Filed 9/9/19 Maher v. Wolcott CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

TIMOTHY MAHER,

Plaintiff and Respondent,

v.

TIMOTHY WOLCOTT,

Defendant and Appellant.

E070398

(Super.Ct.No. PSC1702863)

OPINION

APPEAL from the Superior Court of Riverside County. James T. Latting, Judge. Reversed with directions.

Law Offices of Bradford Calvin and Bradford Calvin for Defendant and Appellant.

Law Offices of Michael Hawbecker and Michael Hawbecker for Plaintiff and Respondent.

After default judgment was entered against defendant and appellant Timothy Wolcott, Wolcott moved to have both the default judgment and the underlying default set aside pursuant to Code of Civil Procedure section 473, subdivision (b). The trial court denied the motion. On appeal, Wolcott contends that the trial court abused its discretion in denying the motion, and that the default judgment is void to the extent it awarded an amount greater than what the complaint specified. We hold that the trial court did not abuse its discretion in denying the motion but agree with Wolcott that the judgment is void in part. We therefore reverse and remand with instructions.

I. FACTUAL AND PROCEDURAL HISTORY
II.
As alleged in the complaint, plaintiff and respondent Timothy Maher and Wolcott were business partners in a Rancho Mirage art gallery that operated from 2015 to 2016. Under the gallery’s operating agreement, Wolcott was to contribute $100,000 in framed photographs and other inventory while Maher was to contribute $100,000 cash. Wolcott never made his full capital contribution, and once the gallery went out of business Wolcott took possession of the photographs he contributed and has “failed to sell, liquidate or otherwise distribute all of the assets” as required by the operating agreement.

On June 2, 2017, Maher brought suit against Wolcott and others, alleging six causes of action against Wolcott: (1) breach of contract, (2) breach of fiduciary duty, (3) failure to make contribution, (4) improper distribution, (5) refusal to make distribution, and (6) breach of oral contract. The first five causes of action relate to the facts described above. In the sixth, Maher alleges that Wolcott breached an oral agreement whereby Maher would make an additional $10,000 cash capital contribution in exchange for 10 large-scale prints from Wolcott.

In the body of the first, second, third, and fifth causes of action, Maher alleged that he “suffered damages in excess of $25,000.” In the fourth, Maher alleged no specific amount of damages suffered, and in the sixth, he alleged that he “suffered damages in the sum of $10,000.” The prayer for relief sought “damages in an amount to be determined at trial” for the first five causes of action and $10,000 in damages for the sixth.

Default was entered against Wolcott on September 28, 2017, and on November 15, 2017, the trial court entered a default judgment against Wolcott comprising $98,714.71 in damages, which, after attorneys’ fees and costs were added, totaled $107,183.21.

In January 2018, Wolcott filed a motion to set aside the default and default judgment. The motion included a declaration from Wolcott, three relevant paragraphs of which describe why he did not file an answer:

“9. In about May or June of [2017] I told my friend Shay Roehm about the dispute that Mr. Maher and I were having. I understand that she had some conversations with Mr. Maher and his attorney before this lawsuit was filed. She had agreed to get involved as a mutual friend in an effort to mediate our dispute before litigation was filed. I thought that this would be a good idea. I told Ms. Roehm that I wanted Mr. Maher to provide me all of the financials for the gallery.

“10. On or about July 18, 2017, I was served with Mr. Maher’s summons and complaint that he filed in this case. I was served in person at my residence address . . . . As at this time I was aware that Ms. Roehm was already in communication with Mr. Maher and his attorney about mediation I did not feel that I needed to file an answer.

“11. Over the next couple months I had a few conversations with Ms. Roehm wherein she explained to me that she was working with Mr. Maher and his attorney to arrange a mediation of our dispute. Again, as I knew that Mr. Maher and I would be meeting shortly to resolve our dispute, I did not believe it necessary to file an answer to his complaint.”

Wolcott also stated that he never received the request for entry of default because it was mailed “only” to his residence in Big Bear Lake; in his words, “the U.S. Post Office does not deliver mail to residential addresses in Big Bear Lake,” and he was “aware that the U.S. Post Office’s practice would be to return such document to the sender.”

In the motion, Wolcott argued that he believed “his default would not be taken until the parties mediated their disputes” and that the default and subsequent judgment “were due to his surprise and excusable neglect.”

The trial court denied the motion. This appeal followed.

III. DISCUSSION
IV.
Wolcott contends that the trial court abused its discretion in denying the motion and that the judgment is void for being excessive. We consider each in turn.

A. Abuse of Discretion
B.
Under what is sometimes referred to as the “discretionary” provision of section 473, subdivision (b), “[t]he 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.”

“A motion for relief under section 473 is addressed to the sound discretion of the trial court and an appellate court will not interfere unless there is a clear showing of an abuse.” (Davis v. Thayer (1980) 113 Cal.App.3d 892, 904.) “The statute is remedial and should be liberally applied to carry out the policy of permitting trial on the merits, but the moving party has the burden of showing good cause.” (Ibid.) “The mere recital of mistake, inadvertence, surprise or excusable neglect is not sufficient to warrant relief. Relief on grounds of mistake, inadvertence, surprise or excusable neglect is available only on a showing that the claimant’s failure to timely present a claim was reasonable when tested by the objective ‘reasonably prudent person’ standard. The definition of excusable neglect is defined as ‘neglect that might have been the act or omission of a reasonably prudent person under the same or similar circumstances.’” (Department of Water & Power v. Superior Court (2000) 82 Cal.App.4th 1288, 1293.) Although Wolcott relied on both “excusable neglect” and “surprise” before the trial court, he relies only on “excusable neglect” on appeal.

In our view, a reasonably prudent person who has been sued would not neglect to answer based on a personal belief that potential mediation talks negated procedural requirements. In his declaration, Wolcott repeatedly stated his view that because there was some discussion of mediation, he did not believe it necessary to file a responsive pleading. Wolcott does not attempt to reconcile such a belief with the requirement, as stated in the summons he was served with, that he had 30 days to file a written response. (See § 412.20, subds. (a)(3), (a)(4) [summons must contain “[a] direction that the defendant file with the court a written pleading in response to the complaint within 30 days after summons is served” as well as “[a] notice that, unless the defendant so responds, his or her default will be entered upon application by the plaintiff, and the plaintiff may apply to the court for the relief demanded in the complaint”].)

Moreover, a reasonably prudent person relying on informal, prelitigation dispute resolution measures would not have continued to rely solely on such measures once formal litigation commenced. In his declaration, Wolcott states that Roehm “agreed to get involved as a mutual friend in an effort to mediate [the parties’] dispute before litigation was filed.” The mere fact that Maher ultimately commenced litigation shows that this effort had failed. Once Wolcott was served, it was incumbent on him to seek legal advice or, if he so chose, to educate himself as to possible next steps. It was inexcusable for him to “not feel” he needed to file an answer simply because Roehm continued to attempt informal resolution of the dispute.

Finally, once it became apparent that no mediation would take place, a reasonably prudent person in Wolcott’s position would not have continued to do nothing. Declarations from Roehm and Maher’s attorney indicate that a mediation meeting was supposed to take place in August 2017, but never did. Both Roehm and Maher’s attorney indicate that no discussions took place between them after August 2017. Under such circumstances, a reasonably prudent person in Wolcott’s position would not have continued to believe, as Wolcott did, that the plaintiff remained receptive to resolving the dispute outside of court. Wolcott’s attempt to explain that he did not believe it necessary to file an answer in the months after he was sued because he “knew” he and Maher would be “meeting shortly” is thus wholly unconvincing to the extent he refers to any period after August 2017.

Wolcott contends that neither Maher nor his attorney ever warned Wolcott that they would take his default. However, “[w]hile as a matter of professional courtesy counsel should have given notice of the impending default, and we decry this lack of professional courtesy [citation], counsel was under no legal obligation to do so.” (Bellm v. Bellia (1984) 150 Cal.App.3d 1036, 1038.) Moreover, Maher waited a reasonable amount of time after Wolcott’s answer was due before taking default, as more than a month went by between mid-August, when his answer would have been due, and September 28, when the default was taken. (See Robinson v. Varela (1977) 67 Cal.App.3d 611, 616 [“quiet taking of default on the beginning of the first day on which defendant’s answer was delinquent” may justify vacating the default].)

Wolcott also relies on Fasuyi v. Permatex, Inc. (2008) 167 Cal.App.4th 681 for the proposition that so long as a defendant promptly seeks relief from default and there is no showing of prejudice to the plaintiff, “‘“very slight evidence will be required to justify a court in setting aside the default.”’” (Id. at p. 696.) As the sentence following this proposition in Fasuyi states, however, “‘[u]nless inexcusable neglect is clear, the policy favoring trial on the merits prevails.’” (Ibid., italics added.) As discussed above, Wolcott’s neglect was inexcusable. Accordingly, “very slight evidence” is not the applicable standard, and Wolcott fails to show that the trial court abused its discretion in denying the motion.

C. Void Judgment
D.
“The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint . . . .” (§ 580, subd. (a).) “The policy behind this statute is that a defendant is entitled to be informed of the maximum liability which he will face if he chooses to default.” (National Diversified Services, Inc. v. Bernstein (1985) 168 Cal.App.3d 410, 417.) “Except for personal injury or wrongful death cases, a defendant must be notified by the prayer [citation] or allegations in the body of the complaint of the damages sought.” (Id. at pp. 417-418, fn. omitted.)

Although Maher notes that Wolcott did not raise this issue before the trial court, Wolcott is not precluded from raising it now, as “questions of jurisdiction are never waived and may be raised for the first time on appeal” (Petty v. Manpower, Inc. (1979) 94 Cal.App.3d 794, 798-799). “[A] default judgment greater than the amount specifically demanded is void as beyond the court’s jurisdiction.” (Greenup v. Rodman (1986) 42 Cal.3d 822, 826.)

Here, the first five causes of action against Wolcott (for breach of contract, breach of fiduciary duty, failure to make contribution, improper distribution, and refusal to make distribution) each sought “damages in an amount to be determined at trial” in the prayer for relief and four of those causes of action claimed that Maher “suffered damages in excess of $25,000” in the body of the complaint. These allegations do not entitle Maher to obtain a maximum of four times $25,000, or $100,000, in a default judgment; rather, because these causes of action arise from violations of the same primary right—namely, the right to rely on the terms and protections provided by the gallery’s operating agreement—Maher actually only asserts a single cause of action here. (See Sass v. Cohen (2019) 32 Cal.App.5th 1032, 1046 [“a demand for relief will not be counted twice just because it is alleged under two different claims; duplicative damages recoverable under more than one theory of liability will only be counted once”], review granted May 22, 2019, S255262; Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 860 [“Bay Cities was not asserting two causes of action. . . . Bay Cities had one primary right—the right to be free of negligence by its attorney in connection with the particular debt collection for which he was retained. He allegedly breached that right in two ways, but it nevertheless remained a single right.”].) Maher acknowledges this, stating in his brief that the complaint “contains multiple causes of action against Wolcott [citation], all arising from the general allegation that Wolcott improperly retained corporate assets and failed to make his initial capital contribution in an amount equal to $100,000, as required by the [operating agreement] between the parties.” Thus, as to these “causes of action,” Maher may recover no more than $25,000 in damages. Combined with the demand for $10,000 in the remaining cause of action against Wolcott for breach of oral contract—which does not rely on the terms of the operating agreement—Maher may recover no more than $35,000 in damages.

Maher contends that he is entitled to recover a maximum of $110,000 in damages, $10,000 from the cause of action for breach of oral contract, and $100,000 from a demand letter to Wolcott, attached to the complaint, requesting such an amount. Maher, however, cites no authority for the proposition that a demand letter or pleading attachment can satisfy the notice requirement of section 580. This is unsurprising, given that “[u]nder section 580 actual notice of the damages sought is not sufficient; due process requires ‘formal notice.’” (Stein v. York (2010) 181 Cal.App.4th 320, 326; see also Airs Aromatics, LLC v. CBL Data Recovery Technologies, Inc. (2018) 23 Cal.App.5th 1013, 1016 [where complaint alleged $25,000 in damages, default judgment of over $3 million void as excessive even though defendant “participated in a settlement conference in which [plaintiff] demanded $5 million to settle all claims”]; Dhawan v. Biring (2015) 241 Cal.App.4th 963 [in case that did not involve personal injury or wrongful death, where complaint listed no damages figure, default judgment of nearly $2 million void as excessive even though defendants were served with a statement of damages].) In any event, the demand letter does not ask for $100,000; rather, it demands, somewhat confusingly, “all assets in [Wolcott’s] possession equal to ‘$100,000 in capital contribution, in the form of framed photographic images for display in the gallery and other inventory items, at cost[,’] less any proceeds from the above inventory sold by the , prior to May 30, 2016.”

Accordingly, the default judgment, awarding Maher $98,714.71 in damages, is void as excessive.

“When we reverse a judgment on the ground that the damages awarded exceeded those pled, the court may modify the judgment by reducing it to the amount specified in the complaint, or the plaintiff may choose to amend the complaint to state the full amount of damages he or she seeks. But if the plaintiff chooses the latter, the court should vacate the default, ‘“entitling defendants to either attack the pleadings, or answer the amended complaint.”’” (Rodriguez v. Cho (2015) 236 Cal.App.4th 742, 755.) We reverse and remand to allow Maher to make this choice.

V. DISPOSITION
VI.
The order is reversed. The matter is remanded with directions to vacate the judgment. Maher may choose to accept a modified judgment, in which case the trial court shall enter a modified judgment not exceeding $35,000 in damages. Alternatively, Maher may amend his complaint to increase the amount of damages he is seeking, at which point Wolcott’s default will be vacated. The parties shall bear their own costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RAPHAEL

J.

We concur:

FIELDS

Acting P. J.

MENETREZ

J.