Opinion
H024329.
11-25-2003
REHON & ROBERTS, etc., Plaintiffs and Respondents, v. SUSAN MAHL, Defendant and Appellant.
Defendant Susan Mahl unsuccessfully moved to set aside an order striking her answer to a complaint brought by her former law firm, then known as Mahl Rehon Walworth & Roberts. The court had issued this terminating sanction pursuant to Code of Civil Procedure section 2023 based on Mahls misuse of the discovery process, and it subsequently entered judgment against her after a trial at which she did not appear.
Mahl resigned from Mahl Rehon Walworth & Roberts in November 1999. The firm subsequently changed its name to Rehon & Roberts, the name under which it sued Mahl.
On appeal, Mahl seeks review of both the order denying her motion and the judgment itself. She contends that this was a default judgment that was void on its face because the firm had failed to comply with the mandatory default procedures set forth in Code of Civil Procedure sections 580, 585, and 587. She alternatively seeks reduction of the damages award because the amount exceeded the demand in the firms complaint. We will affirm the order denying Mahls motion.
Background
Rehon & Roberts (the firm) initiated this action in January 2000 by filing an action against Mahl for fraud and deceit, breach of fiduciary duty, conversion, and related causes of action. The firms complaint alleged that Mahl, its former managing partner, had fraudulently caused the firm to overpay her for her work, to pay her personal expenses, and to accept a loan at a usurious interest rate. The firm sought damages of at least $400,000.
Mahl has subsequently changed her last name to Scott. We will use the name under which she was sued.
In early February 2000 Mahl, represented by the Law Offices of Thomas R. Hogan (Hogan), filed an answer and a cross-complaint. Later that month the firm served on Mahls counsel an 11-page bill of particulars itemizing $899,630.54 that Mahl allegedly owed the firm.
In February 2001, Mahl closed her law practice and moved out of California. Between February and June of 2001, having no permanent address, she used a mail service in South Dakota to receive and forward her mail. From June through October of that year a friend collected the mail for Mahl from the mail service. Mahl did, however, attend mediation in the case in June 2001. Meanwhile, in March 2001 the superior court notified Hogan of the trial date, which was set for September 10, 2001.
On August 17, 2001, after an unopposed motion, the court issued an order for Mahl to appear for deposition. The order was served on Hogan. On August 21, 2001, Hogan and the firms counsel stipulated to continue the trial to September 17, 2001.
On August 24, 2001, however, Hogan sought to withdraw as Mahls attorney. Thomas Hogan explained that he had been unable to reach Mahl since early July in spite of concerted efforts by him and other firm members to communicate with her. The South Dakota mail service did not have a current address for her, her cell phone number did not accept messages, and she had not responded to e-mail or regular mail.
On August 28, 2001, the firm filed a discovery motion based on Mahls failure to respond to five sets of form interrogatories, a second request for admissions, and other discovery requests. On August 31, 2001, the court ordered that the admissions be deemed admitted and ordered Mahl to respond to the other discovery by September 5, 2001. The order was served on Hogan.
On September 6, 2001, the firm filed a motion for terminating and monetary sanctions based on Mahls failure to comply with the courts prior discovery orders. The motion asked the trial court to strike Mahls answer and cross-complaint and to enter judgment in favor of the firm.
On September 7, 2001, the court granted Hogans motion to withdraw as counsel for Mahl. The order was sent to the South Dakota mail drop. One week later, the trial court granted the firms motion for terminating and monetary sanctions under Code of Civil Procedure section 2023. The court struck Mahls answer and cross-complaint and awarded the firm monetary sanctions of $223. The order further provided that "[p]laintiff may proceed to trial on September 17, 2001." This order was sent to the South Dakota mail drop.
The case came on for trial on Monday, September 17, 2001. The court noted that Mahl had not appeared, and the matter proceeded as a court trial. The firm submitted a 41-page trial brief and introduced 34 documentary exhibits into evidence. Peter Rehon testified that everything in the verified complaint was true to the best of his knowledge. The firm requested damages of $749,572.37. Rehon explained the damage calculations included in the bill of particulars.
At the conclusion of the trial, the court granted judgment to the firm, awarding general damages of $749,572.37 and $150,000.00 in punitive damages. In the judgment the court noted that Mahls cross-complaint and answer had been struck and that Mahl had failed to appear for trial although notice of trial had been served on her. Notice of entry of judgment was sent to Hogan and to Mahl at the South Dakota mailing address.
On January 16, 2002, Mahl moved to set aside both the September 14, 2001 sanctions order and the subsequent judgment, citing Code of Civil Procedure section 473. Mahl specifically complained that she had not received notice of trial, that she had been suffering from clinical depression, and that she had had no "direct access to any funds" to pay her attorney. Mahl further argued that the punitive damages award violated her due process rights because she had not received advance notice of the specific amount sought. Finally, Mahl argued that because she was in "technical default," the amount of compensatory damages could not exceed the amount prayed for in the complaint — i.e., $400,000.
After a hearing the court denied her motion, finding that Mahls request for relief had not been filed within a reasonable time and that she had failed to show mistake, inadvertence, surprise or excusable neglect. (Code Civ. Proc., § 473, subd.(b).) Regarding Mahls claim of lack of notice of the trial, the court concluded that Mahl "was experienced in civil litigation" and had "deliberately refrained from obtaining information about the status of her case and the trial date if, assuming arguendo, she actually did not know of said date." The court also found that Mahl was not too mentally impaired to participate in the litigation. Indeed, she had been active in litigation in other states, and she had not only "substantial assets to obtain counsel" but the "wherewithal to transfer the title to her late model Jaguar automobile within a few days after she purportedly learned of the judgment against her on October 30, 2001."
Discussion
Mahl contends that the judgment was improperly entered because the firm had failed to follow the statutory procedures for obtaining a default judgment. She further challenges the compensatory and punitive damages award on the grounds that a default judgment may not award more than the amount demanded in the complaint, and that a plaintiff must file a statement under Code of Civil Procedure section 425.115 in order to recover punitive damages.
Further unspecified statutory references are to the Code of Civil Procedure.
Since the premise of this claim is that the striking of her answer "had the same effect" as entering her default, we must determine whether this situation was indeed governed by the statutory scheme for default judgments. We first review the pertinent provisions.
1. The Default Judgment Statutes
A civil action begins with the filing of a complaint. (§ 411.10.) The court acquires jurisdiction over a defendant by his or her appearance or by service of a summons. (§ 411.50.) The summons warns a defendant that if he or she fails to file a written response to the complaint within 30 days, "his or her default will be entered upon application by the plaintiff, and the plaintiff may apply to the court for the relief demanded in the complaint . . . ." (§ 412.20, subd. (a)(4).)
In most cases the complaint must specify the relief requested, including the amount of damages. (§ 425.10, subd. (a)(2).) The actual damages sought for personal injury or wrongful death should not be stated in the complaint, but should be specified in a separate statement of damages upon the defendants request under section 425.11. "If no request is made for the statement referred to in subdivision (a), the plaintiff shall serve the statement on the defendant before a default may be taken." (§ 425.11, subd. (c).) Section 425.115 allows a plaintiff to reserve his or her right to seek punitive damages by serving a separate statement on the defendant. "The plaintiff shall serve the statement upon the defendant pursuant to this section before a default may be taken, where the motion for default judgment includes a request for punitive damages." (& sect; 425.115, subd. (f); Heidary v. Yadollahi (2002) 99 Cal.App.4th 857, 867.)
It is important for the plaintiff to specify the relief sought, because "[t]he relief granted to the plaintiff, if there is no answer, cannot exceed that which he or she shall have demanded in his or her complaint, in the statement required by Section 425.11, or in the statement provided for by section 425.115 . . . ." (§ 580, subd. (a).) Due process underlies this statutory requirement of notice to the defendant of his or her potential maximum exposure. (Greenup v. Rodman (1986) 42 Cal.3d 822, 826 [Greenup].) "Such notice enables a defendant to exercise his right to choose . . . between (1) giving up his right to defend in exchange for the certainty that he cannot be held liable for more than a known amount, and (2) exercising his right to defend at the cost of exposing himself to greater liability." (Id. at p. 829.)
A party who fails to timely answer a complaint is in default. The plaintiff is entitled upon written application to have the clerk enter the defendants default. (§ 585.) "Entry of default by the court clerk is a statutory prerequisite to both a clerks default judgment (Code Civ. Proc., § 585, subd. (a)) and a default judgment by the court (Code Civ. Proc., § 585, subds. (b) and (c))." (People v. One 1986 Toyota Pickup (1995) 31 Cal.App.4th 254, 259.) An application for entry of default must include an affidavit that the application has been mailed to the defendants attorney if there is one, or otherwise to the defendant. (§ 587.)
Severe consequences attach to the entry of a default. "A default cuts off the defendant from making any further opposition or objection to the relief which plaintiffs complaint shows he is entitled to demand. A defendant against whom a default is entered is out of court and is not entitled to take any further steps in the cause affecting plaintiffs right of action. [Citation.] He cannot thereafter, nor until such default is set aside in a proper proceeding, file pleadings, or move for a new trial, or demand notice of subsequent proceedings." (Title Ins. & Trust Co. v. King Land & Improvement Co. (1912) 162 Cal. 44, 46; cf. Christerson v. French (1919) 180 Cal. 523,525; Taintor v. Superior Court (1949) 95 Cal.App.2d 346, 349-351; see People v. One 1986 Toyota Pickup, supra, 31 Cal.App.4th 254, 259.)
Entry of a partys default precedes entry of a default judgment. In limited cases arising from contract where no evidence is needed to calculate the damages, the clerk is authorized to enter a default judgment. (§ 585, subd. (a).) In all other cases the court takes evidence of damages at a prove-up hearing. (& sect; 585, subd. (b); Liberty Loan Corp. of North Park v. Petersen (1972) 24 Cal.App.3d 915, 918, and cases there cited.) A party whose default has been entered cannot participate in a judgment hearing on punitive damages. (Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 385-387.) As indicated above, the amount of damages is limited to what the plaintiff has specified in the complaint or in statements under sections 425.11 and 425.115. The general rule is "that a default judgment greater than the amount specifically demanded is void as beyond the courts jurisdiction." (Greenup , supra, 42 Cal.3d at p. 826.)
2. The Effect of Striking an Answer as a Discovery Sanction
In this case, Mahl did file an answer. Her answer was subsequently struck as a discovery sanction. The central question before us is whether the striking of Mahls answer was tantamount to entry of her default. In urging us to answer this question in the affirmative, Mahl relies on Greenup, supra, 42 Cal.3d 822. In that case the trial court granted the plaintiffs motion to strike the answer and to enter a default as a sanction for the defendants conduct during discovery. (Id. at p. 825.) A month later the plaintiff filed a request to enter a default judgment, stating for the first time the amount of damages she claimed. After a prove-up hearing, the plaintiff was awarded compensatory and punitive damages in excess of the amount demanded in her complaint.
Section 2023, subdivision (b), authorizes a variety of terminating sanctions for misuse of discovery. "(4) The court may impose a terminating sanction by one of the following orders: [¶] (A) An order striking out the pleadings or parts of the pleadings of any party engaging in the misuse of the discovery process. [¶] (B) An order staying further proceedings by that party until an order for discovery is obeyed. [¶] (C) An order dismissing the action, or any part of the action, of that party. [¶] (D) An order rendering a judgment by default against that party."
Citing Brown v. Ridgeway (1983) 149 Cal.App.3d 732, the plaintiff in Greenup argued that a defendant whose answer was struck as a discovery sanction was not similarly situated to a defendant who had never filed an answer, and the former was therefore not entitled to claim the protection of section 580, the provision that limits damages to the complaint and the section 425.11 statement. The Supreme Court was not convinced. "The rationale stated in Brown, i.e., that striking the answer renders it a nullity (see Brown v. Ridgeway, supra, 149 Cal.App.3d at p. 736), applies equally when the answer is struck pursuant to section 2034. It is true that sections 586, 585, and 580, which together govern default judgments, do not explicitly list answers stricken pursuant to section 2034 as proceedings in which default judgment is rendered as if the defendant had failed to answer . . . . (§ 586.) Yet unless and until the Legislature specifically provides a separate procedure for defaults after discovery sanctions, these sections remain the sole statutory procedures for default judgments. Indeed, in the present case the ex parte prove-up hearing was conducted pursuant to section 585, subdivision (b). We conclude that the damages awarded must be limited by the terms of the same section: when an answer is stricken as a sanction for the defendants obstruction of discovery, it is as if no answer had been filed in the first instance." (Greenup, supra, 42 Cal.3d at p. 828.) The court further concluded that the compensatory and punitive damages awarded had to be reduced to the maximum amounts alleged or implied in the complaint. (Id. at pp. 829-830.)
Greenup involved an earlier version of the discovery statute applicable here.
Mahl maintains that Greenup is controlling. The firm, however, recognizes an important difference in that case: There, the trial court not only struck the defendants answer, but also, at the plaintiffs request, entered their default as a discovery sanction. The firm argues that Johnson v. Pratt & Whitney Canada, Inc. (1994) 28 Cal.App.4th 613 (Johnson) is more on point. We agree.
In Johnson, the trial court initially struck the defendants answer among other discovery sanctions. (Id. at p. 621.) The court subsequently modified its order, "striking Pratts answer except as to the issue of damages." (Ibid.) There was a jury trial on damages, after which the defendant appealed. (Id. at p. 622.) The defendant relied on Greenup in arguing that once its answer was struck, the total damages available were those alleged in the complaint. (Id. at p. 623.) The appellate court distinguished Greenup, stating: "Pratt clearly wishes the court had entered its default and given a default judgment to plaintiffs. . . . But, unlike the defendant in Greenup, Pratt did not achieve a default; it was simply deprived of the right to litigate the issue of liability. . . . Here, where there was no entry of default, a default prove-up hearing would have been not only inappropriate, but unauthorized. The court could not have excluded Pratt from proceedings to determine plaintiffs damages. It therefore correctly conducted an adversarial jury trial on the only issue remaining, i.e., the extent of plaintiffs damages." (Id. at pp. 624-625.)
Mahl seeks to distinguish Johnson, noting that there the defendants answer was not entirely struck and the amount of damages was preserved for trial. Here, she argues, once the trial court struck her answer, she was "powerless to defend herself." According to Mahl, she "was in default the moment her answer was stricken, and thus, she could not have defended herself, challenged the evidence presented, or taken any steps to protect her rights."
Greenup did equate the position of a defendant whose answer is struck as a discovery sanction with that of a defendant who fails to answer, but the Supreme Court did not say that striking the answer is equivalent to entering the defendants default. Nor does Mahl cite any other case establishing this proposition. As we explained above, entry of default is the next procedural step after an answer has not been timely filed. Section 2023 also distinguishes between the terminating sanctions of striking a pleading (subd. (b)(4)(A)) and entering a default judgment (subd. (b)(4)(D)).
This court recognized the distinction between striking an answer and entering a default in a different context in Lorenz v. Commercial Acceptance Ins. Co. (1995) 40 Cal.App.4th 981 (Lorenz). In that case the answer of a nonadmitted alien insurer was struck after the insurer failed to file a statutory bond in order to participate in litigation. (Id. at p. 986.) One question on appeal was whether there was any significance to the entry of default by the court instead of the clerk. We explained: "Under section 585, a default is generally entered by the clerk. A judge enters a default only if no clerk is available." (Id. at p. 991.) After the defendants answer was struck, we stated: "At this point, plaintiffs could have gone to the clerk and requested entry of CAICs default, using the Judicial Council form adopted for this purpose. (Cf. Greenup v. Rodman, supra, 42 Cal.3d 822, 827-828 [failure to answer includes situation where answer is filed but later stricken by the court].) This is the statutorily mandated procedure under section 585." (Lorenz , supra, at p. 995.) Lorenz indicated that applying to the clerk, not the court, for entry of default is the appropriate procedure after an answer is struck. Lorenz did not equate striking an answer with entering a default.
We need not speculate about the status of other defendants whose answers have been struck as discovery sanctions. In this case the same September 14, 2001 order that struck Mahls answer and cross-complaint also indicated her continuing status in this action. While granting these requested sanctions, the trial court implicitly denied the firms request for entry of judgment in its favor. Instead the court ordered, "Plaintiff may proceed to trial on September 17, 2001." When Mahl failed to appear for trial, the court noted her nonappearance and proceeded by way of a court trial.
People v. One 1986 Toyota Pickup, supra, 31 Cal.App.4th 254 is helpful to our analysis. There the court applied the default judgment statutes in a civil forfeiture arising out of a criminal drug charge. The defendant had filed a claim opposing the forfeiture, but had not filed an answer. (Id. at p. 257.) The People moved the trial court to enter a default judgment without first asking the clerk to enter the defendants default. (Id. at p. 259.) Due to the defendants failure to answer the complaint, "[h]e was not allowed to appear in the proceedings on the basis it was a default proceeding." (Ibid.) The appellate court stated: "No default had been entered against claimant prior to the date of the hearing, thus, his ability to file an answer, appear, or make some other motion was not cut off. The courts failure to allow the claimant to appear and be heard absent an entry of default was an abuse of discretion." (Id. at pp. 259-260.) The decision recognized that the defendant had a right to appear and be heard in the trial court in the interim between his failure to answer and entry of his default.
Ordinarily a defendant who has not answered is entitled to participate in the proceedings until his or her default is entered. The terminating discovery sanction of striking an answer might well preclude filing another answer or proving an affirmative defense, but it would not necessarily bar a party from arguing about the admissibility or relevance of proffered evidence. It is not clear from the trial courts order and subsequent actions exactly how much Mahl might have been allowed to participate at trial. But it is clear that the trial court refused to enter a requested default judgment as a discovery sanction. The trial court did not order entry of Mahls default, nor did it act as though Mahl were in default. The trial court apparently expected Mahl to appear and to participate somehow in the trial. The uncontested trial took on aspects of a default prove-up hearing due to Mahls nonappearance. But we do not believe that the courts order either legally or actually prevented Mahl from participating in the trial.
We conclude that this case is closer to Johnson than Greenup. Since the same trial court order that struck Mahls answer also ordered a trial, Mahl was not placed in default. And because the striking of Mahls answer did not transform these proceedings into default proceedings, the firm was not required to file and serve either an application for entry of default under section 587 or a statement of punitive damages under section 425.115. Likewise, the trial court was not bound by sections 580 and 585 but had jurisdiction to proceed as it did, by holding a trial in Mahls absence. The resulting judgment is not void, and the damages awarded need not be reduced to the amount demanded in the complaint.
Disposition
The order denying the motion to vacate the judgment is affirmed.
WE CONCUR: Wunderlich, J., Mihara, J.