Case Number: KC061475 Hearing Date: May 05, 2016 Dept: O

Raphael v. Rizk, et al. (KC061475)

1. Defendants Rizk and Cadarex, Inc.’s MOTION TO SET ASIDE AND VACATE THE DEFAULT JUDGMENT OF 2/8/16 [per CCP 580(a) and 473(d)]

Respondent: Plaintiff Raphael

2. Defendants Rizk and Cadarex, Inc.’s MOTION TO SET ASIDE AND VACATE THE DEFAULT JUDGMENT OF 2/8/16 [per CCP 580(a) and 663(1)]

Respondent: Plaintiff Raphael

3. Defendants Rizk and Cadarex, Inc.’s MOTION FOR NEW TRIAL

Respondent: Plaintiff Raphael

TENTATIVE RULING

1. Defendants Rizk and Cadarex, Inc.’s motion to set aside and vacate the default judgment of 2/8/16 per CCP 580(a) and 473(d) is GRANTED.

2-3. Defendants Rizk and Cadarex, Inc.’s motion to set aside and vacate the default judgment of 2/8/16 per CCP 663(1) and motion for new trial is MOOT.

1-2. Motions to Set Aside Default and Motion for New Trial

The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115; but in any other case, the court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue. The court may impose liability, regardless of whether the theory upon which liability is sought to be imposed involves legal or equitable principles. (CCP 580(a).) 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. (CCP 473(d).)

THE GRANTING OF TERMINATING SANCTIONS REQUESTED BY PLAINTIFF FOR CONTINUING DISCOVERY ABUSES:
The Complaint in this matter was originally filed on 6/16/11. Litigation and discovery in this matter has been long and arduous, requiring the assistance of a discovery referee, as well as the appellate court, who observed that “the conduct of Rizk and his attorneys is an intolerable display of disrespect for the judicial system and court orders…. Appellants have wasted Plaintiff’s time, the referee’s time, and the courts’ time, which ‘is not fair to the opposing litigant who is victimized by such tactics and it is not fair to the greatly overworked judicial system itself and those citizens with legitimate disputes waiting patiently to use it.’…. Trial was originally scheduled for 2012 in this case. Owing to their underhanded tactics, appellants have denied Plaintiff his day in court for three years.” (Motion for Terminating Sanctions, Suppl. Sultanyan Decl., Ex 1, Pages 9-10.)

On 12/4/15, this court granted Plaintiff’s motion for terminating sanctions, finding that “Defendant and his counsels have exhibited a pattern and practice of discovery misuse throughout this litigation… It is apparent to this court that Defendant has engaged in a course of conduct and a history of discovery abuse, specifically aimed at preventing Plaintiff from obtaining the discovery he is entitled, and drawing out the five-year litigation clock. This court has given Defendant every opportunity and benefit, and resisted terminating sanctions when this motion was filed over 10 months ago. At this juncture, and based on Defendant’s history of discovery abuses and litigation tactics, this court finds that terminating sanctions are proper and warranted.”

On 1/15/16, the Court struck Defendants’ answer, and dismissed Rizk’s Cross-Complaint and entered a default against Defendants. On 2/8/16, default judgment was granted.

MOTION BY DEFENDANTS TO SET ASIDE DEFAULT:
Defendants now move to set aside and vacate the default judgment as void because damages exceeded damages demanded in the TAC. They urge that notice of potential damages obtained by participation in discovery or presence at a default prove-up hearing does not satisfy CCP section 580. (Stein v. York (2010) 181 Cal.App.4th 320, 326.) Default judgments resulting from failure to answer and from discovery sanctions follow the same rules. [U]nless and until the Legislature specifically provides a separate procedure for defaults after discovery sanctions, these sections remain the sole statutory procedures for default judgments. … We conclude that the damages awarded must be limited by the terms of the same section: when an answer is stricken as a sanction for the defendant’s obstruction of discovery, it is as if no answer had been filed in the first instance.” (Greenup v. Rodman (1986) 42 Cal. 3d 822, 828.)

In opposition, Plaintiff contends that the TAC gives notice to Defendants that Plaintiff was making a “request for accounting.” (TAC, caption.) In an action for an accounting, “the complaint need only specify the type of relief requested, and not the specific dollar amount sought. We foresee no danger that defaulting defendants will be taken by surprise by judgments entered against them, because, like spouses facing property division, they will be in possession of the essential information necessary to calculate their potential exposure. Of course, if they seek to be heard on the method of calculating the withdrawing partner’s financial interest, or on the figures used in arriving at the value of the interest, they are free to appear in the action. Thus, we reverse the trial court’s order vacating the original April 1998 default judgment against the partnership.” (Cassel v. Sullivan, Roche & Johnson, 76 Cal. App. 4th 1157; see also Warren v. Warren (2015) 240 Cal. App. 4th 373, approving Cassel v. Sullivan, but reversing on other grounds.)

The court finds, however, that Cassel v. Sullivan is distinguishable. There, Plaintiff’s entire action against several of plaintiff’s former law partners and the partnership was “for an accounting and valuation of plaintiff’s interest in the partnership on the date of his withdrawal.” Here, Plaintiff did not allege a cause of action for Accounting, and Plaintiff’s Prayer does not mention a request for accounting. The only reference to a “request for accounting” appears in the caption of the TAC. The court finds that such request, hidden in the caption, does not give fair notice to Defendants that Plaintiff was seeking an accounting to exempt them from CCP 580(a).

Accordingly, motion to set aside default judgment must be GRANTED pursuant to CCP 473(d) and 580(a).

Plaintiff’s request to keep terminating sanctions intact is denied. Dept. of Fair Employment & Housing v. Ottovich (2014) 227 Cal.App.4th 706, 716 is distinguishable. After a late filed statement of damages, Defendant never sought to reinstate his answer and summary adjudication of the issues other than damages was granted because there, “the court kept alive the issue of damages.” Here, Defendants’ entire Answer was stricken, there is no later filed “statement of damages” (nor is one available in this type of action) and the rational – perhaps a fiction, but still binding on this court – remains that [s]uch notice enables a defendant to exercise his right to choose—at any point before trial, even after discovery has begun—between (1) giving up his right to defend in exchange for the certainty that he cannot be held liable for more than a known amount, and (2) exercising his right to defend at the cost of exposing himself to greater liability. [Greenup v. Rodman, Supra, 829.]

Footnote 4 in the DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO SET ASIDE AND VACATE DEFAULT seemingly tries to minimize the egregious and continuing abuses of defendant in the discovery process, including improper delay by seeking inappropriate and unwarranted appellate review (sanctions by the court of appeal) and thereafter the court’s finding of his continued complicity in having Mr. McGarrell fail to produce requested financial documents in continued defiance of the orders of this court and of the discovery referee. There had been prior, less severe, sanction orders and a review of the tortured history of plaintiff’s attempting to obtain the compliance of proper discovery requests directed at obtaining the very financial information relating to damages now contested due to the direct actions of the defendant and his counsel will show the requested terminating sanction was otherwise appropriate. The defendant and his counsel’s actions should not be condoned nor minimized and, but for the Plaintiff’s failure to provide proper notice of damages in the complaint, this and the now moot attendant motions for new trial would be denied for the reasons otherwise raised in Plaintiff’s opposition.

Motion to set aside default judgments pursuant to CCP 663(1) are GRANTED and motions for new trial on other grounds are MOOT.

SETTING NEW DATES
The court will have counsel address: What is the effect of the BK stay (lifted to allow defendantS to bring these motions) on the setting of a new trial date?