Opinion
E065209 E065808
08-07-2017
JOEL KENNETH SPENCER et al., Plaintiffs and Appellants, v. SECURED COLLATERAL MANAGEMENT & RECOVERY, Defendant and Respondent. JOEL KENNETH SPENCER et al., Plaintiffs and Respondents, v. EMPIRE FIRE & MARINE INSURANCE COMPANY, Movant and Appellant.
Abir Cohen Treyzon & Salo, Federico C. Sayre, Boris Treyzon, and Cynthia Goodman for Plaintiffs, Appellants, and Respondents. Lewis Brisbois Bisgaard & Smith, Gary M. Lape for Movant and Appellant. No appearance for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. RIC495644) OPINION APPEAL from the Superior Court of Riverside County. David E. Gregory, Temporary Judge (Pursuant to Cal. Const., art. VI, § 21) and Gloria Trask, Judge. Affirmed in part and dismissed in part. Abir Cohen Treyzon & Salo, Federico C. Sayre, Boris Treyzon, and Cynthia Goodman for Plaintiffs, Appellants, and Respondents. Lewis Brisbois Bisgaard & Smith, Gary M. Lape for Movant and Appellant. No appearance for Defendant and Respondent.
Judge Gregory denied a default judgment and dismissed the action. (See part IV, post.) Judge Trask denied the postjudgment motion to intervene. (See part V, post.)
Allegedly, an employee of defendant Secured Collateral Management & Recovery (Secured) tried but failed to repossess a pickup truck from plaintiff Joel Kenneth Spencer (Joel Kenneth). The employee then caused both Joel Kenneth and his son, Joel Ryan Spencer (Joel Ryan) (collectively the Spencers) to be arrested and prosecuted for carjacking and other crimes. The Spencers were innocent, and eventually they were acquitted.
Based on an allegation that the employee was not "licensed, registered or authorized" to repossess vehicles, the Spencers sued Secured for negligence, negligence per se, negligent entrustment, negligent hiring and supervision, and unfair business practices. For reasons best known to themselves (and their attorneys), they did not assert a cause of action for malicious prosecution.
Secured failed to respond to the operative complaint; the trial court entered its default. When the Spencers requested a default judgment, however, the trial court denied the request; it dismissed the action instead. The Spencers appeal.
Meanwhile, Empire Fire & Marine Insurance Company (Empire), which is Secured's liability insurer, repeatedly moved to intervene, asserting that the action had to be dismissed in any event because it had not been brought it to trial within five years. Its motions to intervene were denied. Empire appeals.
The two appeals have been consolidated. However, in the Spencers' appeal, we will hold that the trial court properly denied a default judgment because they failed to state a cause of action. In light of this holding, Empire's appeal is moot.
I
FACTUAL BACKGROUND
The following facts are taken from the allegations of the operative complaint. We caution that they are only allegations; they have never been proven or found true.
Matthew Donald Williams (Williams) was an employee of Secured. Secured was not licensed as a repossession company. Moreover, Williams "was not licensed, registered or authorized by the State of California to repossess vehicles."
On October 31, 2006, at 3:00 a.m., Williams knocked on the front door of the Spencers' house. He indicated that he was there to repossess Joel Kenneth's pickup truck. He added, however, that if Joel Kenneth paid him a $150 bribe, he would tell Secured that he had not been able to find it.
Joel Kenneth refused to pay. Instead, he walked over to his pickup, got in, and drove it away. Meanwhile, Williams tried to stop him, by grabbing his wrist, punching him in the head, and rear-ending the pickup, but without success.
Williams called the police and reported falsely that he had been attacked. Moreover, he identified his attacker as Joel Ryan, rather than Joel Kenneth. As a result, the police arrested Joel Ryan.
Both Joel Kenneth and Joel Ryan were charged with (1) carjacking, (2) robbery, (3) aggravated assault, and (4) attempting to dissuade a witness. Joel Ryan remained incarcerated, pending trial, for seven months. As a result, he could not finish his first semester of college. On June 6, 2007, after a jury trial, the Spencers were acquitted.
II
PROCEDURAL BACKGROUND
In March 2008, the Spencers filed this action against Secured.
The original complaint also named Capital One Auto Finance, Inc. (Capital One) and Williams as defendants. Capital One was granted summary judgment. The Spencers served Williams by publication, but they never sought a default judgment against him. Thus, neither of these defendants is a party to this appeal.
In January 2013, they filed the operative (second amended) complaint. It included a prayer for $4,061,800 in damages. Secured was served by substituted service in February 2013 and by publication in July 2013. In September 2013, the trial court entered Secured's default.
In August 2014, with leave of court, the Spencers served a statement of damages (see Code Civ. Proc., § 425.11) on Secured by publication. They took the position that they were not required to do so and were acting only out of an excess of caution.
In April 2015, Empire filed a motion to intervene. It explained that Secured was a suspended corporation, and that Empire was Secured's liability insurer.
One day later, however, the trial court, on its own motion, dismissed the action for failure to obtain a default judgment within 45 days after the entry of default. (Cal. Rules of Court, rule 3.110(h).) It took Empire's motion to intervene off calendar, as moot.
Empire claims that the trial court dismissed the action based on failure to bring it to trial within five years. At the hearing, the trial court did opine that the action was subject to dismissal under the five-year rule. However, it had given notice only that it was considering dismissal under the 45-day rule; moreover, the minute order states that it dismissed the action under the 45-day rule.
In May 2015, the Spencers filed a motion to set aside the dismissal. (Code Civ. Proc., § 473, subd. (b).) In June 2015, the trial court granted the motion. At the same time, it placed Empire's motion to intervene back on calendar, setting it for hearing on July 27, 2015. There is a dispute as to whether notice was served on counsel for Empire.
The Spencers filed an opposition to Empire's motion to intervene. Again, there is a dispute as to whether the opposition was served on counsel for Empire.
On July 27, 2015, the trial court held a hearing on Empire's motion to intervene. For whatever reason, counsel for Empire did not appear. Counsel for the Spencers also did not appear. The trial court denied the motion. It purported to order counsel for the Spencers to give notice of this ruling; however, there is no indication that it gave notice of this order to counsel for the Spencers.
In September 2015, the Spencers filed a request for entry of a default judgment. In November 2015, the trial court held a prove-up hearing. After taking evidence, it denied a default judgment; it ordered the action dismissed instead. In March 2016, it entered a judgment of dismissal. The Spencers filed a timely notice of appeal from this judgment.
In March 2016, Empire filed a second motion to intervene. In that motion, it also argued that (1) the June 2015 order setting aside the dismissal of the action should itself be set aside as void, and (2) the action should be dismissed based on failure to bring it to trial within five years. (Code Civ. Proc., § 583.310.)
In April 2016, the trial court denied the motion. Empire filed a timely notice of appeal from that order.
III
THE TRIAL COURT'S RULING
The trial court began by stating that the Spencers were proceeding on two theories: ordinary negligence and negligence per se.
Regarding negligence per se, it stated: "I didn't find . . . any indication whatsoever that the Legislature would have intended this statute or this collective body of statutes to be consumer protection statutes in the way that plaintiff[s'] counsel argues should be applied in this case.
" . . . [I]t doesn't create any real qualifying standards as far as education, training, certification, et cetera, such that it would be indicative that the legislature wanted to insure some minimum level of competence and training and experience of those engaged in collateral recovery. It's simply an identification statute. It's a basic license statute: We want to know who's doing this and where they claim to be so that we might be able to go after them."
Regarding ordinary negligence, it stated: "Secured . . . would only be liable under a theory of . . . respondeat superior, that would require that the plaintiffs show that the acts engaged in by Mr. Williams were within the expected course and scope of his employment such that they were procuring a benefit for his employer, they were subject to being regulated by his employer, or, alternatively, that his employer was well aware of his unfitness . . . and/or by their action subsequent to the incident in question they ratified his unlawful conduct."
"And I don't find that the making of the police report was something that was normally part of Mr. Williams' job duties or description. It was purely collateral, outside the scope of his employment. It's not something that benefited his employer in any way. It's not something that his employer had an opportunity to train him for or to supervise or to oversee or should be responsible for."
Finally, the trial court stated: "What was an improper act . . . was . . . Joel Kenneth Spencer interfering with an otherwise lawful repossession by . . . admittedly driving away in his truck while causing property damage to the vehicle driven by Mr. Williams. That's unlawful. That's a breach of the contract. He's not testified, 'They didn't have any right to repossess this.' . . . So I presume . . . it was a lawful repo that was unlawfully interfered with.
"For all of those reasons, I don't believe plaintiffs have established any viable theory of recovery that would have give[n] them any right to recover any damages against . . . Secur[ed] . . . "
IV
THE DENIAL OF A DEFAULT JUDGMENT
A. General Principles Governing the Entry of a Default Judgment.
"[T]he trial court may not enter a default judgment when the complaint's allegations do not state a cause of action. [Citations.]" (Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 392.)
"'Substantively, "[t]he judgment by default is said to 'confess' the material facts alleged by the plaintiff, i.e., the defendant's failure to answer has the same effect as an express admission of the matters well pleaded in the complaint.'" [Citation.] The 'well-pleaded allegations' of a complaint refer to '"'all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.'"' [Citation.]
"Because the default confesses those properly pleaded facts, a plaintiff has no responsibility to provide the court with sufficient evidence to prove them — they are treated as true for purposes of obtaining a default judgment. [Citation.] . . .
"And if the well-pleaded allegations of the complaint do not state any proper cause of action, [a] default judgment in the plaintiff's favor cannot stand." (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 281-282.)
"Our inquiry here into the complaint's adequacy is akin to that triggered by a general demurrer, namely, whether the complaint lacks factual allegations indispensable to the asserted claims. [Citations.] A court must indulge reasonable inferences in support of the factual allegations in the complaint; mere uncertainties and other defects subject to a special demurrer do not bar a default judgment against the defendant. [Citations.] Nonetheless, the absence of essential factual allegations is fatal to a judgment against the defendant. [Citation.]" (Los Defensores, Inc. v. Gomez, supra, 223 Cal.App.4th at pp. 392-393.)
In the trial court, "there is no opposing party in a default judgment situation. Thus, cases properly recognize that in such situation 'it is the duty of the court to act as gatekeeper, ensuring that only the appropriate claims get through.' [Citations.]" (Fasuyi v. Permatex, Inc. (2008) 167 Cal.App.4th 681, 691.)
Likewise, in the Spencers' appeal, there is no party with standing to file a respondent's brief. Nevertheless, they are not entitled to prevail by default. Even when no respondent's brief has been filed, the appellant has the burden to affirmatively demonstrate prejudicial error. (Smith v. Smith (2012) 208 Cal.App.4th 1074, 1078; County of Lake v. Palla (2001) 94 Cal.App.4th 418, 420.)
B. Cause of Action for Negligence Per Se.
The doctrine of negligence per se is codified in Evidence Code section 669, which provides:
"(a) The failure of a person to exercise due care is presumed if:
"(1) He violated a statute, ordinance, or regulation of a public entity;
"(2) The violation proximately caused death or injury to person or property;
"(3) The death or injury resulted from an occurrence of the nature which the statute, ordinance, or regulation was designed to prevent; and
"(4) The person suffering the death or the injury to his person or property was one of the class of persons for whose protection the statute, ordinance, or regulation was adopted."
In their cause of action for negligence per se, the Spencers alleged that Secured violated Business and Professions Code section 7502.1, subdivision (a), by employing Williams to repossess the pickup when Williams was not duly licensed or registered.
California's statutory scheme for the regulation of repossessors is found in Business and Professions Code section 7500 et seq., entitled the Collateral Recovery Act. (Bus. & Prof. Code, § 7500.) It divides repossessors into three types.
First, there is a "repossession agency," which must have a license from the state. (Bus. & Prof. Code, §§ 7500.2, subd. (a), 7502.) A licensed repossession agency is referred to as a "licensee." (Bus. & Prof. Code, § 7500.1, subd. (o).)
Second, there is a person who "manage[s] the day-to-day operations, operate[s], control[s], or transact[s] [the] business" of a repossession agency. (Bus. & Prof. Code, § 7500.2, subd. (c).) Such a person must have a certificate from the state, which in turn requires at least two years of experience in repossession, plus the passage of an examination. (Bus. & Prof. Code, § 7504.) A person who has such a certificate is referred to as a "qualified certificate holder" or "qualified manager." (Bus. & Prof. Code, § 7500.1, subd. (t).) Every licensed repossession agency must have at least one qualified manager. (Bus. & Prof. Code, § 7505.1.)
Third, there is a nonexempt employee of a licensed repossession agency. Such an employee must register with the state. (Bus. & Prof. Code, § 7506.3.) A registered employee is referred to as a "registrant." (Bus. & Prof. Code, § 7500.1, subd. (v).) An application for registration must include a set of the applicant's fingerprints, which are used to carry out a background check. (Bus. & Prof. Code, § 7506.5, subd. (e).) Registration may be denied if the applicant has committed a disqualifying crime or has committed any act that would cause a license to be denied, suspended, or revoked. (Bus. & Prof. Code, §§ 480, 7506.8, subd. (a).)
A qualified manager is exempt. (Bus. & Prof. Code, § 7506.6.) An employee with exclusively clerical duties is also exempt. (Bus. & Prof. Code, § 7506.7.)
A repossession agency is defined as "any person who, for any consideration whatsoever, engages in business or accepts employment to locate or recover collateral . . . ." (Bus. & Prof. Code, § 7500.2, subd. (a).) Despite the apparent breadth of this definition, however, it includes only a person who accepts employment from an owner, lienholder, lessor, or debt collector (see Bus. & Prof. Code, § 7507.13) — not a person who accepts employment from a repossession agency. This follows from the requirement that an employee of a licensed repossession agency need only be registered. It is also consistent with the administrative construction given to the statute by the Bureau of Security & Investigative Services. (Repossession Agency Fact Sheet <http://www.bsis.ca.gov/forms_pubs/repo_fact.shtml>, as of Aug. 2, 2017.)
As mentioned, the Spencers rely on Business and Professions Code section 7502.1, subdivision (a). As relevant here, it provides: "Any person . . . who knowingly engages a nonexempt unlicensed person to repossess collateral on his or her behalf is guilty of a misdemeanor." For the reasons just discussed, however, this applies only to an owner, lienholder, lessor, or debt collector who hires a repossession agency, because only a repossession agency is required to be licensed. It does not apply to a repossession agency that hires an employee, because an employee is merely required to be registered. Thus, the Spencers have not adequately alleged a violation of this statute.
We acknowledge that a different statute — Business and Professions Code section 7506.13, subdivision (a) — provides that "[a] licensee may not have in his or her employment or under contract a person subject to registration who has not registered . . . or whose registration has expired or been revoked, denied, suspended, or canceled." The Spencers have not cited this statute; thus, they have forfeited any argument based on it. In any event, it applies only to a "licensee." Secured could not violate this statute because it was not licensed.
Separately and alternatively, even assuming Secured violated some statute by employing an unregistered repossessor, we agree with the trial court that the Spencers failed to allege a cause of action for negligence per se. The Collateral Recovery Act protects the public from harm by requiring a repossession agency to have at least one qualified manager, who must have a certain level of knowledge, training, and experience. By contrast, it does not require that lower-level employees have any particular knowledge, training, or experience. The only apparent purpose of the requirement that employees must be registered is to weed out persons with a past history of crime or misconduct. There is no allegation that Williams had such a history. Thus, the Spencers' alleged injuries did not result from an occurrence of the nature which the statute was designed to prevent.
The operative complaint therefore failed to state a cause of action for negligence per se.
C. Ordinary Negligence Cause of Action.
The trial court assumed that the Spencers' theory of ordinary negligence was that Williams was negligent, and that Secured, as his employer, was vicariously liable for his negligence under the doctrine of respondeat superior. Thus, it ruled that, on these facts, respondeat superior did not apply.
The Spencers do not explain why this was wrong; they do not even discuss respondeat superior. Arguably, then, they have forfeited any challenge to the trial court's ruling on this cause of action. Nevertheless, we will reach the merits.
In their cause of action for ordinary negligence, the Spencers alleged that Secured breached a duty not to employ Williams to repossess the pickup because Williams was "an unlicensed repossession driver." Thus, their theory was not that Secured was vicariously liable; rather, it was that Secured was directly liable for its own negligent hiring. Admittedly, they purported to plead a separate cause of action for negligent hiring; it went into more detail about precisely how Secured was negligent. Nevertheless, these two causes of action were somewhat duplicative.
The trial court therefore erred by rejecting the ordinary negligence cause of action based on respondeat superior. However, "[i]t is established that on appeal we review the decision of the trial court rather than its reasoning, and thus ' . . . a ruling or decision correct in law will not be disturbed on appeal merely because it was given for the wrong reason. If correct upon any theory of law applicable to the case, the judgment will be sustained regardless of the considerations that moved the lower court to its conclusion.' [Citations.]" (Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216.)
The ordinary negligence cause of action was defective in any event because it failed to adequately plead causation. "One of the essential elements of a cause of action alleging negligence . . . is causation, that is, that the defendant's negligence was a substantial factor in causing the plaintiff's harm. [Citations.]" (Sanchez v. Kern Emergency Medical Transportation Corporation (2017) 8 Cal.App.5th 146, 168.) All this cause of action stated on this point was that the Spencers were damaged "[a]s a direct and proximate result of said tortious acts, omissions, or conduct . . . ."
When "the complaint's factual recitations show plainly the connection between cause and effect, it suffices to plead causation succinctly and generally. [Citations.] . . . But when, by contrast, '""the pleaded facts of negligence and injury do not naturally give rise to an inference of causation[,] the plaintiff must plead specific facts affording an inference the one caused the others."' [Citation.] That is, the plaintiff must allege facts, albeit as succinctly as possible, explaining how the conduct caused or contributed to the injury. [Citations.]" (Bockrath v. Aldrich Chemical Co., Inc. (1999) 21 Cal.4th 71, 78-79.)
Here, it is not at all apparent how Williams' failure to register as a repossessor caused him to falsely accuse the Spencers. As already discussed in part IV.B, ante, registration does not require any particular knowledge, training, or experience. Moreover, it should be obvious to anyone, whether trained as a repossessor or not, that it is wrong to accuse someone falsely of a crime. If Williams was, as alleged, a mean jerk, registration would not have made him less so.
It could be argued that, if Secured had refused to hire Williams because he was not registered, then it would have had to hire someone else; hence, Williams would not have gone to the Spencers' house that night, and he would not have had any opportunity or any reason to accuse them falsely. However, it is equally possible that Williams would have registered and everything else would have played out in exactly the same way.
In any event, this argument proves, at most, that Williams' lack of registration was the "but for" cause of the Spencers' injuries. "Causation in the law of negligence is not determined by a linear projection from a 'but for' premise. Instead, it is expressed in terms of 'foreseeability' and is limited by the policy that cause must be 'proximate.' [Citation.]" (Espinosa v. Kirkwood (2010) 185 Cal.App.4th 1269, 1275.)
In Mendoza v. City of Los Angeles (1998) 66 Cal.App.4th 1333, a police officer, while off-duty and drunk, used his service weapon to shoot and kill his fiancée. (Id. at pp. 1335-1336.) There was some evidence that the city that employed him knew or should have known that he had a drinking problem. (Id. at pp. 1337-1339.) A jury found the city liable for negligent hiring and for negligent entrustment of a concealed firearm. (Id. at pp. 1335-1336.) The appellate court reversed the jury verdict. (Id. at p. 1343.) It held, among other things, that there was insufficient evidence of causation: "Like duty, proximate cause reflects a judgment regarding the permissible extent of liability for negligence. [Citation.] It limits the defendant's liability to those foreseeable consequences that the defendant's negligence was a substantial factor in producing. The fact that [the officer] may have shown signs of abusing alcohol is insufficient to establish that the City should have foreseen that he would on a drunken spree shoot [his fiancée]. [The officer] had no history of past violence or excessive use of force. [His] unforeseeable private act broke the chain of proximate cause connecting the City's negligence to [the fiancée's] death. [Citation.]" (Id. at p. 1342.)
Here, similarly, it was not reasonably foreseeable that an unregistered repossessor would be more likely to falsely accuse someone of a crime than would a registered repossessor. Williams' false accusation was an "unforeseeable private act."
It follows the operative complaint failed to state a cause of action for ordinary negligence.
D. Other Causes of Action.
The Spencers contend that they stated causes of action for negligent entrustment, negligent hiring, and/or unfair business practices.
The problem with this is that, in their briefing in the trial court, their counsel stated: "Plaintiffs have two viable negligence theories[:] general negligence and negligence per se." Counsel then proceeded to argue only these two causes of action. Moreover, when the trial court stated, for the record, that the Spencers were proceeding only on these two theories, they did not object. We therefore conclude that the Spencers abandoned these causes of action. (See Del Oro Hills v. City of Oceanside (1995) 31 Cal.App.4th 1060, 1071, fn. 5.) At a minimum, the Spencers invited any error in the trial court's failure to consider them. (See Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 403.)
E. The Trial Court's Additional Comments.
As mentioned (see part III, ante), the trial court commented that Secured apparently had a right to repossess the pickup. The Spencers now assert that "[t]hese comments were inappropriate and reflect bias by the trial court."
They forfeited any claim of bias by failing to bring a disqualification motion below. (Code Civ. Proc., § 170.3, subd. (c)(1); People v. Guerra (2006) 37 Cal.4th 1067, 1111, disapproved on other grounds in People v. Rundle (2008) 43 Cal.4th 76, 151.)
They further forfeited any claim of bias by failing to file a prompt writ petition. An appellate court can review a claim of judicial bias only by writ; it cannot review such a claim on appeal. (Code Civ. Proc., § 170.3, subd. (d); People v. Brown (1993) 6 Cal.4th 322, 335-336; Roth v. Parker (1997) 57 Cal.App.4th 542, 547-549.) Failure to pursue a statutory bias claim will also bar a nonstatutory, constitutional bias claim. (Brown, supra, at pp. 335-336; Roth, supra, at pp. 547-549.)
We need not decide whether the trial court's comments were "inappropriate." The Spencers argue that Secured's right, if any, to repossess the pickup was not legally relevant. Even if so, however, we review the trial court's ruling independently. (See part IV.A., ante.) Accordingly, even assuming the trial court did consider irrelevant matters, the Spencers are not prejudiced. (Cal. Const., art. VI, § 13.)
V
EMPIRE'S APPEAL
Empire contends that in June 2015, the trial court erred by vacating the dismissal and reinstating the case. Empire further contends that the trial court erred by denying its second motion to intervene. Meanwhile, the Spencers contend that Empire's appeal is untimely because Empire had to appeal, if at all, from the denial of its first motion to intervene.
Empire represents that, if we affirm the judgment in the Spencers' appeal, then all of these issues are moot. We agree. We therefore do not reach these issues.
VI
DISPOSITION
In the Spencers' appeal, the judgment is affirmed. Empire's appeal is dismissed as moot in light of the outcome of the Spencers' appeal. Each side shall bear its own costs.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAMIREZ
P. J. We concur: McKINSTER
J. MILLER
J.