Court Opinion

ID: 4034173
Source: CourtListenerOpinion
Date Created: 2016-09-15 23:03:48.255692+00
Date Added: 2024-06-11T14:09:08.731270
License: Public Domain

Filed 9/15/16 Minhall, Inc. v. Christensen CA1/5
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION FIVE

MINHALL, INC.,
          Plaintiff and Appellant,
                                                                     A145669
v.
RICHARD A. CHRISTENSEN et al.,                                       (San Francisco County
                                                                     Super. Ct. No. CGC-13-535245)
          Defendants and Respondents.

          Plaintiff and appellant Minhall, Inc. appeals from the judgment entered after the
trial court granted summary judgment to defendants and respondents Richard A.
Christensen and Bacca Da Silva Couture, Inc. (BDS). The grant of summary judgment
was based on issues sanctions awarded by the court after Minhall failed to comply with
an order to produce its principal, Dr. Jimmy Wong (Dr. Wong), for a deposition. We
affirm.
                                                  BACKGROUND
          In April 2008, BDS leased commercial retail space on Sutter Street in San
Francisco from Minhall (the Lease). The specified Lease term was May 1, 2008 through
January 31, 2014. The Lease provided that BDS would pay $4,250 in monthly rent for
the first nine months. Beginning February 1, 2009, the rent was to double to $8,500, and
the rent was subject to annual increases for the rest of the term. BDS’s President, Mr.
Christensen, signed a personal guaranty of BDS’s obligations under the Lease through

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January 31, 2013 (the Guaranty). Mr. Christensen had the option of terminating the
Guaranty on January 31, 2011 if BDS paid an increased security deposit by that date.
       BDS was in the business of selling luxury apparel. The parties agree an economic
recession occurred after the Lease was signed; Mr. Christensen averred BDS’s business
was seriously impacted and BDS was unable to pay the rent increases in the Lease.
       Dr. Wong is Minhall’s sole director and officer, and the principal owner and
decision-maker for the company. David Blatteis is Minhall’s property manager and was
respondents’ point of contact for Minhall. Mr. Christensen told Mr. Blatteis that BDS
could not afford to pay more than $4,250 per month. Mr. Christensen averred he
repeatedly told Mr. Blatteis that if Minhall required them to pay more, BDS would
declare bankruptcy and vacate the premises. Mr. Christensen reminded Mr. Blatteis of
the large number of vacancies on Sutter Street. Mr. Christensen also averred that, if BDS
had been required to pay higher rent, he would have exercised his option to terminate the
Guaranty two years early. Mr. Blatteis told Dr. Wong some rental income would be
better for Minhall than none at all.
       BDS continued to offer payments of $4,250 per month to Minhall, increasing to
$4,750 per month in the final months of the tenancy. Mr. Christensen averred Minhall
accepted all of the rent payments without objection, as payments of the rent in full.
       Mr. Christensen averred that, in September or October 2013, Minhall demanded
for the first time that BDS pay the difference between the rent rates in the Lease and the
amounts actually paid during the course of the tenancy. In November 2013, Minhall filed
the present action against BDS and Mr. Christensen, under the Lease and Guaranty.
Under the Lease, Minhall sought damages of $308,921, plus prejudgment interest; under
the Guaranty, Minhall sought damages of $249,989, plus prejudgment interest. Minhall
also sought its attorney fees and costs.
       BDS filed for bankruptcy in May 2014. On July 15, Minhall filed a motion for
summary judgment against Mr. Christensen. On July 24, 2014, respondents noticed the
deposition of Minhall itself. They set the deposition for August 20 in San Francisco and
requested that Minhall designate and produce those persons most qualified to testify as to

                                             2
20 matters. Minhall designated Mr. Blatteis as the person most qualified to testify on its
behalf as to most of the matters. As to five of the matters, Minhall designated Dr. Wong
as the person most qualified to testify on its behalf, although it objected on the ground
that the matters were irrelevant to the lawsuit. Minhall produced Mr. Blatteis to be
deposed on August 21, but failed to produce Dr. Wong. Mr. Blatteis lacked knowledge
as to certain corporate matters, expressed concern he could not testify as to Dr. Wong’s
knowledge, and said Dr. Wong was the person who actually had knowledge about
various matters.
       On September 5, 2014, respondents moved to compel Minhall to produce Dr.
Wong for deposition. Respondents argued deposing Dr. Wong was reasonably likely to
result in testimony concerning, among other things, what Minhall did in relation to the
acceptance of reduced rents from BDS and Minhall’s knowledge of the economic
circumstances underlying the requested rent reductions.
       On September 16, 2014, the trial court, acting through a judge pro tem, granted the
motion to compel following a hearing on the motion. Minhall was ordered to produce
Dr. Wong to testify on its behalf by September 26, and to pay $1,000 in monetary
sanctions to respondents. The order directed that Dr. Wong was to testify as Minhall’s
person most knowledgeable as to nine of the twenty topics specified in the notice of
deposition.
       Respondents’ counsel averred that, following entry of the order, he attempted to
schedule Dr. Wong’s deposition, but Minhall did not cooperate. On September 22, 2014,
Minhall’s counsel sent respondents’ counsel an e-mail indicating that Dr. Wong was not
going to appear to be deposed by the September 26 deadline.1
       On September 26, 2014, respondents moved for terminating or issues sanctions
against Minhall. With respect to issues sanctions, respondents sought to prohibit Minhall

1
  Minhall contends its failure to produce Dr. Wong was due to miscommunication
between Wong and Minhall’s then counsel, Stephen Wong, citing former counsel’s
declaration filed in support of Minhall’s Code of Civil Procedure section 473 motion for
relief from the judgment. As explained later in this decision, the declaration is not part of
the record that can be considered on appeal.

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from contesting several facts relevant to their affirmative defenses, including, for
example, that Minhall agreed to reduce BDS’s rents and accepted BDS’s rents as
payments in full. Minhall opposed the motion on the grounds that Dr. Wong’s testimony
was not important to the issues in the case and respondents had obtained the same
information sought from Dr. Wong through other discovery, including by deposing Mr.
Blatteis. Those were essentially the same arguments Minhall advanced in unsuccessfully
opposing respondents’ September 5 motion to compel. Further, Minhall “re-designated”
Mr. Blatteis as the person most qualified to testify on its behalf as to all matters specified
in respondents’ deposition notice and stated that Dr. Wong would not be a witness at
trial. Minhall did not offer any excuse for its failure to produce Dr. Wong for deposition
and did not state it was willing to produce him in the future. The opposition indicated Dr.
Wong’s failure to appear was willful, arguing “[i]t is understandable why Dr. Wong is
reluctant to commit to coming to San Francisco.” Minhall argued terminating sanctions
were inappropriate, but did not address respondents’ request for issue sanctions.
         On October 23, 2014, the trial court (again through a judge pro tem) granted the
motion for sanctions.2 The court imposed issue sanctions, deeming the following facts
“conclusively established for all purposes in this lawsuit”: (1) “Plaintiff agreed to reduce
BDS’s monthly rents under the Lease from February 1, 2009 through the end of BDS’s
tenancy”; (2) “Plaintiff accepted all monthly rents offered by BDS as payments in full”;
(3) “Plaintiff did not object to any of BDS’s tenders of rents”; (4) “Plaintiff did not
request that BDS ever pay the increased rents scheduled in the Lease”; (5) “Plaintiff was
aware of BDS’s financial status and provided with BDS’s financial statements”; (6)
“Plaintiff was advised that BDS would declare bankruptcy and vacate the premises if it
were required to pay rents at the rates stated in the Lease”; and (7) “Plaintiff knew that
the Guaranty contained an option to terminate it two years early.” The court also
imposed monetary sanctions in the amount of $2,500.

2
    The order was signed October 23, 2014, and stamped as filed October 27.

                                              4
       The trial court denied Minhall’s motion for summary judgment, and respondents
filed their own motion for summary judgment in reliance on the facts established in the
sanctions order. On April 21, 2015, the court entered an order granting respondents’
motion. Among other things, the order stated, “The facts conclusively established by the
October 23, 2014 discovery order show [respondents] are entitled to summary judgment
as a matter of law.” The court entered judgment in respondents’ favor on May 5, 2015.
       On June 30, 2015, Minhall filed a motion for relief from the judgment under Code
of Civil Procedure, section 473, subdivision (b),3 noticed for hearing on July 30.4 The
motion was made on the grounds that the sanctions order and judgment were entered due
to the mistake, inadvertence, surprise, or neglect of Minhall or its prior counsel. The
motion was supported by a declaration from Minhall’s prior counsel outlining, among
other things, difficulties he had experienced in communicating with Dr. Wong. Minhall
filed its notice of appeal on July 9, and the motion for relief was taken off calendar.
                                       DISCUSSION
       Minhall contends the trial court erred in imposing issue sanctions due to Minhall’s
failure to produce Dr. Wong for deposition. “The trial court has broad discretion in
selecting discovery sanctions, subject to reversal only for abuse.” (Doppes v. Bentley
Motors, Inc. (2009) 174 Cal. App. 4th 967, 992 (Doppes).) Minhall has not shown the trial
court abused its discretion.
       Section 2025.450, subdivision (h) authorizes a trial court to impose an issue,
evidence, or terminating sanction under section 2023.030 if a party “fails to obey an order
compelling attendance, testimony, and production.” As to issue sanctions, subdivision
(b) of section 2023.030 provides: “The court may impose an issue sanction ordering that
designated facts shall be taken as established in the action in accordance with the claim of
the party adversely affected by the misuse of the discovery process. The court may also

3
 All undesignated statutory references are to the Code of Civil Procedure.
4
 The trial court denied Minhall’s ex parte application for an order shortening time and
setting the motion for hearing prior to the time that Minhall would need to file its notice
of appeal.

                                              5
impose an issue sanction by an order prohibiting any party engaging in the misuse of the
discovery process from supporting or opposing designated claims or defenses.”
       “The discovery statutes evince an incremental approach to discovery sanctions,
starting with monetary sanctions and ending with the ultimate sanction of termination.
‘Discovery sanctions “should be appropriate to the dereliction, and should not exceed that
which is required to protect the interests of the party entitled to but denied discovery.” ’ ”
(Doppes, supra, 174 Cal.App.4th at p. 992.) “The trial court should consider both the
conduct being sanctioned and its effect on the party seeking discovery and, in choosing a
sanction, should ‘ “attempt[] to tailor the sanction to the harm caused by the withheld
discovery.” ’ [Citation.] The trial court cannot impose sanctions for misuse of the
discovery process as a punishment.” (Ibid.) “In exercising its broad discretion to
sanction discovery abuses, the trial court may impose any sanction authorized by statute
that will enable the party seeking discovery to obtain the objects of the discovery sought.
[Citation.] ‘A discovery sanction may not place the party seeking discovery in a better
position than it would have been in if the desired discovery had been provided and had
been favorable.’ ” (In re Marriage of Chakko (2004) 115 Cal. App. 4th 104, 109.)
       At the outset, we reject Minhall’s attempt to rely on the declaration of its prior
counsel submitted in support of its section 473, subdivision (b) motion for relief from the
judgment. This court’s “appellate jurisdiction” is “the power to review and correct error
in trial court orders and judgments.” (Leone v. Medical Board (2000) 22 Cal. 4th 660,
668.) Thus, “ ‘[i]t is an elementary rule of appellate procedure that, when reviewing the
correctness of a trial court’s judgment, an appellate court will consider only matters
which were part of the record at the time the judgment was entered. [Citation.] This rule
preserves an orderly system of litigation by preventing litigants from circumventing the
normal sequence of litigation.’ ” (Haworth v. Superior Court (2010) 50 Cal. 4th 372, 379,
fn. 2.) As respondents point out, “the trial court cannot have made an erroneous decision
based on evidence and argument that Minhall never submitted to the court for
consideration.” Accordingly, in determining whether the trial court erred in imposing

                                              6
issue sanctions we give no consideration to the declaration of prior counsel submitted in
support of Minhall’s post-judgment motion for relief.
       Minhall argues the trial court’s issues sanctions are excessive because it did not
engage in willful discovery misconduct. However, in so arguing, Minhall relies on the
declaration of its prior counsel submitted in support of its motion for relief from the
judgment, which cannot be considered on appeal. Based on the information before the
court at the time of the sanctions order, it was reasonable for the court to conclude
Minhall’s failure to produce Dr. Wong was willful. Minhall was aware of the order
compelling the production of Dr. Wong to be deposed, nothing before the court suggested
Minhall was unable to comply, and Minhall did fail to comply. That was willful
misconduct justifying the imposition of appropriate sanctions. (Deyo v. Kilbourne (1978)
84 Cal. App. 3d 771, 787–788 [“A willful failure does not necessarily include a wrongful
intention to disobey discovery rules. A conscious or intentional failure to act, as
distinguished from accidental or involuntary noncompliance, is sufficient to invoke a
penalty.”].)
       Minhall also contends the trial court abused its discretion in imposing issue
sanctions because respondents “obtained full and complete discovery on the relevant
issues in the case and had a fair opportunity to defend themselves on the merits.”
Minhall emphasizes that Mr. Blatteis was the only person who communicated with
respondents regarding the Lease; Mr. Blatteis had been deposed as to his communications
with respondents and Dr. Wong about the Lease; and Minhall had produced all related
documents. Minhall further argues that a number of the matters regarding which Dr.
Wong was to be deposed are irrelevant to the issues in the case, such as Minhall’s
corporate structure, owners, management personnel, minutes, and board resolutions.
Minhall was also directed to produce Dr. Wong to be deposed regarding the rent due
under the Lease and the modification of the Lease, as well as his knowledge of the
economic circumstances facing BDS, but Minhall argues any relevant knowledge Dr.
Wong possessed came from information provided by Mr. Blatteis, which was already
provided to respondents.

                                              7
       Minhall’s argument misses the mark. It is undisputed that Dr. Wong was the
ultimate decision-maker regarding all matters relating to the Lease, including any rent
reductions.5 Accordingly, it was proper for respondents to seek to obtain Dr. Wong’s
sworn testimony regarding his understanding of the Lease, the nature of respondents’
payments, and whether Minhall approved a reduction in rent or merely a postponement in
rent collection. Moreover, respondents could properly seek to ask Dr. Wong about his
knowledge of BDS’s financial condition and the likelihood the leased property would
have remained vacant if BDS had ceased operations, as well as the consequences of a
decision by Mr. Christensen to terminate the Guaranty early. It was also proper for
respondents to seek to question Dr. Wong about his communications with Mr. Blatteis, in
order to ascertain the bases for some of Dr. Wong’s assertions to Mr. Blatteis and to
determine whether there were differing recollections on any material issues.
       Mr. Blatteis’s deposition testimony made it clear that Dr. Wong was the person
most knowledgeable about whether Minhall had actually approved a rent reduction and
other related issues. During his deposition on August 21, 2014, Mr. Blatteis was asked
whether he understood he had been designated as Minhall’s person most knowledgeable,
and Mr. Blatteis said he was “concerned, because I have certain responsibilities and
powers under my property management agreement . . . . I do not know specifically, or I
can’t say what is in the mind of the principal stockholder of the corporation, Minhall.
And I don’t know how he feels or wants to express himself about issues that are going to
be discussed here today.” Mr. Blatteis testified he was unaware what corporate
procedures would be required to approve a rent reduction or modification of a lease or
whether any such procedures were followed with respect to BDS’s rent or the Lease. He

5
  It its opposition to the September 2014 motion to compel, Minhall asserted that Dr.
Wong “makes all the business decisions for Minhall in connection with the operation of”
the property at issue “and directs Mr. Blatteis to carry them out.”

                                             8
testified he personally thought that the past due rent would be forgiven but Dr. Wong
made it clear to him in October 2013 that was not the case.6
       Minhall’s knowledge and conduct at the corporate level are relevant to
respondents’ affirmative defenses that Minhall waived any objections to the amounts
respondents paid, that Minhall is equitably estopped from seeking back rents from
respondents, and that the parties orally modified the Lease. When Minhall failed to
comply with the trial court’s order to produce Dr. Wong to be deposed, the trial court
properly awarded issue sanctions that put respondents in the position they would have
been had the deposition testimony “been entirely favorable.” (Sauer v. Superior Court
(1987) 195 Cal. App. 3d 213, 229; see also In re Marriage of Chakko, supra, 115
Cal.App.4th at p. 109.) Because respondents sought to use Dr. Wong’s testimony to
support their affirmative defenses, it would not have been an effective sanction to, as
Minhall suggests, prohibit Minhall from presenting Dr. Wong as a witness at trial.
(Miranda v. 21st Century Ins. Co. (2004) 117 Cal. App. 4th 913, 929 [“An evidence
sanction is not effective where the party withholding the evidence is not the party who
wishes to use it.”].)
       In its reply brief, Minhall disputes that Dr. Wong’s testimony, had it been
favorable to respondents, could have provided support for the affirmative defenses. It
asserts, “Dr. Wong’s intention either to accept, or not to accept, the reduced rental as full
payment, or his motives for doing so, are immaterial to their defenses under the

6
  Respondents submitted in opposition to Minhall’s motion for summary judgment an
October 2013 e-mail exchange between Dr. Wong and Mr. Blatteis obtained in discovery.
In the exchange, Dr. Wong states, “You have always said and implied and understand it
is not a actual lowering of rent and has collected them on our behalf based on the fact that
he guaranteed to pay back the unpaid amount.” Mr. Blatteis responds, “I do not
remember at all saying/implying that Richard Christiansen would always make up the
difference.[¶] I am sorry if there was this misunderstanding between you and me.[¶] I
had assumed that . . . you were accepting the payments that he was making, and not going
to be asking for more....maybe my error.[¶] I know that Christensen assumed he would
not be asked for more.” Respondents could have asked Dr. Wong about this exchange in
a deposition, which potentially could have resulted in a concession from Dr. Wong that
he had never before told Mr. Blatteis that Minhall expected to collect the rent shortfall.

                                              9
circumstances because it is undisputed that Dr. Wong had no communications
whatsoever with Respondents regarding the lease.” Minhall cites no authority in support
of its apparent contention that Minhall’s decision-maker’s intentions and understandings
are wholly irrelevant to respondents’ affirmative defenses of waiver, estoppel, and
modification of the Lease. And, although Minhall asserts that Dr. Wong would have
testified contrary to respondents’ position, Minhall has not shown there was no
possibility that, under oath, Dr. Wong would have admitted the company agreed to
reduce BDS’s monthly rents and accepted BDS’s rent as payments in full.
       Minhall cites various pieces of evidence it argues shows that it did not accept
BDS’s tenders of rent as payments in full and that it requested BDS pay the back rent
due. That evidence did not preclude the trial court from imposing issue sanctions
establishing to the contrary. Issue sanctions “may be proper even when inconsistent
evidence is available . . . because the sanctions ‘effectively remov[e] from the jury’s
consideration evidence favorable to the offending party’s position, or . . . deem[] issues in
favor of the aggrieved party even though the offending party has strong evidence to the
contrary. Such is the natural consequence of serious discovery violations.’ [Citation.]”
(NewLife Sciences, LLC v. Weinstock (2011) 197 Cal. App. 4th 676, 687.)
       The cases Minhall cites where a trial court was held to have abused its discretion
are distinguishable. In Thomas v. Luong (1986) 187 Cal. App. 3d 76, the Court of Appeal
reversed a trial court’s order entering a defendant’s default due to discovery violations.
There, however, the defendant was missing and his counsel offered to stipulate to liability
before entry of the sanctions order. (Id. at pp. 81–82.) In Brown v. Presley of So.
California (1989) 213 Cal. App. 3d 612, the trial court dismissed the plaintiff’s action after
she failed to appear at a deposition. (Id. at p. 615.) The plaintiff filed a section 473
motion for relief, attaching her attorney’s declaration explaining his failure to file a
written opposition to the sanctions motion, his absence at the hearing on sanctions, and
that the plaintiff was available and willing to be deposed. (Id. at pp. 615–620.) Based on
those facts, the Court of Appeal reversed, concluding “the court’s use of the ultimate
sanction of dismissal was excessive.” (Id. at p. 620.) In Crummer v. Beeler (1960) 185

                                              10
Cal. App. 2d 851, the appellant challenged denial of his motion for relief from a default
judgment, entered as a discovery sanction. The Court of Appeal reversed because the
sanction was too “drastic” where the record, including a declaration submitted in support
of the post-judgment motion, demonstrated the defendant had always been willing to
appear for a deposition and the only issue was whether the deposition should be delayed
to accommodate the defendant’s travel schedule. (Id. at pp. 853–854, 860.)
       In the present case, in response to the sanctions motion Minhall offered no
explanation for its failure to produce Dr. Wong, provided no assurance he would be
produced in the future, and proposed no adequate alternative to the issue sanctions.
Unlike Brown and Crummer, this is not an appeal from denial of a section 473 motion for
relief and our review does not involve consideration of the declaration submitted by
Minhall in support of its motion for relief that was taken off calendar. Moreover, the trial
court here imposed issue sanctions rather than terminating sanctions. Although the issue
sanctions had the effect of requiring a grant of summary judgment in respondents’ favor,
Minhall has not, as explained previously, shown the issue sanctions were an inappropriate
sanction for the failure to produce Dr. Wong.7
       Because Minhall has not demonstrated the trial court abused its discretion in
granting the motion for sanctions, we will affirm the judgment. We decline respondents’
passing request that this court “direct Minhall not to present or advocate any further or
renewed motion purporting to affect the affirmed judgment upon issuance of the
remittitur,” because that issue was not briefed on appeal.

7
  Minhall also cites several cases where terminating sanctions and entries of default
judgments were upheld and asserts they “involved significantly more egregious discovery
conduct than that presented here.” However, here the trial court did not enter terminating
sanctions and cases regarding the showing required to do so are inapposite. Moreover,
that published cases upholding terminating sanctions may have involved more egregious
conduct than that at issue in the present case does not show the trial court abused its
discretion. We also reject Minhall’s contentions that the record before the trial court
showed the deposition of Dr. Wong was being pursued for an improper purpose and that
the trial court’s issue sanctions were a violation of Minhall’s constitutional due process
rights.

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                             DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondents.

                                   12
                   SIMONS, J.

We concur.

JONES, P.J.

NEEDHAM, J.

(A145669)

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