Court Opinion

ID: 9399333
Source: CourtListenerOpinion
Date Created: 2023-06-02 17:04:58.88484+00
Date Added: 2024-06-11T17:19:06.417255
License: Public Domain

Filed 6/2/23
               CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

               SECOND APPELLATE DISTRICT

                         DIVISION SIX

 CHAMPLIN/GEI WIND                      2d Civil No. B319563
 HOLDINGS, LLC,                     (Super. Ct. No. 20CV02270)
                                      (Santa Barbara County)
 Plaintiff, Cross-defendant and
 Respondent,

 v.

 KEITH AVERY,

 Defendant, Cross-complainant
 and Appellant.

       This litigation started as an ordinary claim of breach of
contract flowing from a business venture that went awry. We
hopefully put this matter to rest. But we must opine on the
duties of counsel as an officer of the court. We expect counsel to
know and follow basic law relating to civil procedure. That did
not happen here. We will impose sanctions for the filing of a
frivolous appeal from a discretionary trial court ruling. We
publish this opinion for several reasons, not the least of which is
a guidepost to the bar not to file a frivolous appeal. We ourselves
had occasion to warn attorneys concerning the abuse of discretion
standard on appeal twenty-five years ago. (Estate of Gilkison
(1998) 65 Cal.App.4th 1443 (Gilkison).) “‘Everything has been
said already; but as no one listens, we must always begin again.’”
(Overton v. Vita-Food Corp. (1949) 94 Cal.App.2d 367, 370.) We
borrow the phrase from our previous opinion: This appeal “was
‘dead on arrival’ at the appellate courthouse.” (Gilkison, supra,
at p. 1449.) This does not mean that we do not consider the
contentions of counsel. We do. But sometimes, the contentions
are frivolous in light of the record on appeal. That is the case
here.
        Respondent Champlin/GEI Wind Holdings, LLC and
appellant Keith Avery entered into a Development Services
Agreement (DSA) to develop a wind energy project in Hawaii.
Respondent terminated the DSA and sold the project before it
was finished. Appellant filed a mechanic’s lien against the
project in Hawaii. Respondent filed a complaint for breach of
contract against appellant in California and appellant filed a
cross-complaint. On a motion for summary judgment the trial
court ruled that no additional compensation was due to
appellant. It granted respondent summary judgment on the
cross-complaint and summary adjudication of its cause of action
for declaratory relief. Final judgment was entered one month
later. Thereafter, appellant filed a notice of appeal from the
order granting summary judgment, and not from the judgment
itself.
        Appellant contends, with no factual support in the record,
that the trial court erred because it should have granted leave to
amend the cross-complaint to allege a new and different breach of
the DSA and because disputed issues of fact exist. Respondent
contends the appeal must be dismissed because it was taken from

                                2
a non-appealable order. Alternatively, it contends the judgment
should be affirmed because appellant failed to demonstrate the
existence of disputed facts. We affirm the judgment and, as
indicated, we also impose sanctions for filing a frivolous appeal.
              FACTS AND PROCEDURAL HISTORY
      Appellant, acting through West Wind Works, LLC (3W) a
limited liability company of which he was the sole member, and
respondent entered into a Development Services Agreement
(DSA) to develop a wind energy project on Oahu, Hawaii.
Pursuant to the DSA and related agreements, appellant had a 5
percent interest in Champlin Hawaii, an entity formed to jointly
develop wind energy projects on Oahu. These agreements
provided that all distributions from Champlin Hawaii would be
made to respondent until respondent received a 15 percent
internal rate of return on its invested capital. Then, appellant’s
limited liability company, 3W, would participate in distributions.
Appellant was paid a monthly services fee, starting at $2,000 per
month, with a cap of $250,000.
      About two years after these agreements were made,
appellant assigned his 5 percent interest in Champlin Hawaii to
respondent. As a consequence of that assignment, appellant and
3W no longer held an ownership interest in Champlin Hawaii.
The parties also amended the DSA. The amendment provided for
an initial payment to appellant of $10,000, once certain permits
were issued for the project. Appellant was slated to receive
another $75,000 after the project executed a power provider
agreement (PPA) with the Hawaiian Electric Company (HECO)
and the PPA was approved by the Public Utilities Commission.
Finally, the amended DSA provided for a bonus to be paid to
appellant after the project achieved its commercial operation date

                                3
(COD) or was sold, and respondent achieved its 15 percent pre-
tax internal rate of return.
       Respondent terminated the DSA in March 2015, after
appellant stopped working on project-related matters and the
project missed many of its development milestone dates.
Respondent paid appellant the $2,000 services fee through the
termination date, as well as the first two bonuses provided for in
the amended DSA. In December 2018, respondent sold its
interest to a third party. Its net proceeds from the sale exceeded
$20 million, resulting in an actual internal rate of return of
8.60676 percent.
       In May 2020, appellant filed a mechanic’s lien in Hawaii,
alleging he was entitled to additional compensation under the
amended DSA. Respondent filed its complaint against appellant
in California. It alleged that appellant breached the DSA by,
among other things, failing to mediate before filing the
mechanic’s lien and ignoring the DSA’s choice of law and forum
selection provisions.1 Appellant’s cross-complaint alleges only
that respondent breached the DSA when it “sold the project . . .
without [appellant’s] knowledge or approval,” resulting “in the
termination of [appellant’s] compensation . . . .”
       Respondent moved for summary judgment or summary
adjudication on both its complaint and appellant’s cross-
complaint. Contrary to traditional and time-honored rules on

      1 Paragraph 12.9 of the DSA requires the parties to attempt
to informally resolve disputes and to engage in formal mediation
before commencing any litigation. Paragraph 12.4 requires the
DSA to be interpreted under Delaware law and any mediation or
litigation to occur in Santa Barbara County, where respondent
has its principal place of business.

                                 4
how to contest such a motion (see pp. 8-11), appellant did not file
a timely opposition or separate statement of disputed facts. On
the day before the hearing, appellant only filed an opposing brief
where he argued summary judgment on the cross-complaint
should be denied because respondent breached the DSA by not
paying appellant his capital account balance. At the hearing,
appellant’s counsel acknowledged that this breach was not
alleged in the cross-complaint. He informed the trial court,
“We’re basically asking to amend the wording of the cross-
complaint to conform with what our theory is and we’d like to
present that at trial.” This argument does not “carry the day” at
a law and motion hearing.
      The trial court denied the oral motion to amend the cross-
complaint. It granted judgment to respondent on the cross-
complaint, concluding the DSA did not require respondent to
obtain appellant’s approval before selling the project. It also
granted summary adjudication on respondent’s cause of action for
declaratory relief. The trial court ruled, as a matter of law, that
respondent’s obligation to pay a bonus to appellant “was
conditioned on [respondent’s] receiving” a 15 percent internal
rate of return on the project. Respondent did not receive that
rate of return and appellant therefore “is not entitled” to the
bonus “or any other compensation or payment” under the DSA.
                           DISCUSSION
      Appealable Order. Respondent contends the appeal must
be dismissed because it was taken from the non-appealable order
granting its motion for summary judgment, rather than from the
judgment itself. An order granting summary judgment is not an
appealable order. (Levy v. Skywalker Sound (2003) 108
Cal.App.4th 753, 761.) However, when the order is followed by a

                                5
judgment, we have discretion to deem the premature notice of
appeal to have been filed after the entry of judgment. (Mukthar
v. Latin American Security Service (2006) 139 Cal.App.4th 284,
288.) We exercise our discretion to do so here because judgment
was actually entered and respondent has not been misled to its
prejudice by the premature notice of appeal. (Mitchell v. Los
Robles Regional Medical Center (2021) 71 Cal.App.5th 291, 296,
fn. 2 (Mitchell); Boyer v. Jensen (2005) 129 Cal.App.4th 62, 69.)
       Denial of Leave to Amend the Cross-Complaint. Appellant
contends the trial court abused its discretion when it denied leave
to amend the cross-complaint to allege a different breach of the
DSA. He further contends the trial court erred because there is a
disputed issue of fact on the question whether appellant is
entitled to be paid for his capital investment in the project. We
are not persuaded.
       “The trial court must grant a motion for summary
judgment ‘if all the papers submitted show that there is no
triable issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.’ ([Code Civ. Proc.,]
§ 437c, subd. (c).)” (Mitchell, supra, 71 Cal.App.5th at p. 296.)
Whether a factual issue is material is determined by the
pleadings which “‘set the boundaries of the issues to be resolved
at summary judgment.’” (Conroy v. Regents of University of
California (2009) 45 Cal.4th 1244, 1250.) The moving party’s
burden is to negate the theories of liability alleged in the
operative pleading, not to “‘“‘“refute liability on some theoretical
possibility not included in the pleadings.”’”’’ . . .” (Id. at pp. 1254-
1255.) The moving party is not required “to negate elements of
causes of action plaintiffs [or cross-complainants] never pleaded.”

                                   6
(Melican v. Regents of University of California (2007) 151
Cal.App.4th 168, 182 (Melican).)
       It follows that a party cannot avoid summary judgment by
relying on theories that are not alleged in the pleadings. (County
of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th
292, 332-333.) “[A] plaintiff [or cross-complainant] wishing ‘to
rely upon unpleaded theories to defeat summary judgment’ must
move to amend the complaint before the hearing.” (Oakland
Raiders v. National Football League (2005) 131 Cal.App.4th 621,
648.)
       Although leave to amend should be liberally granted, the
trial court has discretion to deny it when a party unreasonably
delays making the request. (Falcon v. Long Beach Genetics, Inc.
(2014) 224 Cal.App.4th 1263, 1280.) Unreasonable delay may be
found where a plaintiff (or cross-complainant) seeks leave to
amend only after the defendant (or cross-defendant) moves for
summary judgment on grounds addressed by the proposed
amendment and the proposed amendment is based on facts
previously known to the plaintiff. (Ibid.) “It would be patently
unfair to allow plaintiffs to defeat [the] summary judgment
motion by allowing them to present a ‘moving target’ unbounded
by the pleadings.” (Melican, supra, 151 Cal.App.4th at p. 176.)
       Here, appellant’s cross-complaint alleged a single breach of
the DSA: that respondent sold the project without his knowledge
or approval. Appellant’s untimely opposition to the motion for
summary judgment asserted that the only issue raised by the
cross-complaint “is whether or not he is owed compensation.” At
the hearing on the motion, appellant’s counsel explained the
cross-complaint “was not worded well” and that appellant was
“going on a broader view of a breach of contract.” He informed

                                 7
the trial court that he was “basically asking to amend the
wording of the cross-complaint to conform” to his new theory that
respondents breached the DSA by failing to repay his capital
account balance.
       The trial court did not abuse its discretion when it denied
leave to amend. Appellant never filed a motion to amend the
cross-complaint, or the proposed amendment itself. He had
access at all times to the DSA and related agreements, and could
have requested leave to allege another breach before respondents
filed their summary judgment motion, or even in a timely
opposition to the motion. Instead, he waited until the summary
judgment hearing to informally request leave to amend. In light
of this unexplained delay and appellant’s failure to file a motion
to amend and proposed amended pleading, the trial court acted
within its broad discretion when it denied leave. Appellant
ignores the well-settled appellate rule requiring him to show that
the trial court ruling was arbitrary, whimsical, or capricious;
beyond the bounds of reason. (See, e.g., Gilkison, supra, 65
Cal.App.4th at pp. 1448-1450; citing Brown v. Newby (1940) 39
Cal.App.2d 615, 618.)
       Moreover, the proposed amendment would have been futile
because appellant was not entitled to any additional
compensation. (Foroudi v. The Aerospace Corp. (2020) 57
Cal.App.5th 992, 1000-1001.) It is undisputed that appellant
assigned his 5 percent membership interest in Champlin Hawaii
to respondent. As the trial court ruled in granting summary
judgment, this assignment released any ownership interest
appellant had in the project. There was no capital account, or
any balance to be repaid. Respondent paid appellant the monthly
services fees and bonuses to which he was entitled, and appellant

                                8
acknowledged that he received those payments. He was not
entitled to the final COD bonus provided for in the amended DSA
because the project did not achieve a 15 percent internal rate of
return on its sale. Given these undisputed facts, appellant would
have been unable to allege that respondent breached the DSA by
failing to repay his non-existent capital account. The trial court
did not abuse its discretion when it denied leave to file a futile
amendment to the cross-complaint.
       Our ruling should end this litigation: res judicata pro
veritate accipitur (a matter adjudged is taken for truth). (See
Black’s Law Dict. (8th ed. 2004) p. 1755, col. 1.) The Hawaiian
lien should be vacated upon respondent’s request in a Hawaiian
court.
       Untimely and Incomplete Opposition. Appellant contends
the trial court erred when it granted summary judgment because
material facts are in dispute. There was no error.
       The opposition to a motion for summary judgment “shall
include a separate statement” responding to each material fact
identified by the moving party and indicating whether that fact is
disputed by the opposing party. (Code Civ. Proc., § 437c, subd.
(b)(3).) “Each [disputed] material fact . . . shall be followed by a
reference to the supporting evidence. Failure to comply with this
requirement of a separate statement may constitute a sufficient
ground, in the court’s discretion, for granting the motion.” (Ibid.)
       The separate statement “is an indispensable part of the
summary judgment or adjudication process” because it plainly
identifies factual issues and allows the trial court to determine
whether a trial is required to establish those facts and resolve the
dispute. (Whitehead v. Habig (2008) 163 Cal.App.4th 896, 902;
Collins v. Hertz Corp. (2006) 144 Cal.App.4th 64, 73.)

                                 9
“Opposition separate statements must cite to facts and evidence
for the evidence to be considered by the court.” (Bacoka v. Best
Buy Stores, L.P. (2021) 71 Cal.App.5th 126, 131, fn. 1.)
       Once the moving party meets its burden to show that the
material facts are undisputed, the party opposing summary
judgment has the burden “to present evidence establishing a
triable issue exists on one or more material facts.” (Carlsen v.
Koivumaki (2014) 227 Cal.App.4th 879, 889.) Admissible
evidence is required to show that disputed issues of material fact
exist. (Taylor v. Financial Casualty & Surety, Inc. (2021) 67
Cal.App.5th 966, 994.) “Responsive evidence that ‘gives rise to no
more than mere speculation’ is not sufficient to establish a triable
issue of material fact.” (Carlsen, supra, at pp. 889-890, quoting
Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163.)
       Here, the motion for summary judgment was, in effect,
unopposed. On the day before the hearing, appellant filed an
opposing brief that lacked any separate statement and included
no supporting evidence. Respondent supported its motion for
summary judgment with a declaration from an accountant who
explained how she calculated respondent’s internal rate of return
on the investment and determined that it was below the 15
percent target rate of return identified in the DSA. Appellant’s
opposition did not challenge this calculation or offer an opposing
expert opinion regarding the project’s rate of return. Simply
asserting that appellant is entitled to additional compensation
without any supporting admissible evidence is not sufficient to
create a disputed factual issue for trial.
       The trial court had no obligation to disregard these defects.
Appellant’s failure to file a timely opposition, including a
separate statement, was sufficient grounds to grant summary

                                10
judgment. His failure to submit any evidence showing a triable
issue of fact was also sufficient grounds to grant the motion.
       Rules on Appeal.
       Trial counsel at the motion for summary judgment also
represents appellant in this court. He ignores all of the
traditional rules of appeal. He is correct that our review of a
grant of summary judgment is de novo. That does not mean we
consider counsel’s conclusion that there are issues of fact to be
resolved at trial. These “facts” are not in the record, i.e., not in a
separate statement of disputed facts or supported by declarations
or other evidence.
       He is also correct in saying that pleadings are to be
liberally construed. That does not mean his oral motion to
amend the cross-complaint should have been granted. This is a
discretionary ruling. Again, counsel does not appreciate
traditional rules on appeal. (See, e.g., In re Gilkison, supra, 65
Cal.App.4th at pp. 1448-1456.)
       Sanctions for Frivolous Appeal. Describing this appeal as
frivolous and taken solely for delay, respondent has moved for an
award of sanctions under Code of Civil Procedure section 907 and
California Rules of Court, rule 8.276.
       We have discretion to impose sanctions where the appeal is
frivolous. “‘An appeal is frivolous “only when it is prosecuted for
an improper motive – to harass the respondent or delay the effect
of an adverse judgment – or when it indisputably has no merit –
when any reasonable attorney would agree that the appeal is
totally and completely without merit. . . .” . . .’” (Personal Court
Reporters, Inc. v. Rand (2012) 205 Cal.App.4th 182, 191, quoting
In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.) Sanctions
against a party’s counsel are appropriate when “counsel had a

                                 11
professional obligation not to pursue the appeal or should have
declined the case outright. [Citation.] Sanctions against the
party are appropriate when the record indicates the party
benefitted from the delay or was otherwise involved in the bad
faith conduct.” (Malek Media Group LLC v. AXQG Corp. (2020)
58 Cal.App.5th 817, 837 (Malek Media Group); see also Clarity
Co. Consulting, LLC v. Gabriel (2022) 77 Cal.5th 454, 466.)
       The appeal here is frivolous because it indisputably has no
merit. As we have explained, appellant’s opposition to the motion
for summary judgment was untimely and insufficient because it
did not include any supporting evidence. The oral request to
amend the cross-complaint was equally inadequate because
appellant did not file a motion to amend or the proposed
amendment. The rules attendant to summary judgment and
summary adjudication of issues are not arcane and should be
known to a reasonable attorney appearing at a law and motion
hearing. The procedure is set out, in detail, by statute. The rules
are the subject of hundreds of appellate court opinions. Appellate
counsel did not follow any of these rules. To rule in appellant’s
favor on appeal, we would have to suspend Code of Civil
Procedure section 437(c) and the rules on appeal. In light of
these obvious inadequacies, any reasonable attorney would agree
that the trial court properly granted summary judgment and that
this appeal would not result in a reversal.
       Appellant claims the appeal is not completely without
merit. He states that in his opinion, and the opinions of two
other attorneys whom he has consulted, the appeal is not
frivolous. He also states that the appeal is not frivolous because
1. leave to amend is liberally granted and 2. the DSA provides,
“Irrespective of whether the DSA has been terminated or not,

                                12
Champlin Hawaii shall pay to [appellant] . . . an amount equal to
the Capital Account balance of West Wind Works,” under certain
conditions. Appellant claims he “has evidence that in fact he is
owed 1.72 million.” As we have explained, however, appellant did
not include that allegation in his cross-complaint or present any
evidence of it in opposition to the motion for summary judgment.
His naked claim that the evidence exists does not raise a triable
issue of fact. For these reasons the trial court properly granted
summary judgment and this appeal had no chance of success.
       In addition, there is reason to believe the appeal was taken
for purposes of delay. Appellant’s mechanic’s lien remains active
in Hawaii, despite the fact that the trial court ruled he was not
entitled to any additional compensation for services rendered to
the project. Rather than withdraw the lien in deference to the
trial court’s judgment, appellant filed this appeal to which delays
the finality of that judgment. Appellant must know his claims
are without merit, yet he continues to pursue additional
compensation through the mechanic’s lien action.
       Sanctions are warranted here because both appellant and
his counsel had to have known this appeal was totally lacking in
merit and unfairly delayed removal of the Hawaii mechanic’s
lien. We have discretion to award sanctions in an amount that
reflects the costs this appeal imposed on respondent and on the
court.2 In addition, sanctions should reflect “the need to
discourage similar conduct in the future.” (Malek Media Group,
supra, 58 Cal.App.5th at p. 837.) At the same time, we are aware
that the power to impose sanctions for a frivolous appeal “should

      Respondent indicates it incurred attorney fees and costs of
      2

$48,915.50 in connection with this appeal and $13,329.82 in
connection with its defense in the Hawaii mechanic’s lien action.

                                13
be used most sparingly to deter only the most egregious conduct,”
so that we “avoid a serious chilling effect on the assertion of
litigants’ rights on appeal.” (In re Marriage of Flaherty, supra, 31
Cal.3d at pp. 650-651.)
       With these considerations in mind, we decline to award
sanctions in the full amount sought by respondent. We
nevertheless conclude sanctions are warranted against both
appellant and his counsel. Appellant and his counsel, jointly and
severally, are sanctioned in the amount of $10,000 payable to
respondent, and in the amount of $5,000 payable to the clerk of
this court. This opinion constitutes a written statement of our
reasons for imposing sanctions. (Clarity Co. Consulting, LLC v.
Gabriel (2022) 77 Cal.App.5th 454, 468.)
                           DISPOSITION
       The judgment is affirmed. Respondent’s motion for
sanctions on appeal is granted. For taking and prosecuting a
frivolous appeal, sanctions are imposed on appellant and his
counsel of record, jointly and severally, in the amount of $10,000
to be paid to respondent, and $5,000 to be paid to the clerk of this
court. Upon issuance of the remittitur, the clerk of this court is
ordered to forward a copy of this opinion to the State Bar. (Bus.
& Prof. Code, §§ 6086.7, subd. (a)(3), 6068, subd. (o)(3).) All
sanctions shall be paid no later than 30 days after the date the
remittitur is issued. In addition, respondent shall recover its
costs on appeal. (Cal. Rules of Court, rule 8.278(d).)

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     CERTIFIED FOR PUBLICATION.

                                   YEGAN, J.

We concur:

             GILBERT, P. J.

             BALTODANO, J.

                              15
                   Thomas P. Anderle, Judge

            Superior Court County of Santa Barbara

                ______________________________

      Steven Slavitt, for Defendant, Cross-complainant and
Appellant.
      Reicker, Pfau, Pyle & McRoy and Timothy J. Trager, for
Plaintiff, Cross-defendant and Respondent.