The Taxes are based on the deduction you took when contributing to the account and if you have the early withdrawal penalty, it is that, a penalty to punish you. 

Punitive damages are designed to punish a person for wrongful conduct and to deter others from engaging in the same conduct.  

Is their a law to restrict or punish this kind malicious litigation?

You can not do anything to punish this behavior.

If the tenant does not move out after 60 days, then you will have to file an unlawful detainer case. 

Set a list of 'punishments' for each stage of the process that you don't achieve. 

You will probably want to file an unlawful detainer which is not hard to do yourself and then show up to court.

She could do a quit claim to her husband, then he could execute the special warranty deed.The old contract for deed was a go-to strategy back in the day, usually done improperly and full of flaws they rarely were pulled off as agreed, now besides the determination of sale issues with the IRS, these now get into other title matters, wrongful foreclosures, lost deeds, pre-arranged unlawful deed transfers and/or predatory lending/dealing issues.

The previous landlord hired an attorney and they delay the case for two years with multiple bankruptcies on the eve of unlawful detainer trial. 

(Again, if you have not read this document you really should as you could be found guilty of unintentional, but punishable discrimination)Section B"In the second step of the discriminatory effects analysis, the burden shifts to the housing provider to prove that the challenged policy or practice is justified – that is, that it is necessary to achieve a substantial, legitimate, nondiscriminatory interest of the provider.