Code of Civil Procedure Section 473
If a default judgment has been taken against you, or some other result or mistake needs to be corrected, you or your attorney will use Section 473 to try to vacate that default or correct the error. In the case of a default judgment, the usual procedure is to file a "motion to vacate", asking the court to set aside the judgment and put the matter back on the trial calendar. Here is all of section 473:
473.
(a)
(1) The court may, in furtherance of justice, and on anyterms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party, or by correcting a mistake in the name of a party, or a mistake in any other respect; and may, upon like terms, enlarge the time for answer or demurrer. The court may likewise, in its discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading or proceeding in other particulars; and may upon like terms allow an answer to be made after the time limited by this code.
(2) When it appears to the satisfaction of the court that the amendment renders it necessary, the court may postpone the trial, and may, when the postponement will by the amendment be rendered necessary, require, as a condition to the amendment, the payment to the adverse party of any costs as may be just.
(b) The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. Application
for this relief shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted, and shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order,
or proceeding was taken. However, in the case of a judgment, dismissal, order, or other proceeding determining the ownership or right to possession of real or personal property, without extending the six-month period, when a notice in writing is personally served
within the State of California both upon the party against whom the judgment, dismissal, order, or other proceeding has been taken, and upon his or her attorney of record, if any, notifying that party and his or her attorney of record, if any, that the order, judgment,
dismissal, or other proceeding was taken against him or her and that any rights the party has to apply for relief under the provisions of Section 473 of the Code of Civil Procedure shall expire 90 days after service of the notice, then the application shall be made within 90
days after service of the notice upon the defaulting party or his or her attorney of record, if any, whichever service shall be later. No affidavit or declaration of merits shall be required of the moving party. Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney's sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney's mistake, inadvertence, surprise, or neglect. The court shall, whenever relief is granted based on an attorney's affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties. However, this section shall not lengthen the time within which an action shall be brought to trial pursuant to Section 583.310.
(c)
(1) Whenever the court grants relief from a default, default judgment, or dismissal based on any of the provisions of this section, the court may do any of the following:
(A) Impose a penalty of no greater than one thousand dollars ($1,000) upon an offending attorney or party.
(B) Direct that an offending attorney pay an amount no greater than one thousand dollars ($1,000) to the State Bar Client SecurityFund.
(C) Grant other relief as is appropriate.
(2) However, where the court grants relief from a default or default judgment pursuant to this section based upon the affidavit ofthe defaulting party's attorney attesting to the attorney's mistake, inadvertence, surprise, or neglect, the relief shall not be made conditional upon the attorney's payment of compensatory legal fees or costs or monetary penalties imposed by the court or upon compliance with other sanctions ordered by the court.
(d) The court may, upon motion of the injured party, or its own motion, correct clerical mistakes in its judgment or orders as entered, so as to conform to the judgment or order directed, and may, on motion of either party after notice to the other party, set aside any void judgment or order.
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The following case is very long, but it is provided here because it provides a very nice summary of the legal authorities that apply to default judgments, the problems that default judgments can create, and the standards that should be applied by the judge.
KIM v. WESTMOORE PARTNERS, INC.
GIL KIM, Plaintiff and Respondent,
v.
WESTMOORE PARTNERS, INC., et al.,
Defendants and Appellants.
No. G044216.
Court of Appeals of California, Fourth District, Division
Three.
Filed November 29, 2011.
CERTIFIED FOR PUBLICATION
OPINION
BEDSWORTH, ACTING
P. J.
We reluctantly
return in this case to the question of default judgments with a cautionary tale
— well, three actually. The first is a tale for plaintiff's attorneys, who may
assume a defendant's default is an unalloyed gift: an opportunity to obtain a
big judgment with no significant effort. It is not. Instead, when a defendant
fails to timely respond to the complaint, the first thing plaintiff's counsel
should do (after offering an extension of time to respond)1 is review
the complaint with care, to ascertain whether it supports the specific judgment
the client seeks. If not, a motion to amend is in order. In this case, counsel
for plaintiff Gil Kim failed to do that. Instead, he simply asked the court to
enter defendants' defaults on the complaint as initially alleged. Unfortunately
for Kim, the factual allegations of that complaint do not support any judgment
in his favor.
And even when the
allegations of a complaint do support the judgment plaintiff seeks, he is not
automatically entitled to entry of that judgment by the court, simply because
defendant defaulted. Instead, it is incumbent upon plaintiff to prove-up
his damages, with actual evidence. It is wholly insufficient to simply declare,
as Kim did here, that defendants' breach of one or more promissory notes "caused
[him] tremendous financial loss," and that a judgment of "$5 million against
each defendant, for a total of $30 million . . . would be a reasonable sum."
That evidence may establish the amount Kim feels entitled to recover, but
it fails utterly to demonstrate what he is legally entitled to recover.
Kim's failure to offer any significant evidence to support his damage claims
precludes any monetary judgment in his favor.
We consequently
reverse the default judgment entered in Kim's favor, and remand the case to the
trial court with directions to enter judgment in defendants' favor.
The second
cautionary tale is for trial courts. And it's not the first time we have told
this tale. As we previously explained in Heidary v. Yadollahi (2002) 99
Cal.App.4th 857, 868, "[i]t is imperative in a default case that the trial
court take the time to analyze the complaint at issue and ensure that the
judgment sought is not in excess of or inconsistent with it. It is not in
plaintiffs' interest to be conservative in their demands, and without any
opposing party to point out the excesses, it is the duty of the court to act as
gatekeeper, ensuring that only the appropriate claims get through. That role
requires the court to analyze the complaint for itself — with guidance from
counsel if necessary — ascertaining what relief is sought as against each
defaulting party, and to what extent the relief sought in one cause of action is
inconsistent with or duplicative of the relief sought in another. The court must
then compare the properly pled damages for each defaulting party with the
evidence offered in the prove-up." Unfortunately, the trial court in this case
seems not to have done that, and instead simply gave Kim what he asked for —
which in this case was $30 million. Even more unfortunately, this trial court is
certainly not alone in doing so, even since Heidary was published. (See,
e.g., Electronic Funds Solutions, LLC v. Murphy (2005) 134
Cal.App.4th 1161 [$8 million in compensatory damages awarded on a complaint
alleging $50,000 in damages].) We need to shore this up. The court's role in the
process of entering a default judgment is a serious, substantive, and often
complicated one, and it must be treated as such.
And third, this
case is a cautionary tale for appellate counsel. Those who practice before this
court are expected to comport themselves honestly, ethically, professionally and
with courtesy toward opposing counsel. The fact a respondent has no obligation
to file a brief at all, in no way excuses his counsel's misconduct if he chooses
to do so. The conduct of Timothy J. Donahue, Kim's counsel herein, which
included seeking an extension of time to file his brief under false pretenses,
and then filing a brief which was not just boilerplate, but a virtual copy of a
brief for another case — including a boilerplate accusation of misconduct
against appellants' counsel and a boilerplate request for sanctions based
on a purportedly "frivolous" appeal — will not be countenanced. Donahue's
response to this court's notice, informing him that we were contemplating the
imposition of sanctions on our own motion, was both truculent and dismissive,
going so far as to assert that we must have issued the notice in error. We did
not. Nor did we appreciate him responding to our order that he appear to address
possible sanctions against him by sending in his stead an attorney who had not
been informed sanctions were being considered, and knew nothing about our order.
Donahue's conduct on appeal was inappropriate in nearly every respect, and we
hereby sanction him in the amount of $10,000.
FACTS
Gil Kim's
unverified complaint, filed March 25, 2009, alleges defendants Matt Jennings and
Rob Jennings are "sophisticated businessmen, licensed investment brokers and/or
experienced in selling investments to the general public." It further alleges
that "[o]ver the last several years," the Messrs. Jennings "opened up and formed
several companies and businesses," including Westmoore Partners, Inc., Honolulu
Harry's, Inc., Westmoore Capital, Inc., and Temecula Harry's Pacific Grill, each
of which is also named as a defendant.
According to the
complaint, the two Jenningses "would mix, mingle and shuffle money between the
different companies, close one and open another one. This was designed to hide
assets and evade potential creditors."
All six defendants
were allegedly "jointly involved in, owned and operated a global multi-level
marketing business, and . . . sought investment money from plaintiff." Although
Kim initially thought defendants were "honest, reputable and forthright," he
learned only "within the last year," after defendants had "taken" his money,
that this was untrue.
Allegedly,
defendants initially borrowed only "a little bit of money" from Kim, and
promised a substantial return. And in fact, Kim acknowledges that "[i]n the
beginning, defendants paid a substantial return," although he asserts they did
so "as bait, to entice [him] to loan more money." This alleged enticement was
apparently effective, as Kim asserts he did loan defendants more money, again
relying upon their promise "to repay the loans with a substantial
return."
Defendants then
allegedly enticed Kim to once again lend them even more money, "by informing
[him] that they really didn't need his money." Then, in August of 2006, Matt and
Rob Jennings, acting on behalf of the other defendants, allegedly promised to
make monthly payments, in the amount of $13,020.85, on an office building owned
by Kim, in exchange for Kim's investment of $1,250,000. However, according to
Kim, defendants "had no intention of repaying the loan."
Kim attaches to
his complaint, and incorporates by reference, seven promissory notes which
reflect defendants' alleged indebtedness to him. He asserts that within the last
year, defendants have each "acknowledged responsibility to pay on the seven
notes, and have promised to pay [him]." However, "defendants have never followed
through on [the] promises and the money remains outstanding."
The first
promissory note reflects that on February 28, 2003, Westmoore Partners, Inc.,
promised to pay Kim $25,000, on the maturity date of March 28, 2003 — only 30
days later. Interest payments of $750 per month were due on the 28th of each
month, starting on February 28, 2003. It provides that a default occurs if
Westmoore Partners fails to pay the principal and interest on the maturity
date.
The second
promissory note reflects that on May 29, 2003, Westmoore Partners, Inc.,
promised to pay Kim $25,000, on the maturity date of December 29, 2003 — only
seven months later. Interest payments of $750 were due on the 29th of each
month, "starting February 28, 2003."2 It provides that a default occurs if
Westmoore Partners fails to pay the principal and interest on the maturity
date.
The third
promissory note reflects that on June 10, 2003, Honolulu Harry's, Inc., promised
to pay Kim $50,000, on the maturity date of August 10, 2003 — two months later.
Interest payments of $1,500 per month were due on the 10th of each month,
starting on July 10, 2003. It provides that a default occurs if Honolulu
Harry's, Inc., fails to pay the principal and interest on the maturity
date.
The fourth
promissory note reflects that on August 6, 2003, Matt Jennings promised to pay
Kim $78,750, on or before October 6, 2003 — two months later. The note further
specifies that the funds are "immediately due and payable" upon sale of a
specified piece of real property owned by Matt Jennings. This note does not
specify an interest rate, but includes "closing costs" of 5 percent as part of
the principal amount due, and provides for interest of 19 percent per annum in
the event of default in the payment of principal when due.
The fifth
promissory note reflects that on July 27, 2005, Westmoore Capital, Inc.,
promised to pay Kim $60,000, on the maturity date of July 27, 2006 — one year
later. Interest payments of $2,000 were due on the 27th of each month, starting
on July 27, 2005.3 It provides that a default occurs if Westmoore Capital
fails to pay the principal and interest on the maturity date.
The sixth
promissory note reflects that on July 27, 2005, Westmoore Capital, Inc.,
also promised to pay Kim $100,000, on the maturity date of July 27, 2006
— again, one year later. Interest payments of $2,000 were due on the 27th of
each month, starting on July 27, 2005. It provides that a default occurs if
Westmoore Capital fails to pay the principal and interest on the maturity
date.
Nowhere does Kim
allege that the maturity dates of any of these first six promissory notes were
ever extended, either orally or in writing. By their terms, each required full
payment of the indebtedness on dates between March of 2003 and July of 2006,
inclusive — meaning the latest note was to be fully performed nearly three years
prior to the filing of Kim's complaint.
The seventh
promissory note reflects that on August 16, 2006, Temecula Harry's Pacific
Grill, LLC, promised to pay Kim $1,250,000 on the "maturity date," which is
defined as being "at such time as Harry's Pacific Grill restaurant located in
Temecula, CA and owned and operated by [Temecula Harry's Pacific Grill] is sold
or substantially all of its assets are transferred, except for any transfer or
sale to Westmoore Capital Group, LLC or any other Westmoore affiliated entity."
Pending the maturity date, Temecula Harry's is obligated to pay interest at a
rate of 12.5 percent per annum on the 15th of each month, but — remarkably —
only so long as it has the "cash available" to do so. Also of note, any interest
which is not paid when due "shall accrue and will be payable at such time as the
Company has sufficient funds to pay any interest which is in
arrears."
As additional
consideration for this seventh promissory note, Kim was also entitled to "a
prorated portion of 80% of the annual net income from the operation of the
Temecula restaurant . . . in excess of $470,000," until such time as either Kim
converted some or all of his loan into "membership interests" in Temecula
Harry's Pacific Grill, or the loan principal was repaid. Finally, this seventh
promissory note includes a provision specifying that it reflects the entire
agreement between the parties with respect to the subject matter, supersedes all
prior agreements and understandings, and cannot be amended except by signed
written agreement.
While it is
somewhat inconsistent with the conclusory allegation that defendants had no
intention of repaying him, Kim also alleges that until approximately one year
prior to the filing of the complaint (i.e., until March of 2008), defendants did
comply with their loan obligations. However, they allegedly stopped doing so
"within the last year." With respect to defendants' alleged obligation to make
monthly payments of $13,020.85, on an office building he owned, Kim specifically
asserts that "as of January 2009, defendants were behind, by more than $78,125,"
a number which equates to six months of arrearages. Finally, Kim alleges that
although he requested defendants disclose "where the investments were placed,"
they refused to specify, and refused to account for the money.
Kim's first cause
of action is for breach of contract. In support of this claim, he incorporates
all of his factual allegations, and further alleges that defendants "by their
actions, payments, statements and signatures," became obligated to perform under
the promissory notes attached as exhibit 1, and that "[a]fter making some
payments, and agreeing to make further payments, defendants breached the
contract . . . and said breach occurred within the last one year." As a result
of the breach, he "suffered loss and harm."
Kim's second cause
of action is for negligent misrepresentation, and in support of that cause of
action, he incorporates all prior allegations, and further alleges "[d]efendants
had a special relationship with [him]" and they undertook a duty to exercise due
and reasonable care in "advising and speaking to [him]." Defendants allegedly
breached that duty by "unreasonably and improperly fail[ing] to warn [him]" and
"improperly advis[ing him.]" Kim alleges that he was harmed by these breaches
and "reserves the right to perform discovery, and prove the extent and amount of
damages caused by defendants."
Kim's third cause
of action is for professional negligence, and in support of that cause of
action, he incorporates all prior allegations, and further alleges that at all
relevant times, defendants were "acting as investment brokers," and made
numerous representations to him that he relied upon. He also alleges defendants
"concealed material facts and material information from [him]," despite having
"the ability to disclose true information." He asserts defendants acted
unreasonably in failing to disclose true information. He alleges that he was
"misled and relied upon the lack of full disclosure," and suffered consequent
"loss and harm." He again reserves the right to "perform discovery, and present
evidence of the full extent of loss and harm."
Kim's fourth cause
of action is for conversion, and states, without explanation, that it is alleged
"in the alternative." In support of that claim, Kim incorporates all prior
allegations, and alleges additionally that "[i]nstead of using [Kim's] money as
agreed for business purposes, defendants took the money, squandered the money,
enjoyed the money and used the money for their own personal pleasure." Kim
asserts defendants "formed the intent to misuse the money and to spend it, [and
they] knew that their use of [his] money . . . was improper, unauthorized and
unlawful." He alleges that defendants' conduct was "willful, wanton, malicious,
oppressive and fraudulent," and claims an entitlement to punitive damages.
Conversion is the only cause of action for which Kim seeks punitive
damages.
Kim's final cause
of action is for "unfair business practices."4 In addition to incorporating all
prior allegations, it is supported with additional allegations that defendants
"are licensed investment brokers" and he is a "consumer and member of the
general public." Defendants are alleged to "have violated Business and
Professions Code section 17200," and to have "taken [his] money and wasted it,
spent it and enjoyed it, for their own personal benefit." He alleges defendants
"took advantage of [him], tricked [him] and fooled [him.]"
Kim's complaint
specifies no amount of damages or harm caused to him by defendants' alleged
actions, other than the failure to pay $13,020.85 per month, starting sometime
in 2008, which amounted to an alleged debt of "more than $78,125" by January of
2009. However, when Kim served defendants with the complaint, on May 11, 2009,
he also served each with formal "Statement[s] of Damages," which recites that it
is for "personal injury or wrongful death," and which claims that Kim had
suffered special damages consisting of "property damage" of $500,000, "unpaid
fees" of $1.5 million, and "loan payments" of $2 million. Only the "loan
payments" claim is consistent with the facts pleaded by Kim in his
complaint.5 The complaint includes no allegation of either property
damage or unpaid fees of any kind. The statements also reflected that Kim
reserved the right to seek punitive damages of $5 million against each
defendant.6
Defendants did not
timely respond to Kim's complaint. Kim requested and obtained entry of their
defaults on August 13, 2009.
On November 19,
2009, defendants Westmoore Partners, Inc., Westmoore Capital, Inc., and Matt
Jennings moved to set aside the defaults entered against them.7 In support
of their motions, these defendants asserted that at the time Kim commenced his
lawsuit, Matt Jennings — who was also the president of both Westmoore entities,
"was undergoing incredible financial and emotional hardships due to the current
economic downturn . . . [and] was in near financial ruin and on the verge of
filing for bankruptcy." The "extreme personal stress" this imposed on Jennings
"caused him to be dilatory in engaging in [Kim's] lawsuit," and made dealing
with it "an overwhelming impossibility, especially because at the time that
[Kim] filed his Complaint, Jennings did not have the resources to hire legal
counsel." However, these defendants asserted that "[i]n recent months,"
Jennings' health and financial outlook had "drastically improved," such that he
had been able to hire legal counsel, and wished to defend the
lawsuit.
Kim opposed the
motion to vacate, and the court denied it. In its ruling, the court explained
that the motion failed to cite a statutory basis for the relief, but it appeared
relief could be available only on the basis of excusable neglect. The court felt
Matt Jennings' declaration did "not sufficiently establish that [he] was ill, or
even under a doctor's care at any point, such that he could not have avoided
default through the exercise of ordinary care."
Kim thereafter
filed two separate requests for entry of a default judgment, each of which was
rejected by the clerk due to inconsistent or incomplete paperwork. However,
Kim's third attempt to secure a default judgment from the court was
successful.
In support of that
third attempt, Kim provided the court with the six statements of damages he
served on defendants along with the complaint. Although each of those statements
of damages set forth claims totaling $9 million, including punitive damages, Kim
requested a judgment of only $5 million against each defendant, "for a total of
$30 million." Kim made no effort to correlate that amount to any particular
claim or promissory note, or even to explain the extent to which it represented
compensatory and punitive damages. Instead, Kim's declaration simply stated that
"[c]onsistent with the statement of damages, each defendant owes me at least $5
million." He goes on to explain that a judgment of $5 million against each
defendant, for a total of $30 million, "would not be an excessive sum. [It]
would be a reasonable sum, if they ever paid it. It would compensate me for some
of the devastation caused by these defendants." And that is all it says.
Otherwise, Kim merely states that "[his] attorney Mr. Donahue submits a
declaration with Exhibit 1, dated October 26, 2009" and that he "concur[s] with
that declaration and its contents are incorporate[d] herein by reference as
those [sic] set forth at length."
Donahue's
declaration, in turn, explains nothing about the damages incurred by Kim.
Instead, it merely references the attached "Exhibit 1," which Donahue describes
as "documentation regarding the damages" and "information" he "e-mailed to
[defendants' counsel] on September 23, 2009"8 Those documents consist of several
pages of accounts, some of which consist solely of numbers, and others of which
list dates and monetary sums, with references to "Maplewood," "Gil Kim" "Judy
Kim," "LV Waterford Castle," and "Brigadoon rent." None of those references
seems to correlate to any of the promissory notes appended to the complaint, and
none of them is explained in any declaration. We have no evidence demonstrating
who prepared the accounts, or when. In short, these documents are entirely
unintelligible, and useless as evidence.
Kim filed this
third prove-up package with the court on June 25, 2010. On July 19, the matter
was assigned to a new judge. On July 21, that judge signed the judgment proposed
by Kim, without any changes. The document states that "[j]udgment is hereby
ordered in favor of plaintiff Gil Kim, and against each individual defendant
listed below, in the single sum of $5,000,000, plus costs of suit in the amount
of $804.40, for the total sum of $5,000,804.40." It then lists the names of all
six defendants.9
I
Appellants Matt
Jennings, Westmoore Partners, Inc., and Westmoore Capital, Inc. (collectively
"the Westmoore defendants"), first challenge the court's denial of their motion
to set aside the defaults entered against them. They rely upon the public policy
favoring disposition of cases on their merits, and argue the court abused its
discretion in denying them relief in this case. The Westmoore defendants argue
because they moved for relief from the default promptly, and offered sufficient
evidence of a reasonable excuse to justify that relief, the court was obligated
to grant it.
We are not
persuaded. First, as to the issue of promptness, the Westmoore defendants argue
their motion was filed "within three weeks" of learning about the default, "as
[they] did not receive Notice of Entry of Default from Plaintiff and it wasn't
until Plaintiff filed his request for entry of judgment on October 26, 2009 . .
. that [they] were made aware that default had been entered." But that claim,
whether accurate or not, is not supported by the record. The declaration of Matt
Jennings, which was the sole evidentiary support for the motion to set aside the
defaults, contains no assertion that he did not receive notice of the entry of
default. The trial court was consequently free to presume the Westmoore
defendants actually received the notice of entry of default in August of 2009,
and waited over three months (rather than three weeks), to do anything about it.
While such a delay does not preclude relief, neither does it demonstrate
particular promptness.
More
significantly, Jennings' declaration, notable primarily for its brevity, amounts
to nothing more than a conclusory assertion his "anxiety, depression, and
financial hardships" caused the Westmoore defendants to be "dilatory in
answering [the] lawsuit." He offers no evidentiary facts about either his
emotional or financial state, which the court might have been able to assess in
determining whether his failure to respond was actually excusable in the
circumstances. As such, the declaration was insufficient to support relief.
(United Parcel Service Wage & Hour Cases (2010) 190
Cal.App.4th 1001, 1018 [a declaration consisting of only a recitation of
legal conclusions and ultimate facts, without any evidentiary facts, was
insufficient to establish a triable issue of fact to defeat summary judgment];
Hayman v. Block (1986) 176
Cal.App.3d 629, 640 [declarations containing "general and vague charges" do
not qualify as "competent or credible evidence."].)
The trial court
focused on this very issue in its order denying relief, noting that "[t]he
declaration does not sufficiently establish that [Matt Jennings] was ill, or
even under a doctor's care at any point, such that he could not have avoided
default through the exercise of ordinary care." On the record before us, we
cannot say the trial court erred in that conclusion.
II
Next, all six
appellants argue that even if the entry of their defaults was valid, the default
judgment must nonetheless be reversed. On this point, they fare substantially
better.
We begin with the
basic guidelines for analyzing the legal effect of a default. "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." (Steven M. Garber & Associates v. Eskandarian (2007)
150
Cal.App.4th 813, 823, second italics added.) The "well-pleaded allegations"
of a complaint refer to "`"all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law."'" (Evans v. City of
Berkeley (2006) 38 Cal.4th 1,
6, quoting Serrano v. Priest (1971) 5 Cal.3d 584,
591.)
Because the
default confesses those properly pleaded facts, 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.
(Ostling v. Loring (1994) 27
Cal.App.4th 1731, 1746.) But that is all the default does. There is no
penalty for defaulting. "A defendant has the right to elect not to answer the
complaint. (Greenup v. Rodman (1986) 42 Cal.3d
822, 829.) Although this may have been a tactical move by defendant, it is a
permissible tactic." (Stein v. York (2010) 181
Cal.App.4th 320, 325.)
And if the
well-pleaded allegations of the complaint do not state any proper cause of
action, the default judgment in plaintiff's favor cannot stand. On appeal from
the default judgment, "[a]n objection that the complaint failed to state facts
sufficient to constitute a cause of action may be considered. (Martin v.
Lawrence (1909) 156 Cal. 191; Bristol Convalescent Hosp. v. Stone
(1968) 258
Cal.App.2d 848, 859.) Moreover, "[w]hen considering the legal effect of
those facts, we disregard any erroneous or confusing labels employed by the
plaintiff. (Mead v. Sanwa Bank California (1998) 61
Cal.App.4th 561, 564, citing Saunders v. Cariss (1990) 224
Cal.App.3d 905, 908.)
In this case, a
review of Kim's complaint reveals it does not set forth any valid cause of
action. Although Kim purports to state several different causes of action, the
gravamen of his complaint is breach of contract. He alleges defendants, acting
in concert, entered into various agreements with him to borrow increasing sums
of money over a period of time, promising him substantial returns, but then
breached their repayment obligations within the year prior to the filing of his
complaint.
In support of that
claim, Kim incorporates by reference seven written promissory notes which
reflect defendants' alleged indebtedness to him. And that's where the trouble
begins. When plaintiff attaches a written agreement to his complaint, and
incorporates it by reference into his cause of action, the terms of that written
agreement take precedence over any contradictory allegations in the body of the
complaint. "If facts appearing in the exhibits contradict those alleged, the
facts in the exhibits take precedence." (Holland v. Morse Diesel Internat.,
Inc. (2001) 86
Cal.App.4th 1443, 1447, citing Mead v. Sanwa Bank California,
supra, 61
Cal.App.4th 561, 567-568.)
Here, the first
six of the seven promissory notes Kim incorporated into his complaint specify
that defendants were obligated to repay the subject debt, in full, on dates
between three and six years prior to the date he filed his complaint, and
nowhere does Kim allege that the maturity dates for any of those obligations
were ever extended. Consequently, those first six promissory notes could not, by
their terms, have been breached within a year prior to Kim's filing of the
complaint. They were breached — if at all — years earlier. The complaint
therefore states no cause of action for breach of those first six promissory
notes.
The seventh
promissory note, in the amount of $1.25 million, fares no better as a basis for
Kim's breach of contract claim. Although that agreement could have been
breached within the year prior to Kim's filing of his complaint, he alleges no
facts demonstrating that it actually was. By its terms, the seventh promissory
note requires payment of the principal amount only when "Harry's Pacific Grill
restaurant located in Temecula, CA and owned and operated by [Temecula Harry's
Pacific Grill] is sold or substantially all of its assets are transferred . . .
." Kim does not allege that ever happened.
Pending that
maturity date, the seventh promissory note required payment of interest at rate
of 12.5 percent per annum on the 15th of each month, but only so long as
defendant Temecula Harry's Pacific Grill had the "cash available" to do so.
And any interest which is not paid when due would "accrue and will be payable at
such time as [Temecula Harry's Pacific Grill] has sufficient funds to pay any
interest which is in arrears." Kim did not allege that Temecula Harry's ever had
the "cash available" to make those interest payments or "sufficient funds" to
pay interest arrearages. Consequently, he had not alleged any facts
demonstrating a breach of this promissory note.
What Kim does
allege is that, in exchange for his loan of $1.25 million, defendants promised
to make his loan payments on a commercial property. He claims they breached the
agreement when they stopped making those loan payments. That allegation, being
entirely inconsistent with the terms of the seventh promissory note, must be
disregarded as a basis for establishing its breach, especially given that the
promissory note includes a provision specifying that it reflects the entire
agreement between the parties with respect to the subject matter, that it
supersedes all prior agreements and understandings, and that it cannot be
amended except by signed written agreement.
In short, Kim has
alleged no facts establishing any defendant breached the terms of any of the
promissory notes he attaches to his complaint, and his complaint thus fails to
state a cause of action for breach of contract.
Kim's next cause
of action is for negligent misrepresentation, stated in terms which are entirely
conclusory. Kim alleges that defendants "advised him on what to do and how to
proceed," and "recommend[ed] investments and loan strategies to [him.]" They
allegedly breached their duty of due care "in addressing, advising and speaking
to [him] . . . [¶] . . . by failing to properly advise him." If we ignore the
"`"contentions, deductions or conclusions of fact or law"' [citation]" contained
in this purported cause of action (Evans v. City of Berkeley, supra, 38
Cal.4th at p. 6), there is simply nothing left. Specifically, Kim fails to
allege what factual representations were made to him, or any facts suggesting
that a reasonable person in defendants' position should have known those
representations were untrue at the time they made them. Consequently, no cause
of action is stated.
Kim's third cause
of action, for "professional negligence" fails because its key allegation — that
"[a]t all times herein, defendants were acting as investment brokers" — is
squarely contradicted by the terms of the promissory notes he incorporated into
the complaint. Those promissory notes make clear that defendants were not
"brokering" any investments. (See UFITEC, S.A. v. Carter (1977) 20 Cal.3d
238, 244, italics added [noting the definition of a securities broker is a
"person engaged in the business of effecting transactions in securities for
the account of others."]; Bus. & Prof. Code, § 10131, italics added
[defining a real estate broker as one who "does or negotiates to do one or more
. . . acts for another or others."].) Instead, the promissory notes
unambiguously establish that the relationship between Kim and defendants was
simply one of creditor-debtor.
Kim's fourth cause
of action, for conversion, fails because the simple failure to pay money owed
does not constitute conversion. A cause of action for conversion of money can be
stated only where defendant interferes with plaintiff's possessory
interest in a specific, identifiable sum, such as when a trustee or agent
misappropriates the money entrusted to him. "`Money cannot be the subject of a
cause of action for conversion unless there is a specific, identifiable sum
involved, such as where an agent accepts a sum of money to be paid to another
and fails to make the payment. [Citation.]' (McKell v. Washington Mutual,
Inc. (2006) 142
Cal.App.4th 1457, 1491; see Haigler v. Donnelly (1941) 18 Cal.2d 674,
681; Fischer v. Machado (1996) 50
Cal.App.4th 1069, 1072-1074 [sales agent liable for conversion of proceeds
from consignment sale of farm products]; Software Design & Application,
Ltd. v. Hoefer & Arnett, Inc. (1996) 49
Cal.App.4th 472, 485 [`money cannot be the subject of a conversion action
unless a specific sum capable of identification is involved.'].) A `generalized
claim for money [is] not actionable as conversion.' (Vu v. California
Commerce Club, Inc. (1997) 58
Cal.App.4th 229, 235; 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, §
703, pp. 1026-1027.) [¶] . . . [¶] . . . California cases permitting an action
for conversion of money typically involve those who have misappropriated,
commingled, or misapplied specific funds held for the benefit of others. (See,
e.g., Haigler v. Donnelly, supra, 18 Cal.2d at p. 681 [real estate
broker]; Fischer v. Machado, supra, 50 Cal.App.4th at pp. 1072-1074
[sales agent for consigned farm products]; Weiss v. Marcus (1975) 51
Cal.App.3d 590, 599 [attorney claim for $6,750 fees from proceeds of
settlement subject to lien]; Watson v. Stockton Morris Plan Co. (1939) 34
Cal.App.2d 393, 403 [savings and loan issued duplicate passbook and delivered
funds to third party].)" (PCO, Inc. v. Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP (2007) 150
Cal.App.4th 384, 395-396; see also, Software Design & Application,
Ltd. v. Hoefer & Arnett, Inc., supra, 49 Cal.App.4th at p. 485 [no claim
for conversion is stated where money was allegedly misappropriated "over time,
in various sums, without any indication that it was held in trust for"
plaintiff]; McKell v. Washington Mutual, Inc., supra, 142 Cal.App.4th at
pp. 1491-1492 [bank's practice of overcharging customers for third-party fees,
and retaining the difference, did not constitute a conversion of customers'
funds, since the bank had not violated any duty to distribute the disputed funds
to the third parties].)
In this case, Kim
did not allege he entrusted funds to defendants for a specific purpose, and the
promissory notes he incorporated into the complaint demonstrate beyond dispute
that this case actually involves a simple creditor-debtor relationship, in which
defendants are alleged to have violated their obligations to repay the subject
debts. Those facts do not constitute a claim defendants interfered with Kim's
possession of a specific, identifiable sum of money. Thus, no cause of action
for conversion was stated.
Finally, Kim has
also failed to state a valid cause of action for "unfair business practices."
What he asserts as the basis of this purported claim is that "[d]efendants are
licensed investment brokers" and "have violated Business [and] Professions Code
section 17200." However, Business and Professions Code section 17200 does not
actually prohibit any conduct. It is merely definitional.10 No
cause of action can be stated for violating a statutory definition. An action
for unfair competition must refer to one of the sections following
Business and Professions Code section 17200.
Kim alleges that
defendants "have engaged in wrongful, improper, illegal and unreasonable
business practices," have "taken plaintiff's money and wasted it, spent it and
enjoyed it, for their own personal benefit," and have "[taken] advantage of
[him]," "tricked [him]," and "fooled [him.]" These allegations are entirely
vague, conclusory, and do not amount to any cognizable claim. Moreover, Kim
alleged no facts which would support his implied assertion defendants were
prohibited from doing whatever they wanted with the money he loaned them. Their
only obligation, as set forth in the promissory notes, was to pay the money back
in accordance with the terms of those notes. Their alleged failure to do that
does not qualify as an "unfair business practice."
Because Kim's
complaint does not state any cognizable cause of action against defendants, it
does not support any judgment in his favor.
III
But Kim's problems
don't end there, because his complaint also fails to set forth any clear demand
for damages, let alone one which would support the enormous judgment he obtained
from the trial court. As this court has iterated and then reiterated, Code of
Civil Procedure section 580 prohibits the entry of a default judgment in an
amount in excess of that demanded in the complaint. (Stein v. York (2010)
181
Cal.App.4th 320; Electronic Funds Solutions, LLC v. Murphy (2005) 134
Cal.App.4th 1161, 1173; Sole Energy Co. v. Hodges (2005) 128
Cal.App.4th 199, 206, fn. 4.)
Moreover, we have
also made it clear that a statement of damages cannot be relied upon to
establish plaintiff's monetary damages, except in cases of personal injury or
wrongful death. "Statement[s] of damages are used only in personal injury and
wrongful death . . . . [Citation.] In all other cases, when recovering damages
in a default judgment, the plaintiff is limited to the damages specified in the
complaint. [Citations.]" (Sole Energy Co. v. Hodges, supra, 128
Cal.App.4th at p. 206, fn. 4; Electronic Funds Solutions, LLC v. Murphy
(2005) 134
Cal.App.4th 1161, 1173; see also Levine v. Smith (2006) 145
Cal.App.4th 1131, 1136-1137.)
Here, the only
damage numbers included in Kim's complaint are found in his allegation
defendants defaulted on their obligations to make monthly payments on his
commercial property, in consideration of his agreement to loan them $1.25
million. Kim alleges defendant's failure to do that caused him damages of "more
than $78,125." However, as we have already explained, Kim's complaint states no
valid claim for breach of that purported obligation, since it is inconsistent
with the terms of the promissory note he incorporated into the complaint, which
governs that particular loan. Consequently, Kim's complaint supports no award of
damages at all.
As explained in
Ostling v. Loring, supra, 27 Cal.App.4th at p. 1743, "Ordinarily when a
judgment is vacated on the ground the damages awarded exceeded those pled, the
appropriate action is to modify the judgment to the maximum amount warranted by
the complaint." (See also Finney v. Gomez (2003) 111
Cal.App.4th 527.) In this case, that maximum is zero.
IV
And finally, even
if Kim's complaint were sufficient to support a judgment in his favor, he would
still be facing reversal of that judgment on appeal, because he failed to
provide the court with sufficient evidence to "prove-up" his entitlement to any
damages.
Code of Civil
Procedure section 585 sets forth the two options for obtaining a default
judgment. First, where the plaintiff's complaint seeks compensatory damages
only, in a sum certain which is readily ascertainable from the allegations of
the complaint or statement of damages, the clerk may enter the default judgment
for that amount. (Code Civ. Proc., § 585, subd. (a).) A clerk's judgment is
appropriate only in cases where the determination of damages is a purely
ministerial act, i.e., where there is "some definite, fixed amount of damages or
where such may be ascertained by computation made by the clerk. If evidence must
be taken to establish the amount due . . ., the clerk may not render judgment."
(Ford v. Superior Court (1973) 34
Cal.App.3d 338, 342.)
However, if the
relief requested in the complaint is more complicated than that, consisting of
either nonmonetary relief, or monetary relief in amounts which require either an
accounting, additional evidence, or the exercise of judgment to ascertain (such
as emotional distress damages, pain and suffering, or punitive damages), the
plaintiff must request entry of judgment by the court. (Code Civ. Proc., § 585,
subd. (b).) In such cases, the plaintiff must affirmatively establish his
entitlement to the specific judgment requested. "The court shall hear the
evidence offered by the plaintiff, and shall render judgment in the plaintiff's
favor for that relief, not exceeding the amount stated in the complaint, in the
statement required by Section 425.11, or in the statement provided for by
Section 425.115, as appears by the evidence to be just. If the taking of
an account, or the proof of any fact, is necessary to enable the court to give
judgment or to carry the judgment into effect, the court may take the account or
hear the proof, or may, in its discretion, order a reference for that purpose.
If the action is for the recovery of damages, in whole or in part, the court may
order the damages to be assessed by a jury; or if, to determine the amount of
damages, the examination of a long account is involved, by a reference as above
provided." (Ibid., italics added.)
And while Code of
Civil Procedure section 585 does give the court discretion to "permit the use of
affidavits, in lieu of personal testimony, as to all or any part of the evidence
or proof required or permitted to be offered, received, or heard in those
cases," it specifically requires that "[t]he facts stated in the affidavit or
affidavits shall be within the personal knowledge of the affiant and shall be
set forth with particularity, and each affidavit shall show affirmatively
that the affiant, if sworn as a witness, can testify competently thereto." (Code
Civ. Proc., § 585, subd. (d), italics added.)
In this case, that
did not happen. Instead, as we have already explained, Kim's prove-up evidence
consisted of nothing more than his own conclusory demand for $5 million dollars
from each defendant — a demand that bore absolutely no relationship to the
allegations of his complaint. Additionally, Kim's counsel offered the court a
sheaf of documents which he claimed to have transmitted to opposing counsel at
some earlier point. Those documents were not only unintelligible, but also
unsupported by any foundation suggesting how, when, or by whom they were
created. They were consequently useless as evidence.
On appeal,
defendant may challenge the sufficiency of the evidence offered to support the
default judgment. "Plaintiffs in a default judgment proceeding must prove they
are entitled to the damages claimed." (Barragan v. Banco BCH (1986) 188
Cal.App.3d 283, 302, citing Code Civ. Proc., § 585; Taliaferro v.
Hoogs (1963) 219
Cal.App.2d 559, 560.)
Although some
cases have recited a "general rule that sufficiency of the evidence [tendered in
a default proceeding] cannot be reviewed on an appeal from a default judgment"
(see, e.g., Uva v. Evans (1978) 83
Cal.App.3d 356, 363), that rule applies only "as to matters for which no
proof is required by virtue of the admission by default of the allegations of
the complaint." (Ostling v. Loring, supra, 27 Cal.App.4th at p. 1745.)
"However, as to damages which, despite default, require proof the general rule
does not apply." (Ibid.)
Indeed, the
Uva court itself departs from the so-called general rule in concluding
that defendants can challenge the sufficiency of the evidence to support the
damage award in that case. As explained by the court, such a challenge is proper
because "the right to appellate review flows logically from the fact that
damages must be proved in the trial court before the default judgment may be
entered. ([Code Civ. Proc.,] § 585, subd. 2.) The requirement of proof of
damages is meaningless if it can be fulfilled by any evidence, even evidence
which results in a judgment prompted by `passion, prejudice or corruption.' Yet
without appellate review, such a judgment would stand. . . . While the role of
the appellate court in reviewing damages is much more limited than that of the
trial court reviewing a jury verdict, the policies which sanction such review
are not dissimilar: just as the trial court need not sit idly by and watch
injustice be done through an improper award by the jury, we know of no statutory
or constitutional barrier which requires an appellate court to ignore gross
injustice in the award of damages simply because the judgment was procured by
way of default." (Uva v. Evans, supra, 83 Cal.App.3d at p. 364; see also
Scognamillo v. Herrick (2003) 106
Cal.App.4th 1139, 1150 ["the issue of speculative damages is subject to
review where, as here, the damages awarded are unsupported by sufficient
evidence."]; Finney v. Gomez, supra, 111 Cal.App.4th at p. 547.)11
Appellants here
have challenged the sufficiency of the evidence to support the damages awarded
to Kim, and they were right to do so. Kim's effort to prove up his damages was
wholly insufficient to sustain any award of damages in his favor.
"`When the
plaintiff has had full and fair opportunity to present the case, and the
evidence is insufficient as a matter of law to support plaintiff's cause of
action, a judgment for defendant is required and no new trial is ordinarily
allowed, save for newly discovered evidence. . . . Certainly, where the
plaintiff's evidence is insufficient as a matter of law to support a judgment
for plaintiff, a reversal with directions to enter judgment for the defendant is
proper.'" (Kelly v. Haag (2006) 145
Cal.App.4th 910, 919, quoting McCoy v. Hearst Corp. (1991) 227
Cal.App.3d 1657, 1661; accord, Avalon Pacific-Santa Ana, L.P. v. HD
Supply Repair & Remodel, LLC (2011) 192
Cal.App.4th 1183; Frank v. County of Los Angeles (2007) 149
Cal.App.4th 805, 833.)
Based upon the
foregoing authorities, appellants are entitled to entry of judgment in their
favor.
V
After appellants'
counsel filed their opening brief, Kim's counsel, Timothy J. Donahue, requested
an extension of time to file his respondent's brief. In that request for
extension, Donahue explained — under penalty of perjury — that additional time
was required to file the brief because of the many "complex issues raised" by
appellants and his "[n]eed [for] more time to research cases & finalize
brief. . . ." He also cited "other time commitments of counsel." The extension
was granted.
However, when
Donahue filed his brief, it belied his claim that he had been engaged in any
significant research in connection with this appeal, as well as his claim of
needing any significant time to "finalize" his brief. In fact, Donahue's brief
proved to be an almost verbatim duplicate of another brief he filed with this
court in September of 2009, in the case of Nguyen v. Castillo
(G041494).12
The earlier brief
was filed in a case in which appellant argued only that he had not received
proper notice of the lawsuit, and sought relief from the default, and the
ensuing judgment, solely on that basis. Unlike this appeal, the earlier one
raised no objections to the substance of the judgment entered, or the
sufficiency of the evidence to support it. Nonetheless, every case cited in
Donahue's current brief was cited in that earlier brief. The lack of attention
Donahue paid to his brief in this case can perhaps best be illustrated by two
things: First, Donahue includes the assertion that "[t]he defendants in this
case got more than actual notice. The defendants were personally familiar with
the events and the accident." This case, of course — unlike Donahue's
earlier case — involved no "accident." And second, Donahue's signature on the
brief in this case reflects he is acting on behalf of "Plaintiff/Respondent
PABLO CASTILLO" — his client in the earlier case.
Equally
disturbing, both briefs contain an identical accusation that appellants'
counsel is guilty of "false[ly] arguing the case." In this case, that assertion
— which seemingly amounts to an accusation that appellants' counsel engaged in
professional misconduct, is backed up by precisely nothing. The six sentences
which comprise the "false argument" section of the brief do not identify even
one alleged falsehood.
Both briefs also
contain an identical — and we mean word-for-word identical — assertion
that the appeal is frivolous, and a request for sanctions in the amount of
$20,000.13 This assertion is utterly inconsistent with Donahue's
prior contention, in his request for extension of time, that the issues raised
by appellants in this case were "complex," and required significant time to
research. Frivolous claims, by their nature, do not require significant
research to rebut.
After Donahue
filed the boilerplate brief, appellants filed their request that this court take
judicial notice of the earlier brief in the Nguyen v. Castillo case.
After review of that brief, we issued a notice pursuant to California Rules of
Court, rule 8.276, informing Donahue that we were considering the imposition of
sanctions against him, for unreasonable violations of the California Rules of
Court, rules 8.63 and 8.212(b)(3) (hereinafter "rule 8.63" and "rule
8.212(b)(3)," respectively), which govern requests for extensions of time, and
rule 8.204(a)(1) (hereinafter "rule 8.204(a)(1)"), which governs the contents of
briefs.14
Donahue filed a
letter brief in response to our notice. In conclusory terms, he simply denied
violating "any provision" cited in our notice. He then used the letter as a
further opportunity to argue for sanctions against appellants, asserting
that "[t]he appeal was obviously filed as a delay tactic," and inaccurately
criticizing appellants' counsel for making "several mistakes in their
brief."15
Donahue defended
his decision to simply copy his brief from the earlier case, stating "I have the
right to modify my own work product," and summarizing his strategy as "[s]ame
issue, same brief, should be the same ruling."
In closing,
Donahue asserted that our sanctions notice must have been erroneous, that it was
probably intended to target "`appellants' counsel,' instead of respondents,"
since "[i]t was respondents who requested sanctions against appellants, not the
other way around." He again characterized the appeal as "frivolous," and as
having "no merit."
When the time came
for hearing on the possible sanctions, not only did Donahue not appear, he sent
counsel who was unaware that sanctions were being considered against Donohue.
That attorney informed us he had not been told sanctions were being considered,
and he was prepared only to submit the matter on Donahue's briefing of the
merits. We had to issue a second order to get Donahue to appear personally on
the sanctions issue.
Rule 8.63 sets
forth the policies applicable to requests for extensions of time in the
appellate courts, and contains a list of factors to be considered in determining
whether "good cause" for an extension of time has been shown. Rule 8.63(b)(4)
requires that an extension request based upon the "number and complexity of the
issues raised" "must specify the issues." Rule 8.63(b)(9) requires that an
extension request based upon counsel's time constraints cannot be based on
"[m]ere conclusory statements that more time is needed because of other pressing
business . . . ."
Rule 8.212
(b)(3)(A) sets forth the procedural requirements for obtaining an extension of
time, specifying that a party applying for an initial extension of time must
show the court that he "was unable to obtain — or it would have been futile to
seek — the extension by stipulation . . . ."
Both of those
rules were violated in Donahue's extension request in this case. He failed to
specify the complex issues he claimed required additional time to research; he
failed to make more than a conclusory assertion that he had "other time
commitments," and he failed to demonstrate any effort to obtain a stipulation to
the extension request.
Donahue is
certainly not the only counsel to stint on detail in support of a request for
extension of time. As this case exemplifies, we try to accommodate such
requests, even when the technical requirements of the request are not fully
satisfied, especially when the opposing party registers no objection. It's
simply more efficient, and generally more fair to the parties, for us to do so.
Consequently, not every violation of these rules rises to the level of
sanctionable conduct. (See Huschke v. Slater (2008) 168
Cal.App.4th 1153, 1162 ["To be sure, not every violation of a procedural
rule is properly sanctionable, as some may be the result of excusable
inadvertence or exigent circumstances and/or relatively
inconsequential."].)
However, what
distinguishes this case from the run-of-the-mill violation, is that Donahue's
subsequent filing of what is essentially a copy of a brief he filed in an
earlier case — and one which does not, in fact, address any of the "complex"
issues actually raised in this appeal — demonstrates that the justifications
offered for his extension request were not merely cursory, but prevaricative.
The brief Donahue ultimately filed herein did not reflect any research of
complex issues, and its preparation simply could not have claimed any
significant amount of his time. His conclusory claims to the contrary, in
support of his extension request, were — not to put too fine a point on it —
untrue.
We cannot overlook
such conduct. It is critical to both the bench and the bar that we be able to
rely on the honesty of counsel. The term "officer of the court," with all the
assumptions of honor and integrity that append to it, must not be allowed to
lose its significance. While some might find these to be only "little" lies, we
feel the distinction between little lies and big ones is difficult to delineate
and dangerous to draw. The corrosive effect of little lies differs from the
corrosive effect of big lies only in the time it takes for the damage to become
irreversible. Donahue's violations of the requirements set forth in the
California Rules of Court governing extension requests meet the standard of
unreasonableness, and warrant the imposition of sanctions.
The same
conclusion applies to Donahue's violation of California Rules of Court, rule
8.204(a)(1), which specifies the required content of a brief. Among other
things, it requires that briefs must "support each point by argument and, if
possible, by citation of authority . . . ." (Cal. Rules of Court, rule
8.204(a)(1)(B).) In this case, Donahue's brief fails to meet that standard in
significant ways. First, it includes a separately-captioned argument asserting
this appeal is frivolous and seeking an award of sanctions, but without
including therein any discussion of either the facts of the case, or the law
pertaining to sanctions. And second, the brief includes a separately-captioned
argument asserting that appellants have "falsely argue[d] the case," again
without including any meaningful analysis — either factual or legal — to justify
that accusation in the context of this case. And what makes these violations
unreasonable is the clear evidence that Donahue simply copied these
arguments from the earlier brief he submitted in the Nguyen v. Castillo
case. The circumstances suggest he didn't even pause to consider whether they
were appropriate points to make in response to this appeal.
In fact, a
comparison of his "falsely argue[d]" section in the two briefs reveals that
Donahue constructed the argument in this case by simply redacting the
facts recited in the earlier brief, and reproducing the bellicose rhetoric
without any reference to anything that actually happened here. In other words,
Donahue reduced this misconduct accusation to boilerplate.
It is difficult
for us to express how wrong that is. Sanctions are serious business. They
deserve more thought than the choice of a salad dressing. "I'll have the
sanctions, please. No, on second thought, bring me the balsamic; I'm trying to
lose a few pounds." A request for sanctions can never be so lightly
considered as to be copied word for word from another brief — much less copied
in reliance on facts from another case that do not obtain in the present one. A
request for sanctions should be reserved for serious violations of the standard
of practice, not used as a bullying tactic.
Our profession is
rife with cynicism, awash in incivility. Lawyers and judges of our generation
spend a great deal of time lamenting the loss of a golden age when lawyers
treated each other with respect and courtesy. It's time to stop talking about
the problem and act on it. For decades, our profession has given lip service to
civility. All we have gotten from it is tired lips. We have reluctantly
concluded lips cannot do the job; teeth are required. In this case, those teeth
will take the form of sanctions.
We do not come to
this conclusion lightly. Judges are lawyers, too. And while we have taken on a
different role in the system, we have not lost sight of how difficult it is to
practice law. Indeed, at the appellate level, we are reminded daily how complex
and recondite the issues that confront practitioners daily can be.
So we are loath to
act in any way that would seem to encourage courts to impose sanctions for
mistakes or missteps. But for serious and significant departures from the
standard of practice, for departures such as dishonesty and bullying, such steps
are necessary. We will step onto the slippery slope and trust our colleagues on
the trial court bench to tread carefully along with us. It is time to make it
clear that there is a price to pay for cynical practices.
If this be
quixotic, so be it. Rocinante is saddled up and we are prepared to tilt at this
windmill for as long as it takes.
We sanction Mr.
Donahue in the amount of $10,000. In arriving at that amount, we have struggled
with the absence of precedent. "How much do you sanction an attorney who lies to
the court, seeks unwarranted sanctions, bullies opposing counsel, shows no
remorse, and effectively vows to continue such tactics by endorsing his conduct
when challenged on it?" does not seem to have been a question yet addressed by
other courts.
The appellate
sanctions we have found involving sanctions paid to the court rather than
opposing counsel16 have ranged of late from $6,000 to $12,500. These are
mostly sanctions for frivolous appeals, based in part on the cost to the court
of processing a frivolous appeal (See, e. g., Foust v. San Jose Construction
Company (2011) 198
Cal.App.4th 181; Pierotti v. Torian (2000) 81
Cal.App.4th 17). Those cases, however, did not involve the added elements of
dishonesty and lack of remorse we have here. And they did not require additional
settings to bring the offending attorney before the court. The only case we have
found that included those elements is, lamentably, from our own district,
DeRose v. Huerlin (2002) 100
Cal.App.4th 158.
In DeRose,
a different panel of this court took into consideration their difficulty in
getting counsel into court and his complete lack of compunction about his
horrifying conduct in assessing what it termed a "conservative" sanction of
$6,000. Given the passage of time, the out-and-out deceit, and the similar level
of defiance involved in this case, we consider the amount we have chosen
appropriate. Counsel's conduct clearly rises to the level of an unreasonable
violation of California Rules of Court, rule 8.204(a)(1), and for this and the
other violations outlined above, we impose monetary sanctions against him in the
amount of $10,000, payable to this court within 90 days.
The judgment is
reversed, and the case is remanded to the trial court with instructions to enter
judgment in favor of appellants. Appellants are to recover their costs on
appeal.
The court having
found that Timothy J. Donahue, State Bar No. 110501, has violated court rules in
such a degree as to require sanctions in the amount of $10,000, the clerk of
this court is ordered, pursuant to Business and Professions Code section 6086.7,
subdivision (a)(3), to forward a copy of this opinion to the State Bar upon
return of the remittitur, and to notify Mr. Donahue that the matter has been
referred to the State Bar.
MOORE, J. and
FYBEL, J., concurs.
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ASSOCIATIONS
ADDITIONAL INFORMATION
