Arrow Highway Steel, Inc. v. Dubin

• Decision Date: 29 October 2020
• Docket Number: B303289
• Court: California Court of Appeals Court of Appeals
• Parties: ARROW HIGHWAY STEEL, INC., Plaintiff and Appellant, v. Robert DUBIN, Defendant and Respondent.

56 Cal.App.5th 876

270 Cal.Rptr.3d 773

ARROW HIGHWAY STEEL, INC., Plaintiff and Appellant,

v.Robert DUBIN, Defendant and Respondent.

B303289

Court of Appeal, Second District, Division 2, California.

Filed October 29, 2020

Law Offices of Matthew C. Mickelson and Matthew C. Mickelson for Plaintiff and Appellant.

Alpert Barr & Grant and David M. Almaraz, Los Angeles, for Defendant and Respondent.

HOFFSTADT, J.

In Bendix Autolite Corp. v. Midwesco Enterprises, Inc. (1988) 486 U.S. 888, 108 S.Ct. 2218, 100 L.Ed.2d 896 ( Bendix ), the United States Supreme Court held that an Ohio statute that tolled the statute of limitations while a defendant is out of state impermissibly burdened interstate commerce and was accordingly unconstitutional. ( Id. at pp. 891-895, 108 S.Ct. 2218.) California has a similar tolling statute— Code of Civil Procedure section 351 —that, as relevant here, applies when a defendant "departs from the State" "after [a] cause of action accrues." ( Code Civ. Proc., § 351.)¹ In this case, a creditor sued in 2018 to enforce a 1997 judgment against a judgment debtor who departed California in 1998 to start a new business in Nevada. Because this lawsuit is timely only if section 351 applies, this case squarely presents the question: Does section 351 impermissibly burden interstate commerce—and hence violate the so-called "dormant Commerce Clause"—when it is used to toll the statute of limitations against a judgment debtor who moved away from California to engage in commerce after the judgment was entered? We conclude that the answer is "yes." This is the answer most consistent with California case law. The creditor urges us to follow a recent Sixth Circuit case that charts a different path than this California precedent, Garber v. Menendez (6th Cir. 2018) 888 F.3d 839 ( Garber ), but we find Garber to be unpersuasive. Accordingly, we affirm the trial court's grant of summary judgment to the debtor on the ground that the creditor's lawsuit is time-barred.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

Between 1967 and 1994, Arrow Highway Steel, Inc. (Arrow) hired Robert Dubin (Dubin) to do its bookkeeping and to obtain credit financing for its operations. Both Arrow and Dubin were, during that time, based in California. Dubin obtained Arrow's credit financing from out-of-state lenders, and many of Dubin's other clients were located outside California.

In the early 1990s, Dubin embezzled money from Arrow. For his crimes, Dubin was convicted of bankruptcy fraud in federal court and served time in federal prison between 1995 and 1998, and after a brief period of parole, in 1998 and 1999.

In March 1994, Arrow and its principals—Seymour and Henrietta Albert—sued Dubin and others to recover the money Dubin embezzled from Arrow.² On February 27, 1997, Arrow and Dubin entered into a stipulated judgment pursuant to which Dubin agreed to pay Arrow $937,000.

Dubin moved to Nevada after he was released from federal prison (the first time) in 1998. After his final release from prison, Dubin founded a new accounting, bookkeeping and tax business that currently has clients all around the United States and around the world.

At no point since 1997 did Arrow "renew" its judgment against Dubin.

II. Procedural Background

On July 3, 2018, Arrow filed a complaint seeking to enforce its 1997 judgment against Dubin, along with interest and attorney fees.

Dubin filed a motion for summary judgment on the ground that Arrow's lawsuit was time-barred because section 351, the tolling statute Arrow relies upon to render its action timely, violated the dormant Commerce Clause as applied to Dubin.³ Following further briefing, and a hearing, the trial court granted summary judgment on the ground that Arrow's lawsuit was time-barred because section 351 was unconstitutional. The court reasoned that the dormant Commerce Clause was, as a threshold matter, implicated in this case because "Dubin [had] ... engaged in interstate commerce while he performed accounting services for Arrow ...." To decide whether section 351 violated the dormant Commerce Clause as applied in this case, the court engaged in a two-part inquiry by (1) "assess[ing] the burden section 351 would impose on interstate commerce under the circumstances," and (2) "determin[ing] whether the burden is counterbalanced by state interests supporting section 351." As to the first part, the court found that section 351 imposed an "unreasonable burden on interstate commerce" because it "force[d]" a " ‘nonresident individual engaged in interstate commerce’ " " ‘to choose between [abandoning his Nevada business and returning to] California for several years’ " in order to run down the limitations period or staying in Nevada to maintain his business but forfeiting his limitations defense and remaining " ‘subject to suit in California in perpetuity.’ " As to the second part, the court found that California's interests did not "outweigh [this] burden" because the justification for tolling lawsuits against out-of-state defendants was largely undermined by "California[’s] ... long-arm statute," which "would permit service on a[n out-of-state] defendant like Dubin." Balancing these factors, the court found that applying section 351 "to this case would impermissibly burden interstate commerce and thereby violate the [dormant] Commerce Clause as applied to Dubin."

Following the entry of judgment, Arrow filed this timely appeal.

DISCUSSION

Arrow argues that the trial court erred in granting summary judgment for Dubin because, in its view, section 351 does not run afoul of the dormant Commerce Clause on the facts of this case. As a result, Arrow continues, its action against Dubin has been tolled since 1998, and thus its 2018 lawsuit on the 1997 judgment is still timely.

A party in a civil case is entitled to summary judgment if, among other things, he can show that the undisputed facts "establish[ ] an affirmative defense" "as a matter of law." (§ 437c, subds. (c) & (o)(2).) Thus, summary judgment is appropriate where the undisputed facts establish that a claim is barred by the statute of limitations. ( Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112, 245 Cal.Rptr. 658, 751 P.2d 923 ; Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 487, 59 Cal.Rptr.2d 20, 926 P.2d 1114.) We independently review a trial court's grant of summary judgment. ( Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 286, 172 Cal.Rptr.3d 653, 326 P.3d 253.)

California's Enforcement of Judgments Law (§ 680.010 et seq.) grants judgment creditors seeking to extend the enforceability of a final judgment two options: (1) they can file an application with the court that issued the judgment to renew that judgment for another 10 years (§§ 683.110, 683.120), or (2) they can file an action to enforce the judgment, and as long as that action is timely filed, the creditors are entitled to enforcement (§ 683.050 [authorizing such actions]; Green v. Zissis (1992) 5 Cal.App.4th 1219, 1222-1223, 7 Cal.Rptr.2d 406 ( Green ) [entitlement to relief automatic]; Trend v. Bell (1997) 57 Cal.App.4th 1092, 1098, 68 Cal.Rptr.2d 54 [same] ). (See generally Kertesz v. Ostrovsky (2004) 115 Cal.App.4th 369, 372-373, 8 Cal.Rptr.3d 907 ( Kertesz ) [detailing two options]; Pratali v. Gates (1992) 4 Cal.App.4th 632, 637-638, 5 Cal.Rptr.2d 733 ( Pratali ) [same].)

If the judgment creditor pursues the latter option, it must file its action within 10 years of the final entry of judgment or its last renewal of judgment, whichever comes later. (§§ 337.5, subd. (b) [setting 10-year limitations period for such actions], 683.220 [renewal extends time for such actions].) Section 351 is an exception to all statutes of limitations in California, including this one. It provides:

"[1] If, when the cause of action accrues against a person, he is out of the State, the action may be commenced within the term herein limited, after his return to the State, and [2] if, after the cause of action accrues, he departs from the State, the time of his absence is not part of the time limited for the commencement of the action."

( § 351.) As the bracketed numbers indicate, section 351 tolls the limitations period in two different situations—namely, (1) when the defendant is outside California at the moment the plaintiff's cause of action accrues, and (2) when the defendant is present in California at the moment the cause of action accrues, but he subsequently "departs" the state. ( Kohan v. Cohan (1988) 204 Cal.App.3d 915, 920, 251 Cal.Rptr. 570 ( Kohan ).) This second clause applies whether the departure is temporary ( Green , supra , 5 Cal.App.4th at p. 1223, 7 Cal.Rptr.2d 406 ) or permanent ( Heritage Marketing & Ins. Services, Inc. v. Chrustawka (2008) 160 Cal.App.4th 754, 761, 73 Cal.Rptr.3d 126 ( Heritage )).

In this case, Arrow's stipulated judgment against Dubin was finally entered on the day it was signed—February 27, 1997. (See Cadle Co. II, Inc. v. Sundance Financial, Inc. (2007) 154 Cal.App.4th 622, 624, 64 Cal.Rptr.3d 824 [generally, "[a] stipulated judgment ... becomes final when entered"].) As a consequence, Arrow had 10 years—until February 27, 2007—to bring its enforcement action. Arrow did not do so until July 3, 2018. The only way that Arrow's enforcement action is timely is if section 351 applies, which occurs only if it withstands the dormant Commerce Clause challenge leveled by Dubin. The constitutionality of a statute is a question of law we independently review. ( In re Taylor (2015) 60 Cal.4th 1019, 1035, 184 Cal.Rptr.3d 682, 343 P.3d 867.)

I. The Law of the Dormant Commerce Clause

A. Generally

The Commerce Clause of the United States Constitution grants Congress the power "[t]o regulate Commerce ... among the several States." ( U.S. Const., art. I, § 8, cl. 3.) By entrusting Congress with this power, the clause implies that the states lack that power. ( McBurney v. Young (2013) 569 U.S. 221, 235, 133 S.Ct. 1709, 185 L.Ed.2d 758 ( McB...