Opinion
B229828
08-29-2011
CAPITAL GOLD GROUP, INC., Plaintiff and Respondent, v. WENDY DAVIS, Defendant and Appellant.
Law Offices of Paul T. Locke and Paul T. Locke for Defendant and Appellant. Skousen Law, Robert James Skousen and Lisa A. Stilson for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Los Angeles County Super. Ct. No. BC409270
APPEAL from a judgment of the Superior Court of Los Angeles County. Malcolm H. Mackey, Judge. Reversed.
Law Offices of Paul T. Locke and Paul T. Locke for Defendant and Appellant.
Skousen Law, Robert James Skousen and Lisa A. Stilson for Plaintiff and Respondent.
Wendy Davis appeals from the judgment entered against her on the complaint filed by Capital Gold Group, Inc. (Capital Gold). We reverse.
BACKGROUND
On February 3, 2006, Davis filed suit against Capital Gold and two individual defendants, alleging five claims including breach of contract and fraud. According to the allegations of her complaint, Davis had entered into a contract with Capital Gold to purchase gold coins. After she paid the purchase price of $20,886, she found that she had been misinformed about the value of the coins, and she attempted to rescind the contract. Capital Gold refused her request for rescission, and she never received the coins or a refund of the purchase price.
Capital Gold did not timely file a response to the complaint. On July 25, 2006, the trial court entered a default judgment in favor of Davis in the amount of $36,017.85, consisting of the $20,886 purchase price and $10,000 in general damages (in her default prove-up, Davis claimed to have suffered "at least $100,000 in general damages" because of emotional trauma and stress-induced physical symptoms), plus attorney fees, interest, and costs.
On August 17, 2006, Davis obtained a writ of execution to enforce the judgment. On November 30, 2006, the levying officer levied upon Capital Gold's bank account, obtaining $36,917.77 and transferring that amount to Davis.
On January 30, 2007, Capital Gold moved to set aside the default judgment on the basis of extrinsic mistake. According to Capital Gold, its failure to file a response to the complaint was the result of a miscommunication between local counsel and a process server. Capital Gold also contended, contrary to the allegations of Davis's complaint, that Capital Gold sent Davis the purchased coins, she returned them, and Capital Gold "disposed of them "[i]n order to mitigate damages."
Capital Gold did not explain what damages it was attempting to mitigate, given that it apparently concedes that it was in possession of both the coins and the purchase money tendered by Davis.
On March 6, 2007, the trial court granted Capital Gold's motion and set aside the default judgment. The court also awarded Davis $4,500 in attorney fees and costs.
On May 15, 2007, Davis voluntarily dismissed her complaint without prejudice.
On March 9, 2009, nearly two years after the dismissal, Capital Gold filed suit against Davis and her attorney, alleging claims for conversion and restitution and a common count for money had and received. According to the allegations of the complaint, Capital Gold demanded that Davis return the $36,917.77 after the default judgment was set aside, but Davis failed to do so. By its complaint, Capital Gold sought to recover the $36,917.77, punitive damages, attorney fees, costs, and "such other, further, and different relief as the [c]ourt deems just and proper."
Davis contends that Capital Gold waited to file suit until after expiration of the statute of limitations on her fraud claim.
Capital Gold moved for summary adjudication, contending that there were no material factual disputes concerning either the conversion claim or Davis's liability for punitive damages. The court granted the motion but also ruled that Davis was entitled to a trial on the amount of punitive damages.
When the matter came on for trial on August 30, 2010, the court appeared to have reconsidered its ruling on the conversion claim, stating, for example, that "this is a case of restitution, not necessarily conversion," and "I'll grant it on restitution, not on conversion." After further colloquy with counsel, however, the court said "conversion and restitution, I'm going to find both areas." Also, when Davis's counsel pointed out that entitlement to restitution would depend on the "equities," the court responded that "the equities are certainly in [Capital Gold's] favor" because it was "improper" for Davis to have dismissed her complaint after the default judgment was vacated. (Similarly, the court later said "[i]t was a sneaky trick of counsel in dismissing the case" after the default judgment was vacated.) The court nonetheless expressed uncertainty as to Capital Gold's entitlement to punitive damages, because the court was not sure whether Davis (as opposed to her former counsel) had done anything sufficiently willful and malicious to warrant punitive damages.
The attorney representing Davis in Capital Gold's suit, both in the trial court and on appeal, is not the same attorney who represented Davis in her underlying suit against Capital Gold.
The court then conducted a brief trial at which Davis and her former counsel were the only witnesses. Davis's present counsel repeatedly attempted to introduce evidence concerning the facts of the underlying litigation, namely, that before Davis executed on the default judgment, Capital Gold retained both the gold coins and the purchase money Davis had paid. The court, however, refused to admit evidence of those facts, concluding that "[w]hat happened in the prior case, that's irrelevant."
As far as we can determine, Capital Gold has never denied either of these facts, either in the trial court or on appeal.
At the conclusion of trial, the court orally found in favor of Capital Gold on its claim for restitution ("the court finds restitution is in order"; "[t]his is restitution"). The court rejected the claim for punitive damages because Capital Gold had not "shown any assets of [Davis]," among other reasons. The court's minute order states that the court "finds restitution and conversion" in the amount of $36,917.77 but "denies the request for punitive damages." The judgment, however, does not mention restitution and states only that at trial the court "confirmed its ruling" in favor of Capital Gold on the conversion claim. The judgment awarded Capital Gold $36,917.77 plus costs and 10 percent interest, for a total of $51,555.91 as of August 30, 2010. Davis timely appealed.
STANDARD OF REVIEW
We review the trial court's ruling on a motion for summary adjudication de novo. (Certain Underwriters at Lloyd's of London v. Superior Court (2001) 24 Cal.4th 945, 972.) We review the trial court's evidentiary rulings for abuse of discretion. (Gordon v. Nissan Motor Co., Ltd. (2009) 170 Cal.App.4th 1103, 1111.)
DISCUSSION
Davis argues that the trial court erred by granting summary adjudication on Capital Gold's conversion claim and abused its discretion at trial by excluding evidence of the facts of the underlying litigation. We agree.
I. Conversion
The elements of conversion are "(1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages." (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) Capital Gold has introduced no evidence tending to prove the first element. Davis obtained funds from Capital Gold by means of a valid levy on Capital Gold's bank account, pursuant to a valid writ of execution issued on a valid judgment. Title and all possessory rights to those funds were thereby transferred to Davis. Capital Gold has introduced no evidence that title or any possessory rights were transferred back to Capital Gold. The order vacating the default judgment did not bring about such a transfer, just as the default judgment did not, by itself, transfer title to Davis.
Because it is unnecessary to our decision, we do not address the issue of whether Capital Gold's conversion claim falls within the exception to the general rule that money cannot be converted. (See, e.g., Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229, 235.)
In the trial court, Capital Gold cited two cases for the proposition that "once the default judgment was vacated, ownership of the seized funds immediately reverted back to [Capital Gold]," but neither case so holds. In Levy v. Drew (1935) 4 Cal.2d 456, the court stated that "[a]fter reversal" of a judgment, the plaintiff "stands in the position of a trustee of [the defendant] of the property obtained under the judgment." (Id. at p. 459.) The case does not hold that such a plaintiff is a trustee—and thus that equitable title automatically vests in the defendant—but rather that such a plaintiff stands in the position of a trustee. The meaning of that statement is clarified by the case that Levy v. Drew cites, Ward v. Sherman (1909) 155 Cal. 287. There, the Supreme Court explained that a court may order restitution "where justice requires it" and that if restitution is sought in a separate action, then the defendant in that action (i.e., the plaintiff in the underlying litigation) "must account for the property received under the judgment which has been reversed and the rule governing the extent of [the defendant's] liability is that applicable to a trustee." (Id. at p. 291.) Thus, neither Levy v. Drew nor the authorities on which it relies provides any support for the contention that the order vacating the default judgment automatically transferred title or possessory rights in the levied funds to Capital Gold.
The other case cited by Capital Gold, Stegge v. Wilkerson (1961) 189 Cal.App.2d 1, 5, holds only that it was proper for the trial court to recall and quash a writ of execution after setting aside the default judgment on which the writ was based. That holding does not show that the order setting aside the default judgment transferred to Capital Gold title or possessory rights in the funds that Davis had properly obtained by means of a valid writ of execution issued on a valid judgment.
For all of the foregoing reasons, we conclude that the trial court erred by granting summary adjudication on Capital Gold's conversion claim.
II. Exclusion of Evidence at Trial
At the trial of Capital Gold's restitution claim, Davis attempted to introduce evidence of the facts of the underlying litigation in order to show that before she filed suit, obtained the default judgment, and levied on Capital Gold's bank account, Capital Gold retained both the purchase money she had tendered and the gold coins. The trial court excluded such evidence on the ground that the facts Davis sought to prove were irrelevant. Those evidentiary rulings were abuses of discretion.
In its action to recover the funds that Davis obtained pursuant to the writ of execution on the default judgment, Capital Gold "has no absolute right to an order for restitution." (Bank of America, etc. v. McLaughlin (1940) 37 Cal.App.2d 415, 418 [hereafter Bank of America].)Rather, the trial court has discretion to grant or deny restitution, and "restitution may be denied where it would be inequitable to grant such restitution." (Ibid.)
The facts that Davis attempted to prove—namely, that before she filed suit Capital Gold still had both her purchase money and the gold coins—were certainly relevant to determining whether it would be inequitable to grant restitution. The trial court therefore abused its discretion by concluding that those facts were irrelevant.
The trial court apparently based its evidentiary rulings in this regard on two different arguments, but neither has merit. First, the court appears to have believed that Davis's dismissal of her original lawsuit was in some way improper, "a sneaky trick." The dismissal was not, however, improper in any way. After properly levying on Capital Gold's account pursuant to a valid writ of execution on a valid judgment, Davis had obtained all of the relief she sought—she thought the matter "was settled." She had an absolute right to dismiss her complaint, and it was reasonable for her to decline to expend further resources on litigating it. The dismissal in no way prejudiced Capital Gold's rights, because Capital Gold could seek restitution either by motion in the original action or by an independent action such as this one. (Bank of America, supra, 37 Cal.App.2d at pp. 417-418.) For all of these reasons, Davis's dismissal of her complaint was not improper and provides no basis for excluding evidence of the underlying facts.
Second, the court appears to have believed that because Davis no longer had a judgment in the original litigation, the facts underlying that litigation were irrelevant. For example, when Davis's counsel requested "an offset for the money that [Capital Gold] kept," the court responded that "There's no offset because . . . you have no judgment." That reasoning too was erroneous. The underlying facts are relevant to determining whether it would be inequitable to grant restitution. The absence of a favorable judgment in the original action does not preclude an inquiry into those facts. Indeed, in Bank of America, the original judgment had been reversed with directions to enter judgment in favor of the defendant, but the trial court still denied restitution on the basis of an inquiry into the underlying facts, and the Court of Appeal held that it would have been an abuse of discretion to grant it. (Bank of America, supra, 37 Cal.App.2d at pp. 416-419.)
For all of the foregoing reasons, the trial court abused its discretion when it excluded evidence of the underlying facts on the ground that those facts were irrelevant to determining whether it would be inequitable to grant restitution.
DISPOSITION
The judgment is reversed and the matter is remanded for further proceedings consistent with this opinion. Appellant shall recover her costs of appeal.
NOT TO BE PUBLISHED.
ROTHSCHILD, J. We concur:
MALLANO, P. J.
JOHNSON, J.