Opinion
B291825
04-03-2020
SABINE KANEKO, as Successor in Interest, etc., Plaintiff and Appellant, v. TOSHIO MASUI, Defendant and Respondent.
Sabine Kaneko, in pro. per., for Plaintiff and Appellant. Law Offices of Robert W. Cohen and Robert W. Cohen, for Defendant 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. SC025245) APPEAL from an order of the Superior Court of Los Angeles County, Gerald Rosenberg, Judge. Reversed. Sabine Kaneko, in pro. per., for Plaintiff and Appellant. Law Offices of Robert W. Cohen and Robert W. Cohen, for Defendant and Respondent.
In the 1990s, Erika Kaneko (Erika) loaned money to her then son-in-law, defendant and respondent Toshio Masui (Toshio). In 1993, she sued him to recover that money, and in 1996, she obtained a default judgment against him because he did not respond to her amended complaint. More than two decades later, Toshio filed a motion to vacate the default judgment, arguing the entry of default was improper and the resulting default judgment was void because he had in fact filed an answer to Erika's initial complaint. The trial court granted the motion, and plaintiff and appellant Sabine Kaneko (Sabine), Erika's daughter and successor, then moved the trial court to vacate that order or grant her a new trial. The trial court denied Sabine's motion and she appeals that denial. We consider whether the default judgment entered against Toshio was void because, as Toshio contends, his answer to the original complaint sufficed as a response to the amended complaint.
I. BACKGROUND
A. The Original Complaint and Answer
Erika filed her initial form complaint in this matter in July 1993. It alleged three causes of action against Toshio, who was the only named defendant. Each cause of action was asserted on a separate, individually labeled attachment form. The causes of action were for "Fraud," "Breach of Contract," and "Common Counts." The complaint prayed for damages in the amount of $229,407, interest and attorney fees according to proof, $750,000 in punitive damages, and such other legal and equitable relief the court deemed just and proper.
The common counts asserted were for open book account, an account stated in writing, money had and received, and money lent or paid to defendant at defendant's request.
The fraud cause of action asserted theories of intentional or negligent misrepresentation, concealment, and promise without intent to perform. All three theories were premised on allegations that Erika loaned money to Toshio in reliance on representations he would invest the money in real estate and repay the funds, Toshio later told Erika he had not invested the money, Erika then demanded he return it, and Toshio stated he no longer had the money and never repaid her.
The breach of contract cause of action was similarly based on allegations Erika had entered into an oral contract with Toshio pursuant to which Erika had loaned Toshio money that he was to invest in real estate and later repay. Erika alleged Toshio had given her notice that he had failed to perform the contract, stated he intended to repay the money, and failed to do so.
Toshio filed a form answer to this original complaint, asserting a general denial. The answer also asserted six affirmative defenses: failure to state a cause of action, failure to exercise reasonable care, laches, statute of limitations, statute of frauds, and an assertion that all funds given were gifts.
B. The First Amended Complaint
Erika filed a first amended complaint in May 1994. The amended complaint, which was also a form complaint, again sought damages from Toshio in the amount of $229,407, interest and attorney fees according to proof, punitive damages, and further legal and equitable relief as the court deemed just and proper. It asserted the same fraud and breach of contract causes of action, as well as the same common counts claim. Each cause of action was again presented in its own attachment. The factual allegations underlying the fraud and breach of contract claims against Toshio alone were the same in the first amended complaint as they had been in the original complaint.
The amended complaint did, however, make some substantial changes. It named two additional defendants: Hideaki Masui (Toshio's father) and H. Masui and Company (the Company). It also included three additional "Cause Of Action" attachments: an additional concealment cause of action against all defendants; a cause of action for "Intentional Tort," which the attachment further specified was for "Conversion" against all defendants; and an additional common counts claim against all three defendants.
In support of the additional concealment cause of action, the amended complaint alleged the following. Toshio represented to Erika that a certain property located in Pacific Palisades (the Pacific Palisades property) and three other properties would be purchased by Toshio and Sabine with the money Erika loaned to Toshio (along with other funds), Erika's loan would be protected by the purchases, and the properties could be sold and her loan repaid from the proceeds. The Pacific Palisades property was purchased in the names of Toshio and Sabine, but the down payment was made by the Company. The Company then owned and managed the Pacific Palisades property for its own benefit and treated it as though it was owned by the Company. It also paid its investors sums obtained from a loan drawn upon the equity of the properties.
The new fraud by concealment cause of action further alleged Erika suffered damages because she had not received a return of the money she loaned Toshio and because all defendants "wrongfully extracted equity from [the Pacific Palisades property] and said other properties which was for the protection of the monies loaned by [Erika]."
The amended complaint's new conversion cause of action incorporated by reference all the other allegations in the complaint and further alleged all three defendants had wrongfully converted equity from the properties which was for the protection of the monies loaned by Erika.
C. Entry of Default and Subsequent Proceedings
In September 1994, some four months after the amended complaint was filed, Erika filed a request for entry of default against Toshio and the Company; neither had filed a response to the amended complaint. Default was entered by the clerk against both defendants the same day.
The following month, Hideaki filed an answer to the complaint, generally denying the causes of action and asserting affirmative defenses. Around the same time, the U.S. Bankruptcy court issued a notice indicating Toshio had filed for bankruptcy under Chapter 7 of the Bankruptcy Code.
The same attorney represented all three defendants (i.e., Toshio, Hideaki, and the Company) in the trial court.
In December 1994, Erika and the Company entered into a stipulation pursuant to which the default entered against the Company was set aside, and the Company was permitted to file an answer to the First Amended Complaint.
In January 1995, Toshio's bankruptcy case was dismissed. Later that same year, Erika filed a motion for sanctions against Hideaki and the Company, seeking to have their answers to the complaint stricken and default entered against them, as well as seeking the payment of monetary sanctions based on their failure to obey court orders and respond to discovery. The trial court granted the motion and struck the answers. The court also set a trial date for Erika to prove up the defaults.
In early 1996, Erika filed a request for entry of a default judgment. Erika, her counsel, and Sabine filed declarations in support of the request. The memorandum of points and authorities filed with the request argued defendants had committed fraud and conversion and asked the trial court to enter judgment based on those causes of action. The trial court held a hearing and entered default judgment against Toshio, Hideaki, and the Company. The court awarded Erika the $229,407 demanded in the complaint, interest through December 31, 1995, in the amount of $155,280.40, daily interest from January 1, 1996, through the date of judgment in the amount of $5,340.55, punitive damages in the amount of $250,000, and costs in the amount of $308.
As discussed in greater detail in our previous opinion regarding this dispute, Kaneko v. Masui (Sept. 29, 2017, B275389) [nonpub. opn.], Erika renewed the judgment in 2006, and Sabine renewed it again in 2015 as Erika's successor in interest. Toshio moved to vacate the renewed judgment later that year, the trial court denied his motion, and we affirmed the denial.
D. Toshio's Most Recent Motion to Vacate the Default Judgment
In December 2017, Toshio filed a motion under Code of Civil Procedure section 473, subdivision (d), seeking to vacate the 1994 entry of default and the 1996 default judgment. He argued the default entered against him was incompatible with due process because he had filed an answer denying the allegations of Erika's original complaint. Toshio additionally contended the default judgment was void because he had filed an answer to the original complaint, the material allegations against him had not changed in the amended complaint, and he had thus not defaulted. Sabine opposed Toshio's motion to vacate.
The trial court granted Toshio's motion and set aside the default judgment against him. The notice of ruling filed by Toshio states the trial court gave the following justification for its decision: "[T]he default entered September 21, 1994 was improper because Toshio Masui had filed an answer on February 4, 1994, denying [Erika's] claims against him. [Erika's] first amended complaint, filed May 31, 1994, did not require a new answer or other response from Toshio . . . because the substantive factual claims in both complaints were essentially identical and his denial of the claims of the original complaint thus served equally as a denial of the claims of the amended complaint. The default and ensuing judgment against Toshio . . . were accordingly void and properly set aside. See Carrasco v. Craft (1985) 164 Cal.App.3d 796, 808-809."
Sabine responded by filing her own motion to set aside the order vacating the judgment that the trial court just made. Sabine's motion argued the judgment was valid—or at most voidable but not void, in which case the time to challenge it had long since passed. In the alternative, Sabine also moved for "a new trial."
The trial court denied Sabine's motion to undo its prior order. The court explained the request for a new trial was procedurally improper because there had been no trial where the court decided an issue of fact or law. Instead, the court reasoned, it vacated an existing judgment, which the court believed it had the power to do pursuant to Code of Civil Procedure section 473, subdivision (d).
Sabine appeals both the ruling vacating the 1996 default judgment against Toshio and the subsequent ruling denying her motion to set aside that order.
II. DISCUSSION
When Erika filed her first amended complaint in 1994, she included allegations and a claim for conversion that had not been alleged in her original complaint. The differences were substantive, not formal or immaterial, and changed the cause of action she alleged against Toshio. As a result, Toshio was required to file an answer responding to the new allegations and new conversion claim in the amended complaint. Because he did not, the default judgment entered against him was valid and the trial court should not have vacated it.
A. Standard of Review
The trial court in this case granted Toshio's motion to vacate the default judgment under section 473, subdivision (d), which provides in pertinent part that trial courts "may, on motion of either party after notice to the other party, set aside any void judgment or order." (Code Civ. Proc., § 473, subd. (d).) The use of the word "may" in subdivision (d) "makes it clear that a trial court retains discretion to grant or deny a motion to set aside a void judgment." (Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 495.) Subdivision (d) does not, however, empower a trial court to vacate a judgment that is not void. (Id. at 495-496; see also Pittman v. Beck Park Apartments Ltd. (2018) 20 Cal.App.5th 1009, 1020 (Pittman.) "The trial court's determination whether an order is void is reviewed de novo; its decision whether to set aside a void order is reviewed for abuse of discretion." (Pittman, supra, at 1020.)
B. The Default Judgment Was Not Void
The determinative question in this appeal is whether the trial court correctly concluded the 1996 default judgment was void. Sabine asserts the default judgment was valid, arguing, among other things, that Toshio was required to respond to the amended complaint but failed to do so. Toshio maintains the default judgment was void, arguing the trial court was right to conclude the amended complaint did not require a new response, and that his answer to the original complaint served to controvert the allegations of the amended complaint. Sabine is right.
When a plaintiff amends a complaint, the "amended complaint supersedes the original complaint and thereafter the original complaint performs no function as a pleading." (Darsie v. Darsie (1942) 49 Cal.App.2d 491, 493-494.) Generally, if the defendant does not respond to the amended complaint within 30 days of its service, default may be entered. (Code Civ. Proc., § 471.5, subd. (a) ["[t]he defendant shall answer the amendments . . . within 30 days after service . . . and judgment by default may be entered upon failure to answer, as in other cases"].)
But this general rule, unsurprisingly, has exceptions. As articulated by our high court long ago: "Th[e] rule is without application . . . where the amendment is merely as to formal or immaterial matters, and does not change the cause of action; nor does it apply where the original plea or answer set forth a sufficient defense to the declaration or complaint as amended." (Gray v. Hall (1928) 203 Cal. 306, 311 (Gray).) This exception for immaterial amendments was applied in the case cited by the trial court, Carrasco v. Craft (1985) 164 Cal.App.3d 796, 811 (Carrasco), which held entry of default and default judgment against the defendants was error where their answer to the original complaint could stand as an answer to the amended complaint. After comparing the original and amended complaints, the court concluded that, as to the pertinent defendants, the amended complaint merely clarified or corrected allegations pled in the original complaint, and neither changed the causes of action pled nor stated any new causes of action. (Id. at 809-811.)
As it pertains to Toshio, there are two key differences between the original complaint and the amended complaint. First, the amended complaint includes additional allegations that concern him specifically. While some merely provide additional detail regarding events described in the original complaint, two aspects of the amended complaint go further and are meaningful, substantive alterations of the original. First, the amended complaint alleged Toshio "wrongfully extracted equity from [certain properties] which was for the protection of the monies loaned by plaintiff," and distributed those funds to investors in the Company. These facts, and the extraction of equity elaboration on the theory of liability were not alleged in the initial complaint. Second, the amended complaint contains a new count—a cause of action for "Intentional Tort," namely, conversion, based in large part on those new allegations. These two changes were neither immaterial nor formal, and they required an additional response.
These features of the amended complaint are also why the analogy to Carrasco, supra, 164 Cal.App.3d 796 breaks down. There, the court concluded the differences in the amended complaint merely corrected or clarified other previously pled facts regarding the pertinent defendants. (Id. at 809-811.) The Carrasco court acknowledged there were two causes of action added by the amended complaint, but noted they did not relate to the defendants who were appealing their default judgment. Here, in contrast, the amended complaint pled a new count for conversion against Toshio, based in part on new allegations regarding Toshio's actions. Toshio never filed an answer controverting those additions, and without such a contradiction, the entry of default was proper.
Toshio resists this conclusion because he believes the added conversion count does not amount to a new cause of action. He cites a series of cases that define the term "cause of action" and distinguish between "causes of action" and "counts." (E.g., Bay Cities Paving & Grading v. Lawyers' Mutual Ins. Co. (1993) 5 Cal.4th 854, 860 ["'the invasion of one primary right gives rise to a single cause of action'"] (Bay Cities); Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 625 ["cause of action" is defined in accord with "primary rights" theory and "[p]rimary rights must be distinguished from the relief sought"].) In other words, Toshio contends that because the primary right asserted in both the original and amended complaint was the same, both complaints asserted identical causes of action and his answer to the original complaint should operate as a denial of everything in the amended complaint.
The argument is in two ways mistaken. First, though Toshio acknowledges the terms "cause of action" and "count" are often used "interchangeably," and the "usage is in fact 'imprecise' and 'indiscriminate,'" he nevertheless assumes Carrasco meant "cause of action" as in "primary right" rather than "count." Nothing in Carrasco nor Gray, however, indicates the primary rights doctrine governs the analysis of whether an amended complaint is sufficiently changed as to require a new responsive pleading. Second, and more importantly, neither Carrasco nor Gray hold only a new cause of action requires a defendant to file a new answer in response to an amended complaint. Rather, the exception that eliminates the need to file a new answer applies only where the amendment is immaterial or formal and "does not change the cause of action." (Carrasco, supra, 164 Cal.App.3d at 809; Gray, supra, 203 Cal. at 311.) Even if we assume the conversion claim was not a "new" cause of action, its addition constituted a change to the cause of action alleged against Toshio.
"[T]he phrase 'cause of action' is 'often used indiscriminately to mean what it says and to mean counts which state differently the same cause of action, . . . '" (Slater v. Blackwood (1975) 15 Cal.3d 791, 796; see also Bay Cities, supra, 5 Cal.4th at 860, fn. 1.)
Ford v. Superior Court (1973) 34 Cal.App.3d 338 (Ford) suggests the opposite. In Ford, the plaintiff's original complaint included two causes of action against defendant Ford. Ford did not answer the complaint and default was entered. The plaintiff then filed two amendments to the complaint and, after that, obtained a default judgment against Ford. (Id. at 341.) Ford moved to vacate the judgment as void and the trial court denied the motion. (Id. at 342.) The court of appeal reversed, reasoning in part that both of the plaintiff's amendments made changes of substance, not form, and thus opened up Ford's default on the original complaint. The court described the first amendment as "purport[ing] to state a new cause of action against all defendants . . . for additional damages," and the second as "purport[ing] to state an alternative cause of action to the second count of the original complaint." (Id. at 343.) The court further noted the second amendment "was based on a different legal theory, negligent misrepresentation as opposed to fraudulent misrepresentation[,]" with no suggestion that a primary rights analysis was required to conclude "[t]hese changes cannot be considered mere matters of form." (Id. at 343.) --------
Finally, Toshio argues he was independently relieved of his obligation to file a new answer because his answer to the original complaint, which asserted a general denial, controverted every allegation of the amended complaint. While Toshio is correct that the answer controverted those allegations in the amended complaint that were substantively asserted in the original complaint, this does not mean the answer served as a response to the new substantive allegations. Rather, the contrary is the case, as even Carrasco recognizes. (Carrasco, supra, 164 Cal.App.3d at 809 [an "'"original answer stands as [a defendant's] answer to the amended complaint; and in such case [the defendant] will not be in default except as to the additional facts set up in the amended complaint[ ] and not put in issue by the answer"'"].)
Because the default judgment was not void, the trial court's decision to grant the motion vacating the default judgment for voidness was an abuse of discretion. (David v. Hernandez (2014) 226 Cal.App.4th 578, 590 [trial court abuses its discretion where decision is based on an error of law].)
DISPOSITION
The trial court's order is reversed. Appellant is awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, Acting P. J. We concur:
MOOR, J.
KIM, J.