Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County No. SC084328, Joseph S. Biderman, Judge. Reversed.
Larry S. Greenfield for Defendants and Appellants.
Griffith & Thornburgh, John R. Rydell and Marisa K. Beuoy for Plaintiff and Respondent.
WILLHITE, Acting P. J.
Defendants Glen Tobias (Tobias) and Besdine Management Company (Besdine) appeal from the entry of default judgment against them obtained by plaintiff Michael Wang (Wang). We reverse.
BACKGROUND
On February 4, 2005, Wang filed a complaint against Tobias and Besdine arising out of a failed venture to manufacture and market an invention called the Flip Cup, a beverage container design to which Tobias held the intellectual property rights. According to the complaint, the Flip Cup Company was an entity in which Tobias owned the majority interest, and Besdine, a California corporation, owned the minority interest. At Tobias’s urging, Wang invested substantial sums in the Flip Cup Company, as well as additional funds to permit Tobias to acquire another company which held the rights to an invention similar to the Flip Cup. Wang alleged that his investments totaled approximately $7 million, and that Tobias engaged in various improper transactions with the funds without Wang’s knowledge. Wang alleged causes of action against Tobias and Besdine seeking damages for breach of implied contract, breach of the covenant of good faith and fair dealing, fraud, and libel.
Following denial of his motion to quash service of process and a motion for clarification, Tobias answered the complaint on August 1, 2005, and also filed a cross-complaint against Wang and certain other named cross-defendants. Besdine initially failed to answer Wang’s complaint and Wang took its default. However, the court later vacated the default, and Besdine (represented by the same attorney as Tobias) answered the complaint on September 9, 2005. It also apparently then joined in the cross-complaint earlier filed by Tobias. Wang answered the cross-complaint as to Tobias on August 29, 2005 and as to Besdine on September 22, 2005.
On December 7, 2005, Wang moved to compel Tobias’s deposition and to compel him to produce documents at the deposition. According to Wang’s attorney, he had noticed Tobias’s deposition for September 20, 2005. Tobias’s attorney gave notice that Tobias was unavailable and sought a meeting to discuss settlement. Wang renoticed the deposition for October 17, 2005 and consented to a meeting. Following the meeting, Tobias’s attorney gave notice that Tobias was unavailable for the October 17 deposition and suggested a deposition date of November 22, 2005. Wang agreed, but Tobias’s attorney later gave notice that Tobias would not appear.
Tobias opposed the motion to compel. His attorney argued that Wang was abusing the discovery process because although he demanded that Tobias appear for deposition, he himself had failed to respond to Tobias’s discovery requests in good faith.
On January 10, 2006, the trial court granted the motion to compel and ordered that Tobias’s deposition be completed within 30 days. Later, the attorneys for Tobias and Wang agreed to hold the deposition on February 3, 2006, and Wang served an amended notice of deposition and request to produce documents for that date. Two days before the scheduled deposition, however, Tobias’s attorney advised Wang’s attorney that Tobias would not appear for the deposition and would be filing a motion for a protective order regarding the request for production. On February 3, 2006, Tobias moved for a protective order on the ground that the amended notice of deposition contained an overly burdensome request to produce documents beyond the scope ordered by the court.
On the afternoon of February 6, 2006, Wang’s attorney faxed a letter to Tobias’s attorney stating that he had reviewed the motion for a protective order and found it meritless. He stated that he intended to apply ex parte on February 8 for an order compelling Tobias to appear at his deposition and produce documents, and a further order imposing monetary sanctions, striking Tobias’s answer, entering his default, and dismissing his cross-complaint with prejudice.
As promised, on February 8 Wang’s attorney filed an ex parte application seeking the relief outlined in the letter of February 6. In the ex parte application, Wang’s attorney noted that the document production request in the amended deposition notice was the same as that in all prior notices. Tobias filed no opposition to the ex parte application.
The court granted the ex parte application on February 8. Other than the court’s signed order, no record of the February 8 proceeding is contained in the record on appeal. It is apparent, however, that Tobias made no appearance. The court ordered Tobias to appear for deposition on February 16, 2006 and to produce the documents specified in the deposition notice. The court awarded monetary sanctions of $2,140, and also ordered: “In the event Mr. Tobias fails to appear at the date and time set forth in this order or fails to pay the monetary sanctions specified herein, Mr. Tobias’s answer to the complaint in this action is ordered stricken and default entered against him. In addition, Mr. Tobias’s cross-complaint shall be dismissed with prejudice.” Wang’s attorney served the order on Tobias’s attorney by fax and mail.
In a declaration filed on February 15, 2006, in support of a motion for reconsideration, Tobias’ attorney stated that he received a copy of Wang’s ex parte application by fax on or about February 7, 2006, and received a copy of the court’s order on or about February 10. Tobias’ attorney argued in part that Tobias had not had the opportunity to be heard regarding the sanctions. Thus, as Wang acknowledges in his respondent’s brief on appeal, the record indicates that Tobias made no appearance at the ex parte proceeding on February 8. The record does not indicate whether the motion for reconsideration was ever ruled upon.
Tobias failed to appear for the deposition on February 16 and failed to pay the monetary sanctions. On February 24, 2006, Wang’s attorney faxed a letter to Tobias and Besdine’s counsel giving notice of an ex parte application to be filed on February 28, 2006. Wang’s attorney wrote that he intended to seek terminating and monetary sanctions against Tobias for his failure to appear at the deposition. He also stated that he intended to seek an order striking Besdine’s answer, entering Besdine’s default, and dismissing its cross-complaint on the ground that Besdine was suspended by the California Secretary of State and therefore lacked the capacity to sue or defend.
On February 28, 2006, Wang filed the promised ex parte application. As to Tobias, the ex parte application noted that Tobias failed to appear at deposition on February 16 and failed to pay monetary sanctions. Therefore, according to the application, Tobias had violated the February 8 ex parte order and was “subject to terminating sanctions under the terms of the . . . order” and Code of Civil Procedure section 2023.030, subdivision (d). As to Besdine, the ex parte application asserted, based on a printout from the Secretary of State’s website, that Besdine was in suspended status for failure to pay its corporate franchise taxes. Therefore, according to the application, Besdine lacked the capacity to sue or defend and the court should strike Besdine’s answer, strike its cross-complaint, and enter its default. Tobias and Besdine filed no opposition to the ex parte application.
On February 28, 2006, the court granted the ex parte application and ordered Tobias’s and Besdine’s answers stricken, their defaults entered, and their cross-complaint dismissed with prejudice. The record on appeal does not contain a minute order of the proceeding. According to the reporter’s transcript of that date, counsel for Wang appeared, but no appearance is reflected for either Tobias or Besdine. No hearing on the ex parte application was held. Rather, after calling the case, the trial court simply informed Wang’s counsel that it had “already granted your ex parte which you requested.” The court also set “an o.s.c. re entry of default judgment” for May 1, 2006.
Following reassignment of the case to a different judge, Wang filed an application for entry of default judgment against Tobias and Besdine, supported by his own declaration and various documents. On June 30, 2006, the court entered default judgment against Tobias and Besdine in the sum of $7,145,259, plus interest and costs, and further assigned to Wang all rights to International Patent No. WO 2005/082729 held by Tobias, Besdine, or any of their agents or representatives.
Besdine and Tobias filed a timely notice of appeal.
DISCUSSION
Tobias and Besdine argue that the terminating sanctions entered against them were improperly issued by ex parte application, and that therefore the default judgment must be reversed. We agree, but in doing so do not mean to approve Tobias’s disregard of his discovery obligations, and express no opinion on what sanctions, if any, the trial court might impose on noticed motion upon remand.
A. Terminating Sanction as to Tobias
As to Tobias, the terminating sanction was a discovery sanction, issued under Code of Civil Procedure section 2023.030, subdivision (d), based on Tobias’s failure to submit to a deposition and pay monetary sanctions despite being ordered to do so. However, discovery sanctions must be sought by noticed motion. If awarded on ex parte notice, the sanctions are invalid. (Sole Energy Co. v. Hodges (2005) 128 Cal.App.4th 199, 208 (Sole Energy); see Parker v. Wolters Kluwer United States, Inc. (2007) 149 Cal.App.4th 285, 296; Alliance Bank v. Murray (1984) 161 Cal.App.3d 1, 6 (Alliance Bank).) Indeed, a leading practice guide warns: “No matter how clear the violation, [discovery] sanctions cannot be awarded ex parte. This is true even if the court has warned the violating party (at some earlier hearing) of the specific consequences if its order is violated. A noticed motion and hearing are still required before sanctions can be awarded.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2007) ¶ 8:866, p. 8E-153.) Here, there was certainly evidence sufficient to sustain a finding that Tobias was acting in bad faith in failing to submit to a deposition. However, Tobias’s conduct did not permit Wang to seek a terminating sanction without statutory notice.
The court’s order of February 8, 2006, purported to conditionally impose a terminating sanction on Tobias if he failed to appear for his deposition on February 16 or failed to pay the ordered monetary sanctions. To the extent the order imposed monetary sanctions and conditionally imposed a terminating sanction, it was invalid because it was issued by ex parte application rather than noticed motion. (See Alliance Bank, supra, 161 Cal.App.3d at p. 6 [order conditionally authorizing ex parte application for attorney fees if opposing party failed to appear at ordered deposition held “void”].) Similarly, the court’s order of February 28 imposing the terminating sanction on Tobias was improper: it purported to implement the invalid conditional sanction of the February 8th order, and it, too, was issued by ex parte application.
B. The Striking of Besdine’s Answer and Dismissal of Its Cross-Complaint
Wang’s ex parte application as to Besdine was not truly a request for sanctions. Rather, it was, in substance, a non-statutory, non-noticed motion: (1) to strike Besdine’s answer on the ground that Besdine’s suspended corporate status deprived it of the capacity to defend (see Grell v. Laci Le Beau Corp. (1999) 73 Cal.App.4th 1300, 1306; Rev. & Tax. Code, § 23301); and (2) to assert a plea in abatement and dismiss Besdine’s cross-complaint on the ground that Besdine’s suspended corporate status deprived it of the capacity to sue (see Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604-1606).
Regardless of characterization, however, due process required adequate notice to Besdine. “The general rule is that notice of motion must be given whenever the order sought may affect the rights of an adverse party.” (McDonald v. Severy (1936) 6 Cal.2d 629, 631; Miller v. Foremost Motors, Inc. (1993) 16 Cal.App.4th 1271, 1276.) Here, no formal notice was provided, and no reason for dispensing with formal notice was stated. (See 6 Witkin, Cal. Procedure (4th ed. 1997) Proceedings Without Trial, § 6, p. 405 [formal notice of motion “usually considered essential in any application affecting the rights of the adverse party, unless there is pressing necessity for dispensing with it”].) Moreover, the matter was handled in summary fashion without an appearance by Besdine: the reporter’s transcript of February 28, 2006, shows that the court held no hearing on the ex parte application, and granted it before even calling the case. Because Wong failed to provide formal notice and showed no adequate justification for dispensing with it, we conclude that the order striking Besdine’s answer and dismissing its cross-complaint with prejudice was invalid. (See St. Paul Fire & Marine Ins. Co. v. Superior Court (1984) 156 Cal.App.3d 82, 85-86.)
C. Tobias and Besdine Have Not Waived the Inadequacy of Notice
On appeal, Wang does not dispute the general rule that the absence of formal notice precludes granting the relief he sought against Tobias and Besdine. He contends, however, that Tobias and Besdine have waived the issue. Wang asserts that the ex parte notices described the relief to be sought, and were served by fax with adequate time to prepare opposition (service on Feb. 6 for the Feb. 8 ex parte, and service on Feb. 24 for the Feb. 28 ex parte). Under these circumstances, according to Wang, Tobias and Besdine’s failure to respond to the ex parte applications preclude them “from contesting the substance of the ex parte orders . . ., the procedural deficiencies regarding notice . . ., as well as the alleged deficiencies regarding the basis for the ex parte application[s].”
Wang relies on Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1288 (Reedy), and Eliceche v. Federal Land Bank Assn. (2002) 103 Cal.App.4th 1349, 1375-1376 (Eliceche). Neither supports his argument.
In Reedy, before trial on consolidated probate petitions, the plaintiff (the trustee of the trusts involved) filed motions in limine seeking terminating sanctions against the defendants for abuse of discovery and failure to comply with court orders. The motions were the latest in a series of noticed motions seeking sanctions for the defendants’ disregard of discovery obligations. The motions in limine “included a formal notice of motion with a specification of the particular sanctions requested, a memorandum of points and authorities, and a declaration establishing the factual grounds upon which the motions were based.” (Reedy, supra, 148 Cal.App.4th at p. 1282.) The defendants filed only cursory oppositions. (Ibid.) At a pretrial hearing attended by the parties, the trial court took the motions in limine under submission. Later, after several days of trial occasioned by defendants’ further discovery abuses, the trial court granted terminating sanctions. (Id. at pp. 1275, 1287.)
On appeal, the appellate court concluded (as here relevant) that the defendants waived the issue whether the notices of the motions for terminating sanctions were adequate. The court relied on the general rule, as stated in Carlton v. Quint (2000) 77 Cal.App.4th 690, 697 (Carlton), that a party who appears and opposes a motion in the trial court, but who does not request a continuance and demonstrate prejudice from defective notice, cannot contend on appeal that notice was inadequate. (Reedy, supra, 148 Cal.App.4th at p. 1288 .) The court noted that “[a]lthough [defendants’] oppositions to [plaintiff’s] motions in limine for terminating sanctions were – to put it mildly – cursory, they did file written opposition. And in doing so, they never so much as suggested notice was defective. [Defendants] also appeared at the commencement of trial when the court considered the motions and took them under submission – again without asserting any defect in the notice.” (Id. at p. 1288, fn. omitted.)
Reedy does not apply here. It involved formally noticed motions rather than ex parte applications. Further, unlike the defendants in Reedy, Tobias and Besdine did not file opposition on the issue whether the relief sought should be granted, and did not appear when the ex parte applications were heard. Thus, the general rule relied on by Reedy – that appearance and opposition on the merits waives any objection to notice – does not apply.
The decision in Eliceche is similarly distinguishable. There the defendant filed a motion for discretionary dismissal under Code of Civil Procedure section 583.420, subdivision (a)(3)(C), based on the plaintiff’s failure to bring the action to trial within two years after issuance of a remittitur reversing a prior judgment. The motion was accompanied by an ex parte application to shorten time to hear the motion. (Eliceche, supra, 103 Cal.App.4th at p. 1355.) The plaintiff filed no opposition to the ex parte application to shorten time, and the trial court granted the application, shortening time in such a way as to require plaintiff’s opposition to the dismissal motion to be filed the next day (July 11) for a hearing to be held ten days later (July 21). (Id. at p. 1356.) Rather than filing an opposition to the motion to dismiss or requesting additional time within which to do so, the plaintiff filed written procedural objections to the order shortening time. (Id. at pp. 1356-1357.) Counsel for the plaintiff then appeared at the hearing on the motion to dismiss and declared a tactical intent not to oppose the motion on the merits, but rather to stand on the earlier written objections to the court’s lack of jurisdiction to hear the motion on shortened notice. (Id. at p. 1374.) The trial court rejected the plaintiff’s objections to the order shortening time, and granted the motion to dismiss. (Id. at p. 1357.)
On appeal, the appellate court rejected the plaintiff’s contention that the order shortening time denied the plaintiff an opportunity to prepare and present an opposition to the motion. The court observed that the plaintiff “made a tactical decision not to oppose the dismissal motion on the merits. He cannot be heard now to complain he was denied something he deliberately chose to forgo.” (Id. at p. 1374.) Like the court in Reedy, the court in Eliceche relied on the general rule that “‘[a] party who appears and contests a motion in the court below cannot object on appeal or by seeking extraordinary relief in the appellate court that he had no notice of the motion or that the notice was insufficient or defective.’ [Citation.]” (Id. at p. 1375.) Citing Carlton, supra, the court observed that the plaintiff should have requested a continuance on the ground that he had inadequate notice, or should have filed the best opposition on the merits possible under the circumstances and also made his procedural objections. The court noted that the plaintiff “took neither course. Most importantly, he did not request a continuance, which [as the trial court informed the plaintiff’s counsel at the hearing on the motion to dismiss,] would have been granted and conceivably could have been accomplished without triggering a . . . dismissal [for expiration of the three-year mandatory dismissal period under Code Civ. Proc., § 583.320, subd. (a)(3)].” (Eliceche, supra, 103 Cal.App.4th at p. 1376; see id. at pp. 1373, 1374.) Finally, the court “emphasize[d] . . . that [plaintiff] brought these scheduling problems on himself by failing to arrange a trial setting conference until there were only 46 days remaining before the mandatory dismissal date.” (Id. at p. 1376.)
Eliceche is distinguishable on several grounds. First, it involved the granting of a noticed motion to dismiss that was heard on shortened time. It did not, as here, involve the granting of an ex parte application to terminate the action that was heard on mere ex parte notice. Second, Eliceche, like Reedy, invoked the rule that a party who appears and opposes a motion, but fails to request a continuance, forfeits any objection to the adequacy of notice. As we have already explained, that rule does not apply here. Third, although the plaintiff in Eliceche was responsible for the scheduling problems he complained about, in the instant case Tobias and Besdine had no hand in the scheduling of Wang’s ex parte applications.
We conclude that Tobias and Besdine did not waive Wang’s failure to give proper notice, and that the orders striking their answers, dismissing their cross-complaint, and entering their defaults were invalid. Therefore, the default judgment against them must be reversed. (Sole Energy, supra, 128 Cal.App.4th at p. 210.)
DISPOSITION
The judgment is reversed. Tobias and Besdine shall recover their costs on appeal.
We concur:
MANELLA, J. SUZUKAWA, J.