Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment and an order of the Superior Court of Los Angeles County, Morris Bruce Jones, Judge. Judgment and order affirmed; motion for sanctions denied. Los Angeles County Super. Ct. No. BC336429
Gary L. Holmes and Meir J. Westreich for Plaintiffs and Appellants.
Meir J. Westreich for Objector and Appellant.
Steckbauer Weinhart Jaffe, Dawn M. Coulson and Susan M. Freedman for Defendants and Respondents.
VOGEL, Acting P.J.
This is the third lawsuit by a former general partner of two real estate investment partnerships against one of the limited partners and others. Because the only issue raised in the current action was conclusively decided against the former general partner in the first action, the trial court resolved this case by sustaining a demurrer without leave to amend and imposing sanctions for a frivolous lawsuit against the former general partner and his lawyer, both of whom appeal. We affirm the judgment of dismissal and the sanction award, but deny the respondents’ motion for sanctions against the former general partner and its primary lawyer for a frivolous appeal.
FACTS
A.
In 1971, Shelter Management Corporation (as general partner) and seven investors (as limited partners) formed Project 10 Limited to acquire and operate a low-income 76-unit apartment complex in the City of Delano. The Delano property is owned by Delano Gardens, a general partnership whose original partners were Shelter Management and Project 10.
At about the same time, Shelter Management (as general partner) and six investors (as limited partners) formed Project 11 Limited to acquire and operate a low-income 28-unit apartment complex on Lemoli Avenue in the City of Hawthorne. The Lemoli property is owned by Lemoli Apartments, a general partnership whose original partners were Shelter Management and Project 11.
Project 10 and Project 11 are each owned entirely by their limited partners who provided all the capital for the projects, but Shelter Management has a contingent 10 percent interest in the proceeds of any sale or refinance (with the remaining 90 percent of such proceeds allocable among the limited partners). Neither Shelter Management nor its controlling shareholder (Donald Hollingshead, who owns 99 percent of Shelter Management’s shares) contributed any capital to Project 10 or Project 11, and neither Shelter Management nor Hollingshead has or had an equity interest in either limited partnership.
B.
Shelter Management’s corporate powers were suspended in 1979 for nonpayment of taxes so that, by operation of law, neither Project 10 nor Project 11 had a general partner. (Corp. Code, §§ 15501, 15502 [a limited partnership must have at least one general partner].) Without obtaining the limited partners’ consent and after concealing Shelter Management’s incapacity, Hollingshead simply took over as the general partner of Project 10 and Project 11 and controlled the operations of Delano Gardens and the Lemoli Apartments. By the 1990’s, Hollingshead had unilaterally conferred upon himself equity interests in both limited partnerships, modified the partnership documents, and assumed sole management and control of the properties.
In 1998, Hollingshead and his former lawyer (Ronald Gregg) formed a nonprofit corporation, National Shelter Foundation (NSF), which then purportedly acquired a partnership interest in Delano Gardens. This was supposed to create a tax advantage for Delano Gardens, but none was obtained because NSF never attained nonprofit status. Around the same time, Hollingshead formed Proland Management Company (a limited liability entity controlled by Hollingshead and Gregg), and Proland thereafter claimed it was the successor in interest to the shares of two deceased partners in Project 10 and Project 11. Proland entered several contracts with the partnerships.
C.
The First Action . In 1999, Arvind Doshi (and other limited partners in Project 10 and Project 11 who are included in our references to Doshi) sued Hollingshead for declaratory relief, seeking declarations that Hollingshead was not and never had been the general partner of either limited partnership or a partner in the Delano Gardens or Lemoli Apartments general partnerships, and that Hollingshead had no equity interest in any of the entities. Doshi also sought a declaration that, 20 years earlier, both limited partnerships had been dissolved by operation of law upon Shelter Management’s incapacity and the limited partners’ failure to select new general partners.
There were two separate lawsuits but that distinction is no longer relevant and we thus treat them as one. Because Shelter Management had no legal status, it was not named as a party in either suit.
Hollingshead, for himself and purportedly on behalf of the limited partnerships, cross-complained against Doshi for declaratory relief, asking for declarations that the limited partnerships had not been dissolved, that he (not Shelter Management) was the general partner of the limited partnerships and owned an equity interest in both of them, and that Doshi was not a limited partner in either Project 10 or Project 11. NSF and Proland joined Hollingshead as cross-complainants.
The case was tried to the court (Hon. Gregory O’Brien, Jr.), which in July 2001 rendered judgment in favor of Doshi and against Hollingshead, NSF and Proland. Among other things, the trial court found that Hollingshead was not and never had been the general partner in either limited partnership or a partner in either general partnership; that he did not own an equity interest in any of the entities, and only had a contingent 10 percent interest in the limited partnerships (the contingency being sale or refinance); that neither NSF nor Proland had any interest in any of the entities; that certain agreements executed by Hollingshead on behalf of the partnerships were void, and that others made on behalf of Delano Gardens and the Lemoli Apartments were voidable; that Shelter Management had been legally incapacitated since 1979; and that the limited partners of Project 10 and Project 11 were authorized to reform the partnerships and designate new general partners.
Three days after the judgment was entered, by duly executed written consents, three of Project 10’s six limited partners owning a majority interest in Project 10 dissolved the old entity and reformed it as a newly constituted limited partnership with Doshi as the general partner. The same day, two of Project 11’s limited partners owning a majority interest in Project 11 did the same with regard to Project 11. As authorized by the judgment, Proland’s management contracts were voided and Doshi asked Proland and Hollingshead to turn over the partnerships’ records. They did not comply.
Instead, on July 18, 2001 (eight days after the judgment was entered), Shelter Management revived its corporate powers. Two days after that, it filed two motions, one to intervene, the other to vacate the judgment, both on the ground that its corporate status had been revived. According to Shelter Management, it had “resumed” its place as general partner of the limited partnerships. On August 30, the trial court granted Shelter Management’s motion to intervene and acknowledged its revived corporate status, then denied its motion to vacate the judgment on the ground that the “revival of Shelter [Management] ha[d] no impact on the judgment.” In the same minute order, the trial court granted Doshi’s request to correct the judgment to provide that all contracts between Proland and the limited partnerships were voidable (the judgment had erroneously referred to contracts between the limited partnerships and the general partnerships). A formal order confirming the nunc pro tunc correction to the judgment was lodged but apparently never signed or entered.
Hollingshead, Shelter Management and Proland appealed and lost, with Division Two of our court affirming the judgment in its entirety. (Doshi v. Hollingshead (Jan. 7, 2003, B152972) [nonpub. opn.].) Among other things, the opinion confirms that Shelter Management’s suspension left it legally incapacitated which, under the terms of Project 10’s and Project 11’s partnership agreements, dissolved the limited partnerships. (Id., typed opn. at pp. 10-11.)
D.
When Hollingsworth and Shelter Management persisted in their refusal to relinquish control of Delano Gardens and the Lemoli Apartments, Doshi applied to the trial court for the appointment of a receiver to manage the properties. In August 2003, Shelter Management (represented by Gary L. Holmes) opposed the receivership on the ground that Shelter Management’s corporate powers had been revived, alleging that it was then “functioning as [the] general partner” of the limited partnerships and -- ignoring Division Two’s affirmation of the finding that the limited partnerships had been dissolved by operation of law as a result of Shelter Management’s incapacity -- insisting that the limited partners had not formed new limited partnerships as contemplated by the judgment but instead had “merely ‘reformed’ the partnerships.” Shelter Management did not explain its apparent belief that this mattered.
On August 18, after a hearing, the trial court (Hon. David P. Yaffe) rejected Shelter Management’s arguments, granted Doshi’s application, appointed a receiver to manage both apartment complexes, and ordered Hollingshead, Proland, NSF, and Shelter Management to turn over the properties and the books and records to the receiver. Shelter Management did not appeal from the August 18 post-judgment order.
E.
In late 2003 or early 2004, Haven for Affordable Housing, Inc. became the interim general partner of both Project 10 and Project 11. In the spring of 2004, Sun Pacific Realty Investors, Inc. replaced Haven as the general partner of both limited partnerships -- and Doshi (supported by the receiver) then asked the trial court for an order authorizing the receiver to turn over the management of the apartment complexes to Sun Pacific. Shelter Management (represented by Holmes) opposed the application, contending once again that it was the general partner of both limited partnerships and contending the limited partners’ written consents to form the new limited partnerships were not valid.
This is the same issue raised in the action before us on this appeal. In the first action, Shelter Management put it this way: “Rather than following the statute to properly ‘form a new partnership’ in accordance with the Judgment, [Doshi] involved a few, but not all, of the limited partners of Project 10 and Project 11 in executing a document entitled ‘Written Consent in Lieu of a Meeting of the Limited Partners for the Purpose of Electing Arvind Doshi as General Partner.’ Only three of the eight limited partners of Project 10 as listed in the Judgment signed such ‘written consents, ’ as did only two of the six limited partners of Project 11.” This is the identical issue raised in the complaint in the third action. (See fn. 7, post.)
Following a hearing held in June 2004, the trial court (Judge Yaffe) rejected Shelter Management’s challenge to the written consents, granted Doshi’s application, and ordered the receiver to transfer control of the properties to Sun Pacific, finding that Shelter Management’s position was “without merit.” As the trial court put it at that time, Shelter Management opposed “the motion by criticizing the procedures used by the limited partners to form a new partnership and contend[ed] that the procedures employed were not sufficient to actually create a new partnership. The contentions made by [Shelter Management] are without merit. No authority is cited for the assumption that the procedural defects alleged prevent a new partnership from being formed.” Shelter Management did not appeal from the June 2004 post-judgment order.
In September, Shelter Management (represented by Holmes) filed a motion to vacate the June 2004 order directing the receiver to turn over the properties to Sun Pacific, citing Code of Civil Procedure section 473 and claiming the judgment had not been corrected nunc pro tunc to reflect that the contracts entered by Shelter Management were voidable, and that Shelter Management was still in charge. Shelter Management asked the court to give it control of the properties. The trial court denied the motion, describing it as nothing more than a disguised and untimely motion for reconsideration. Shelter Management did not appeal from the October 2004 post-judgment order.
Undesignated section references are to the Code of Civil Procedure.
F.
The Second Action . Shelter Management (represented by Holmes) sued Doshi, Sun Pacific, and Haven in November 2004, seeking declaratory relief on an allegation that the nunc pro tunc amendment regarding the voidable contracts was invalid because a formal order was never entered (and that the minute order had no effect). That’s all that was alleged. Doshi, Haven, and Sun Pacific demurred, contending there was no actual controversy because the issue had been resolved against Shelter Management in the first action.
The trial court (Hon. John Shepard Wiley, Jr.) sustained the demurrer without leave to amend and on March 2, 2005, entered a judgment of dismissal. Shelter Management did not appeal from the judgment.
G.
The Third Action . In July 2005, Shelter Management (still represented by Holmes) and purporting to act on behalf of Project 10 and Project 11 as well as for itself, again sued Haven, Sun Pacific, and Doshi for declaratory relief, once again challenging the validity of the written consents executed by the limited partners to reform their partnerships. Shelter Management alleged that “[n]othing in the Judgment removed [it] as general partner of Project 10 and Project 11, ” that it had “resumed its role as general partner” upon its July 2001 revivor, and that the written consents were void and defective because (although they were signed by partners constituting the majority interests in the partnerships) they were not signed by all of the limited partners. Shelter Management did not claim that it had to consent to anything.
Doshi, Haven, and Sun Pacific demurred, contending the validity of the written consents had been determined in the first action. In November, the trial court (Hon. Morris B. Jones) sustained the demurrer without leave to amend. Doshi, Haven, and Sun Pacific then moved for sanctions (§ 128.7), asking for $25,260.20 payable jointly and severally by Shelter Management and Holmes on the ground that the complaint in the third action was filed for the improper purpose of harassing Doshi and interfering with the operation of the partnerships and their properties. In December, the trial court granted the motion for sanctions, finding that Doshi had complied with the procedural requirements of section 128.7, and ordering Shelter Management and Holmes, jointly and severally, to pay $15,260.20 in sanctions to Doshi.
Shelter Management appeals from the judgment and the sanction order, and Holmes appeals from the sanction order.
DISCUSSION
I. Shelter Management’s Appeal
In related arguments, Shelter Management (represented by Holmes) contends (A) it was entitled to a decision on the merits on the collateral estoppel issue -- that is, that the issue should not have been decided on demurrer and that, in any event, (B) the current declaratory relief complaint is not barred by collateral estoppel because it addresses issues that occurred after entry of the judgment in the first action, and (C) each of those issues must be separately decided. None of these claims have merit.
On this appeal, our review of the issues of law is de novo (V.C. v. Los Angeles Unified School Dist. (2006) 139 Cal.App.4th 499, 506; Jenkins v. County of Riverside (2006) 138 Cal.App.4th 593, 618), but our review of the sanction order is governed by the abuse of discretion standard (Olson Partnership v. Gaylord Plating Lab, Inc. (1990) 226 Cal.App.3d 235, 240; Winick Corp. v. County Sanitation Dist. No. 2 (1986) 185 Cal.App.3d 1170, 1176).
A.
Although it is true, as Shelter Management contends, that a complaint for declaratory relief alleging facts sufficient to show an actual controversy regarding the parties’ legal rights entitles the plaintiff to a declaration of its rights whether favorable or not (Strozier v. Williams (1960) 187 Cal.App.2d 528, 531-532; Helmer v. Miller (1993) 19 Cal.App.4th 1565, 1569), that rule applies only where its factual predicate is met -- that is, where the facts establish the existence of an actual controversy. But where a complaint shows on its face and by reference to facts judicially noticed “that the entire controversy has been settled by a prior judgment, ” the dispute may be resolved by demurrer. (Bennett v. Hibernia Bank (1956) 47 Cal.2d 540, 549-550.)
B.
The issue raised by the complaint in this action -- the validity of the written consents -- was previously litigated in the first action and is barred by the doctrine of collateral estoppel -- which bars relitigation of an issue (1) that is identical to an issue (2) that was actually litigated and (3) necessarily decided in a prior proceeding; (4) the decision in the prior proceeding is final and on the merits; and (5) the party against whom preclusion is sought was a party or in privity to a party to the prior proceedings. (Pacific Lumber Co. v. State Water Resources Control Bd. (2006) 37 Cal.4th 921, 943.)
The “controversy” alleged in this action consists of Shelter Management’s challenge to the validity of the written consents executed by the limited partners after the judgment in the first action was entered. According to Shelter Management, the defect in the consents means the original limited partnerships still exist with Shelter Management as their general partner. This issue was determined against Shelter Management in the first action.
The validity of the written consents was first placed in issue by Shelter Management in August 2003 when -- after it intervened in the first action -- it opposed Doshi’s application for the appointment of a receiver on the ground that the limited partners had not validly formed new partnerships. The trial court rejected this contention in its August 2003 order appointing a receiver, and that order is final (no appeal having been taken from it). (Kittredge v. Stevens (1863) 23 Cal. 283 [where the issue is one of law, a trial court’s order on a motion is a final adjudication upon the subject matter]; Pacific Lumber Co. v. State Water Resources Control Bd., supra, 37 Cal.4th at p. 943.)
Although a factual issue decided by a motion to vacate a default in a prior action usually does not operate as a bar to a subsequent action in equity to vacate the same default judgment (Groves v. Peterson (2002) 100 Cal.App.4th 659), we are concerned here with an issue of law decided on the basis of undisputed facts (that is, whether the written consents were legally sufficient), not an issue of fact. Groves is expressly limited to its own facts. (Id. at p. 667; see also Rohrbasser v. Lederer (1986) 179 Cal.App.3d 290, 300 [another case where the prior decision turned on a question of fact, not law]; Schaefer/Karpf Productions v. CNA Ins. Companies (1998) 64 Cal.App.4th 1306, 1314 [same].) When the ruling on a motion is based on a pure question of law, it satisfies the rules of res judicata and collateral estoppel and bars subsequent relitigation of the same issue.
The validity of the written consents was again placed in issue by Shelter Management in May 2004 when it opposed Doshi’s motion for an order directing the receiver to turn over the properties to Sun Pacific. At that time, Shelter Management attacked the written consents signed by Doshi and the other limited partners on the identical grounds raised in the current action. In June 2004, the trial court rejected Shelter Management’s contention, and that order is final. (Kittredge v. Stevens, supra, 23 Cal. 283; Pacific Lumber Co. v. State Water Resources Control Bd., supra, 37 Cal.4th at p. 943.)
Accordingly, collateral estoppel bars relitigation of the validity of the written consents because, in the first action, the identical issue was actually litigated and necessarily decided against Shelter Management on the merits of the issue -- after Shelter Management intervened in that action -- by orders that are now final. (Pacific Lumber Co. v. State Water Resources Control Bd., supra, 37 Cal.4th at p. 943.)
The claim never had any merit. Judge Yaffe rejected it because no authority was cited, and there is no authority cited now to suggest Judge Yaffe was mistaken. And, as Judge Yaffe noted, Shelter Management did not explain (and still hasn’t) how any procedural defect prevented the limited partners from forming new limited partnerships that preserved all of the partners’ rights, as well as Shelter Management’s contingency interest.
C.
Moreover, the entire point of the current action -- the restoration of Shelter Management as the general partner of Project 10 and Project 11 -- has been litigated and resolved in the first action. The original partnerships no longer exist.
To avoid this conclusion, Shelter Management contends the purpose of the current action is to preserve its contingency interest in the proceeds of any sale or refinance of the limited partnerships. This “issue” is not raised in the complaint in this action, and the only issue that is raised is the validity of the reformation of the limited partnerships. Accordingly, there is nothing left to be decided. (Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292, 1299.)
The only cause of action in Shelter Management’s current complaint alleges that “[a]n actual controversy has arisen and now exists between plaintiffs and defendants concerning their respective rights and duties in that plaintiffs contend that the written consents of the limited partners are ineffective and invalid for any purpose, and in particular ineffective and invalid to carry into effect any provision of the Judgment or meet any conditions of the Judgment and therefore elect or otherwise install Mr. Doshi as general partner of either Project 10 or Project 11, did anything to permit any of the defendants to control or operate plaintiffs’ property and defendants dispute this contention and assert that the written consents were all valid to accomplish their purpose.” The prayer asks for “a declaration that the written consents . . . are ineffective and invalid for any purpose, that they fail to carry into effect any provision of the Judgment [in the first action] and do not elect or otherwise install Arvind Doshi as general partner for either Project 10 or Project 11.” That’s it. No other declaration is requested. For the claim made in the first action, see footnote 2, ante.
We summarily reject Shelter Management’s contention that leave to amend should have been granted -- because there is not so much as a hint about what it is that Shelter Management could possibly allege that would salvage this action. (City of Pomona v. Superior Court (2001) 89 Cal.App.4th 793, 800 [leave to amend is not appropriate where there is no possibility that an amendment would cure the complaint’s defects].) To the extent Shelter Management claims there are unresolved issues concerning its contingency interest in the limited partnerships, those interests will not ripen until the limited partnerships are sold or refinanced in such a manner as to produce proceeds to be distributed to the partners. (Pacific Legal Foundation v. California Coastal Com. (1982) 33 Cal.3d 158, 170-171 [declaratory relief not available where there is no “actual” controversy, i.e., where issue is not ripe].)
The demurrer was properly sustained without leave to amend.
II. The Appeals from the Sanctions Order
Shelter Management and Holmes (represented for this purpose by Meir J. Westreich) appeal from the trial court’s sanction order, challenging both its factual basis and the procedure leading to the order. These claims lack merit.
A.
At the conclusion of the hearing on Doshi’s motion for sanctions, the trial court granted the motion and explained its ruling this way: “[T]he court feels [Doshi, Haven, and Sun Pacific have] complied with the procedural requirements of [section] 128.7 . . . . This court sustained [the] demurrer without leave to amend on November 22 of this year stating that the complaint was barred by principles of res judicata and collateral estoppel. This objectively shows that the claim and legal contentions were not warranted by law and because these claims had already been litigated arguably twice. It seems that this action was brought primarily for an improper purpose. Thus, sanctions are warranted under [section] 128.7. Here, the court will award the costs in attorney’s fees of bringing this motion as well as the cost in attorney’s fees for bringing the demurrer [and will] award sanctions in the amount of $15,260.”
B.
Three types of papers warrant sanctions -- those that are factually frivolous, those that are legally frivolous, and those interposed for an improper purpose. (Guillemin v. Stein (2002) 104 Cal.App.4th 156, 167; Bolden v. Morgan Stanley & Co., Inc. (S.D.N.Y. 1991) 765 F.Supp. 830, 834 [a claim lacks legal merit and is frivolous if it is both baseless and made without reasonable inquiry]; Bolivar v. Pocklington (1st Cir. 1992) 975 F.2d 28, 33.) To be sanctionable, the conduct must be objectively unreasonable. (Guillemin v. Stein, supra, 104 Cal.App.4th at p. 167.) A finding that a complaint was filed for an improper purpose supports an award of sanctions against both the plaintiff and its lawyer. (Laborde v. Aronson (2001) 92 Cal.App.4th 459, 466.)
Because section 128.7 is modeled on rule 11 of the Federal Rules of Civil Procedure, our interpretation of section 128.7 is frequently based on federal cases interpreting rule 11. (Hart v. Avetoom (2002) 95 Cal.App.4th 410, 413.)
As relevant to the substantive issue, section 128.7 provides: “(a) Every pleading, petition, written notice of motion, or other similar paper shall be signed by at least one attorney of record . . . [¶] (b) By presenting to the court . . . a pleading . . . or other similar paper, an attorney . . . is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met: [¶] (1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. [¶] (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law. [¶] (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. . . . [¶] (c) If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. In determining what sanctions, if any, should be ordered, the court shall consider whether a party seeking sanctions has exercised due diligence. . . .”
Our rejection of Shelter Management’s challenges to the ruling on the demurrer compels the conclusion that this action was both legally and factually frivolous and filed for an improper purpose. Because the identical claims were resolved against Shelter Management in the first action (Part I, ante), it follows ineluctably that this effort to relitigate the same issue was baseless and pursued for an improper purpose.
Although we agree with Shelter Management and Holmes that the factual basis for the trial court’s improper purpose finding must be inferred from the act of filing their complaint (Townsend v. Holman Consulting Corp. (9th Cir. 1990) 914 F.2d 1136, 1140), we reject their effort to breathe life into their baseless complaint. As we have explained, there is no legal basis for the complaint, which is absolutely barred by established rules of res judicata and collateral estoppel, and no reasonable person (layman or lawyer) who knew or should have known about the orders made in the first action (and who had even a vague understanding of the rules of res judicata) would have filed the third action. The only issue in this action -- the validity of the limited partners’ written consents -- was heard and decided on the merits in the first action, rejected out of hand, and could not on any theory be relitigated again.
More to the point, neither Shelter Management nor Holmes offers a legitimate reason for this suit. There is none -- and we summarily reject their self-serving and conclusory assertion that “similarly situated objectively reasonable parties and attorneys would reasonably believe that they were entitled” to pursue this declaratory relief action. The only two issues even mentioned in the appellants’ briefs -- the validity of the written consents (the only issue raised by the complaint) and the purported concern about Shelter Management’s contingency interest is the sale or refinance proceeds of the limited partnerships -- were resolved in the first action. There is nothing left to determine.
C.
Shelter Management and Holmes contend the sanctions order is procedurally flawed. We disagree.
As relevant to the procedural issues, subdivision (c)(1) of section 128.7 (the safe harbor provision) provides that a motion for sanctions must be made separately from other motions and must describe the specific conduct alleged to violate subdivision (b) of section 128.7. Notice of the motion must be served as provided in section 1010, but not filed within the following 21 days (the safe harbor period), and it may then be filed only if the challenged pleading is not withdrawn or appropriately corrected. (See Levy v. Blum (2001) 92 Cal.App.4th 625, 637.) Shelter Management and Holmes contend the papers served on them before the hearing on the demurrer were insufficient because there was no notice of motion, only the motion itself. As did the trial court, we reject this argument.
On October 27, 2005, Doshi personally served both Shelter Management and Holmes with the motion for sanctions and all supporting documents, including a request for judicial notice of the documents from the first and second actions. Accordingly, the 21-day safe harbor period expired November 17, a date that came and went without any effort by Shelter Management or Holmes to withdraw the complaint. On November 22, the trial court sustained Doshi’s demurrer to the complaint. On November 28, Doshi filed (and again personally served) his motion for sanctions with a notice of hearing set for December 20.
Because the motion served was essentially identical to the motion filed, and because the motion was served at a time when Shelter Management and Holmes could have avoided sanctions by voluntarily dismissing their complaint (that is, it was served before the hearing on the demurrer), the motion was procedurally sound. (Cf. Hart v. Avetoom, supra, 95 Cal.App.4th at pp. 414-415.)
It is the service that must be made before a demurrer is sustained, not the filing. (See Malovec v. Hamrell (1999) 70 Cal.App.4th 434, 436-437.)
D.
At Doshi’s request, the sanction order provides that, “[b]efore Shelter [Management] can commence any other action against [Doshi, Sun Pacific, or Haven], Shelter [Management] must give written notice to [Doshi, Sun Pacific, and Haven], and each of them, and Shelter [Management] must obtain prior written authorization from [the trial] court.” Shelter Management’s contention, raised for the first time on this appeal, is that this is an impermissible restriction on its right of free speech. Aside from the fact that no relevant authority is cited to support this assertion (only cases interpreting the anti-SLAPP statute, section 425.16, e.g., Flatley v. Mauro (2006) 39 Cal.4th 299), the issue was waived by Shelter Management’s failure to raise it below (in opposition to the motion for sanctions, which asked for this order, or at the hearing on the motion for sanctions, or in a motion for reconsideration of the sanction order). (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 879.)
Shelter Management’s contention that the legitimacy of this litigation is shown by the fact that Doshi (through Sun Pacific) is presently suing Shelter Management is simply wrong. At Shelter Management’s request, we have judicially noticed a pending lawsuit, Sun Pacific Realty Investors, Inc. v. Shelter Management Corporation, Los Angeles Superior Court case number BC357256 -- in which Sun Pacific, as the limited partnerships’ general partner, seeks damages allegedly caused by Shelter Management’s malfeasance during the period it had control of the partnerships. The judicially noticed documents establish that one thing has nothing to do with the other.
The trial court’s sanction award is sound.
III. The Motion for Sanctions for a Frivolous Appeal
Doshi, Sun Pacific, and Haven contend that Shelter Management, Holmes, and Westreich (the lawyer representing Shelter Management and Holmes on the appeal from the sanction order) should be sanctioned for a frivolous appeal. Although it is a close issue, the motion is denied.
DISPOSITION
The judgment of dismissal and the sanction order are affirmed; the motion for appellate sanctions is denied. Respondents Arvind Doshi, Haven for Affordable Housing, Inc., and Sun Pacific Realty Investors, Inc. are awarded their costs of appeal.
We concur: ROTHSCHILD, J. JACKSON, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.