KIM v. WESTMOORE PARTNERS, INC.
201 Cal.App.4th 267 (2011)
133 Cal. Rptr. 3d 774
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.
November 29, 2011.
OPINIONBEDSWORTH, 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 a plaintiff seeks, he is not automatically entitled to entry of that judgment by the court, simply because the defendant defaulted. Instead, it is incumbent upon the 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 is not the first time we have told this tale. As we previously explained in Heidary v. Yadollahi (2002) 99 Cal.App.4th 857, 868 [121 Cal.Rptr.2d 695], "[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 [36 Cal.Rptr.3d 663] [$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.
1. When we say counsel "should" offer an extension of time to respond, we do not mean to imply any legal obligation to do so—merely a standard of professionalism. "While 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. [Citations.]" (Bellm v. Bellia (1984) 150 Cal.App.3d 1036, 1038 [198 Cal.Rptr. 389].)
2. That date is not a typo—at least not ours. This promissory note, dated May of 2003, provides for interest payments to have commenced three months prior to the date of the note.
3. The terms of this promissory note are internally inconsistent with respect to the amount of interest to be paid, because it also states that interest "shall accrue at a rate per month equal to Two percent (2%.)" Two percent of $60,000 is $1,200 per month, not $2,000 per month. This discrepancy might be explained by the fact that the promissory note originally specified a principal obligation of $100,000, but was revised to reflect the lower amount of $60,000. The monthly interest payments, which would have correlated to 2 percent of $100,000, were not revised. They are thus inconsistent with the specified rate.
4. Kim's purported fifth and sixth causes of action, for "Recision" (sic) and "Imposition of Constructive Trust," respectively, are both remedies, not causes of action.
5. The closest reference to "unpaid fees" we can find in the complaint is in the terms of the fourth promissory note, which specifies that $3,750 of "closing costs" are to be added to the principal amount of the loan. However, we cannot fathom how that single item of "closing costs" might correlate to the $1.5 million in "unpaid fees" set forth in the statement of damages. As for the alleged $500,000 in "property damage," there is simply nothing in the complaint which even arguably supports such a claim.
6. Defendants assert in their opening brief that the statements of damages "were not properly served," and suggest that Kim may have acted inappropriately by "attach[ing] the proof of service of summons for the original complaint (Dated May 21, 2009) to Plaintiff's statements of damages which [were] filed more than a year later on June 25, 2010." But there was no impropriety in doing so. The proofs of service in question actually reflect that each defendant was served with both the complaint and the statement of damages (along with other documents) on May 11, 2009. And the statement of damages form states, on its face, that it should not be filed with the court "unless you are applying for a default judgment under Code of Civil Procedure § 585." Thus, it is perfectly proper to serve a statement of damages on one date, but not file it with the court until much later, when a default judgment is actually sought.
7. The other three named defendants, Rob Jennings, Temecula Harry's Pacific Grill, LLC, and Honolulu Harry's, Inc., did not move to set aside their defaults.
8. Donahue's claim to have e-mailed exhibit 1 to opposing counsel on September 23, 2009, cannot be reconciled with Kim's characterization of the exhibit as being "dated October 26, 2009."
9. Because the judgment was prepared by Kim, and it is clear from his declaration that he is seeking a total judgment of $30 million, we presume that is what is intended by the judgment. However, in our view, the language of the judgment is ambiguous. It specifies that judgment is entered against "each individual" defendant, but in the "single" sum of $5 million. Removing the words "each individual" would make it clear that the total liability is $5 million, assessed jointly and severally against all defendants; and removing the word "single" would make it clear that the total liability is $30 million—consisting of $5 million assessed against each defendant severally. However, including both words in the same sentence makes it unclear. Moreover, the judgment's treatment of costs exacerbates the confusion. The total amount of costs claimed by Kim in this case was $804.40, and the judgment adds those costs to the "single sum" of $5 million, for a "total sum of $5,000,804.40." If that "total sum" is assessed against each defendant separately—consistent with the $30 million in damages requested by Kim—that means Kim would be entitled to recover his costs six times over. That is clearly inappropriate. We need not resolve this ambiguity, however, because, as we have already indicated, the judgment must be reversed in any case.
10. Business and Professions Code section 17200 states: "As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code."
11. We found the "general rule" prohibiting review of the sufficiency of the evidence to support a default judgment cited in two modern cases. The first, In re Matthew S. (1988) 201 Cal.App.3d 315, 320 [247 Cal.Rptr. 100], is a juvenile dependency case, which relies on Uva v. Evans, supra, 83 Cal.App.3d 356, 363, as authority for that general rule, without acknowledging the fact that Uva itself actually allows such a challenge relating to damages. In re Matthew S., supra, 201 Cal.App.3d 315, is then cited, in turn, for the same proposition by Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294 [24 Cal.Rptr.3d 780], a case involving an appeal from a trial court order denying a motion to vacate a default judgment. The Sporn court goes on to acknowledge, however, that various courts have allowed a challenge to the sufficiency of the evidence in a direct appeal from a default judgment, and then simply distinguishes that situation from the one before it, in which the defendant forfeited any direct appeal. Neither of these cases constitutes persuasive authority precluding review of the sufficiency of the evidence to support the damage award in this case.
12. Appellants assert the two briefs differ in only 15 words. We have not undertaken such an analysis, but appellants' estimate is not outside the ballpark. The two are virtually identical. Appellant's request that we take judicial notice of that earlier brief is granted.
13. The only difference in the sanction requests is a technical one. While both briefs assert "[a]ll parties have been put on notice of the pending request for sanctions, as a result of frivolous appeal," the earlier brief in the Nguyen v. Castillo case actually references a letter sent by Donahue to opposing counsel providing such a notice. Apparently, Donahue sent no such letter to opposing counsel in this case, an omission which did not deter him from making the identical assertion of "notice."
14. California Rules of Court, rule 8.276(a) provides that the court may, on its own motion, impose sanctions on a party for "[f]iling a frivolous motion" or "[c]ommitting any other unreasonable violation of these rules."
15. In making this assertion, Donahue relies on a "notice of errata" filed by appellants, which acknowledges one clerical error in the brief, and corrects it.
16. Sanctions payable to opposing counsel typically involve amounts much higher than sanctions payable to the court. Appellant here did not request sanctions.