Filed 1/24/20 Bagby v. Davis CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

DOUGLAS A. BAGBY,

Plaintiff and Respondent,

v.

JOSEPH DANIEL DAVIS,

Defendant and Appellant.

B294081

(Los Angeles County

Super. Ct. No. BC663174)

APPEAL from a judgment of the Superior Court of Los Angeles County, Joseph R. Kalin, Judge. Reversed and remanded.

Frank W. Nemecek and Mark Schaeffer for Defendant and Appellant.

Law Offices of Douglas A. Bagby, Douglas A. Bagby, in pro. per., and James L. Keane for Plaintiff and Respondent.

In this action for legal malpractice and breach of contract, Joseph Davis appeals from a default judgment awarding plaintiff and respondent Douglas Bagby over $27 million in damages against Davis, an amount that exceeds the prayer for relief in Bagby’s complaint by approximately $22 million. Davis contends, among other things, that the trial court erred in refusing to grant his motion to vacate the judgment or his motion for a new trial. We agree. A default judgment that exceeds the amount demanded in the complaint is void as a matter of law. Accordingly, we vacate the default judgment, and remand the matter to the trial court to enter a new default judgment limiting Bagby’s damages to $5 million, or vacate the default and permit Bagby to file and serve an amended complaint to seek additional damages.

BACKGROUND

In July 2013, Bagby was injured in a traffic collision when the motorcycle he was driving was struck by an automobile driven by then 93-year old Edward Grastorf, a resident of the Palisades Homeowners Association (HOA). Grastorf made an unsafe turn onto the street from the HOA’s driveway. As a result of the collision Bagby sustained significant injuries, including amputation of one leg below the knee. Bagby (himself a family law practitioner) retained Davis to represent him in a personal injury action against Grastorf and the HOA, among others.

At trial the jury apportioned 90 percent fault to Grastorf (who admitted failing to look left before turning onto the street), and 10 percent fault to Bagby. The jury found no fault on the part of the HOA. Bagby was awarded over $5 million in damages. Bagby terminated Davis’s representation.

In May 2017, following the trial, Bagby filed this action against Davis alleging identical claims for damages as a result of Davis’s alleged breach of contract and legal malpractice, and also sought declaratory relief. The breach of contract and malpractice claims were based on Bagby’s failure to recover against the HOA in the personal injury case. Bagby claimed Davis failed to introduce certain evidence at trial in the underlying action which, if introduced, would have allowed Bagby to recover damages against the HOA. The complaint alleged that, as a result of Davis’s failure “to comply with his legal and ethical obligations to [Bagby], [Bagby] sustained damages in excess of $5 million, or such other and further amount, as [would] be shown according to proof at . . . trial.” Bagby’s request for declaratory relief sought to modify the stipulated judgment against Grastorf to divert all payments to Bagby.

Davis failed to respond to the complaint, but advised Bagby of his intent to petition to compel arbitration. Bagby notified Davis he would seek entry of default, which he obtained in August 2017. In December 2017, the trial court granted Davis’s petition to compel arbitration and his motion to vacate the entry of default. This court issued an alternative writ, after which the trial court vacated its order compelling arbitration but declined to vacate the order granting Davis relief from default. We granted Bagby’s petition, directing the trial court to vacate the order granting Davis relief from default. In August 2017, default was entered against Davis.

The case proceeded to a default prove-up hearing at which the trial court declined to permit Davis to have a court reporter transcribe the proceedings. Bagby testified about the effect that injuries and damages resulting from the collision had on his personal and professional life and introduced 22 exhibits. Exhibit 21 was an (unsigned) April 15, 2015 letter Davis purportedly sent to counsel for the HOA’s insurer demanding the $1.98 million policy limit from the HOA. Bagby testified that Davis had “informed him that if [the insurer] declined to pay the demand of $1,980,000 . . . , [it] would be obligated to pay the amount of any verdict [Bagby] would obtain even if far in excess of their policy limits of $2 million.” The insurer rejected Davis’s demand. Bagby also testified that Davis had said he was glad the HOA’s insurer rejected the policy limits demand because, at trial, Bagby could “anticipate a recovery in excess of $10 million from [the HOA].”

Bagby also offered testimony of attorney Thomas Girardi, as an expert witness, who opined on the worth of Bagby’s “leg-off” case. The trial court inquired whether Bagby could have collected a judgment against the HOA. According to the Settled Statement, Girardi testified that Bagby’s injuries totaled about $27 million, and the HOA’s insurer “would have had the financial ability and obligation to pay” $26,780,000 if a judgment had been obtained against the HOA after its insurer rejected Davis’s April 2015 policy limits demand. Girardi opined that the insurer’s failure to accept that demand “opened up” the HOA’s insurance policy, and the insurer would have the ability to satisfy a $27 million judgment.

On September 25, 2018, the court entered a default judgment awarding Bagby $27,146,021.41. That judgment also modified the judgment in the underlying action to remove any rights Davis had to monies paid or property owned by Grastorf, or to recover from Bagby costs Davis allegedly had advanced on Bagby’s behalf. Davis timely appealed the trial court’s subsequent denial of his motions to vacate the default judgment and for a new trial.

DISCUSSION

I. The Default Judgment, Which Exceeds the $5 Million Demand in the Complaint, is Void
II.

Davis contends the judgment is void as a matter of law because the $27 million award exceeds the amount of damages demanded in the complaint. He is correct.

The question whether a “default and default judgment complied with constitutional and statutory requirements are questions of law as to which we exercise independent review.” (Falahati v. Kondo (2005) 127 Cal.App.4th 823, 828 (Falahati); Transamerica Title Ins. Co. v. Hendrix (1995) 34 Cal.App.4th 740, 741-742.) Due process notice requirements “lie at the core of [Code of Civil Procedure] section 580” and are “strictly construed.” (Finney v. Gomez (2003) 111 Cal.App.4th 527, 535; Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 493 (Becker) [a default judgment that awards relief beyond the type and amount sought in the operative pleadings is void].)

Section 580 provides that “[t]he relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint.” (§ 580, subd. (a).) The purpose of section 580 is to ensure that a defendant who declines to contest an action does not thereby subject himself to open ended liability. (Greenup v. Rodman (1986) 42 Cal.3d 822, 824, 826 (Greenup).) Because a default judgment in excess of plaintiff’s demand effectively denies a defaulting defendant a fair hearing, courts routinely apply the plain language of section 580 to mean that the demand in the complaint establishes the ceiling for recovery, and a default judgment in excess of that demand is void as beyond the court’s jurisdiction. (Ibid.; In re Marriage of Lippel (1990) 51 Cal.3d 1160, 1166 [“Section 580 . . . means what it says and says what it means: that a plaintiff cannot be granted more relief than is asked for in the complaint”]; Airs Aromatics, LLC v. CBL Data Recovery Technologies, Inc. (2018) 23 Cal.App.5th 1013, 1021 [“default judgment awarding damages in excess of the demand is void”]; see Levine v. Smith (2006) 145 Cal.App.4th 1131, 1137 [after default in legal malpractice action, the court has jurisdiction only to award damages up to amount of demand in complaint; an excessive default judgment is void].)

Bagby concedes that the $27 million default judgment is excessive, but invites this court to reduce the judgment to $10 million based on his allegations seeking declaratory relief. But a plaintiff may not rely on any allegation that simply recites a number to arbitrarily raise the amount of a damages demand on appeal. (Heidary v. Yadollahi (2002) 99 Cal.App.4th 857, 866 (Heidary).) Further, in the case of an inconsistency between the complaint’s allegations and the prayer regarding the amount of relief sought, “the prayer for relief controls.” (Barragan v. Banco BCH (1986) 188 Cal.App.3d 283, 305 (Barragan).) If multiple claims are pled seeking the same relief for the same injury, a default judgment may not award duplicative damages. “Regardless of the nature or number of legal theories [pleaded], [plaintiff] is not entitled to more than a single recovery . . . . [Citation.] Double . . . recovery for the same items of damage amounts to [prohibited] overcompensation.” (Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1158-1159; Heidary, supra, 99 Cal.App.4th at p. 868 [where plaintiff’s claims sought the same damages for the same wrong, damages awarded in a default judgment could not be duplicated simply because the damages were sought in two separately pled causes of action].)

Bagby’s complaint alleges two causes of action seeking monetary relief from Davis, one for breach of contract and another for legal malpractice. The redundant claims allege that Bagby suffered the same injury as a result of Davis’s professional negligence in breach of his contractual obligations. (See Loube v. Loube (1998) 64 Cal.App.4th 421, 429 [“professional negligence breaches a duty that exists only because the parties have a contractual agreement”].) Both claims allege identical wrongdoing and violation of the same primary right, i.e., Davis’s failure to present evidence adverse to the HOA in the personal injury trial. Bagby’s assertions that the $27 million default judgment was not excessive or void because the contract and malpractice claims each alleged that he suffered damages “in excess of $5 million,” and because Davis told him to expect a verdict against the HOA in excess of $5 million are unpersuasive. As discussed above, the principal purpose of section 580 is to guarantee that a defaulting party has “adequate notice of the maximum judgment that may be assessed against” him, and protect him from exposure to open-ended liability. (Greenup, supra, 42 Cal.3d at p. 826.) The language “in excess of” and “according to proof” is superfluous; Bagby’s damages are limited by the $5 million specified in the prayer for relief. (See Janssen v. Luu (1997) 57 Cal.App.4th 272, 279 (Janssen); accord, Behm v. Clear View Technologies (2015) 241 Cal.App.4th 1, 16; Electronic Funds Solutions, LLC v. Murphy (2005) 134 Cal.App.4th 1161, 1173–1174 (Murphy).)

The trial court exceeded its jurisdiction in awarding $27 million, and that award must be reduced. (Julius Schifaugh IV Consulting Services, Inc. v. Avaris Capital, Inc. (2008) 164 Cal.App.4th 1393, 1397; see Barragan, supra, 188 Cal.App.3d at p. 305 [although various claims alleged damages of $1 million, default judgment was properly limited to $500,000 requested in prayer].)

We also reject Bagby’s argument that, as his counsel in the underlying action, Davis was uniquely positioned to know of the maximum of his potential liability, and thus had actual or constructive notice of his potential exposure upon default. Neither actual nor constructive notice is sufficient to provide formal notice to a defendant of the maximum amount of his potential liability in the case of a default. (See Greenup, supra, 42 Cal.3d at p. 826 [actual notice is not sufficient]; accord, Murphy, supra, 134 Cal.App.4th at p. 1176; Janssen, supra, 57 Cal.App.4th at p. 279 [constructive notice not sufficient].)

Stein v. York (2010) 181 Cal.App.4th 320 (Stein), is instructive. In Stein, plaintiff sued her former attorney for malpractice, among other things. The defendant failed to answer the complaint, which did not allege a specific amount for damages. (Id. at p. 323.) The parties engaged in various pretrial procedures, including discovery, for over a year before the plaintiff obtained defendant’s default. (Ibid.) At the default prove-up hearing (which the defendant attended), plaintiff informed the trial court she sought $2.61 million. (Ibid.) The court awarded a default judgment for $2.65 million. (Ibid.) Strictly construing section 580, the appellate court vacated the judgment as void because it exceeded the amount of the prayer in the complaint. (Id. at pp. 325–326.) The court found that formal notice of the amount sought was necessary, and the fact that the defaulting defendant attorney had actual or constructive notice of the damages plaintiff sought by virtue of his representation of her in the underlying action and his participation in pretrial activities, including an exchange of evidence in the malpractice case against him, was insufficient to satisfy section 580’s due process requirement that he be afforded formal notice so he knew “‘“exactly what risk [he] assume[d] by not responding to the pleadings.”’” (Id. at p. 326.)

The trial court erred in denying Davis’s motion to vacate the excessive damages award and void judgment, and limit the amount of any default judgment entered to a maximum of $5 million, the amount of the prayer. (Greenup, supra, 42 Cal.3d at p. 824; Becker, supra, 27 Cal.3d at pp. 493–494; § 663.) For the same reasons, the court also erred in denying Davis’s motion for a new trial. (See § 657, subd. (5); Don v. Cruz (1982) 131 Cal.App.3d 695, 706 [“a trial court has authority to grant a new trial after a default judgment on the ground that damages are excessive as a matter of law”].)

II. Bagby Demonstrated Collectibility of a Judgment Against the HOA

Davis argues that the default judgment must be vacated for the independent reason that Bagby failed to plead or prove the “collectibility” of a judgment against the HOA at the default prove-up. (See Hecht, Solberg, Robinson, Goldberg & Bagley LLP v. Superior Court (2006) 137 Cal.App.4th 579, 590–591 [“‘where the alleged malpractice consists of mishandling a client’s claim[,] the plaintiff must show proper prosecution of the matter would have resulted in a favorable judgment and collection thereof’”].) Davis asserts that Bagby did not allege or offer evidence that any judgment against the HOA was collectible, apart from Girardi’s “expert” opinion and Bagby’s testimony that Davis told him he could expect to “recover” over $10 million from the HOA. Davis is wrong. Bagby sufficiently put the question of collectibility of a judgment against the HOA at issue, and introduced such evidence at the default prove-up.

Davis’s principal argument is that Bagby failed to establish the collectibility of a judgment against the HOA because the malpractice and breach of contract claims do not specifically allege that, but for Davis’s breach of his professional obligations, Bagby would have obtained a judgment against the HOA and could have collected on such a judgment. This contention ignores authority requiring that, given his default, Davis is deemed to have admitted allegations against him. Here, as in any challenge to the sufficiency of a pleading (such as by demurrer), the allegations of the pleading are accepted as true. (See Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 823 [default]; Popescu v. Apple, Inc. (2016) 1 Cal.App.5th 39, 44 [demurrer].) In the complaint, Bagby alleged that Davis told him that Bagby “could anticipate a recovery . . . in excess of $10 million from [the HOA],” given the HOA’s rejection of the $2 million settlement demand.

Davis’s claim that he was not on notice that Bagby claimed a judgment against the HOA would have been collectible is disingenuous. Pleadings must be reasonably interpreted, liberally construed and read as a whole, such that the meaning of each part may be derived from the context in which it appears. In determining whether a pleading is sufficient based on an assertion that it fails to state facts necessary to constitute a cause of action, we consider the stated facts to determine whether it appears the plaintiff is entitled to relief. Using this guidance, a complaint is sufficient if it is reasonably precise in stating the essential facts necessary to acquaint the defendant with the nature, source and extent of the claims against him. (See Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245; Zakk v. Diesel (2019) 33 Cal.App.5th 431, 446-447.)

While Davis represented Bagby in the underlying action, Bagby would reasonably have relied on his counsel to negotiate with the HOA, and also would reasonably have believed Davis would and did undertake actions necessary to procure a recovery (particularly because, after Bagby settled with Grastorf, the only viable chance for a significant recovery was against the HOA). The significance of the loss of that potential recovery from the HOA is reflected in allegations in Bagby’s complaint regarding Davis’s failure properly to prosecute the claims against the HOA, the only defendant with pockets deep enough (or an insurer able) to satisfy an anticipated judgment of over $10 million. Notwithstanding technical deficiencies in Bagby’s complaint, the pleading sufficiently placed Davis on notice that, by virtue of his failure to present pertinent evidence, among other wrongdoing, Davis was accused of having inexplicably undermined Bagby’s only chance for a significant recovery at trial.

Further, in addition to his own testimony (and 22 exhibits), Bagby presented the expert opinion testimony of Girardi, an experienced plaintiff’s personal injury attorney. On this evidence, the trial court was persuaded that Bagby should and would have received about $27 million in compensation for his injuries had Davis prosecuted the action against the HOA in accordance with the standard of care. Specifically, in the default judgment, the court stated that: “Girardi also testified and the Court finds that [the HOA’s insurer] would have had the financial ability to pay such a Judgment [$26,780,000] after [the insurer] turned down the policy limits demand” in Davis’s April 2015 letter. (Italics added.) Davis claims that the findings in the default judgment should be rejected because they lack sufficient evidentiary support rests on the fact that his April 2015 settlement demand admitted at trial was not signed (Ex. 21), and there is no evidence of the HOA’s response to the demand. However, in attacking the letter as insufficient evidence that a policy limits demand was made, Davis ignores the rule that we must draw reasonable inferences from the evidence presented. Here, the trial court reasonably inferred that Davis made a policy limits demand on the insurer (otherwise, the figure of $1,980,000 makes no sense), particularly in light of the significantly

higher damages Davis said Bagby could expect to recover for his injuries.

It also bears mention that at the default prove-up, Bagby was required only to present prima facie evidence to support his factual contentions. (Johnson v. Stanhiser (1999) 72 Cal.App.4th 357, 361–362.) Prima facie evidence is merely “slight evidence which creates a reasonable inference of fact sought to be established but need not eliminate all contrary inferences.” (Evans v. Paye (1995) 32 Cal.App.4th 265, 280, fn. 13.) The facts contained in the record are sufficient to establish prima facie evidence of the requisite fact of collectability.

The default judgment must be reversed. We will remand the case with directions to the trial court either to modify the default judgment by striking the award of damages in excess of $5 million, or by vacating the default, and allowing Bagby to amend the complaint to seek additional or different damages. (Becker, supra, 27 Cal.3d at p. 495.) Unless Bagby chooses to amend the complaint to seek additional damages, vacating the default judgment “does not vacate the default itself.” (Murphy, supra, 134 Cal.App.4th at p. 1177.)

III. Davis’s Remaining Contentions Lack Merit

A. Davis Was Not Entitled to a Reporter’s Transcript, Nor Prejudiced by the Absence of a Transcript
B.

The trial court did not abuse its discretion in refusing to permit the reporter Davis hired to transcribe the default prove-up hearing (nor does Davis have such an entitlement on remand). Davis’s reliance on section 269 and cases interpreting that statute is misplaced. Section 269 requires the court to permit a record of the proceeding “at the request of a party.” However, as Davis concedes, once his default was entered, he was no longer an active party nor was he entitled to participate in the litigation. (Garcia v. Politis (2011) 192 Cal.App.4th 1474, 1479.) Davis had no right to participate in the litigation until either the default was set aside or a default judgment was entered. (Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 385-386.)

That the trial court was not required to permit Davis to obtain a reporter’s transcript follows from the fact that the court could have allowed the default prove-up hearing to proceed solely based on “the use of [declarations], 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” the case. (§ 585, subd. (d).) Davis has not shown he suffered harm as a result of the use of a settled statement. (See Cal. Rules of Court, rules 8.130(h) & 8.137 [parties may proceed on appeal using a settled statement in lieu of a reporter’s transcript].) In sum, Davis failed to show he suffered prejudicial harm as a result of the court’s refusal to permit him to have the hearing transcribed.

C. The Trial Court Did Not Err in Modifying the Underlying Judgment and Bagby was Not Required to Use the Case Within a Case Method for Legal Malpractice
D.

We reject Davis’s contention that the trial court lacked authority to modify the judgment in the underlying action to preclude him from recovering any monies owed or paid by Grastorf. In the complaint—the allegations of which are deemed admitted—Bagby alleged that Davis’s failure to satisfy his contractual professional obligations prevented him from recovering over $10 million from the HOA. Accordingly, he requested the stipulated judgment against Grastorf (incorporated in the judgment in the underlying action) be modified to delete any compensation to Davis. At the default prove-up hearing, Bagby introduced evidence to support his claim that Davis was not entitled to recover any portion of the Grastorf payments because his breaches of duty deprived Bagby of compensation he was owed. The court did not err in modifying the stipulated judgment to prevent Davis from receiving compensation and being unjustly enriched at his client’s expense.

We similarly reject Davis’s contention that Bagby was required to prove his damages under the standard “trial within a trial” framework for legal malpractice. Again, in this default action, Davis was deemed to have admitted the allegations of the complaint, i.e., liability. As for damages, although the court exceeded its authority in the amount of its award, it nevertheless found that Bagby presented credible evidence to establish the fact of damages due to Davis’s malfeasance, i.e. that Bagby would have obtained a better result against the HOA but for Davis’s errors. None of the (inapposite) cases on which Davis relies require a contrary conclusion.

E. Bagby’s Default Judgment Need Not be Reduced by the $5 Million Judgment in His Favor in the Underlying Action
F.

Davis asserts that Bagby was fully compensated by the $5 million award in the underlying action, in which the jury found that only Grastorf, not the HOA, was responsible for Bagby’s injuries. In other words, Davis argues that Bagby has been made whole and is not entitled to additional damages for Davis’s professional malfeasance.

This assertion ignores the fact that Davis’s liability was established by virtue of his failure to respond to the complaint. That pleading alleges that major errors by Davis in the course of his representation of Bagby deprived his client of the ability to recover substantial additional damages independently owed by the HOA. Bagby’s compensation through the settlement with Grastorf did not make him whole. The entire premise of this action is that Bagby would have recovered additional damages from the HOA had Davis met his professional obligations. Bagby need not “credit” Davis for any amounts he paid or owed by Grastorf.

DISPOSITION

The default judgment against Davis is vacated. The case is remanded with instructions for the trial court to do one of two things. It may permit Bagby to accept a new default judgment reducing the amount of his compensatory damages award to $5 million. (See Greenup, supra, 42 Cal.3d at pp. 830–831, see also Ostling v. Loring (1994) 27 Cal.App.4th 1731, 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”].) Alternatively, the court may permit Bagby to file and serve an amended complaint demanding the amount and type of damages he seeks. If the latter option is pursued, the trial court shall vacate the default, entitling Davis to either attack the pleadings, or answer the amended complaint. (See Falahati, supra, 127 Cal.App.4th at p. 831; Murphy, supra, 134 Cal.App.4th at pp. 1177-1178.) The parties shall bear their own costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

WILLHITE, J.

We concur:

MANELLA, P. J. COLLINS, J.