d]emurrer, the
pleadings on file in this matter by the parties, and good cause appearing therefore, [the
court] hereby orders that: The demurrer to the complaint is sustained without leave to
amend.”
       Both parties concede that no final judgment was entered in Price I. The order on
the demurrer was filed but no judgment or dismissal has been issued.

       2
         At the request of the court, appellants provided a copy of the demurrer, but they
have failed to provide the court with the record for Price I. The complaint and court
order sustaining the demurrer are attached as exhibits to motions in the Price II record.


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       Three months later, a nearly identical complaint was filed in a new case (Price v.
Vasquez, Super. Ct. Contra Costa County, No. C13-02503) (Price II). The Price II
complaint again alleged causes of action for breach of contract and fraud and deceit.
However, rather than alleging that Price would be an equal partner in the business, the
new complaint alleged that Price was a member of the Holistic Healing Collective. It
alleged that when the business generated enough income, it was agreed that Price would
be reimbursed for his investment.
       Vasquez filed a demurrer to the Price II complaint, arguing that the complaint
failed to allege sufficient facts to state a cause of action, and that the Price II complaint
was an improper attempt to relitigate the claims in Price I that had been dismissed
without leave to amend. Vasquez asserted that appellants had filed the complaint “in
contravention of the well-established doctrine of res judicata.” The demurrer attached the
Price I complaint, the court’s order in Price I sustaining the demurrer without leave to
amend, and the declaration of Raudel Wilson. Wilson stated, although not under penalty
of perjury, that he was never hired by Price or Vasquez to write a business plan or to
perform any other services for the Holistic Healing Collective. Wilson never witnessed
any verbal or written communications between Price and Vasquez about Price investing
sums of money or acting as a business partner. He further stated he was not aware of nor
had he ever seen a written agreement between Price and Vasquez.
       Vasquez also filed a motion for sanctions against appellants. The motion argued
that appellants were wrongfully attempting to relitigate the same causes of action that had
already been dismissed pursuant to a binding court order. It alleged that rather than
properly pursuing an appeal, appellants filed a second complaint barred by the doctrine of
res judicata. Vasquez sought both reasonable attorney fees and dismissal of the Price II
complaint. Vasquez served appellants with notice of the motion and allowed them 21
days to retract the complaint, but appellants took no action.
       Appellants opposed both motions, arguing that res judicata did not bar the Price II
complaint because there was no final adjudication on the merits and no judgment entered
in the original case. Appellants argued that they had “incorrectly written the terms of the


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agreement between the parties” in the first complaint and voluntarily decided not to
oppose the demurrer. Appellants asserted that while the court’s order sustaining the
demurrer was issued on September 12, 2013, they were not served with the order until
December 19, 2013—after they had filed the complaint in Price II on December 2, 2013.
Finally, appellants argued the declaration of Raudel Wilson was insufficient because it
was not signed under penalty of perjury and contained the phrase “to the best of my
knowledge.” In reply, Vasquez filed a new declaration by Raudel Wilson, signed under
penalty of perjury, that reiterated his assertions in the original declaration.
       The court held a hearing on the sanctions motion prior to the scheduled hearing on
the demurrer. Appellants argued the two motions should be heard together, but then
stated they were ready to proceed on the sanctions issue. Appellants argued that:
(1) Vasquez failed to cite any authority that the court’s order sustaining the demurrer to
the Price I complaint was res judicata to the filing of the new complaint in Price II;
(2) there was no judgment on the merits and they did not have a fair opportunity to
litigate the case; and (3) they realized they “had made pleading errors in drafting the first
complaint, and we thought the best thing to do is start over and do it right.”
       The court stated it was adopting its tentative ruling.3 The court then issued an
order stating: “Plaintiff and his counsel, Brendan Hallinan, filed the complaint in this
matter for an improper purpose, knowing that their earlier action would be res judicata as
to this matter upon the running of the time for appeal. Thus, the claims in this action are
not supported by law and slight changes in the facts of the current complaint appear to
lack any evidentiary support as they are clearly an attempt to avoid the bar of Price I. See
CCP Section 128.7.” The court granted Vasquez’s request for the nonmonetary sanction
of striking the complaint and awarded reasonable attorney fees. The court ordered
Vasquez to provide detailed information regarding attorney fees within five days.




       3
           The tentative ruling is not part of the record on appeal.


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       Vasquez filed a declaration in support of the sanctions motion, listing her fees and
costs as $23,271.50. In an unreported minute order, the court awarded attorney fees and
costs of $15,576.50.
       The court held a hearing on Vasquez’s demurrer after granting the sanctions
motion striking the complaint. The court stated that given its ruling on the sanctions
motion, the motion on the demurrer was moot. Appellants asked to make a record for
appeal, and argued that if Vasquez’s counsel “wants to ask for [$]22,000 for research,
that she ought to come up with at least one piece of authority to show that this case is res
judicata.” The court instructed counsel that the time to argue about sanctions was during
the prior hearing.
                                             III.
                                      DISCUSSION
       A. Relitigation in Price II of Issues Finally Determined in Price I Was Barred
       by Res Judicata’s Subsidiary Doctrine of Collateral Estoppel, or Issue
       Preclusion

       “ ‘The rules of res judicata are applicable only when a final judgment is rendered.
However, for purposes of issue preclusion (as distinguished from merger and bar), “final
judgment” includes any prior adjudication of an issue in another action that is determined
to be sufficiently firm to be accorded conclusive effect.’ (Rest.2d Judgments, § 13, italics
added).” (Sandoval v. Superior Court (1983) 140 Cal.App.3d 932, 936.) “Most
commonly, issue preclusion arises from successive suits on different claims; this is
referred to as collateral estoppel. If, however, the second action is on the same claim, as
in this case, issue preclusion based on the earlier determination is described as ‘direct
estoppel.’. . .” (Sabek, Inc. v. Engelhard Corp. (1998) 65 Cal.App.4th 992, 997 (Sabek),
citing Rest.2d Judgments, § 17, com. c, pp. 149-150; Rest.2d Judgments, § 27, com. b,
pp. 251-252.)
       In a factually similar scenario, where the trial court sustained a demurrer without
leave to amend and no final judgment was filed, the Fourth District Court of Appeal




                                              5
found that collateral estoppel barred a subsequent action. (Border Business Park, Inc. v.
City of San Diego (2006) 142 Cal.App.4th 1538 (Border Business Park).)4
       Border argued the court erroneously applied the doctrine of res judicata to bar a
subsequent action where no final judgment had been entered. (Border Business Park,
supra, 142 Cal.App.4th at p. 1560.) In the prior action, the court sustained the city’s
demurrer without leave to amend Border’s cross-complaint, in which it asserted the same
breach of contract claims it alleged in the current case. Border argued because no
judgment of dismissal was filed, the order sustaining the demurrer was not a final
judgment and had no res judicata effect. (Ibid.)
       The Fourth District concluded that the doctrine of collateral estoppel applied.
“When issue preclusion arises from successive suits on different claims, it is referred to
as collateral estoppel. If, as in this case, the second action is on the same claim, issue
preclusion based on the earlier determination is described as direct estoppel. [Citations.]”
(Border Business Park, supra, 142 Cal.App.4th at p. 1563.) “Both collateral and direct
estoppel have the ‘ “dual purpose of protecting litigants from the burden of relitigating an
identical issue with the same party or his privy and of promoting judicial economy by
preventing needless litigation. . . .’ [Citation.]” (Ibid., quoting Sabek, supra, 65
Cal.App.4th at p. 997.)
       Like here, in Border Business Park, it was undisputed that no judgment was
entered in the prior lawsuit. However, the court determined that “for purposes of issue
preclusion, as opposed to res judicata, ‘ “final judgment” ’ includes any prior
adjudication of an issue in another action that is determined to be sufficiently firm to be
accorded conclusive effect. . . .” (Border Business Park, supra, 142 Cal.App.4th at
p. 1564, citing Rest.2d Judgments, § 13, italics added.) The court outlined four factors to
determine if an issue in a prior action should be deemed “sufficiently firm” to be

       4
         By letter dated April 9, 2015, this court invited the parties to file supplemental
briefs addressing the applicability of Border Business Park and the doctrine of collateral
estoppel in light of the absence of a final judgment in Price I. Supplemental briefs were
electronically filed on May 11, June 4, and June 23, respectively.


                                              6
accorded preclusive effect: “(1) whether the decision was not avowedly tentative;
(2) whether the parties were fully heard; (3) whether the court supported its decision with
a reasoned opinion; and (4) whether the decision was subject to an appeal. [Citations.]”
(Border Business Park, at p. 1565.)
          Applying the factors, the court found the issue was litigated, the court’s order
sustaining the demurrer was “in no way tentative” and it stated the basis for its decision.
(Border Business Park, supra, 142 Cal.App.4th at p. 1565.) “If Border had wished to
challenge the ruling, it could have requested entry of judgment and appealed the
dismissal of its cross-complaint.” (Ibid.) Thus, the order met the criteria for a final
judgment for purposes of issue preclusion. “Moreover, Border effectively acquiesced in
the ruling by failing to obtain a final judgment and filing an appeal and instead promptly
presenting a Government Code claim asserting the breach of contract claim. Having
decided not to pursue the remedy available to it, it should not now be able to contend that
the order is not a final adjudication of the issues it addressed. Under these circumstances,
the order sustaining the demurrer precludes relitigation of the issues already adjudicated.”
(Ibid.)
          In Schmidlin v. City of Palo Alto, the plaintiff argued that an order denying a
suppression motion in his prior criminal prosecution lacked the finality required to have
preclusive effect in a later civil case. (Schmidlin v. City of Palo Alto (2007) 157
Cal.App.4th 728, 772 (Schmidlin).) The court concluded that the denial of the motion to
suppress precluded relitigation of the question of whether officers had sufficient cause to
detain plaintiff. The court found the common law principles governing issue preclusion
applied, “under which a prior adjudication may be sufficiently final to support preclusion
if it ‘is determined to be sufficiently firm to be accorded conclusive effect.’ (Rest.2d,
Judgments, § 13. . . .)” (Schmidlin, at p. 774.) Applying the Border Business Park
factors, the court concluded the order denying the suppression motion was not tentative,
the court expressed the reasons for its ruling, and the decision was subject to appeal.
(Ibid.) The only debatable issue was whether the parties had been fully heard because
plaintiff elected “not to mount a full-fledged attack on the officers’ testimony.” (Id. at


                                                7
pp. 774-775.) The court concluded that under these circumstances the only obstacle to
the plaintiff having been more fully heard was because “he so elected.” (Id. at p. 775.)
The suppression order was “sufficiently firm to be deemed final” and issue preclusion
applied. (Ibid.)
       Here, the court’s decision was “not avowedly tentative.” The Price I order stated:
“Having considered the papers in support of the [d]emurrer, the pleadings on file in this
matter by the parties, and good cause appearing therefore, [the court] hereby orders that:
The demurrer to the complaint is sustained without leave to amend.” As the basis for its
decision the court cited to the pleadings and papers filed in support of the demurrer.
Although appellants contend that the parties were not “fully heard,” the court scheduled a
hearing on the demurrer providing Price the opportunity to be heard. Price elected not to
file an opposition to the demurrer, or to contest the court’s tentative ruling prior to the
final order. “Any of the contentions [Price] now asserts could have been raised in its
opposition to the demurrer. The order sustaining the demurrer therefore precludes
consideration of those contentions at this juncture.” (Border Business Park, supra, 142
Cal.App.4th at p. 1566.) As in Border Business Park, Price “effectively acquiesced in
the ruling by failing to obtain a final judgment and filing an appeal.” (Id. at p. 1565.)
“Having decided not to pursue the remedy available to it, it should not now be able to
contend that the order is not a final adjudication of the issues it addressed. Under these
circumstances, the order sustaining the demurrer precludes relitigation of the issues
already adjudicated.” (Ibid.)
       Indeed, were we to rule otherwise, a plaintiff could avoid collateral estoppel after
filing an opposition if convinced once the tentative ruling was issued that it would lose,
by not showing up at the hearing and later arguing at a subsequent proceeding that the
matter was not “fully heard.” (See Schmidlin, supra, 157 Cal.App.4th at pp. 774-775.)
The court must simply provide the opportunity to be heard to prevent the injustice of
having the doctrine applied to a non-party.
       Appellants cite only one case in their brief, Goddard v. Security Title Ins. & Guar.
Co. (1939) 14 Cal.2d 47 (Goddard). Goddard held that “a judgment based upon the


                                              8
sustaining of a special demurrer for technical or formal defects is clearly not on the
merits and is not a bar to the filing of a new action. [Citation.]” (Id. at p. 52.) A
judgment after sustaining a general demurrer on a ground of substance may, however, be
deemed a judgment on the merits. (Ibid.) Goddard is inapposite. The Price I court did
not grant the demurrer due to a technical defect, instead it granted the demurrer based
upon Vasquez’s pleading asserting that appellants’ complaint failed to state a cause of
action or allege facts to support the claims.
        For all of the foregoing reasons, we conclude that there was no error in granting
the motion to strike the Price II complaint.
        B. The Trial Court Did Not Abuse Its Discretion in Issuing Sanctions
        Appellants argue that the trial court erred and abused its discretion in awarding
attorney fees as a sanction because it incorrectly concluded the granting of the demurrer
without leave to amend in Price I was a judgment on the merits which barred the filing of
the complaint in Price II. While we note the court should have addressed the demurrer
prior to, or at the same hearing as, the sanctions motion, appellants do not challenge the
procedure the court followed in deciding the merits of Price II, there was no abuse of
discretion in any case.
        In concluding there was no error in awarding attorney fees as a sanction, we
review a section 128.7 sanctions award under the abuse of discretion standard. (Peake v.
Underwood (2014) 227 Cal.App.4th 428, 441 (Peake).) “We presume the trial court’s
order is correct and do not substitute our judgment for that of the trial court. [Citation.]”
(Id. at p. 441, citing Shelton v. Rancho Mortgage & Investment Corp. (2002) 94
Cal.App.4th 1337, 1345.) To be entitled to relief on appeal, the court’s action must be
“ ‘ “ ‘sufficiently grave to amount to a manifest miscarriage of justice . . . .’
[Citations.]” ’ [Citation.]” (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853,
867.)
        Section 128.7 “authorizes trial courts to impose sanctions to check abuses in the
filing of pleadings, petitions, written notices of motions or similar papers.” (Musaelian v.
Adams (2009) 45 Cal.4th 512, 514.) Subdivision (c) of section 128.7 authorizes


                                                9
imposition of sanctions on attorneys or parties who violate subdivision (b) of the section.
Subdivision (b) provides that by filing papers with the court, an attorney does not present
them for an improper purpose, the claims are warranted by existing law or a nonfrivolous
argument for extension or modification of existing law, and the allegations have
evidentiary support. (See Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 972
[upholding sanctions order for presenting an improper amended complaint].) Sanctions
may include payment to the moving party of attorney fees incurred due to the violation.
(Ibid.; § 128.7, subd. (d).)
       “Because our adversary system requires that attorneys and litigants be provided
substantial breathing room to develop and assert factual and legal arguments, sanctions
should not be routinely or easily awarded even for a claim that is arguably frivolous.
Courts must carefully consider the circumstances before awarding sanctions.” (Peake,
supra, 227 Cal.App.4th at p. 448.)
       “Because a trial court has broad discretion in ruling on a sanctions motion, it is
incumbent on the party opposing the motion to proffer all factual and legal theories
showing the party’s challenged assertions were not frivolous and had at least some
merit.” (Peake, supra, 227 Cal.App.4th at p. 443.) Appellants’ legal theory that the
dismissal of Price I does not bar the filing of the identical complaint in Price II is
incorrect. Further, appellants failed to provide any factual or legal arguments that their
allegations in Price II were not frivolous. Appellants provided no written agreement or
other factual support for their assertions, while Vasquez produced the declaration of
Raudel Wilson, which directly contradicted appellants’ allegations. (See id. at p. 433
[finding the claims were inconsistent with the admitted facts and well-settled law and
counsel had no reasonable belief in the validity of the claims].) Appellants’ contention
that they had “incorrectly written the terms” of the agreement and believed that the best
course of action was to allow for dismissal of the Price I complaint without leave to
amend in order to refile the same complaint with slightly altered facts is frivolous. A
reasonable attorney would have replied to the demurrer, sought leave to amend, or
appealed the dismissal. Simply refiling the same complaint as a new case was not


                                              10
warranted under existing law and demonstrates Price and his counsel acted with an
improper purpose.
       Appellants next contend that the trial court abused its discretion by failing to
describe the conduct that allowed for the imposition of sanctions under section 128.7,
subdivision (e). The court’s order, however, stated that appellants filed the complaint
“for an improper purpose, knowing that their earlier action would be res judicata as to
this matter upon the running of the time for appeal. Thus, the claims in this action are not
supported by law and slight changes in the facts of the current complaint appear to lack
any evidentiary support as they are clearly an attempt to avoid the bar of Price I. See
CCP Section 128.7.”
       The court explained appellants’ filing of the Price II complaint as an attempt to
avoid the preclusive effect of the dismissal in Price I and as being filed for an improper
purpose. The claims were not supported by the law and identified the slight changes in
the descriptions of the contract as merely an attempt to avoid the bar set forth in Price I.
Appellants have failed to demonstrate that this description of their conduct was deficient
or lacked a proper basis for the imposition of sanctions. (See Hopkins & Carley v. Gens
(2011) 200 Cal.App.4th 1401, 1418 [trial court order imposing sanctions that simply
stated that a motion was without legal support and for an improper purpose satisfied the
requirements of § 128.7, subd. (e)].)
       While we find that the trial court did not abuse its discretion in imposing both
monetary and nonmonetary sanctions in this case, we decline Vasquez’s request for this
court, on its own motion, to impose additional sanctions for filing a frivolous appeal.
                                             IV.
                                        DISPOSITION
       The judgment is affirmed. Costs on appeal are awarded to Vasquez.




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                                 _________________________
                                 RUVOLO, P. J.


We concur:


_________________________
REARDON, J.


_________________________
STREETER, J.




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A142602, Price v. Vasquez




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