Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County, Ronald L. Bauer, Judge. Los Angeles County Super. Ct. No. BC302996
Judge of the Orange Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Overland Borenstein Scheper & Lim, Mark A. Borenstein for Plaintiffs and Appellants.
KLEIN, P.J.
Morrison & Foerster, David F. McDowell and Sylvia Rivera for Defendants and Respondents Superior Court of California, County of Los Angeles, and John A. Clarke, Executive Officer and Clerk of the Superior Court of California, County of Los Angeles.
Manning & Marder, Kass, Ellrod, Ramirez, Patrick L. Hurley and Sylvia E. Havens for Defendants and Respondents J. Tyler McCauley and County of Los Angeles.
Plaintiffs and appellants Mark E. Overland (Overland), Overland & Borenstein LLP (O & B) and Pamela Poloski (Poloski) (collectively, plaintiffs) appeal a judgment following a grant of summary judgment in favor of defendants and respondents Superior Court for the County of Los Angeles, John A. Clarke, the court’s executive officer and clerk (the court defendants) as well as the County of Los Angeles and J. Tyler McCauley, the county’s auditor-controller (the county defendants) (collectively, defendants).
The issue presented is whether defendants’ refusal to pay the plaintiffs post-exoneration interest on their cash bail deposits constitutes a taking of private property for which plaintiffs are entitled to just compensation.
The obligation herein is contractual and is defined by statute as well as by the language of the contract. The statutory scheme does not provide for exoneration and refund of the bail deposit to occur simultaneously. (Pen. Code, § 1297 [deposit to be returned within 10 days after depositor submits claim].) Unreasonable delay in returning the bail deposit conceivably could give rise to a contract claim. However, delay in returning the bail deposit does not amount to an unconstitutional taking. Therefore, the judgment is affirmed.
All further statutory references are to the Penal Code, unless otherwise indicated.
FACTUAL AND PROCEDURAL BACKGROUND
1. Background.
On September 1, 2000, attorney Overland posted cash bail with the Los Angeles County Sheriff’s Department in the amount of $500,000 by way of a cashier’s check to secure the release of his client, Abdul Aziz Mohd Alkhelaifi in People v. Alkhelaifi (Super. Ct. L.A. County, No. BA206456). Overland did not use his own money for the cash bail deposit but he was the depositor. The sheriff transferred the $500,000 to the superior court clerk, who deposited the bail money with the county’s auditor-controller into the Los Angeles County TK7 Trust Fund on September 21, 2000. On June 19, 2001, the $500,000 bail was exonerated by court order. A check dated July 26, 2001 was issued to Overland in the amount of $500,000; the envelope containing the check was postmarked August 3, 2001. No interest was included with the refund payment. Overland made two requests to the superior court’s accounting division for interest on the deposit. No interest was paid to him.
The statutory scheme in the Penal Code “provides various alternatives for posting bail. A defendant may be released from custody upon (1) execution of a bail bond or undertaking of bail by an admitted surety insurer (§ 1276); (2) deposit by the defendant or any other person of cash in the amount of the bail (§§ 1295, 1296); (3) deposit by the defendant or any other person of bonds of the United States or State of California ‘of the face value of the cash deposit required’ (§ 1298); or (4) provision by the defendant or any other person of equity in real property equal to twice the amount of the cash deposit required (§ 1298).” (Overland v. Superior Court (2005) 126 Cal.App.4th 131, 141 (Overland I).
Money deposited into the TK7 Trust Fund earns interest which is deposited into the Los Angeles County general fund for general fiscal purposes. For the period January 1, 2000 to December 31, 2002, the fund held in the TK7 Trust Fund earned a rate of return between 2.45 and 6.38 percent.
Pamela Poloski deposited cash bail on December 20, 2002, in the amount of $35,000 by way of cashier’s check to secure the presence of Robert Poloski in People v. Robert Alan Poloski (Super. Ct. L.A. County, No. PA042651). The procedures followed in the Alkhelaifi case also were used in the Poloski action. On February 10, 2003, the $35,000 bail was exonerated. Poloski did not receive the $35,000 back until about March 25, 2003. No interest was included with the refund payment.
O & B is a law firm which, on July 12, 2003, deposited cash bail in the amount of $250,000 by way of a cashier’s check to secure the appearance of Leonard McSherry in People v. Leonard James McSherry (Super. Ct. L.A. County, No. 3BH00547-01). The money belonged to McSherry. The $250,000 bail was exonerated on July 25, 2003. The cash bail was returned to O & B on September 5, 2003, without interest.
2. Pleadings.
On September 26, 2003, the three plaintiffs filed the instant action for “unlawful taking without compensation; unjust enrichment; injunctive relief; declaratory relief and petition for writ of mandate to compel payment of interest.”
The complaint’s first cause of action pled an “unlawful taking of property without compensation against all defendants-interest earned between deposit and exoneration.”
The second cause of action alleged an “unlawful taking of property without compensation against all defendants-interest earned between exoneration and return.”
Additionally, the complaint pled a cause of action for unjust enrichment, and requested injunctive and declaratory relief, as well as a writ of mandate directing defendants to pay interest on cash bail deposits.
The complaint also requested private attorney general fees pursuant to Code of Civil Procedure section 1021.5.
3. Trial court sustained demurrer without leave to amend as to first cause of action for pre-exoneration interest; in Overland I we upheld that ruling.
The court defendants filed a motion for judgment on the pleadings or, in the alternative, demurrers to all claims asserted against them in the complaint. The matter was heard in the Orange County Superior Court. On March 17, 2004, the trial court overruled the demurrer to the second cause of action (relating to post-exoneration interest), and otherwise sustained the demurrers without leave to amend. With regard to the first cause of action, for pre-exoneration interest, the trial court ruled Fresno Fire Fighters v. Jernagan (1986) 177 Cal.App.3d 403 (Fresno) controlled and precluded an award of interest. As to the second cause of action, for post-exoneration interest on bail, the trial court determined the Fresno case did not control.
Plaintiffs and the county defendants subsequently stipulated the trial court’s March 17, 2004 order on the demurrers interposed by the court defendants “will be deemed applicable” to the county defendants.
Plaintiffs thereafter brought a petition for writ of mandate, seeking review of the trial court’s order sustaining the demurrer to their first cause of action without leave to amend. Plaintiffs contended that in light of the United States Supreme Court’s decisions in Phillips v. Washington Legal Foundation (1998) 524 U.S. 156 [141 L.Ed.2d 174] (Phillips) and Brown v. Legal Foundation of Wash. (2003) 538 U.S. 216 [155 L.Ed.2d 376] (Brown), the Court of Appeal’s decision in Fresno, supra, 177 Cal.App.3d 403, was no longer good law, and their first cause of action stated a claim for an unconstitutional taking of pre-exoneration interest without just compensation. We issued an order to show cause.
In Overland I, we denied the petition for writ of mandate, ruling the defendants’ retention of pre-exoneration interest did not amount to a taking. We held plaintiffs’ reliance “upon Phillips and Brown is misplaced. Those cases involved the involuntary taking by the government of private property, i.e., interest earned on client funds deposited in IOLTA accounts, for public use, namely, to fund legal services for low income individuals. Those circumstances implicate the Fifth Amendment, which requires the payment of just compensation when private property is taken for public use. However, those constitutional concerns are absent here. [¶] The court defendants’ refusal to pay petitioners interest on their cash bail deposits does not constitute a ‘taking’ because there was no confiscation of private property by the court defendants for a public purpose, or at all. Rather, when [plaintiffs] voluntarily deposited cash bail to free the criminal defendants from custody, [plaintiffs] entered into contracts with the government by which [plaintiffs] guaranteed the appearance of the criminal defendants released on bail at all required court proceedings.” (Overland I, supra, 126 Cal.App.4th at p. 140.)
Thus, the taking principles implicated in interest on lawyers trust account (IOLTA) cases were inapplicable -- the cash bail deposit is in the nature of a contract between the depositor and the government. (Overland I, supra, 126 Cal.App.4th at p. 140.) The contractual obligation “is defined by statute as well as by the language of the contract. [Citation.]” (Id. at p. 141.) The terms of the contract do not include a provision for interest on the deposit. (Id. at p. 140.) Further, the statutory scheme governing bail, section 1268 et seq., does not require the payment of interest on cash bail deposits and the Legislature has made no provision therefor. (Overland, supra, at p. 141.)
In sum, “the quid pro quo for the cash bail deposits which were posted herein was the release of the criminal defendants from custody. The contracts did not include a provision that [plaintiffs] would earn interest on the cash bail deposits.” (Overland I, supra, 126 Cal.App.4th at p. 142.) Therefore, we concluded plaintiffs were incapable of stating a cause of action for denial of pre-exoneration interest on their cash bail deposits and denied plaintiffs’ petition for writ of mandate. (Ibid.)
In Overland I, we also addressed the Fresno decision, on which the trial court had relied in ruling on the demurrer. Fresno held a county’s retention of interest accrued on cash bail deposits in criminal proceedings is not an unconstitutional taking of private property. (Fresno, supra, 177 Cal.App.3d at p. 413.) The Fresno court reasoned that bail money is deposited for a public purpose, namely, securing a defendant’s appearance, and the interest earned thereon is reasonably needed to support the court system. (Id. at p. 412.)
Following the issuance of Overland I, the California Supreme Court denied plaintiffs’ petition for review and the United States Supreme Court denied a petition for writ of certiorari.
4. Subsequent proceedings.
Following the resolution of Overland I, which involved pre-exoneration interest, plaintiffs filed a motion for summary judgment or summary adjudication with respect to their cause of action for post-exoneration interest. Plaintiffs contended the bail contracts terminated upon exoneration, when the trial court ordered return of the cash bail. However, the money was not immediately returned to plaintiffs. Forty five days elapsed between the date of exoneration and the date the bail was returned to Overland, and 42 days elapsed as to Poloski and O & B, during which time interest continued to accrue on the deposits. Plaintiffs argued defendants’ retention of the interest earned on the deposits after exoneration amounts to a taking of property for general county purposes, entitling them to just compensation.
The county defendants filed a competing motion for summary judgment/summary adjudication. The court defendants also filed a motion for summary judgment, or in the alternative, for judgment on the pleadings. Defendants’ papers contended plaintiffs lacked standing because they did not use their own money to post bail; plaintiffs were collaterally estopped from seeking post-exoneration interest; the return of the bail deposits within a matter of weeks was reasonable as a matter of law; and there was no “taking” to implicate the Fifth Amendment.
On May 15, 2006, the matter came on for hearing. The trial court denied plaintiffs’ motion and granted defendants’ motions and ordered entry of judgment in favor of defendants.
It is unclear from the record whether the trial court granted judgment on the pleadings or summary judgment in favor of defendants. The trial court merely ordered “entry of judgment.”
In ruling on the matter, the trial court stated: “[t]he claims presented for the takings assertion, some constitutional deprivation, don’t survive the Overland [I] analysis that I’ve read in that appellate opinion. Whether it be before exoneration or after exoneration, the question about the constitutional rights here I think has been resolved. This contract necessarily requires that it run its course through the reasonable opportunity to return the bail. [¶] . . . [T]hat can’t be an instantaneous event. . . . [¶] . . . I think that’s an unreasonable interpretation of the circumstances. The contract has to be read as running through completion, and through completion of the purpose of this voluntary contract includes the time necessary for a careful and reasoned and proper return of the money. It can’t be done instantaneously. Everyone has acknowledged that that’s the case. [¶] And therefore I think that the contract that is described in the Overland case is still in play, it’s a voluntary undertaking by the bailor who recognizes that he or she had alternatives and they’re all described in that case and chose this one. And that contact does not provide, by its terms, for any interest to the benefit of the bailor. And I think that’s the result that follows here, just as well as it followed in the first version of this case.”
Plaintiffs filed a timely notice of appeal from the judgment.
CONTENTIONS
Plaintiffs contend the trial court erred in granting defendants’ motion for summary judgment and in denying plaintiffs’ competing motion because defendants’ retention of interest earned after the trial court exonerates bail constitutes an unconstitutional taking. Plaintiffs seek a remand to the trial court to determine damages due them.
Defendants contend plaintiffs lack standing, plaintiffs are collaterally estopped from seeking post-exoneration interest, the county is not a proper defendant, and the retention of post-exoneration interest did not constitute a taking.
DISCUSSION
1. Plaintiffs had standing to sue.
Defendants’ theory is that plaintiffs lack standing because they merely showed they deposited the cash, but did not establish they owned the money. The contention lacks merit.
Section 1297 provides: “When money has been deposited, a receipt shall be issued in the name of the depositor. If the money remains on deposit at the time of a judgment for the payment of a fine, the clerk shall, under the direction of the court, if the defendant be the depositor, apply the money in satisfaction thereof, and after satisfying restitution to the victim or the Restitution Fund, fines, and costs, shall refund the surplus, if any, to the defendant. If the person to whom the receipt for the deposit was issued was not the defendant, the deposit after judgment shall be returned to that person . . . .” (Italics added.)
We conclude plaintiffs’ undisputed status as depositors is sufficient to confer standing.
2. No merit to defendants’ collateral estoppel argument; Overland I did not involve the issue of post-exoneration interest.
“Collateral estoppel precludes a party from relitigating in a second proceeding the matters litigated and determined in a prior proceeding. The requirements for invoking collateral estoppel are the following: (1) the issue necessarily decided in the previous proceeding is identical to the one that is sought to be relitigated; (2) the previous proceeding terminated with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party to or in privity with a party in the previous proceeding. [Citation.]” (Coscia v. McKenna & Cuneo (2001) 25 Cal.4th 1194, 1201, fn. 1, italics added.)
As set forth above, Overland I solely involved the trial court’s ruling on the first cause of action for pre-exoneration interest. The issue of post-exoneration interest was not before us in that writ proceeding and we did not purport to address that issue. (Overland I, supra, 126 Cal.App.4th at p. 142, fn. 8.) Therefore, we reject defendants’ collateral estoppel argument.
We now turn to the merits of the appeal.
3. The obligation herein is contractual; delay in returning the bail deposit does not give rise to a taking claim.
As explained in Overland I, the cash bail deposit is in the nature of a contract between the depositor and the government. (Overland I, supra, 126 Cal.App.4th at p. 140.) Plaintiffs assert that be that as it may, the contract terminates at the moment the trial court exonerates bail. The argument is unpersuasive. Pursuant to the statutory framework governing cash bail, the court defendants were contractually obligated to return the cash bail deposit only after exoneration.
The contractual obligation herein “is defined by statute as well as by the language of the contract. [Citation.]” (Overland I, supra, 126 Cal.App.4th at p. 141.) Section 1297 provides in relevant part: “If the person to whom the receipt for the deposit was issued was not the defendant, the deposit after judgment shall be returned to that person within 10 days after the person claims it by submitting the receipt, and, if a claim is not made within 10 days of the exoneration of bail, the clerk shall immediately notify the depositor of the exoneration of bail.” (Italics added.)
Therefore, we reject plaintiffs’ contention the contract requires exoneration of bail and return of the deposit to be simultaneous. Unreasonable delay in returning the bail deposit conceivably could give rise to a contract claim. However, delay in returning the bail deposit does not constitute a taking.
That issue is addressed in the next section of the opinion.
4. Plaintiffs have waived their argument that the delay in refunding the bail money constitutes a breach of contract.
On remand following Overland I, plaintiffs contended they were entitled to post-exoneration interest (second cause of action) to compensate them for the 42 or 45 day interval between exoneration by the court and refund of the monies. The proceedings on remand involved plaintiffs’ theory the denial of post-exoneration interest amounted to an unconstitutional taking. Plaintiffs did not plead or argue that delay in refunding the bail money constituted a breach of contract for which they were entitled to damages.
The proceedings on remand were as follows:
The plaintiffs filed a motion for summary judgment or in the alternative, for summary adjudication, contending that as a matter of law, the undisputed facts established that defendants had taken plaintiffs’ property, namely, the post-exoneration interest earned on the cash bail deposits, without just compensation.
The County defendants filed a competing motion for summary judgment or in the alternative, for summary adjudication.
The Court defendants also filed a motion for summary judgment or in the alternative, for judgment on the pleadings, contending plaintiffs had not alleged facts sufficient to state a takings claim and any delay in returning the money did not support a taking claim.
In ruling on the matter, the trial court found no requirement that the money be restored instantaneously, it rejected the taking claim and granted summary judgment or judgment on the pleadings for defendants.
On appeal, plaintiffs continued to adhere exclusively to their taking theory. For example, the appellants’ reply brief states at page three: “Appellants have never sought contract damages for the delay in returning the cash principal.” Similarly, page six thereof asserts “the right to the interest actually earned post exoneration is not dependent on any contractual rights under the bail contract identified in Overland I, but rather is governed by the Takings Clause of the Fifth Amendment and the due process clause of the Fourteenth Amendment.”
At the time of oral argument, the issue of contract damages was raised by this court on its own motion and this court requested supplemental briefing on the issue. However, we now conclude it is inappropriate at this juncture to inject the contract theory into this case.
It is well settled that on summary judgment, the issues are “framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent’s pleading.” (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064.)
Here, until the filing of their supplemental brief on appeal, plaintiffs have expressly eschewed a contract theory and have proceeded exclusively on their theory that denial of post-exoneration interest amounts to an unconstitutional taking. Given the state of the pleadings, the defendants were not required to negate a breach of contract claim in order to be entitled to summary judgment.
Had the plaintiffs properly raised their breach of contract claim in the trial court, defendants could have asserted any applicable contract defenses in moving for summary judgment. According to defendants, those defenses would have included: failure to file a government claim; statute of limitations; delay resulting from failure of plaintiffs to submit a proper receipt; Gov. Code section 12440 (warrant shall not be drawn unless authorized by law and unless specific appropriation available to meet it); and lack of privity.
Admittedly, plaintiffs might have pled a viable claim for breach of contract based on defendants’ delay in refunding the bail money after exoneration. However, it is too late to change the theory of the case at this late stage. It would be unfair to the defendants to reverse the grant of summary judgment in order to afford the plaintiffs to relitigate this matter as a contract action, especially because plaintiffs have expressly eschewed a contract claim until now.
Therefore, the contract claim is waived by plaintiffs’ failure to raise it earlier.
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.
We concur:
CROSKEY, J., ALDRICH, J.
We concluded that with respect to pre-exoneration interest, Fresno’s rejection of a claimed right to interest on cash bail in criminal proceedings was correct in result. However, we disagreed with Fresno’s rationale. The reason there is no right to pre-exoneration interest on cash bail is not that the money was deposited for a public purpose. Rather, no interest is owed because the bail deposit is made in accordance with the terms of a particular contract and the terms of that contract do not include a provision for pre-exoneration interest. (Overland, I, supra, 126 Cal.App.4th at p. 142.)