ANNETTE AIASSA, Plaintiff and Appellant, v. BECK, ROSS, BISMONTE & FINLEY, LLP et al., Defendants and Respondents.
ORDER MODIFYING OPINION, DENYING REHEARING AND DENYING REQUEST FOR PUBLICATION
[NO CHANGE IN JUDGMENT]
It is ordered that the opinion filed herein on December 20, 2017, be modified as follows:
On page 13, final paragraph, in the first sentence beginning with “Here, the trial court ․ ,” delete the words “either that the Mount Hamilton Property was sold at a grossly inadequate price or.”
On page 13, final paragraph, delete the second sentence beginning with “We begin with ․.”
On page 14, delete the first paragraph beginning with “Aiassa alleges that the Mount Hamilton Property ․.”
On page 15, first paragraph, delete the first sentence, beginning with “Aiassa's second cause of action ․.”
There is no change in the judgment. The petitions for rehearing are denied.
The request for publication of the opinion filed in the above entitled action by Aiassa on January 9, 2018, is denied. The opinion does not establish a new rule of law, nor does it meet any of the other criteria set forth in California Rules of Court, rule 8.1105(c).
In compliance with California Rules of Court, rule 8.1120, the Clerk shall transmit the request for publication and a copy of this order to the Supreme Court.
Plaintiff Annette Pastorini Aiassa appeals from a judgment of dismissal entered after the trial court sustained defendant Corinna Pokorny's demurrer to the first amended complaint without leave to amend. We shall affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2010, Aiassa agreed to settle a probate action (the Probate Action) pending in Santa Clara County Superior Court. Among other things, she agreed to the placement of judgment liens on her residence (the Mount Hamilton Property) to satisfy trustee and attorney fees incurred in the action. Pursuant to the settlement agreement (the Settlement Agreement), the probate court entered a stipulated judgment (the Stipulated Judgment) awarding money judgments to the probate trustee, the trustee's attorneys, and Aiassa's probate attorneys. The Stipulated Judgment ordered the attachment of judgment liens against the Mount Hamilton Property to secure those money judgments. The Stipulated Judgment further ordered Aiassa to sell the Mount Hamilton Property by July 22, 2012. In the event Aiassa failed to sell the property, the Stipulated Judgment provided for the property's sale under a writ of execution.
When Aiassa failed to sell the Mount Hamilton Property as ordered, the trustee's attorneys moved for an order for sale. In February 2013, Aiassa and the trustee's attorneys entered a stipulation for order for sale of property. Among other things, the parties stipulated that the fair market value of the Mount Hamilton Property was $1,509,000 and that the minimum bid that the Sheriff could accept at an execution sale was $1,358,100.
Pokorny purchased the Mount Hamilton Property for $1,561,000 at a July 2013 execution sale conducted by the Sheriff. One month later, Aiassa filed this action (the Equitable Action) to set aside the Stipulated Judgment.
The operative first amended complaint names several defendants, including Pokorny, the trustee, the trustee's attorneys, and Aiassa's probate attorneys. It asserts two causes of action. The first seeks equitable relief to set aside the Stipulated Judgment, which Aiassa alleges was obtained by extrinsic fraud or mistake. Specifically, she alleges the Probate Code required the trustee and probate attorneys to request their fees on noticed motion supported by declarations. Because the trustee and probate attorneys circumvented those statutory requirements by entering a private agreement regarding fees, the Stipulated Judgment is void as a fraud upon the probate court. Further, Aiassa alleges the Stipulated Judgment was procured by attorney misconduct. In particular, she alleges her attorneys in the Probate Action did not properly advise her in connection with the Settlement Agreement, including by failing to disclose the terms of the Settlement Agreement to her or advise her to seek the advice of an independent attorney regarding the Settlement Agreement, which gave the attorneys an adverse security interest in the Mount Hamilton Property.
The second cause of action seeks equitable relief or equitable redemption to set aside the sale of the Mount Hamilton Property. Aiassa alleges the property was worth between $2.5 million and $5 million, and that the purchase price of $1,561,000 was grossly inadequate. She further alleges violations of Code of Civil Procedure section 704.800, subdivisions (a) and (b). Finally, Aiassa alleges Pokorny took undue advantage by, among other things, knowingly purchasing an undervalued property subject to allegedly fraudulent judgment liens with the intent to flip it for a profit.
Apparently, Pokorny is the only defendant Aiassa served in this action. Pokorny moved to dismiss on numerous grounds, including res judicata and collateral estoppel, and to enforce the Settlement Agreement. Pokorny also filed a demurrer and motion to strike. She demurred on the ground that the first amended complaint failed to state a claim against her and moved to strike certain paragraphs of the first amended complaint on various grounds, including res judicata. Aiassa did not oppose the demurrer.
On December 10, 2013, the trial court denied Pokorny's motion to dismiss without prejudice and denied her motion to enforce the Settlement Agreement without prejudice to Pokorny “seeking to enforce the settlement agreement in the Probate action.” The same day, Pokorny moved, in the Probate Action, to enforce the Settlement Agreement and to enjoin prosecution of the Equitable Action. The probate court granted that motion on January 6, 2014. The probate court enjoined Aiassa from (1) prosecuting the Equitable Action against Pokorny, (2) asserting any claim raising extrinsic fraud as grounds for voiding or not enforcing the Stipulated Judgment, and (3) asserting any claim based on the assertion that the Mount Hamilton Property was worth more than $1,509,000 at the time of its sale.
On February 5, 2014, the court in the Equitable Action sustained Pokorny's demurrer for failure to allege sufficient facts to state a cause of action and denied leave to amend based on the Stipulated Judgment and the injunction issued in the Probate Action. The court denied the motion to strike as moot. Aiassa appealed from the order sustaining Pokorny's demurrer on March 14, 2014.
Pokorny moved to augment the record with various documents filed in the Probate Action. This court deemed that motion to be a request for judicial notice and granted it. Pokorny has moved to file a sur-reply and for sanctions. We address those pending motions below.
A. Appealability and Scope of Appeal
Aiassa filed her appeal prematurely from a non-appealable order before judgment had been entered. “An order sustaining a demurrer without leave to amend is not appealable, and an appeal is proper only after entry of a dismissal on such an order.” (Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1386, 1396.) The Rules of Court allow us to “treat a notice of appeal filed after the superior court has announced its intended ruling, but before it has rendered judgment, as filed immediately after entry of judgment.” (Cal. Rules of Court, rule 8.104, subd. (d)(2).) Because an appealable judgment of dismissal was later entered, this court, on its own motion, deemed the notice of appeal filed as of May 9, 2014, the date the notice of entry of judgment was served. (Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1090, fn. 4 [liberally construing appeal taken from non-appealable order as having been taken from the judgment of dismissal].)
Aiassa purports to challenge the injunction entered in the Probate Action. Pokorny likewise appears to believe that the Probate Action injunction is directly before us on appeal. It is not. Our review is limited to the order issued in the instant action sustaining Pokorny's demurrer without leave to amend. The Probate Action injunction is outside the scope of this appeal. Below, we conclude the trial court properly sustained Pokorny's demurrer because the first amended complaint does not state a claim against her. We further conclude Aiassa has not carried her burden to show a reasonable possibility that an amendment will cure the pleading defects, such that the trial court did not abuse its discretion in denying her leave to amend. Because the Probate Court injunction has no bearing on our resolution of this appeal, we do not address its propriety.
B. Motion to File Sur-Reply
Pokorny has moved to file a sur-reply, arguing that Aiassa improperly raised new arguments in her reply brief. We disagree and deny the motion.
Pokorny contends that Aiassa argued in her opening brief that the probate court lacked general or equitable jurisdiction, such that it was not empowered to rule on Pokorny's Code of Civil Procedure section 664.6 motion enforce the settlement. According to Pokorny, Aiassa changed tack in her reply brief, “assert[ing] for the first time that the probate court lacked authority to grant injunctive relief ․ in conjunction with the granting of the section 664.6 motion.” Pokorny is mistaken. Aiassa's opening brief disavowed any challenge to “the general jurisdiction of the probate department—or even their ability to give equitable relief,” explaining that “the issue is whether the probate department has jurisdiction to enjoin or interfere with proceedings in an independent action in equity that is pending in the civil department ․” Plainly, Aiassa's opening brief raised the argument Pokorny claims Aiassa raised for the first time in reply.
Pokorny also complains that the reply brief misrepresents Lee v. Rich (2016) 6 Cal.App.5th 270 (Lee), a case Aiassa did not address in the opening brief but that Pokorny relied on heavily in her respondent's brief. Because Pokorny had the opportunity to address the case in her respondent's brief, and to refute Aiassa's interpretation at oral argument, no additional briefing is warranted.
Finally, in her respondent's brief, Pokorny argued that Aiassa's equitable redemption cause of action fails because Aiassa is judicially estopped from alleging that the Mount Hamilton Property was sold at a grossly inadequate price. Aiassa responded to that argument on reply. Pokorny contends Aiassa should have anticipated her estoppel argument rather than addressing it for the first time on reply. But the general rule on which Pokorny relies—that “points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before”—“is obviously inapplicable where [the] point made is in answer to one made in [the] respondent's brief.” (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 723, pp. 790-791, citing Fratessa v. Roffy (1919) 40 Cal.App. 179, 188.)
In sum, the reply brief does not raise new arguments warranting the filing of a sur-reply. Pokorny's motion is denied.
C. Order Sustaining Demurrer
1. Standard of Review
We review an order sustaining a demurrer de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) Because a demurrer tests only the legal sufficiency of the pleading, the facts alleged in the pleading are deemed to be true. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034 (Berg & Berg Enterprises).) Indeed, “we accept as true even improbable alleged facts, and we do not concern ourselves with the plaintiff's ability to prove [the] factual allegations.” (Friends of Glendora v. City of Glendora (2010) 182 Cal.App.4th 573, 576.) We will not, however, credit the allegations in the complaint where they are contradicted by facts that either are subject to judicial notice or are evident from exhibits attached to the pleading. (Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300 (Hill).)
We do not review the validity of the trial court's reasoning, and therefore will affirm its ruling if it was correct on any theory. (Berg & Berg Enterprises, supra, 178 Cal.App.4th at p. 1034.) Nor are we “limited to plaintiff[']s theory of recovery in testing the sufficiency of [its] complaint against a demurrer, but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory.” (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103.)
“Where a demurrer is sustained without leave to amend, [we] must determine whether there is a reasonable probability that the complaint could have been amended to cure the defect; if so, [we] will conclude that the trial court abused its discretion by denying the plaintiff leave to amend. [Citation.] The plaintiff bears the burden of establishing that it could have amended the complaint to cure the defect.” (Berg & Berg Enterprises, supra, 178 Cal.App.4th at p. 1035.)
2. The First Cause of Action Failed to State a Claim
The trial court did not err in sustaining the demurrer as to the first cause of action because it fails to state a claim for setting aside the Stipulated Judgment on grounds of extrinsic fraud or extrinsic mistake.
a. Legal Principles: Extrinsic Fraud and Extrinsic Mistake
“Extrinsic fraud occurs where a party is deprived of the opportunity to present her claim or defense to the court, or in some manner fraudulently prevented from fully participating in the proceeding.” (Kuehn v. Kuehn (2000) 85 Cal.App.4th 824, 832.) “ ‘Where a civil judgment is procured by extrinsic fraud, the normal remedy is to seek equitable relief from the judgment ․’ ” (Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 26.)
“The right to [equitable] relief [from judgment] has ․ been extended to cases involving extrinsic mistake.” (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 471.) Like extrinsic fraud, extrinsic mistake “deprives the unsuccessful party of an opportunity to present his case to the court.” (Westphal v. Westphal (1942) 20 Cal.2d 393, 397.) “Extrinsic mistake involves the excusable neglect of a party.” (In re Marriage of Melton (1994) 28 Cal.App.4th 931, 937.) Reliance on an attorney who commits “positive misconduct through a total failure to represent his [or her] client” is an example of extrinsic mistake. (People v. One Parcel of Land (1991) 235 Cal.App.3d 579, 584.) “If the attorney has not totally failed to represent the client, but has been guilty of inexcusable neglect, relief [from judgment on extrinsic mistake grounds] will not be granted.” (Lopez v. Superior Court (1986) 178 Cal.App.3d 925, 935.) In those circumstances, the client is charged “with the inexcusable neglect of his attorney ․” (Orange Empire Nat. Bank v. Kirk (1968) 259 Cal.App.2d 347, 353.)
“Equitable relief is available only where the fraud or mistake was ‘extrinsic’—meaning the party was denied the opportunity to be heard. If the fraud or mistake goes to the merits of the action, or occurred at trial, it is deemed ‘intrinsic’ and not ground for relief. (Examples of ‘intrinsic’ fraud [ include] forgery, bribery, [and] perjury.) The theory is that ‘intrinsic’ fraud or mistake can be guarded against through diligence during the proceedings.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2017) ¶ 5:439, p. 5-126.) “When a party was represented by counsel, absent concealment, any fraud will usually be intrinsic.” (In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1070.)
The factual allegations in the first amended complaint do not amount to extrinsic fraud or extrinsic mistake. First, Aiassa alleges that the trustee and attorneys in the Probate Action violated Probate Code sections 10803, 10813, and 10831, subdivision (c)1 by failing to file a noticed motion for attorney and trustee fees supported by declarations and evidence, and instead agreeing to such fees in the Settlement Agreement. Those provisions—which appear in Division 7 of the Probate Code, entitled “Administration of Estates of Decedents”—govern the compensation of personal representatives and their attorneys. In the probate context, a “personal representative” is a person or firm appointed by the probate court “to administer the probate of a decedent's estate.” (Estate of Hilton (1996) 44 Cal.App.4th 890, 894, fn. 1.) “In proceedings for the probate of a decedent's estate in California, the compensation of the personal representative and the compensation of the personal representative's attorney are each [statutorily] fixed ․ based upon a sliding scale of percentages of the value of the estate accounted for.” (Id. at pp. 894-895, fns. omitted, citing sections 10800 & 10810.) Section 10803 provides that “[a]n agreement between the personal representative and an heir or devisee for higher compensation than that provided by [statute] is void.” Similarly, section 10813 provides that “[a]n agreement between the personal representative and the [personal representative's] attorney for higher compensation for the attorney than that provided by [statute] is void.” Section 10831, subdivision (c) requires that notice be given of any hearing on a petition for compensation filed by a personal representative or a personal representative's attorney.
The Probate Action was not a proceeding for the probate of a decedent's estate governed by Division 7 of the Probate Code. Rather, it was a proceeding concerning the internal affairs of a trust. Specifically, the Probate Action was a proceeding to compel a trustee to account, which was initiated pursuant to section 17200, subdivision (b)(7). Section 17200 appears in Division 9 of the Probate Code, entitled “Trust Law.”
Aiassa offers no explanation for her view that sections 10803, 10813, and 10831, subdivision (c)—provisions governing the compensation of personal representatives of decedents' estates and their attorneys—govern the compensation of trustees of trusts and their attorneys. Even assuming those provisions applied in the Probate Action, the alleged failure of the trustee and his attorneys to comply with them would not constitute extrinsic fraud as it did not deprive Aiassa of her ability to participate in the Probate Action. At most, the alleged violation of sections 10803, 10813, and 10831, subdivision (c) constituted intrinsic fraud that could have been guarded against through diligence at the time.
Second, Aiassa alleges the attorneys committed an ethical breach by agreeing to their own compensation in the Settlement Agreement, citing cases in which probate attorneys improperly determined their own fees without court approval. (See Alberton v. State Bar (1987) 43 Cal.3d 638, 639 [court-appointed attorney for the estate and trustee of a testamentary trust charged decedent's wife $600 in fees “even though no probate proceedings had been commenced or court approval obtained”]; Murray v. State Bar (1985) 40 Cal.3d 575, 580 [attorney “unilaterally determined his own fee ․ and without court approval, withdrew that amount from the trust account”]; Tarver v. State Bar (1984) 37 Cal.3d 122, 126 [probate attorney's exaction of $1,500 retainer found to be improper where his “services were performed on behalf of the estate [such] that a request for compensation should have been made to and approved by the probate court”].) Those cases have no application here, as the probate court approved the trustee and attorney fees at issue in approving the Settlement Agreement.
Third, Aiassa alleges additional wrongdoing by her own attorneys in the Probate Action, including that they: (1) violated rule 3-300 of the Rules of Professional Conduct by failing to advise her that she could seek the advice of an independent attorney regarding the Settlement Agreement, which gave her attorneys a security interest in the Mount Hamilton Property; (2) failed to advise her that they were not entitled to be paid from the trust to the extent they were representing her as a trust beneficiary; and (3) failed to advise her that the trustee and the trustee's attorneys were required to request their fees on a noticed motion.2 The foregoing allegations do not amount to a total failure of Aiassa's attorneys to represent her in the Probate Action (i.e., positive misconduct). Accordingly, they do not state a claim for equitable relief from judgment.
Finally, Aiassa alleges the trustee and his attorneys were aware that Aiassa's attorneys had violated rule 3-300 of the Rules of Professional Conduct but did not disclose that violation to the probate court. That alleged nondisclosure did not deprive Aiassa of an opportunity to present her case to the probate court, and thus did not constitute extrinsic fraud or extrinsic mistake.
For all these reasons, we conclude the first cause of action failed to state a claim, such that the trial court did not err is sustaining the demurrer as to that cause of action.
3. The Second Cause of Action Failed to State a Claim
Aiassa's second cause of action is one for equitable redemption. While the first amended complaint invoked Code of Civil Procedure section 704.800, on appeal, Aiassa abandons any claim based on that provision, stating “the second cause of action is not based on section 704.800, it's based on equitable redemption which is not governed by the statute.”
a. Legal Principles: Equitable Redemption
“ ‘Equitable redemption is the right of a judgment debtor to redeem property that was sold at an execution sale for a “grossly inadequate price” where the purchaser is guilty of unfairness or has taken undue advantage.’ ” (Lang v. Roché (2011) 201 Cal.App.4th 254, 261 (Lang).) Our Supreme Court held that a judgment debtor stated a claim for equitable redemption of corporate stock sold to a judgment creditor at an execution sale in Odell v. Cox (1907) 151 Cal. 70 (Odell). The Odell court concluded that the judgment debtor had alleged a grossly inadequate price where he alleged that the corporate stock was worth $2,000 but was purchased at the execution sale for $26.50, which the judgment creditor himself testified was “a nominal sum.” (Id. at pp. 71-73.) The court further concluded that the judgment debtor had alleged unfairness and the taking of an undue advantage by the judgment creditor where the facts alleged indicated that the judgment debtor was excusably unaware of the proposed execution sale and the judgment creditor took advantage of his excusable ignorance by bidding a nominal sum despite his knowledge of the stock's value. (Id. at pp. 76-77.)
The doctrine of equitable redemption was invoked in Smith v. Kessler (1974) 43 Cal.App.3d 26, 28-29 (Smith) to set aside the execution sale of a residence owned by the judgment debtor to a third party who had purchased the judgment in his wife's maiden name. The court concluded that the $990.55 paid for the property was “grossly inadequate,” given a stipulation that it was worth between $20,000 and $24,000 at the time of the sale. (Id. at pp. 29-30.) The court also found sufficient evidence of “manifest unfairness” where the judgment debtor was unaware of the sale and the purchaser bid using “a name that would not readily be connected to him and quietly waited for the expiration of the statutory period for redemption, allowing [the judgment debtor] to collect the rents [on the property, which she rented out]. . . , pay the taxes and build up her equity by payments on the trust deed during that period.” (Id. at p. 32.)
Historically, a judgment debtor also had a statutory right to redeem property that was sold at an execution sale. (Lang, supra, 201 Cal.App.4th at p. 260.) “ ‘The Code of Civil Procedure formerly specified that nearly all execution sales of real property were subject to a right of redemption. Similarly, various provisions in other codes, when authorizing execution sales for various purposes, stipulated that the property would be sold subject to a right of redemption.’ ” (Gonzalez v. Toews (2003) 111 Cal.App.4th 977, 983.) “In 1982, the Legislature enacted the Enforcement of Judgments Law (EJL). ([Code Civ. Proc.,] § 680.010 et seq.)” (Lang, supra, at p. 259.) “One of the purposes of the EJL was to repeal the statutory right to redeem property sold at execution sales.” (Id. at pp. 260-261.) “Among other things, it addresses the procedures for enforcing judgments by writ of execution. Under the statutory scheme, an execution sale ‘is absolute and may not be set aside for any reason.’ ([Code Civ. Proc.,] § 701.680, subd. (a).) ․ If the sale ‘was improper because of irregularities in the proceedings, because the property sold was not subject to execution, or for any other reason,’ and the purchaser at the sale is the judgment creditor, the judgment debtor may institute an action to set aside the sale. (Id., subd. (c)(1).)” (Id. at pp. 259-260 [fn. omitted].)
In Lang, our colleagues in the Second District concluded that “long-standing state law on the doctrine of equitable redemption,” as set forth in Odell and Smith, survives the enactment of the EJL. (Lang, supra, 201 Cal.App.4th at p. 262.) The court reasoned that the Legislature enacted the EJL based on a report and recommendation from the California Law Revision Commission, which stated that “elimination of the statutory redemption right ‘would not affect the equitable right of a judgment debtor to redeem from a sale at a grossly inadequate price where the purchaser is guilty of unfairness or has taken undue advantage.’ ” (Ibid.)
The Legislature has since codified Lang's holding that judgment debtors retain an equitable right of redemption by adding section 701.680, subdivision (e) to the Code of Civil Procedure. (Stats. 2014, ch. 183, § 1, eff. Jan. 1, 2015; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 2317 (2013-2014 Reg. Sess.) Jan. 8, 2014 [“This bill codifies in California's Enforcement of Judgments Law a judgment debtors equitable right of redemption”].) That provision provides that “[t]his section does not affect, limit, or eliminate a judgment debtor's equitable right of redemption.” (Code Civ. Proc., § 701.680, subd. (e).)
Here, the trial court did not err in sustaining the demurrer to the second cause of action because it fails to allege either that the Mount Hamilton Property was sold at a grossly inadequate price or that Pokorny was guilty of unfairness or took undue advantage. We begin with the allegations regarding the purchase price.
Aiassa alleges that the Mount Hamilton Property was worth between $2.5 million and $5 million and that Pokorny purchased it at the execution sale for $1,561,000.3 In other words, she alleges that the purchase price was between 31 percent and 62 percent of the property's fair market value. Gross inadequacy has been found where the purchase price is 10 percent of the property's fair market value or less. (See Odell, supra, 151 Cal. at pp. 71-73 [purchase price that was 1.3 percent of fair market value deemed grossly inadequate]; Smith, supra, 43 Cal.App.3d at pp. 29-30 [purchase price that was 4 to 5 percent of fair market value deemed grossly inadequate]; Darden v. Reese (1948) 88 Cal.App.2d 904, 907 (Darden) [affirming judgment setting aside execution sale of corporate stock and concluding sufficient evidence supported finding of grossly inadequate price where there was testimony that the stock was worth $35,000 and it was purchased for $1,150, or 3.3 percent of fair market value]; Baar v. Smith (1929) 97 Cal.App. 398, 403 [sale set aside where stock worth $400,000 was sold for $100, or .025 percent of fair market value]; Lang, supra, 201 Cal.App.4th at pp. 258-259, 266 [holding judgment debtor had right to equitable redemption where property that had been purchased for $12,000 in 1977 was purchased at a 2003 execution sale for $100, or 0.8 percent of the fair market value over 26 years earlier]; Winbigler v. Sherman (1917) 175 Cal. 270, 276 [“there can be no doubt that there was gross inadequacy of price [because p]roperty worth at least [$5,000] was purchased for [$500,]” or 10 percent of the fair market value]; Hyman v. Stern (1923) 61 Cal.App. 656, 659 [purchase price held to be grossly inadequate where defendant purchased stock worth $2,000 for $15, or 0.75 percent of fair market value].) Aiassa cites no cases, and we have found none, finding gross inadequacy of price where the purchase price was at least 31 percent of the fair market value, as Aiassa alleges. Accordingly, we conclude she has failed to allege gross inadequacy of price and thus has not stated a claim for equitable redemption.
Aiassa's second cause of action also fails to allege unfairness sufficient to justify setting aside the sale of the Mount Hamilton Property. “ ‘Unfairness,’ as it relates to conduct in connection with execution sales, embraces all types of dishonesty, deception and oppression which operate to the prejudice of the judgment debtor or others interested in the sale.” (Darden, supra, 88 Cal.App.2d at pp. 909-910.)
Aiassa alleges that Pokorny planned to flip the house for a profit and knew Aiassa had lived there for 40 years. But there is nothing dishonest, deceptive, or oppressive about purchasing real estate as an investment or purchasing a home that has not changed hands in many years.
Aiassa further alleges Pokorny conducted an estate sale for Aiassa at which she “asked ․ questions ․ to gain an undue advantage in purchase the [property].” That allegation is too vague and conclusory to state a cause of action.
Next, Aiassa alleges Pokorny knew Aiassa had alleged the judgment liens were the result of fraud. But “[a] purchaser at an execution sale[, w]ho is a stranger to the proceedings and buys in good faith[, like Pokorny,] is charged with no duty toward the judgment debtor. He must at his peril examine the judgment and execution[, i]n order to determine whether the officer is duly authorized to make the sale[; b]ut he need not inquire further into the proceedings of the officer and judgment creditor to ascertain if they have been in all respects fair toward the judgment debtor[. H]e may rely upon the officer's authority to sell and his own good faith as to that matter.” (Bock v. Losekamp (1919) 179 Cal. 674, 677 (Bock).) Thus, Pokorny had no obligation to determine whether the judgment liens were the result of fraud or other unfairness carried out by the judgment creditor or others.
Leeper v. Beltrami (1959) 53 Cal.2d 195 (Leeper), on which Aiassa relies, is does not persuade us otherwise. In Leeper, a seller sought to cancel a contract for the sale of land to a buyer based on duress exercised by third parties. The court concluded that the seller could state a claim to set aside the sale against the buyer, despite the fact that “no active wrongdoing ha[d] been alleged against” him, because he was alleged to have “had knowledge of the situation in which [the seller] found herself.” (Id. at p. 205.) The court reasoned that, by knowingly taking advantage “of the wrongdoing of third parties,” the buyer “ ‘connived’ with the wrongdoers as that term is used the statute relating to rescission.” (Id. at p. 206, citing Civ. Code, § 1689.) That statute—section 1689, subdivision (b)(1) of the Civil Code—provides that “[a] party to a contract may rescind the contract ․ [i]f the consent of the party rescinding ․ was ․ obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds ․” Leeper does not govern here as Aiassa does not seek to rescind a contract pursuant to Civil Code section 1689 and does allege that she consented to the sale of the Mount Hamilton Property (or to the Settlement Agreement) as a result of duress or fraud. Instead, she alleges the Stipulated Judgment was a fraud on the court.
Finally, Aiassa alleges that Pokorny knew the property was undervalued by $1 million and was the only bidder other than the judgment creditor. Those allegations also are insufficient to allege the requisite unfairness. Bock is instructive. There, the sole bidder at an execution sale purchased property worth $2,000 at the grossly inadequate price of $35.60. (Bock, supra, 179 Cal. at p. 675.) The purchaser believed that the property was worth $500, and therefore knew it was significantly undervalued at the $35.60 purchase price. (Ibid.) Our Supreme Court reversed the lower court judgment setting aside the sale, even though the judgment debtor was unaware of the execution sale because there was no evidence of unfairness. To the contrary, the purchaser was a stranger to the judgment and the lower court had found no “design or intent” on his part “to carry on or effect a secret sale of the plaintiff's property, or to deprive him of the same for a mere nominal sum, or in any way to defraud the plaintiff.” (Id. at p. 676.) Here, none of the allegations supports the conclusion that Pokorny intended to defraud Aiassa, who, unlike the judgment debtor in Bock, had actual notice of the execution sale. As Bock demonstrates, knowing that the property was undervalued and being one of two bidders is not unfair, as that term is used in the equitable redemption context.
4. Leave to Amend
Aiassa fails to carry her burden to show there is a reasonable possibility that the defects in the first amended complaint can be cured by amendment. Her opening brief proposes no amendments. On reply, she proposes one additional allegation—that she was ignorant of or mistaken as to the market value of the Mount Hamilton Property at the time she stipulated that its fair market value was $1,509,000. That allegation would not cure any of the defects we have identified above. Therefore, we conclude the trial court did not abuse its discretion by denying Aiassa leave to amend.
C. Motion for Sanctions
Pokorny requests sanctions against Aiassa and her counsel for filing a frivolous appeal. Pokorny argues Aiassa's first cause of action is an improper attempt to relitigate previously decided issues and that her second cause of action is barred by statute, making it patently frivolous.4
1. Legal Principles: Sanctions on Appeal
Code of Civil Procedure section 907 provides that “[w]hen it appears to the reviewing 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.” Rule 8.276, subdivision (a) of the California Rules of Court authorizes this court to impose sanctions on a party or an attorney for the taking of a frivolous appeal or appealing solely to cause delay.
An appeal is frivolous “only when 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 (Flaherty).) “The first standard is tested subjectively. The focus is on the good faith of appellant and counsel. The second is tested objectively. [Citation.] ‘While each of the above standards provides independent authority for a sanctions award, in practice the two standards usually are used together “with one providing evidence of the other. Thus, the total lack of merit of an appeal is viewed as evidence that appellant must have intended it only for delay.” ’ ” (In re Marriage of Gong and Kwong (2008) 163 Cal.App.4th 510, 516.) “An appeal that is simply without merit is not by definition frivolous ․” (Flaherty, supra, at p. 650.) Our Supreme Court has cautioned that sanctions for frivolous appeals “should be used most sparingly to deter only the most egregious conduct.” (Id. at pp. 650-651.)
The frivolous relitigation of claims barred by issue or claim preclusion can support sanctions. (See Weber v. Willard (1989) 207 Cal.App.3d 1006, 1010 [“Repeated litigation of matters previously determined by final judgment constitutes harassment and should be penalized.”]; Beckstead v. International Industries, Inc. (1982) 127 Cal.App.3d 927, 935.)
2. Pokorny Fails to Show That Issue Preclusion Bars the First Cause of Action
Pokorny contends the appeal is frivolous, in part, because Aiassa's first cause of action is barred by “the issue preclusion aspect of the res judicata doctrine.” Pokorny likewise argued that the first cause of action is barred by issue preclusion in her respondent's brief, but there she used the terms “collateral estoppel” and “res judicata.”
As our high court explained in DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 823-824 (DKN Holdings), the term “res judicata” is imprecise, as it has been used “as an umbrella term encompassing both claim preclusion and issue preclusion” and as a synonym for claim preclusion. This inconsistency has “caused some confusion,” including among the parties in this case, as discussed below. (Id. at p. 823.) “To avoid future confusion” between the two types of preclusion, which “have different requirements,” the court endorsed the use of the terms “ ‘claim preclusion’ ” and “ ‘issue preclusion.’ ” (Id. at p. 824.) We shall use these terms here, and urge those practicing before this court to do the same.
Claim preclusion “bar[s] relitigation of [a] claim altogether” where a second suit involves: “(1) the same cause of action (2) between the same parties [or those in privity with them] (3) after a final judgment on the merits in the first suit.” (DKN Holdings, supra, 61 Cal.4th at p. 824.) Issue preclusion bars “a party to the first lawsuit, or one in privity with a party” to the first lawsuit, from relitigating issues that were “actually litigated” and “conclusively resolve[d]” in the first lawsuit. (Ibid.) Unlike claim preclusion, issue preclusion (1) “does not bar entire causes of action,” but “prevents relitigation of previously decided issues” and (2) “can be raised by one who was not a party or privy in the first suit.” (Ibid.) “ ‘The party asserting [issue preclusion] bears the burden of establishing [its] requirements.’ ” (Patel v. Crown Diamonds, Inc. (2016) 247 Cal.App.4th 29, 40.)
Pokorny argues Aiassa previously litigated the issues raised in her first cause of action in an unsuccessful motion to set aside the stipulated judgment filed in the Probate Action. In that motion, Aiassa alleged she was “heavily sedated” when she agreed to the settlement and that her probate attorney improperly failed to inform the court that she was medicated. She did not complain about the absence of a noticed motion for trustee and attorney fees or her probate attorneys' failure to advise her to seek the advice of an independent attorney regarding the Settlement Agreement. Accordingly, we cannot conclude that the issues raised in the first cause of action were “actually litigated” and “conclusively resolve[d]” in the Probate Action.
Next, Pokorny contends Aiassa previously litigated the issues raised in her first cause of action in a 2012 lawsuit against her probate attorneys, Aiassa v. Volpe, et al., (Super. Ct. Santa Clara County, 2012, No. 1-12-CV-210378). The trial court dismissed that action as a terminating sanction for Aiassa's failure to comply with an order compelling her to attend and produce documents at a deposition. Accordingly, even assuming Aiassa v. Volpe raised the same issues as are raised in the first cause of action, Pokorny fails to show that those issues were “actually litigated” and “conclusively resolve [d].” (DKN Holdings, supra, 61 Cal.4th at p. 824.)
Citing Franklin Capital Corp. v. Wilson (2007) 148 Cal.App.4th 187, 207 (Franklin Capital), Pokorny claims a judgment of dismissal entered as a discovery sanction has res judicata effect. In Franklin Capital, the court relied on Kahn v. Kahn (1977) 68 Cal.App.3d 372 (Kahn) for the proposition that “dismissals pursuant to terminating sanctions for discovery disobedience are with prejudice and res judicata.” (Franklin Capital, supra, at p. 207.) In Kahn, the court held that a prior judgment of dismissal as a discovery sanction “was res judicata, barring a subsequent action involving the same parties and subject matter.” (Kahn, supra, at pp. 378-379, italics omitted.) The reference to “the same parties” demonstrates that the Kahn court was discussing claim preclusion, not issue preclusion. Accordingly, neither Kahn nor Franklin Capital supports Pokorny's contention that a judgment of dismissal entered as a discovery sanction has issue preclusive effect.
Finally, Pokorny maintains Aiassa previously litigated the issues raised in her first cause of action in a 2012 lawsuit against, among others, the trustee and his attorneys in the Probate Action, Aiassa v. Hansen, et al., Case No. 1-12-CV-228859. There, Aiassa asserted causes of action for deceit and elder abuse, conspiracy to defraud and commit financial elder abuse, tortuous interference with contractual relationships of plaintiff and conspiracy to commit financial elder abuse, intentional infliction of emotional distress, and declaratory relief and constructive trust rescission and/or reformation of judgment. Among other things, she alleged that the Stipulated Judgment “included ‘unconscionable’ attorney fees and an ‘[u]surious' interest rate” and that she was not advised to seek independent counsel in connection with the Settlement Agreement. Aiassa did not allege that the Stipulated Judgment was obtained by extrinsic fraud or mistake, that the Probate Code required the trustee and probate attorneys to request their fees on noticed motion, or that the Stipulated Judgment was void as a fraud upon the probate court. The trial court dismissed the Hansen action against the trustee and his probate attorneys with prejudice after granting their special motion to strike, commonly known as an “anti-SLAPP motion.”5 Aiassa then dismissed the entire action with prejudice.
Two of the primary issues raised by the first cause of action are whether the Probate Code required the trustee and probate attorneys to request their fees on noticed motion supported by declarations and, if so, whether their failure to do so constituted extrinsic fraud. Pokorny has not established that those issues were raised, let alone actually litigated, in the Hansen action. The record shows that Aiassa did raise the issue of her own attorneys' failure to advise her to seek independent counsel regarding the Settlement Agreement in the Hansen action, as she does in the first cause of action. But, because the record does not include the anti-SLAPP motion or the order granting it, Pokorny has not established that that issue was conclusively resolved. The trial court could have based its determination that Aiassa's claims lacked merit on other grounds.
In sum, Pokorny has failed to meet her burden to establish she is entitled to sanctions on issue preclusion grounds.
3. The Second Cause of Action is Not Frivolous
Pokorny contends the second cause of action is frivolous because it is barred by the plain language of Code of Civil Procedure section 701.680. That provision states that an execution sale “is absolute and shall not be set aside for any reason” except if the sale was improper and the “judgment debtor, or the judgment debtor's successor in interest, ․ commence[s] an action within 90 days after the date of sale to set aside the sale if the purchaser at the sale is the judgment creditor.” (Code Civ. Proc., § 701.680, subds. (a) and (c)(1).) Pokorny contends that Code of Civil Procedure section 701.680 bars the second cause of action because she was not the judgment creditor. But Code of Civil Procedure section 701.680 does not impact the doctrine of equitable redemption on which Aiassa relies. (Lang, supra, 201 Cal.App.4th at pp. 262-264; see Code Civ. Proc. § 701.680, subd. (e).) Accordingly, we reject Pokorny's position that it is statutorily barred.
Alternatively, Pokorny contends that equitable redemption, like statutory redemption, is available only where the purchaser at the execution sale was the judgment creditor. For that contention, she relies on the following language in Lee: “In Lang, supra, 201 Cal.App.4th 254, the Court of Appeal held that a form of equitable redemption did survive the EJL but, as we shall explain, only when the judgment creditor purchased the property after obtaining the underlying judgment by fraud.” (Lee, supra, 6 Cal.App.5th at p. 280.) We question Lee's reading of Lang, for the reasons set forth below, and therefore conclude the second cause of action was not frivolous.
As discussed above, in Lang, the court concluded that the EJL did not eliminate the equitable redemption doctrine. The court went on to conclude that the plaintiff had a right to equitable redemption because the defendant, who happened to be the judgment creditor, “acted improperly and inequitably at every turn” and purchased the property at a grossly inadequate price. (Lang, supra, 201 Cal.App.4th at pp. 265-266.) In our view, Lang simply concluded that the doctrine articulated in Odell and Smith was unaffected by the EJL. Notably, in Smith, the purchaser at the execution sale was not the judgment creditor but a third party who had purchased the judgment. (Smith, supra, 43 Cal.App.3d at pp. 28-29.) While the purchaser at the execution sale in Lang was a “judgment creditor [who] purchased the property after obtaining the underlying judgment by fraud,” Lang did not hold that equitable redemption is available only in those circumstances, as Lee suggests. (Lee, supra, 6 Cal.App.5th at p. 280.)
The judgment is affirmed. Pokorny shall recover her costs on appeal.
1. All further statutory references are to the Probate Code unless otherwise noted.
2. Aiassa also alleges her attorneys failed to disclose the terms of the Settlement Agreement to her. But that allegation is contradicted by a judicially noticed document: the transcript of a July 22, 2010 hearing in the Probate Action. At that hearing, the terms of the Settlement Agreement were stated on the record. Immediately thereafter, Aiassa confirmed in open court that she heard the terms of the settlement as stated on the record; that she agreed to those terms; that she had had sufficient time to discuss the settlement terms with her counsel; that she had not taken any medication or other substances that would impair her ability to understand the settlement; that she had not been threatened, pressured, or coerced into agreeing to the settlement; and that she was entering the settlement freely, voluntarily, and intelligently. In view of the foregoing, we shall not credit the allegation of nondisclosure of the Settlement Agreement terms. (Hill, supra, 195 Cal.App.4th at p. 1300.)
3. While Aiassa alleges the purchase price was “grossly inadequate,” we are not required to credit that legal conclusion.
4. We have received an opposition to the sanctions motion from Aiassa as well as a reply from Pokorny. Because we conclude sanctions are unwarranted based on the motion, we shall not file or consider those submissions. (Cal. Rule of Court, Rule 8.276, subdivision (d) [no opposition to sanctions motion may be filed unless the court gives notice that it is considering imposing sanctions].)
5. “A SLAPP is ‘a meritless suit filed primarily to chill the defendant's exercise of First Amendment rights.’ ” (Robles v. Chalilpoyil (2010) 181 Cal.App.4th 566, 572.) The anti-SLAPP statute was designed to deter such actions. (Ibid.) “[A] cause of action that ․ arises from protected speech or petitioning and lacks even minimal merit ․ is a SLAPP, subject to being stricken under the statute.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.)
ELIA, Acting P. J.
WE CONCUR: MIHARA, J. GROVER, J.