Filed 4/25/17 Sukumar v. Sbragia CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
PONANI SUKUMAR et al.,
Plaintiffs and Appellants,
v.
DEAN SBRAGIA,
Defendant and Respondent.
__________________________________
PONANI SUKUMAR et al.,
Plaintiffs and Appellants,
v.
MED-FIT SYSTEMS, INC.,
Defendant and Respondent.
D068166
(Super. Ct. No. 37-2013-00074849-
CU-BT-NC)
D069478
(Super. Ct. No. 37-2013-00074849-
CU-BT-NC)
CONSOLIDATED APPEALS from judgments of the Superior Court of San Diego
County, Robert P. Dahlquist, Judge. Affirmed; requests for sanctions granted in part and
denied in part.
2
Friedhofer and James E. Friedhofer; Hill Farrer & Burrill and Stephen J. Tomasulo
for Plaintiffs and Appellants.
Wilson, Elser, Moskowitz, Edelman & Dicker and Patrick J. Kearns for Defendant
and Respondent Dean Sbragia.
Wilson, Elser, Moskowitz, Edelman & Dicker, Patrick J. Kearns and Robert W.
Harrison for Defendant and Respondent Med-Fit Systems, Inc.
We consider together two appeals filed by Ponani Sukumar and his corporation,
Southern California Stroke Rehabilitation Associates, Inc. (together plaintiffs).1 Both
appeals stem from summary judgments entered against them on their complaint against
defendants Dean Sbragia and Med-Fit Systems, Inc. (Med-Fit, together defendants) on
multiple causes of action related to defendants' failure to return a deposit for the purchase
of exercise equipment. As we shall explain, the claims against Sbragia are barred by the
doctrine of res judicata; accordingly, we affirm the judgment in his favor. We also grant
his motion for sanctions. The judgment in favor of Med-Fit is also affirmed. Med-Fit's
motion for sanctions is denied.
FACTUAL AND PROCEDURAL BACKGROUND
Prior Litigation
Sbragia is the former President and CEO of Med-Fit, a now-defunct corporation.
In 2004, Sukumar approached Sbragia seeking to purchase Nautilus brand exercise

1 Plaintiffs filed separate appeals and we initially denied their consolidation motion.
Upon further consideration, we issued an order vacating this earlier denial and ordered
the matters consolidated.
3
equipment. Sukumar gave Med-Fit $25,000 as a deposit on an order of approximately
$150,000 worth of Nautilus machines. Before the order could be completed, Nautilus
informed Med-Fit that it could not fill the order. Med-Fit, unable to fill Sukumar's order,
attempted to return Sukumar's remaining $23,467.65 deposit (the deposit). Sukumar
rejected the attempted refund. Med-Fit made a second attempt to return the deposit, but
Sukumar again rejected the return of his money.
Instead, Sukumar sued Med-Fit and Nautilus for breach of contract based on their
failure to deliver the machines he had ordered. Sukumar alleged that Med-Fit breached
the contract to provide three different lines of exercise equipment, including some
Next Generation machines. As relevant here, Sukumar sought specific performance and
damages for Med-Fit's failure to deliver the Next Generation machines. A jury rejected
Sukumar's claims and the trial court entered a judgment against him. We affirmed the
majority of the judgment but remanded the matter for a limited retrial on the issue of
whether Med-Fit had breached its contract with respect to Sukumar's order for seven used
Next Generation machines. (Sukumar v. Med-Fit Systems Inc. et al. (Feb. 3, 2009,
D051482) [nonpub. opn.] (Sukumar I).)
During the limited retrial, Sukumar testified that he never requested his deposit
back because he wanted the machines. When asked what would happen to the deposit if
the case was resolved in Med-Fit's favor, Sbragia replied: "I will unequivocally return it
to Mr. Sukumar." On September 23, 2010, a jury found for Med-Fit on Sukumar's breach
of contract claim, concluding that Sukumar failed to perform his obligations under the
4
contract, and that his failure to perform was not excused. Sukumar appealed from the
judgment.
In the meantime, Med-Fit mailed Sukumar a check for the deposit amount, but
Sukumar returned the check. After Sukumar returned the check, Med-Fit's counsel sent a
letter representing that plaintiffs had " 'abandoned' " the deposit and that Med-Fit had the
right to keep the deposit or give it to a charity of Sbragia's choice. Review of the letter
sent by Med-Fit's counsel shows that Med-Fit had concluded that, based on plaintiffs' loss
at trial, it had no legal obligation to return the deposit. Nonetheless, Med-Fit was willing
to return the deposit based on Sbragia's representation at trial that he would do so, giving
plaintiffs 30 days to indicate in writing to whom the check should be written and where
the check should be sent. Med-Fit also requested an acknowledgement by Sukumar that
"his acceptance of the funds at issue [] results in full payment of the outstanding balance
of that deposit placed with Med-Fit Systems, Inc. in 2004." Med-Fit also indicated that it
was willing to stipulate that plaintiffs' "acceptance [of the deposit] does not constitute a
waiver of any legal claims your client may seek to advance on appeal." Plaintiffs'
responded in writing that Med-Fit's attempt to return the funds amounted to "an attempt
to do an end run around the post-trial process and try to better position Med-Fit [] for the
next round of litigation." Thereafter, Med-Fit sent a letter revoking its offer to return the
deposit.
Sukumar's appeal from the second trial ended in the affirmance of the judgment in
favor of Med-Fit. The remittitur issued in July 2012. (Sukumar v. Med-Fit Systems Inc.
et al. (May 2, 2012, D058855) [nonpub. opn.] (Sukumar II).) Thereafter, Sukumar's
5
counsel emailed Med-Fit's counsel claiming that the deposit should be returned because it
was no longer in dispute following the remittitur. Sukumar's counsel suggested using the
deposit amount as an offset for the costs that Sukumar owed Med-Fit. Counsel spoke to
each other by phone. In a follow-up email, Sukumar's counsel suggested exchanging
checks and negotiating release language. The parties, however, could not agree on the
language of the release.
The Instant Action
The following month, plaintiffs filed this action seeking return of the deposit,
alleging causes of action against Med-Fit for: conversion; money had and received;
rescission, restitution and unjust enrichment; violation of Business and Professions Code
section 17200; and promissory estoppel. As alternative theories against Med-Fit,
plaintiffs alleged violation of the California Unclaimed Property Law (UPL, Code Civ.
Proc.,2 §§ 1500, et seq.) and sought declaratory relief. Plaintiffs included Sbragia as a
defendant on their claims for violation of Business and Professions Code section 17200,
and promissory estoppel. All causes of action arose from defendants' failure to return
plaintiffs' deposit. Sbragia later offered to sign and perform the settlement agreement
proposed by plaintiffs if they would dismiss the lawsuit with prejudice. Sukumar rejected
the offer.
Med-Fit moved for summary judgment, arguing that the claims against it were
barred by collateral estoppel and res judicata, the statute of limitations, and the unclean

2 Undesignated statutory references are to the Code of Civil Procedure.
6
hands doctrine. Sbragia moved for summary judgment of the two claims against him on
the same grounds as Med-Fit. He also argued that he was not personally liable for MedFit's
failure to return the deposit.
The trial court granted both motions, concluding that defendants were entitled to
judgment as a matter of law because all claims were barred by the applicable statute of
limitations, and the doctrines of res judicata and collateral estoppel. The court also
concluded that the equitable doctrine of unclean hands barred plaintiffs' claims against
Sbragia and plaintiffs' equitable claims against Med-Fit.
DISCUSSION
I
STANDARD OF REVIEW
A trial court properly grants summary judgment when there is no triable issue of
material fact and the moving party is entitled to judgment as a matter of law. (§ 437c,
subd. (c).) A defendant moving for summary judgment must show that a cause of action
has no merit by putting forth evidence that either one or more elements of the cause of
action, even if separately pleaded, cannot be established or that a complete defense exists
thereto. (§ 437c, subds. (o) & (p)(2); Saelzler v. Advanced Group 400 (2001) 25 Cal.4th
763, 768 (Saelzler).) If the defendant meets this burden, the burden shifts to the plaintiff
to establish that a triable issue of material fact exists. (§ 437c, subd. (p)(2);
Saelzler at p. 768.) "To prevail on a summary judgment motion that does not request
summary adjudication in the alternative, the defendant must show conclusively that all of
7
the plaintiff's causes of action or legal theories fail as a matter of law." (Slovensky v.
Friedman (2006) 142 Cal.App.4th 1518, 1527.)
We review the trial court's decision to grant summary judgment de novo.
(Saelzler, supra, 25 Cal.4th at p. 768.) We must view the evidence submitted in
connection with a motion for summary judgment in a light most favorable to the party
opposing the motion and resolve "any evidentiary doubts or ambiguities in plaintiff's
favor." (Ibid.) We independently determine whether the record supports the trial court's
conclusions that the asserted claims fail as a matter of law, and we are not bound by the
trial court's stated reasoning or rationales. (Prilliman v. United Air Lines, Inc. (1997)
53 Cal.App.4th 935, 951.)
II
RES JUDICATA
A. Legal Principles
"Res judicata, or claim preclusion, prevents relitigation of the same cause of action
in a second suit between the same parties or parties in privity with them." (Mycogen
Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896 (Mycogen).) "[R]es judicata benefits
both the parties and the courts because it 'seeks to curtail multiple litigation causing
vexation and expense to the parties and wasted effort and expense in judicial
administration.' " (Id. at p. 897.) Res judicata bars a subsequent lawsuit if three elements
are established: (1) the prior lawsuit resulted in a final judgment on the merits; (2) the
lawsuit sought to be barred is on the same cause of action as the prior lawsuit; and (3) the
party against whom claim preclusion is sought was a party or in privity with a party to the
8
prior lawsuit. (Busick v. Workmen's Comp. Appeals Bd. (1972) 7 Cal.3d 967, 974.)
Res judicata bars the litigation not only of issues that were actually litigated in the prior
proceeding, but also issues that could have been litigated in that proceeding. (Id.
at p. 975.)
For purposes of res judicata, the term "cause of action" refers neither to the legal
theory asserted by a plaintiff nor to the remedy the plaintiff seeks. (Mycogen, supra,
28 Cal.4th at p. 904.) Instead, "California has consistently applied the 'primary rights'
theory, under which the invasion of one primary right gives rise to a single cause of
action." (Slater v. Blackwood (1975)15 Cal.3d 791, 795.) " 'The most salient
characteristic of a primary right is that it is indivisible: the violation of a single primary
right gives rise to but a single cause of action.' " (Mycogen, at p. 904.) Where an action
has terminated in a judgment on the merits adverse to the plaintiff, the defendant in a
second action may use the first judgment as a bar under the principles of res judicata.
(Ibid.) This is the most common application of the primary rights theory with numerous
cases holding that an adverse judgment in the first suit is a bar even though the second
suit is based on a different theory or sought a different recovery. (Crowley v. Katleman
(1994) 8 Cal.4th 666, 682.) We independently review a trial court's determination that an
action is barred by the doctrine of res judicata. (City of Oakland v. Oakland Police and
Fire Retirement System (2014) 224 Cal.App.4th 210, 228.)
B. Analysis
In Sukumar II, Sukumar alleged that he was entitled to specific performance of his
contract with Med-Fit to provide the Next Generation machines. Alternatively, Sukumar
9
alleged that Med-Fit breached its contract to provide the Next Generation machines and
sought damages in an amount to be proven at trial. The verdict form presented to the jury
asked whether Med-Fit had breached its contract with Sukumar and allowed the jury to
award either specific performance or damages for any breach. Med-Fit, however,
prevailed on Sukumar's claim against it for breach of contract; thus, Sukumar was not
entitled to specific performance or damages. The remittitur in Sukumar II issued on
July 3, 2012. Accordingly, the judgment in Sukumar II is final and on the merits.
Although Sbragia was not a party in Sukumar II, he was Med-Fit's President and
CEO, and acted in this capacity in all of his dealings with defendants. Thus, Sbragia is in
privity with Med-Fit, the defendant in Sukumar II. (Mueller v. J.C. Penney Co. (1985)
173 Cal.App.3d 713, 723 ["Privity refers to a relationship . . . 'sufficiently close' so as to
justify applying collateral estoppel."]; Triano v. F.E. Booth & Co. (1932) 120 Cal.App.
345, 347 ["[R]es judicata arises when one party is in privity with another because the
parties' relationship is 'analogous to that of principal and agent.' "].) Accordingly,
Sukumar II clearly established two of the three elements of res judicata.
Plaintiffs appear to dispute the remaining element of res judicata, whether the
instant action is "on the same cause of action" as Sukumar II. Plaintiffs contend that the
trial court erred in granting summary judgment for defendants based on res judicata
because their causes of action arose after the prior litigation concluded; thus, they assert
these causes of action could not have been litigated in Sukumar II. Specifically, plaintiffs
contend that their cause of action for conversion arose after Sbragia's September 22,
2010, trial promise to return the deposit. Plaintiffs also assert that their causes of action
10
for money had and received and for violation of Business and Professions Code
section 17200 are all based on matters occurring after July 18, 2012, when Sukumar first
requested that defendants return his deposit. As we shall explain, plaintiffs' argument
misconstrues the meaning of a "cause of action" as this term is used under the doctrine of
res judicata.
"[U]nder the primary rights theory, the determinative factor is the harm suffered.
When two actions involving the same parties seek compensation for the same harm, they
generally involve the same primary right." (Boeken v. Philip Morris USA, Inc. (2010)
48 Cal.4th 788, 798.) In Sukumar II, Sukumar alleged that Med-Fit breached the contract
for the Next Generation machines and sought either specific performance or damages.
The primary right at issue was Sukumar's right not to be wrongfully deprived of the
benefits of the contract, and Med-Fit's corresponding duty was to not wrongfully deprive
Sukumar of his contractual benefits. The breach was Med-Fit's failure to deliver the
Next Generation machines.
The alleged material breach of a contract "does not automatically discharge the
contract; it excuses the injured party's performance, and gives him the election of certain
remedies." (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 853, p. 940.)
These remedies include rescission and restitution, damages, specific performance,
injunction, and declaratory relief. (Ibid.) A breach of contract "gives rise to a single
cause of action in which all remedies based on that breach must be requested."
(Mycogen, supra, 28 Cal.4th at p. 906.)
11
The pleading of alternative causes of action on the same set of facts is permissible.
(Steiner v. Rowley (1950) 35 Cal.2d 713, 720; Chapman v. Skype Inc. (2013)
220 Cal.App.4th 217, 234 fn.7 ["A plaintiff ordinarily may pursue inconsistent remedies
in her complaint and need not make an election of remedies at the pleading stage."];
Wallis v. Superior Court (1984) 160 Cal.App.3d 1109, 1114 ["Ordinarily a plaintiff need
not elect, and cannot be compelled to elect, between inconsistent remedies during the
course of trial."].) In other words, a plaintiff can request alternate remedies—specific
performance or damages—in a complaint, "but may not be awarded both to the extent
such an award would constitute a double recovery, e.g., a plaintiff/purchaser of real
property cannot receive both the property itself by a specific performance decree and also
damages measured by payments he or she made towards the purchase price." (Rogers v.
Davis (1994) 28 Cal.App.4th 1215, 1220.) For breach of contract the injured party is
entitled to such amount as will compensate him "for all the detriment proximately caused
thereby, or which, in the ordinary course of things, would be likely to result therefrom."
(Civ. Code, § 3300.) Thus, the measure of damages for a breach of contract will
encompass a deposit made toward the purchase price.
In Sukumar II, the jury concluded that Med-Fit was not liable for breach of
contract and that Sukumar was not entitled to the remedy of specific performance or
damages. (5 Witkin, California Procedure (5th ed. 2008) Pleadings, § 784, p. 203
["Specific performance is an alternative remedy; the cause of action is for breach of
contract."].) Thus, Sukumar II is res judicata as to any causes of action based on
violation of the same primary right, the alleged wrongfully deprivation of the benefits of
12
the contract, including failure to return the deposit. (Steele v. Litton Industries, Inc.
(1968) 260 Cal.App.2d 157, 172 ["if the trial proceeds to judgment on one alternative
remedy such judgment would constitute a bar to the trial in a subsequent action on the
obligation which plaintiff seeks to enforce, but on a different theory."].)
Review of the instant complaint shows that plaintiffs sought return of the deposit
in their first through fifth causes of action for conversion, money had and received, unjust
enrichment, violation of Business and Professions Code section 17200 and promissory
estoppel. At the heart of each of these five distinct legal theories is the same primary
right, wrongful deprivation of the benefits of Sukumar's contract with Med-Fit. Sbragia's
statement during the retrial that Sukumar was entitled to the return of his deposit if he did
not receive the Next Generation machines did not create a new right to the deposit.
Additionally, plaintiffs' request that defendants return the deposit, defendants' refusal to
return the deposit and defendants' act of conditioning return of the deposit on the
execution of a legal release did not create new rights to the deposit. These facts simply
created other legal theories under which plaintiffs sought return of the deposit. Stated
differently, the same primary right was at issue despite these additional facts. Plaintiffs'
argument that they presented "new claims" mischaracterize the primary right based upon
the source of the duty, not the "right to be free from the particular injury suffered."
(Crowley v. Katleman, supra, 8 Cal.4th at p. 681.)
Accordingly, the first through fifth causes of action against Med-Fit (conversion;
money had and received; rescission, restitution and unjust enrichment; violation of
Business and Professions Code section 17200; and promissory estoppel) are barred by the
13
doctrine of res judicata. The causes of action against Sbragia for violation of Business
and Professions Code section 17200; and promissory estoppel are also barred. As these
are the only claims against Sbragia, the judgment in favor of Sbragia is affirmed.
Plaintiffs also alleged a cause of action against Med-Fit for violation of the UPL
and sought declaratory relief as alternative legal theories to the first through fifth causes
of action.3 Specifically, plaintiffs alleged that on or about November 8, 2010, Med-Fit's
counsel informed plaintiffs' counsel that Sukumar had "abandoned" the deposit, and that
Med-Fit had placed itself within the scope of the UPL, creating a statutory obligation to
comply with this law. Plaintiffs' brought the action in the role of a private attorney
general under section 1021.5. Plaintiffs also sought a declaration of rights that
defendants violated the UPL.
"The UPL compels holders of certain classes of abandoned property subject to
escheat to report and deliver the property to the State Controller (Controller), who is
responsible for enforcing the UPL and may investigate suspected violations." (State of
California v. Pacific Bell Telephone Co. (2006) 142 Cal.App.4th 741, 745.)
During oral argument, appellants' disagreed with this court on application of res
judicata on all causes of action alleged as an alternative to their UPL claim. Appellants'
counsel, however, candidly recognized that should we reject their res judicata argument,

3 "Declaratory relief is an equitable remedy, which is available to an interested
person in a case 'of actual controversy relating to the legal rights and duties of the
respective parties . . . ." (In re Claudia E. (2008) 163 Cal.App.4th 627, 633.) This
remedy is attached to and derivative of plaintiffs' claim for violation of the UPL.
Accordingly, it will not be separately discussed.
14
this would resolve the remaining UPL claim against Med-Fit as appellants' would have
no legal right to the return of the deposit. (See Code Civ. Proc., § 1501, subd. (g)
[defining " '[o]wner' " as among other things "any person having a legal or equitable
interest in property subject to this chapter. . . ."].) We agree with and accept this
statement. Accordingly, summary judgment is properly granted in favor of Med-Fit.
Below, we discuss Med-Fit's remaining grounds for summary judgment as they
pertain to the claim against it for violation of the UPL as this discussion is relevant to
Med-Fit's request for sanctions on appeal.4
III
UNCLEAN HANDS
A. Legal Principles
The doctrine of unclean hands provides a complete defense to both legal and
equitable causes of action. (Fladeboe v. American Isuzu Motors, Inc. (2007)
150 Cal.App.4th 42, 56.) Unclean hands "is not a legal or technical defense to be used as

4 Plaintiffs make a lengthy argument that the election of remedies doctrine applies.
A breach of contract gives the aggrieved party an election of remedies. (1 Witkin,
Summary of Cal. Law (10th ed. 2005) Contracts, § 853, p. 940.) The injured party "must
elect to affirm the contract or to terminate it." (3 Witkin, Cal. Procedure (5th ed. 2008)
Actions, § 181, p. 261.) "Pursuant to that election of rights, he or she may obtain
appropriate remedies, such as specific performance based on affirmance, or damages or
restitution based on termination." (Ibid.) But not both. (Rogers v. Davis, supra,
28 Cal.App.4th at p. 1220.) "The election of remedies doctrine states that accepting an
actual benefit from an alternative theory that renders continued pursuit of the alternative
unfair constitutes an election." (Southern Christian Leadership Conference v.
Al Malaikah Auditorium Co. (1991) 230 Cal.App.3d 207, 223.) The election of remedies
doctrine does not apply here because the jury in Sukumar II found Med-Fit not liable for
breach of contract; thus, Sukumar was never required to make an election as to the
alternative remedies of specific performance or damages.
15
a shield against a particular element of a cause of action. Rather, it is an equitable
rationale for refusing a plaintiff relief where principles of fairness dictate that the plaintiff
should not recover, regardless of the merits of his claim. It is available to protect the
court from having its powers used to bring about an inequitable result in the litigation
before it." (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970,
985 (Kendall-Jackson).) "Thus, precluding recovery to the unclean plaintiff protects the
court's, rather than the opposing party's, interests." (Id. at p. 978.) Any conduct that
violates conscience, or good faith, or other equitable standards of conduct is sufficient
cause to invoke the doctrine; the misconduct need not be a crime or an actionable tort.
(Id. at p. 979.)
For the doctrine of unclean hands to apply, plaintiffs' misconduct "must relate
directly to the cause at issue. Past improper conduct or prior misconduct that only
indirectly affects the problem before the court does not suffice. The determination of the
unclean hands defense cannot be distorted into a proceeding to try the general morals of
the parties." (Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.) "Whether the particular
misconduct is a bar to the alleged claim for relief depends on (1) analogous case law,
(2) the nature of the misconduct, and (3) the relationship of the misconduct to the claimed
injuries." (Ibid.) Application of the doctrine of unclean hands presents a question of fact.
(Id. at p. 978.) Nonetheless, where the facts are not disputed, the matter may be resolved
as one of law. (See, e.g., Pond v. Insurance Co. of North America (1984)
151 Cal.App.3d 280, 289-292; DeRosa v. Transamerica Title Ins. Co. (1989)
213 Cal.App.3d 1390, 1395-1398.)
16
B. Analysis
For the doctrine of unclean hands to apply as a matter of law on summary
judgment Med-Fit needed to present facts and argument regarding the nature of the
misconduct and the relationship of the misconduct to the claimed injuries. (KendallJackson,
supra, 76 Cal.App.4th at p. 979.) Med-Fit failed to do so. Nor did Med-Fit
present facts showing that unconscionable conduct by plaintiffs directly tainted plaintiffs'
claim for violation of the UPL. Rather, Med-Fit relied on the history of their interactions
with plaintiffs over the years related to the deposit. Med-Fit did not meet its initial
burden of proof; accordingly, the burden of proof did not shift to plaintiffs to present any
evidence on their claim for violation of the UPL. (Quintilliani v. Mannerino (1998) 62
Cal.App.4th 54, 59-60.)
IV
REMAINING GROUNDS FOR SUMMARY JUDGMENT
Med-Fit also moved for summary judgment based on expiration of the statute of
limitations and collateral estoppel. Collateral estoppel bars relitigation of issues that
were decided in prior litigation between the same parties if the issues: "(1) are identical
to those litigated in the first action; (2) were actually litigated and necessarily decided in
determining the first action; (3) are asserted against a participant in the first action or one
in privity with that party; and (4) the former decision was final on the merits." (Rice v.
Crow (2000) 81 Cal.App.4th 725, 735.) Collateral estoppel does not apply to plaintiffs'
claim against Med-Fit for violation of the UPL because this issue was not actually
litigated and necessarily decided in Sukumar II.
17
Noting that the UPL imposes a $5,000 penalty on any person who willfully fails to
deliver escheated property to the Controller (§ 1576, subd. (b)), Med-Fit argued that
plaintiffs' UPL claim creates a statutory penalty and is thus barred by the one-year statute
of limitations set forth in section 340, which governs an "action upon a statute for a
penalty or forfeiture."
At issue is the limitations period for Med-Fit to deliver the allegedly abandoned
funds to the Controller. Subdivision (a) of section 1572 authorizes the Controller to bring
a legal action to enforce the duty of any person to permit examination of his or her
records, to enforce the delivery of escheated property to the state, or to determine
judicially that particular property is subject to escheat under the UPL. Section 1570
provides that no period of limitations exists that bars such a legal action by the
Controller. Citing former section 1515 (now section 1570), our high court held that the
statute of limitations is not a defense to reporting and paying or delivering abandoned
property to the Controller. (Douglas Aircraft Co. v. Cranston (1962) 58 Cal.2d 462, 463;
Law Revision Com. com., 20 West's Ann. Code Civ. Proc. (2007 ed.) foll. § 1570,
p. 320.)
More recently, another court held that an action by the Controller to enforce the
UPL was not subject to the three-year period of limitations established by section 338 for
actions " ' "upon a liability created by statute." ' " (Bank of America v. Cory (1985)
164 Cal.App.3d 66, 74-75.) Rather, under section 1570, there was no limitation on the
time in which an action may be brought by the Controller to enforce the provisions of the
UPL. (Ibid.) Section 1570 applies here because plaintiffs are standing in the shoes of the
18
Controller to enforce the provisions of the UPL. Accordingly, Med-Fit's statute of
limitations defense to the UPL claim lacks merit.
Finally, below and in their respondent's brief, Med-Fit argued (in a cursory
manner) that plaintiffs lacked standing to sue under the UPL, and assuming standing,
plaintiffs could not demonstrate a valid claim as a matter of law. Med-Fit, however,
failed to include these defenses in its notice of motion; thus, they are not properly before
us. (Maryland Casualty Co. v. Reeder (1990) 221 Cal.App.3d 961, 974 fn.4 [court does
not have the power to make orders beyond the scope of the notice of motion].)
Accordingly, we express no opinion on these issues, other than to note it is highly
doubtful the UPL applies to these facts.
V
DENIAL OF CONTINUANCE
Plaintiffs contend that the trial court erred in denying their request to continue
defendants' summary judgment motions. Specifically, they assert that the motions should
have been continued to allow them to depose Sbragia a second time because when
Sbragia was first deposed in 2014, Med-Fit was still solvent.
The summary judgment statute provides that if the party opposing the motion
shows by declaration that essential evidence "may exist but cannot, for reasons stated,
then be presented, the court shall deny the motion" or continue it for a reasonable period,
or "make any other order as may be just." (§ 437c, subd. (h).) Thus, the plaintiff must
show "that the . . . discovery requested could reasonably lead to evidence necessary to
refute" the defendants' evidence. (Scott v. CIBA Vision Corp. (1995) 38 Cal.App.4th 307,
19
326.) If the plaintiff does not make the required showing by affidavit, a continuance is
not mandatory. (Ibid.) When a continuance is not mandatory, we review the court's
ruling for abuse of discretion. (Ibid.)
The declaration of plaintiffs' counsel in support of their continuance request did
not satisfy the requirements for a mandatory continuance. This declaration established
that when plaintiffs deposed Sbragia in January 2014, his affirmative defenses were
unexplained, Med-Fit's zone of insolvency was not disclosed and Med-Fit's assignment
for the benefit of creditors had not yet occurred and was not foreseeable. Plaintiffs'
counsel does not explain why plaintiffs failed to ask Sbragia about the factual basis for
his affirmative defense or Med-Fit's solvency when they first deposed him in
January 2014. On this record, the trial court did not abuse its discretion in denying a
continuance.
VI
SANCTIONS MOTIONS
A. Legal Principles
A reviewing court "may add to the costs on appeal such damages as may be just"
when that court determines that an appeal "was frivolous or taken solely for delay."
(§ 907.) We may impose sanctions on the offending attorney, offending party, or both.
(Cal. Rules of Court, rule 8.276(a).) Sanctions for a frivolous appeal are imposed "for
two basic reasons: to discourage further frivolous appeals, and to compensate for the loss
that results from the delay." (Pierotti v. Torian (2000) 81 Cal.App.4th 17, 33 (Pierotti).)
In In re Marriage of Flaherty (1982) 31 Cal.3d 637 (Flaherty), our high court sets forth
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alternate subjective and objective guidelines for determining whether an appeal is
frivolous. (Hummel v. First National Bank (1987) 191 Cal.App.3d 489, 494-495.)
An appeal is frivolous "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." (Flaherty, supra, 31 Cal.3d at p. 650.) The second standard,
whether an appeal indisputably lacks merit, is tested objectively. The inquiry is whether
any reasonable attorney would agree the appeal is totally and completely devoid of merit
and, therefore, frivolous. (Id. at pp. 649-650.) "Counsel and their clients have a right to
present issues that are arguably correct. An unsuccessful appeal should not be penalized
as frivolous if it ' " 'presents a unique issue which is not "indisputably" without
merit' . . . , involves facts which are 'not amenable to easy analysis in terms of existing
law' . . . , or makes a reasoned 'argument for the extension, modification, or reversal of
existing law' . . . ." ' (Westphal v. Wal-Mart Stores, Inc. (1998) 68 Cal.App.4th 1071,
1081 (Westphal).) Additionally, "[a]ppellate courts can, and often do, consider the prior
conduct of attorneys and their clients in considering whether sanctions are appropriate."
(Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 192.)
B. Analysis
Defendants request that we impose sanctions on plaintiffs and their counsel on the
ground that their appeal of the summary judgment in their favor is frivolous. They assert
no reasonable attorney could legitimately believe that plaintiffs' claims against them have
any merit. They also contend that it has been repeatedly found that plaintiffs are abusing
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the legal system in an attempt to punish and harass them. Plaintiffs oppose the requests
for sanctions. We informed the parties that the court intended to consider the sanctions
motions with the appeal.
The majority of claims against Med-Fit lack merit based on application of the
doctrine of res judicata. As discussed above, however, plaintiffs' arguments regarding
their UPL claim were not totally and completely without merit. (Ante, Pts. II, III and IV.)
This necessarily means that plaintiffs' appeal of the summary judgment in favor of MedFit
is not totally and completely without merit. (Flaherty, supra, 31 Cal.3d at p. 650.)
Accordingly, we deny Med-Fit's motion for sanctions on appeal.
Applying the Flaherty standard, the appeal against Sbragia qualifies as objectively
frivolous. Plaintiffs sued Sbragia based on defendants' alleged failure to return plaintiffs'
deposit under a theory of promissory estoppel. Plaintiffs also claimed that defendants'
failure to return the deposit violated Business and Professions Code section 17200. As
addressed above, the doctrine of res judicata contains three elements—a final judgment
on the merits, privity and the same primary right. As we explained, these three elements
are satisfied and the doctrine of res judicata applies to bar plaintiffs' claims against
Sbragia. (See Ante, Pt. II.B.)
Review of plaintiffs' opening brief shows they did not present any argument or
authority directly addressing these three elements and showing how the trial court erred
in granting summary judgment in favor of Sbragia based on res judicata. Although
Sbragia argued the three elements of res judicata in his respondent's brief, plaintiffs did
not correct the deficiency in their reply brief. The res judicata issue was subject to easy
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analysis in terms of existing law. Plaintiffs, however, did not even attempt to present a
colorable claim showing that the trial court erred in applying the doctrine of res judicata.
(Westphal, supra, 68 Cal.App.4th at p. 1082 [sanctions granted where appellant presented
no meaningful, substantive analysis indicating contention on appeal has some possible
merit].) Any reasonable attorney would conclude that plaintiffs' appeal of the judgment
in favor of Sbragia is objectively frivolous.
Without citation to any authority, plaintiffs assert that sanctions for an objectively
frivolous appeal cannot be awarded if "any issues raised on appeal [] require more than
cursory review and rejection." In other words, they claim that if a single argument they
have made on any issue in their appeal is objectively reasonable, sanctions must be
denied. We disagree. Under plaintiffs' logic, appellants can escape sanctions for
knowingly filing an untimely appeal for purposes of delay if they presented an
objectively reasonable argument on the merits. An appeal is frivolous "when any
reasonable attorney would agree that the appeal is totally and completely without merit."
(Flaherty, supra, 31 Cal.3d at p. 650, italics added.) An appeal can be totally and
completely without merit where, as here, a single issue is unquestionably dispositive of
the entire appeal.
While this conclusion warrants the imposition of sanctions, we are compelled to
comment on the history of Med-Fit's attempt to return the deposit. Plaintiffs do not
dispute that Med-Fit made multiple attempts to return the deposit before the instant
litigation. Plaintiffs similarly do not dispute that immediately after entry of judgment in
Sukumar II, Sbragia sent a check to plaintiffs in the amount of the deposit. After
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plaintiffs again refused to take the deposit, Med-Fit indicated its willingness to stipulate
that plaintiffs' "acceptance [of the deposit] does not constitute a waiver of any legal
claims your client may seek to advance on appeal." Ironically, plaintiffs' counsel
responded that Med-Fit's attempt to return the deposit was an attempt "to better position
Med-Fit [] for the next round of litigation."
This contention is belied by Med-Fit's final effort to resolve the instant litigation
by tendering the original deposit amount of $25,000, plus an additional $5,000. In
exchange Med-Fit requested "a full release of all claims relating to any of the deposit
funds and any further issues involving the purchases made in 2004-2005. While the
release can be 'limited' to issues arising out of the deposit funds, surely you understand
that Med-Fit will not enter into this transaction without full and complete assurances that
this transaction will completely and fully conclude all remaining issues in connection
with those funds." In that letter, counsel mentioned defendants' res judicata defense and
closed with the following: "Med-Fit's proposal is exceedingly fair and acceptance would
place your client in a far better position than he is currently; that is, your client would get
a full and complete refund of his deposit funds (including the components and add-on
weights for free); as well as receive a significant cash payment for nothing. The only
thing your client 'gives up' in return, is a waiver of claims that don't exist or have no legal
foundation." "Somewhere along the line, litigation must cease." (In re Marriage of
Crook (1992) 2 Cal.App.4th 1606, 1613.) This is where the litigation should have ended.
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Plaintiffs, however, persisted with their claims against Sbragia until the trial court
granted summary judgment in his favor. After hearing the arguments of counsel, the trial
court remarked:
"So this is a case about a $23,000 deposit. Plaintiff asserts that
Plaintiff is entitled to a $23,000 deposit back. It's undisputed that
the other side returned the deposit multiple times. So it's a made-up
dispute, from my perspective. It's a made-up dispute that's been in
litigation for a decade. [¶] In this current litigation, the plaintiffs
have, in my opinion, inappropriately used the judicial system,
process subpoenas that are grossly overbroad to hassle, annoy, bully,
intimidate, punish the other side. [¶] I've had to make orders
quashing subpoenas that were way overbroad. The only
possible . . . motivation for this that I can see is that the plaintiffs are
motivated for some unknown reason to try and use the judicial
system to bully the other side or intimidate or punish. And that is an
entirely inappropriate use of our judicial system."
We concur in this assessment and note that the trial court's comments should have
been a wakeup call to plaintiffs and their counsel to end this litigation. As another court
commented, "[a]n attorney in a civil case is not a hired gun required to carry out every
direction given by the client. [Citation.] As a professional, counsel has a professional
responsibility not to pursue an appeal that is frivolous or taken for the purpose of delay,
just because the client instructs him or her to do so. [Citation.] Under such
circumstances, the high ethical and professional standards of a member of the bar and an
officer of the court require the attorney to inform the client that the attorney's
professional responsibility precludes him or her from pursuing such an appeal, and to
withdraw from the representation of the client." (Cosenza v. Kramer (1984)
152 Cal.App.3d 1100, 1103.)
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In determining the dollar amount of sanctions to be awarded a party who was
forced to respond to a frivolous appeal we consider "the amount of respondent's attorney
fees on appeal; the amount of the judgment against appellant; the degree of objective
frivolousness and delay; and the need for discouragement of like conduct in the future."
(Pierotti, supra, 81 Cal.App.4th at pp. 33-34.) Sbragia's counsel provided a declaration
establishing that Sbragia incurred $17,640 in attorneys' fees and $1,170 in clerk and
paralegal fees, in responding to the appeal and preparing the sanctions motion, for a total
amount of $18,810. This amount appears to be reasonable under all of the circumstances,
as outlined above. Sanctions are imposed on plaintiffs and their counsel of record, jointly
and severally, as the client and the attorney are both responsible for pursuit of this
frivolous appeal. The sanctions are to be payable to both Sbragia and his counsel of
record. Our opinion constitutes a written statement of our reasons for imposing
sanctions. (Flaherty, supra, 31 Cal.3d at p. 654.)
DISPOSITION
The judgment in favor of Med-Fit is affirmed. Med-Fit's motion for sanctions is
denied. Med-Fit is entitled to its costs on appeal. The judgment in favor of Sbragia is
affirmed. Sbragia's motion for sanctions is granted in the amount of $18,810. Sanctions
are imposed on plaintiffs and their counsel of record, jointly and severally. The sanctions
are to be payable to both Sbragia and his counsel of record. Sbragia is entitled to his
costs on appeal. All sanctions are to be paid no later than 30 days after the remittitur has
issued. Upon return of the remittitur, the Clerk of the Court of Appeal is to forward a
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copy of this opinion to the State Bar of California, pursuant to Business and Professions
Code section 6086.7, subdivision (a)(3).
HUFFMAN, Acting P. J.
WE CONCUR:
NARES, J.
HALLER, J.