Opinion
E042304
4-18-2008
MEE SUP CHOI et al., Plaintiffs and Appellants, v. HAE KWANG YANG et al., Defendants and Respondents.
Arias & Lockwood and Christopher D. Lockwood for Plaintiffs and Appellants. Reynolds, Jensen & Swan and Christopher G. Jensen for Defendants and Respondents.
NOT TO BE PUBLISHED
I. INTRODUCTION
The trial court issued an evidence sanction that effectively prohibited plaintiff Mee Sup Choi (Choi) from presenting any evidence to prove an essential element of her claim for specific performance of a real estate purchase contract against defendants Hae Kwang Yang and Oh Bok Yang (collectively Yang). The sanction specifically prohibited Choi from proving she was financially able to pay the $210,000 purchase price for the property, either in cash or with cash and a mortgage loan. The trial court took judicial notice of the sanction and, on that basis, granted Yangs motion for judgment on the pleadings. Thereafter, the court entered judgment in favor of Yang.
On this appeal, Choi claims the evidence sanction was overbroad and violated her right to due process, because it was not limited to the documents or evidence described in the motion seeking the sanction. Instead, the sanction encompassed all evidence concerning Chois ability to pay for the property. Choi maintains she could have proved she was able to pay for the property based on evidence she produced before Yang served the document demand underlying the evidence sanction and before the court ordered her to produce specific documents. She therefore requests reversal of the evidence sanction and entry of a sanction order limited to the discovery she failed to produce.
Plaintiffs Jee Sun Choi and Gee Son Corporation also appeal from the judgment; however, only Chois claims against Yang are pertinent to this appeal, and the record does not indicate that plaintiffs Jee Sun Choi or Gee Son Corporation had any interest in Chois claims against Yang at any time.
We conclude that the sanction order did not violate Chois procedural due process right to notice and an opportunity to be heard. A trial court is authorized to enforce the discovery statutes, and this includes the authority to impose a broader sanction than a party requests in its notice of motion. Furthermore, the court did not abuse its discretion in imposing the evidence sanction prohibiting Choi from presenting any evidence concerning her ability to pay for the property, including the evidence she produced before she failed to respond to Yangs final document demand. Choi had persistently refused to respond to Yangs final document demand, thus, the trial court reasonably concluded that the broader evidence sanction it imposed was reasonably related to the violation and a fair and reasonable way to protect Yang and the judicial system from abuse.
Finally, even if the trial court abused its discretion and should have limited the evidence sanction to the evidence Choi failed to produce in response to Yangs final document demand, Choi has not demonstrated she was prejudiced by the sanction order. (Cal. Const., art. VI, § 13.) Choi has not shown that the evidence she produced before the sanction order was issued was sufficient to show she was financially able to purchase the property—an essential element of her claim for specific performance. Accordingly, we affirm the judgment.
II. RELEVANT BACKGROUND
A. Chois Allegations Against Yang
In her operative first amended complaint, Choi alleged that in April 2003, she and certain other defendants, Whang, entered into a real estate purchase contract whereby Whang agreed to sell Choi certain real property located on 12th Street in Perris (the property) for $210,000. Whang had operated a dry cleaning business on the property. An escrow was opened, but Whang canceled the escrow without Chois consent and later sold the property to Yang for $260,000. Choi sued several parties, including (1) Whang, (2) the real estate broker who represented Whang, and (3) Yang.
The "Whang defendants," Kyung W. Whang and Kyung Sun Whang, are not parties to this appeal. Their defaults were taken after they failed to respond to Chois initial complaint.
Real estate broker Michael Lim and his company, New Star Realty, Inc., are also not parties to this appeal. Chois claims against these defendants were still pending when Choi filed her opening brief.
Choi sought specific performance against Yang of her contract to purchase the property from Whang. Chois theory of recovery was that Yang was not a bona fide purchaser because Yang knew, before it purchased the property, that Choi had an enforceable purchase contract with Whang. On this basis, Choi claimed that Yang took the property subject to her contract with Whang, and was obligated to sell the property to her for $210,000. Alternatively, Choi sought $50,000 from Yang, the difference between Chois and Yangs purchase prices.
B. The Bench Trial
A court trial began on October 19, 2005. In an opening statement, counsel for Choi, Attorney Rodney Bell, claimed the evidence would show that Choi was entitled to specific performance of her real estate purchase contract against Yang. In response to Chois opening statement, counsel for Yang, Attorney Christopher Jensen, made a motion for nonsuit. Jensen argued that Choi was not entitled to specific performance unless she could show she was ready, willing, and able to purchase the property both at the time her escrow was scheduled to close in April 2003 and at the time of trial.
Specifically, Jensen argued that, if Choi was planning to rely on a loan to finance part of the purchase price, she had to show she had "an actual contract [with a lender] with a commitment to loan money." Choi had bank deposits of approximately $ 70,000, and the anticipated loan amount was $139,750. The only evidence Choi had produced of her ability to obtain financing, Jensen claimed, was a letter from a mortgage broker, not an actual lender, showing she was "prequalified" to obtain a loan. Jensen argued that the "prequalification letter" was hearsay and was otherwise insufficient to prove Chois financial ability to buy the property, because, under the statute of frauds, any commitment to loan money in excess of $100,000 must be in writing. (Civ. Code, § 1624, subd. (a)(7).) Thus, Jensen argued, Choi was unable to show she was entitled to specific performance of her purchase contract based solely on the prequalification letter.
The court and the parties discussed the issue at length. Bell maintained that Choi was not obligated to show she had an enforceable loan commitment from a lender in order to obtain specific performance, in view of Whangs anticipatory breach of the purchase contract. Alternatively, Bell argued that in the event Choi was unable to qualify for a loan, she was ready, willing, and able to pay the total $210,000 purchase price in cash. Trial was continued to the following day to allow the court and counsel to conduct further research on the issue.
The next morning, Yang and Choi filed briefs addressing the issue. Before the court ruled on whether Choi was obligated to show she had an enforceable loan commitment from a lender, Jensen complained that Choi had always claimed she was going to obtain a loan to finance her purchase of the property. Now, however, she was claiming she had cash or other assets sufficient to pay the purchase price, without obtaining a loan.
Jensen offered to show, through Chois deposition testimony, that she said she was "going to get a loan," and had not revealed she was planning to pay or was able to pay for the property in cash. Jensen said he had issued a demand for production of documents with Chois deposition notice that requested "anything relating to loan applications and anything relating to down payments," and argued that the document demand encompassed "any methodology" for purchasing the property. The documents Choi had produced to date showed she had $70,000 in bank deposits, but not $210,000. Chois last minute change of strategy was prejudicial to Yang, he argued, because he had sought, but had not obtained, any discovery indicating that Choi could pay for the property in cash.
Bell argued that Choi had never committed to a mortgage loan as the sole means of financing her purchase of the property. Instead, her intent was to get a loan, but if that was not possible, pay for the property in cash. Bell also pointed out that, if Jensen believed that Chois deposition testimony or other discovery responses undercut the credibility of this proposition, then Jensen could cross-examine Choi with that information and challenge her credibility. But, Bell argued, Choi was entitled to present evidence that she could purchase the property with cash.
The trial court, relying on Henry v. Sharma (1984) 154 Cal.App.3d 665, ruled that Choi did not have an obligation to show she had a binding commitment from a lender to obtain a mortgage loan. Particularly in view of Whangs anticipatory breach, it was unlikely any lender would have issued such a binding commitment. Instead, the court ruled, Choi could prove she was entitled to specific performance by showing she either (1) was able to qualify for a loan to pay the balance of the purchase price, or (2) had cash or other liquid assets sufficient to pay the entire $210,000 purchase price in cash.
The court recognized, however, that if Choi was going to present evidence that she had sufficient assets to pay for the property without obtaining a loan, Jensen was unprepared to respond because that evidence had not been produced in discovery. In addition, Jensen told the court that Choi was in the United States under "some type of visa" and her financial net worth would have to be proved by source documents from Korea. The court agreed that obtaining these source documents would take time, and Choi would then have to be deposed on the issue of her financial ability to pay for the property.
The trial court also indicated that, if Chois prequalification letter came from a mortgage broker, it would be hearsay on the issue of whether there was a financial institution committed to loan Choi funds. If the loan commitment was from a lender, however, a representative of the lender could testify to whether or not the lender would have made a loan to Choi based on her financial creditworthiness. Jensen wanted to have a defense expert prepared to challenge that type of evidence, if Choi was going to present it.
Bell confirmed that Chois prequalification letter was from a mortgage broker, not a lender, and that Choi would be relying "primarily" on her ability to pay for the property with cash and other assets. As an offer of proof, Bell said that, shortly before Choi entered into the purchase agreement with Whang, Choi purchased a car wash in Irvine for just under $3 million, including over $1 million in cash. He claimed that Choi had over $1 million in equity in the car wash, plus extensive holdings in Korea.
Bell agreed the trial could be continued to allow Yang to conduct further discovery on Chois ability to pay the $210,000 with cash and other assets. Choi also said her mortgage broker would testify that the broker had performed a credit check on Choi, and the broker was qualified to testify that Choi would have qualified for a loan. The court said that would constitute expert testimony, and if Choi was going to "go that route," the parties might want to designate experts, as Jensen said he wanted to do.
Finally, counsel for Choi and Yang both agreed, and the trial court ordered, that the trial would be continued for no more than four months to conduct further discovery on Chois financial condition and creditworthiness. The court also ordered that Choi and Yang could each designate one expert to testify on this subject. Yangs motion for nonsuit was denied without prejudice.
C. Further Discovery/Yangs Motion to Compel
Soon after the trial was continued, Choi produced a package of documents related to the Irvine car wash acquisition. The documents were produced voluntarily and not in response to any document demand. These documents showed that a corporation, not Choi, purchased the car wash. After the car wash documents were produced, Yang propounded a demand for documents related to all of Chois assets and liabilities. Choi submitted untimely, unverified objections to the demand as being overbroad, but promised to produce some documents. No documents were ever produced, however.
It is not apparent from the record that the corporate purchaser was plaintiff Gee Sun Corporation. There is no indication that Gee Sun Corporation had any interest in the purchase of the Perris property, whether as an assignee of Chois real estate purchase contract or otherwise.
On January 31, 2006, Yang filed a motion to compel production of the documents described in its demand. At the March 7, 2006, hearing on the motion, Attorney Carol Fogelman appeared for Choi and explained that the attorney who had been handling the case, Bell, was no longer with the firm, and Fogelman was unclear what documents had been produced in response to Yangs demand. Attorney Raul Garcia also represented Choi and appeared with Bell at trial on October 19 and 20. Garcia was still representing Choi at the time of the motion to compel.
The court ordered the parties to meet and confer regarding what documents were going to be produced in response to Yangs demand. The parties agreed, and the court ordered, that Choi would produce a narrowed category of documents, specifically, "all documents sufficient to support a standard FHA or HUD form loan application for purposes of loan qualification to buy the property at issue as of the date escrow was scheduled to close," or April 2003. Trial was again continued to allow Choi time to produce the narrowed category of documents, to allow Yang to depose Choi on the issue of her financial ability to pay for the property, and for both parties to designate and depose experts on the issue.
D. Yangs Motion for an Evidence Sanction
By June 2006, Choi had not produced any of the documents she agreed to produce and was ordered to produce at the March 7 hearing on Yangs motion to compel. Accordingly, Yang filed a motion for an evidence sanction. The notice of motion sought an order "prohibiting [Choi] from producing evidence of financial ability to pay cash for the subject property, or otherwise purchase the property except as previously disclosed in discovery ...." (Italics added.) No written opposition was filed.
At the July 20 hearing on the motion, Garcia appeared for Choi and said he was there to "throw [him]self on [his] sword." He explained that, earlier that year, his office had "[gone] from a four-attorney office to a one-attorney office, [himself]." He had been trying to produce the documents Choi had been ordered to produce, and the failure to produce the documents was his fault. He said he believed, however, that Yang had already received "approximately 90 percent of the documents previously through discovery." He asked that he be allowed until Friday of the following week to produce the court-ordered documents.
Jensen told the court that he still had to depose Choi on her ability to pay for the property in cash, that both sides still had to designate experts on whether she would have qualified for a mortgage loan, and that no progress had been made on the matter since the trial began on October 19. Jensen said that documents he had received "were for entities that I could not tell if they were related or not to [Choi]." It is unclear whether Jensen was referring to the package of documents that Choi produced concerning the Irvine car wash acquisition, or other documents previously produced in the action.
In any event, Garcia argued that, if Jensen did not understand how the documents related to Choi, then he was free to retake Chois deposition and could still do so. Garcia also argued that, if Chois "lender" would testify that Choi would have qualified for a loan based on the documents Jensen already had, then Yang would not be prejudiced by Chois failure to produce any additional documents. The court told Garcia that its March 2006 order to produce the narrowed category of documents was issued because the Irvine car wash documents that Choi produced in January 2006 were "insufficient."
The court imposed monetary sanctions of $1,165 against Garcia, noting that Choi had not produced any documents in response to Yangs document demand, motion to compel, or motion for evidence sanction. The court also imposed an evidence sanction, prohibiting Choi from "presenting evidence of [Chois] financial condition/ability to purchase the real property at issue ...." The evidence sanction thus prohibited Choi from presenting any evidence, whether previously produced or not, concerning Chois financial condition, and exceeded the scope of the sanction Yang sought in its notice of motion.
E. Chois Motion to Vacate the Evidence Sanction
Choi obtained new counsel and, in August 2006, filed a motion to vacate the evidence sanction under Code of Civil Procedure section 473, subdivision (b). Following a September 18 hearing on the motion, the court denied the motion on the grounds that, even if the statute otherwise applied, Choi had not produced any of the court-ordered documents at the time she filed her motion, and the statute effectively required the production of those documents as a condition for granting relief.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
In support of the motion, Choi submitted a declaration indicating she had provided Garcia with unspecified bank statements and other financial information many months earlier. Garcia submitted a declaration, again stating it was entirely his fault that the discovery had not been produced. At the hearing on the motion, Chois new counsel, Attorney Nathan Perea, told the court he had "the same six boxes" of documents Garcia had but had not had sufficient time to go through the boxes and provide the discovery. It was unclear whether Choi had, in fact, given any of her attorneys the discovery she had been ordered to produce.
F. Judgment on the Pleadings
Yang filed a motion for judgment on the pleadings, which was heard and granted on September 18, 2006, the same date the trial court denied Chois motion to vacate the evidence sanction. The motion was made on the grounds that, in view of the evidence sanction, Choi was unable to prove she was entitled to specific performance against Yang of her $210,000 purchase agreement with Whang. Specifically, Choi was unable to show she was financially able to purchase the subject property at the time escrow was scheduled to close in April 2003. The court took judicial notice of the evidence sanction, and granted the motion based on the evidence sanction, the allegations of Chois complaint, and the applicable law regarding specific performance. Thereafter, the court entered judgment in favor of Yang on Chois complaint.
As the trial court recognized in granting Yangs motion for judgment on the pleadings, the evidence sanction prevented Choi from presenting any evidence of her ability to pay the $210,000 purchase price for the property. This was an essential element of Chois claim for specific performance. (Behniwal v. Mix (2005) 133 Cal.App.4th 1027, 1044 [to obtain specific performance of a real estate purchase contract, a buyer must prove that he or she "was ready, willing and able to perform at the time the contract was entered into ...."].)
III. DISCUSSION
A. Chois Due Process Claim is Without Merit
Choi argues that the evidence sanction the trial court imposed violated her right to due process because it exceeded the scope of the evidence sanction Yang sought in its notice of motion. We disagree.
As noted, Yangs motion for the evidence sanction sought an order "prohibiting [Choi] from producing evidence of financial ability to pay cash for the subject property, or otherwise purchase the property except as previously disclosed in discovery herein." (Italics added.) The sanction order was broader. It prohibited Choi from "presenting evidence of [her] financial condition/ability to purchase the real property at issue herein ...." Thus, the sanction order prohibited Choi from presenting any evidence of her financial ability to pay the $210,000 purchase price, including any evidence she failed to produce in response to the order compelling production and any evidence she previously produced in the action.
Section 2023.030 authorizes a trial court to impose discovery sanctions, including monetary, issue, evidence, or terminating sanctions, for "conduct that is a misuse of the discovery process," "[t]o the extent authorized by the chapter governing any particular discovery method ..." and "after notice to any affected party ... and after opportunity for hearing ...." Disobeying a court order to provide discovery is a misuse of the discovery process. (§ 2023.010, subd. (g).) And section 2031.320, subdivision (c) authorizes the court to impose discovery sanctions for failing to obey a court order compelling production of documents. Specifically, section 2031.320, subdivision (c) authorizes the court to "make those orders that are just" (italics added), including imposing an issue sanction, evidence sanction, or terminating sanction, either in lieu of or in addition to a monetary sanction.
Regarding notice, section 2023.040 provides that a notice of motion seeking a discovery sanction must "specify the type of sanction sought." (Italics added.) This means that the notice must specify whether the moving party is seeking monetary, issue, evidence, or terminating sanctions. (Mattco Forge, Inc. v. Arthur Young & Co. (1990) 223 Cal.App.3d 1429, 1435-1436.) Yang complied with this requirement by stating, in its notice of motion, that it was seeking monetary and evidence sanctions. Section 2023.040 also requires that the notice motion shall be accompanied by a memorandum of points and authorities. Yang also complied with this requirement.
Choi cites no authority for the proposition that the trial court was not authorized to impose an evidence sanction that was broader in scope than the evidence sanction Yang was seeking, or that imposition of the broader evidence sanction violated her due process rights. Section 2031.320, subdivision (c), which authorized the trial court to impose a "just" evidence sanction, gave Choi ample notice that the trial court was authorized to impose an evidence sanction that was broader in scope than the one Yang was seeking.
Indeed, one of the "basic purpose[s]" of discovery sanctions "is to curb misuse of the discovery process, which can cause unnecessary delay and add greatly to the financial and human costs of litigation." (2 Cal. Civil Discovery Practice (Cont.Ed.Bar. 4th ed. 2007) § 15.86, p. 1366, citing §§ 2023.010-2023.040.) The broader evidence sanction that the trial court imposed was necessary to put a final stop to Chois continuing failure to obey the courts March 7 order to produce particular documents in response to Yangs final inspection demand. At the July 20 hearing on the motion for the evidence sanction, Chois attorney Garcia "fell on his sword" and told the court it was his fault that Choi had not produced any documents in response to the courts order compelling production. Garcia also asserted, but did not even attempt to demonstrate, that the evidence Choi previously produced in the action was sufficient to show she was able to pay the $210,000 purchase price for the property.
The trial court had been hearing the same story since October 2005, when trial was continued to allow Yang to conduct further discovery on the issue of Chois financial ability to pay for the property, whether in cash or with cash and a mortgage loan. The trial court had no reason to believe that Choi would ever produce the documents she was ordered to produce, or that the evidence she had previously produced was sufficient to show she had the financial wherewithal to pay the purchase price for the property.
We are mindful that discovery sanctions (1) must be tailored in order to remedy the offending partys discovery abuse, (2) should not give the aggrieved party more than it is entitled to or should not place the aggrieved party in a better position than it would have been in had the discovery been produced, and (3) should not be used to punish the offending party. (Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th 1202, 1217.) For the reasons explained, however, the trial courts broader evidence sanction did not run afoul of any of these requirements.
Choi relies on Sole Energy Co. v. Hodges (2005) 128 Cal.App.4th 199, 207 through 210 where the court held that a sanction issued in violation of the notice provisions of the discovery statutes violated a partys due process rights and was therefore void. Hodges is distinguishable, however, because it involved terminating sanctions that were issued ex parte and without any notice or opportunity to be heard. (Ibid.) Here, in contrast, Choi had adequate notice of and an opportunity to be heard in response to Yangs motion.
B. No Abuse of Discretion and Harmless Error
A courts decision to impose a particular discovery sanction is "`subject to reversal only for manifest abuse exceeding the bounds of reason. [Citation.]" (Electronic Funds Solutions, LLC v. Murphy, supra, 134 Cal.App.4th at p. 1183.) For the reasons explained, the trial court did not abuse its discretion in imposing the evidence sanction that prohibited Choi from presenting any evidence concerning her ability to pay the $ 210,000 purchase price of the property.
But even if the sanction should have been limited to the evidence Choi failed to produce in response to the courts order compelling production, Choi must demonstrate she was prejudiced by the order. Specifically, Choi must show there is a reasonable probability she would have realized a more favorable result had the sanction order been limited to the evidence she failed to produce. (People v. Watson (1956) 46 Cal.2d 818, 836; Code Civ. Proc., § 475; Cal. Const., art. VI, § 13.) On this record, Choi has not met this burden.
As noted, a purchaser of real property is not entitled to specific performance of its purchase contract unless it can prove it "`was ready, willing and able to perform at the time the contract was entered into .... [Citation.]" (Behniwal v. Mix, supra, 133 Cal.App.4th at p. 1044.) Furthermore, and contrary to Jensens position at trial, Choi did not have an obligation to prove she had a loan commitment or a binding contract from a lender that obligated the lender to loan her the balance of the purchase price. (Henry v. Sharma, supra, 154 Cal.App.3d at p. 672.) Instead, Choi could have met her burden by showing she had cash or liquid assets sufficient to pay the entire $210,000 purchase price in cash. (Ibid.) Alternatively, she could have shown she "`commanded resources upon which [she] could [have] obtain[ed] the requisite credit." (D-K Investment Corp. v. Sutter (1971) 19 Cal.App.3d 537, 546.)
Choi argues that "the evidence of the down payment and the evidence of the loan commitment and the car wash assets were sufficient, by themselves, to carry [her] burden of proof." She also asserts that "evidence of far more than sufficient assets to qualify for a loan was provided" before Yang served its posttrial document demand. We disagree.
The record indicates that Choi had approximately $70,000 in United States bank deposits on hand, and contemplated taking out a loan for the approximate $139,750 balance of the purchase price. During the discussion at trial in October 2005, Bell conceded that the loan commitment letter Choi had produced was issued by a broker, not a lender. And as the trial court indicated, a brokers testimony that a third party lender would have loaned Choi sufficient funds to pay all or any part of the purchase price would have been hearsay. (Evid. Code, § 1200.)
Moreover, even if a mortgage broker could have properly testified that Choi was qualified to obtain a mortgage loan, the broker would have been basing his testimony on financial evidence that, on this record, was apparently never produced. The only financial evidence produced concerned the Irvine car wash acquisition. None of these documents are in the record, however. Nor has Choi demonstrated how or whether she could have used any of these assets to finance the balance of the purchase price of the property, either by liquidating them or using them as collateral for a loan.
Choi further argues that, in connection with renewing her residency status in the Untied States, she submitted an E-2 visa application which "included an extensive collection of documents intended to reflect her financial status and dealings both in the United States and in her home country of South Korea. This included copies of income tax returns, articles of incorporation for a corporation she owns, bank statements, documents reflecting a [section] 1031 exchange of a trailer park in San Bernardino for the car wash in Tustin, and profit and loss statements for the business."
It is unclear from the record whether the documents accompanying Chois E-2 visa application were part of the documents that were produced concerning the car wash acquisition. In any event, Yang concedes it received these documents, but argues they did not "relate to Choi." Moreover, none of these documents are in the record, and Choi has not demonstrated how or whether she could have used any of these documents to pay or finance the balance of the purchase price for the property.
IV. DISPOSITION
The judgment dismissing Chois complaint against Yang is affirmed. Yang shall recover its costs on appeal.
We Concur:
Hollenhorst, Acting P.J.
Miller, J.