Barquis v. Merchants Collection Assn.

• Decision Date: 10 May 1972
• Docket Number: S.F. 22831
• Court: California Supreme Court
• Parties: , 496 P.2d 817 Jessie BARQUIS et al., Plaintiffs and Appellants, v. MERCHANTS COLLECTION ASSOCIATION OF OAKLAND, INC., et al., Defendants and Respondents. In Bank

Page 745

101 Cal.Rptr. 745

7 Cal.3d 94, 496 P.2d 817

Jessie BARQUIS et al., Plaintiffs and Appellants, v. MERCHANTS COLLECTION ASSOCIATION OF OAKLAND, INC., et al., Defendants and Respondents.

S.F. 22831.

Supreme Court of California,

In Bank.

May 10, 1972.

Eugene M. Swann, Richmond, Alan Verson, San Francisco, and Peter N. Hagberg, Richmond, for plaintiffs and appellants.

Evelle J. Younger, Atty. Gen., Andrea Sheridan Ordin, Deputy Atty. Gen., Terry J. Hatter, Los Angeles, Paul L. McKaskle, San Francisco, Abby Soven, Los Angeles, Lucy K. McCabe, Don B. Kates, Jr., San Francisco, Chern & Sharpe, Gertrude D. Chern and Carolyn M. Farren, Santa Maria, as amici curiae on behalf of plaintiffs and appellants.

Irwin J. Eskanos, in pro. per.; Crosby, Heafey, Roach & May, Carlisle C. Crosby, Richard J. Heafey, Oakland, P. Gerhardt Zacher, Peter W. Davis, Gross, Gross, Rose & Schwartz and Barry R. Gross, Oakland, for defendants and respondents.

TOBRINER, Justice.

This action was commenced in the Superior Court of Alameda County in 1968 by six individual plaintiffs on behalf of themselves and other similarly situated persons against defendant Merchants Collection Association of Oakland, Inc. (Merchants), ¹ a licensed collection agency, to challenge the agency's alleged practice of knowingly and wilfully filing actions in improper counties, pursuant to statutorily inadequate complaints, for the purpose of impairing its adversaries' ability to defend these actions, and with the intent, and effect, of obtaining an increased number of default judgments.

To remedy the consequences of the foregoing alleged misfiling practice, plaintiffs sought a variety of relief, including (1) an injunction to restrain the agency from continuing to utilize the challenged practice in the future and (2) an order setting aside, as void, all judgments obtained by defendant in the two years prior to the suit, pursuant to complaints which did not comply with the requirements of section 396a of the Code of Civil Procedure or with the requirements of section 1812.10 of the Civil Code. ² Defendant demurred to plaintiffs' first amended complaint on the grounds that such complaint failed to state a cause of action; the trial court sustained the demurrer without leave to amend and subsequently entered a judgment dismissing the action. It is from this judgment of dismissal which plaintiffs appeal.

For the reasons discussed below, we have concluded that under the allegations of the amended complaint the judgment for defendant with respect to the claim for injunctive relief must be reversed. In alleging that the collection agency has Wilfully commenced actions in Improper counties, with Knowledge that such counties are improper, and for the improper Ulterior purpose of impairing its adversaries' ability to defend such suits, plaintiffs have sufficiently alleged facts which, if true, demonstrate that the agency has in the past been continually committing a gross 'abuse of process' and that the agency threatens to continue this unlawful, tortious conduct in the future. If such allegations can be substantiated at trial, we conclude that plaintiffs are entitled to an injunction to restrain the alleged conduct because it constitutes both a continuing mass tort against which other legal remedies are inadequate and an 'unlawful . . . business practice' which may be enjoined under Civil Code section 3369.

With respect to plaintiffs' attempted wholesale attack on past judgments obtained on complaints inadequate under section 396a of the Code of Civil Procedure, however, we conclude that the challenged final judgments may not be set aside as 'void.' Although we recognize that section 396a is intended to protect litigants against the evil of distantly obtained default judgments, the section contemplates that the trial judge's independent scrutiny of the plaintiff's complaint in the original action will afford such protection. As we explain below, if the trial judge fails to discover a deficient complaint and erroneously permits the entry of a default judgment, a defendant retains the right to challenge such judgment either on appeal or by motion to set aside the default judgment. We conclude, however, that such error does not deprive the trial court of 'jurisdiction' in the fundamental sense, and therefore that plaintiffs may not collaterally attack such judgments long after they have become final.

Finally, we conclude that inasmuch as plaintiffs concede that the judgments which they attack as violative of Civil Code section 1812.10 concern actions on 'installment accounts,' rather than on 'installment contracts,' as defined by the applicable code sections, plaintiffs' attack on pre-1968 judgments cannot succeed. In view of the specificity of the statutory definition of 'installment contract' contained in the Unruh Retail Installment Sales Act, and the fact that at the time of the commencement of this litigation section 1812.10 covered only suits on such 'contracts,' we cannot find that the actions questioned by the instant suit were subject to the provisions of section 1812.10 when brought. Plaintiffs accordingly are not entitled to any relief under the Unruh Retail Installment Sales Act.

1. The facts

In reviewing the sufficiency of plaintiffs' complaint against defendant's demurrer, we, of course, must treat the demurrer as admitting all properly pleaded factual allegations of that complaint. (See, e.g., Serrano v. Priest (1971) 5 Cal.3d 584, 591, 96 Cal.Rptr. 601, 487 P.2d 1241.) As described in the complaint, defendant Merchants is one of the largest collection agencies in Alameda County, filing over 2,000 actions in the Oakland-Piedmont municipal court each year--almost 14 percent of the entire number of suits filed in that court annually. Merchants does collection work primarily for large retail establishments, such as J. C. Penney Co. and H. C. Capwell Co., which maintain retail stores throughout the entire State of California; these establishments assign their customers' allegedly overdue obligations--unpaid balances remaining on their patrons' charge accounts--to Merchants for collection. The named plaintiffs in this action are all defendants in actions filed by Merchants in the Oakland-Piedmont municipal court in Alameda County; none of the individual plaintiffs resides in Alameda County and all contend that, as to them, the actions brought by defendant were improperly filed.

Plaintiffs brought the instant action on their own behalf and on behalf of similarly situated individuals ³ to combat the strategy that they allege to be a conscious 'pettern and practice' of Merchants in filing inadequate complaints in improper courts. As described in the complaint, the defendant's practice involves two related, but analytically distinct, features. First, the practice involves the agency's commencement of suits in a county which is not the proper place for trial under the applicable statutory provisions (Code Civ.Proc., § 395; Civ.Code, § 1812.10), with knowledge that such venue is improper, and for the ulterior purpose of impairing a defendant's ability to present his defense. Second, the practice involves the initiation of these actions by means of 'form complaints' which, in contravention of section 396a of the Code of Civil Procedure, fail to state sufficient facts to enable a trial court to determine whether the action is in fact filed in the proper venue. As a consequence of this combination of improper procedures, defendant agency allegedly obtains many default judgments and favorable settlements which it would not otherwise secure.

Although plaintiffs' objection is directed at defendant's single, alleged pattern of consciously filing inadequate complaints in improper venues, plaintiffs' first amended complaint is divided into three distinct causes of action.

The first cause of action attacks defendant's use of its improper filing practice in all contract actions in which the amount in controversy does not exceed $500. Code of Civil Procedure section 395, the general venue provision, establishes that in contract actions the proper court for trial is 'either (1) the county where (the) obligation is to be performed,' (2) the county 'in which the contract in fact was entered into' or (3) 'the county in which the defendant . . . resides at the commencement of the action' and provides further that 'the county in which such obligation is incurred shall be deemed to be the county in which it is to be performed unless there is a special contract in writing to the contrary.' At all times relevant to this action section 396a of the Code of Civil Procedure provided that: 'In all actions and proceedings within the subject matter jurisdiction of justice courts ($500 or less at the time this suit was commenced), Plaintiff must state facts in the complaint, verified by his oath . . . or in an affidavit . . . from which it can be determined which court is, under the provisions of this title, the proper court for the trial of such action or proceeding . . .' (Emphasis added.) Thus, in contract actions involving a claim of less than $500, under Code of Civil Procedure sections 395 and 396a the complaint 'must state facts' demonstrating that the county in which suit is brought is either (1) the present residence of the defendant, (2) the place where the contract was entered into or (3) the place where the contract was to be performed as set forth in a Special written contract to that effect.

Plaintiffs allege that the collection agency continually failed to bring such actions in a proper county and that the complaints it filed in these actions regularly failed to meet the requirements set out above. Plaintiffs incorporated into their first amended complaint copies of the verified municipal court complaints--'form complaints'--which the defendant agency had filed in the Oakland-Piedmont Judicial District against several of the named plaintiffs. In...