Danielson v. ITT Industrial Credit Co.

• Decision Date: 14 March 1988
• Docket Number: E003792,Nos. E003310,s. E003310
• Citation: 245 Cal.Rptr. 126,199 Cal.App.3d 645
• Court: California Court of Appeals Court of Appeals
• Parties: Glendon DANIELSON, et al., Plaintiffs and Appellants, v. ITT INDUSTRIAL CREDIT COMPANY, et al., Defendants and Respondents.

Page 126

245 Cal.Rptr. 126

199 Cal.App.3d 645

Glendon DANIELSON, et al., Plaintiffs and Appellants, v. ITT INDUSTRIAL CREDIT COMPANY, et al., Defendants and Respondents.

Nos. E003310, E003792.

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

March 14, 1988.

Review Denied June 8, 1988.

Stewart & Harris and William S. Harris, Los Angeles, for plaintiffs and appellants

Berman & Clark, Mark Wood and Paula A. Daniels, Santa Monica, for defendant and respondent ITT Indus. Credit Co.

Caprice L. Collins, Los Angeles, for defendant and respondent Inland Kenworth, Inc.

Shostak and Epstein and Lawrence Shostak, Salinas, for defendants and respondents R & R Distributing Co., R & R Truck Brokerage, and Roger Schwingler.

OPINION

HEWS, Associate Justice.

This is a consolidated appeal from judgment entered after the trial court granted defendants' motions to dismiss plaintiffs' complaint pursuant to Code of Civil Procedure sections 583.410 and 583.420, subdivision (a)(1) ¹ for failure to serve summons and complaint within two years in favor of defendants ITT Industrial Credit Company (ITT), Inland Kenworth, Inc. (Inland), and R & R Distributing Company (Distributing Co.), R & R Truck Brokerage (Truck Brokerage) and Roger Schwingler (Schwingler) and against plaintiffs Glendon and Maxine Danielson (the Danielsons).

The issue on appeal is:

Did the trial court abuse its discretion in granting defendants' motions to dismiss for failure to serve within two years pursuant to Code of Civil Procedure sections 583.410 and 583.420 when it

1) failed to exclude the time during which the action was stayed because it was an asset of the Danielsons' bankruptcy estate?

2) failed to exclude the time during which service was impossible, impracticable or futile because the Danielsons lacked standing to prosecute their lawsuit?

FACTS

The following factual circumstances are alleged:

Between February and June of 1979, the Danielsons negotiated with Joe Morse (Morse), a salesman for Inland, for the purchase of a Kenworth tractor and Utility dry van trailer (tractor-trailer). In mid-June Morse informed the Danielsons they could not qualify for a loan to purchase the tractor-trailer. However, the Danielsons, Morse, Inland, ITT (the credit company) and Matlock and Matlock Transportation (the trucking company for which Glendon Danielson had been driving) orally agreed that the Danielsons would lease the tractor-trailer from ITT and that Matlock Transportation would be the nominal lessee for the first six months of the lease, at which time the Danielsons would be substituted and named as lessees on the master lease in place of Matlock Transportation. According to the agreement, Inland provided the tractor-trailer; the Danielsons agreed to pay all lease payments and other expenses; ITT had the right to claim investment tax credit; and Matlock and Matlock Transportation had the right to claim depreciation on the tractor-trailer. Equity in the tractor-trailer would belong to the Danielsons.

Subsequently, ITT, Inland, Matlock and Matlock Transportation entered into the master lease, with Matlock Transportation as the lessee of the tractor-trailer. Pursuant to a separate permanent lease agreement entered into in July 1979 by the Danielsons and Matlock and Matlock Transportation, Glendon Danielson drove the tractor-trailer primarily for Matlock Transportation.

After six months had elapsed, ITT refused to substitute the Danielsons for Matlock Transportation on the lease. Matlock Transportation and the Danielsons signed an agreement dated November 26, 1980, whereby Matlock Transportation, as lessee, transferred and the Danielsons assumed all rights and obligations under the master lease. Matlock also agreed to be guarantor on the contract. ITT did not sign a consent to the assignment. However, in May 1981, almost two years after the original master lease was signed, ITT transferred title from Matlock Transportation to the Danielsons. Four months later, ITT transferred title from the Danielsons back to Matlock Transportation. Subsequently, ITT's credit manager told the Danielsons that title to the tractor-trailer was never transferred to them and never would be and that ITT was unaware of any oral agreement to change title on the tractor-trailer from Matlock Transportation to the Danielsons six months into the lease.

In June 1981, Distributing Co., Truck Brokerage, and Schwingler assisted Inland and others in repossessing the tractor-trailer and other equipment from the Danielsons.

PROCEDURAL HISTORY

The Danielsons filed a Chapter 7 petition in the United States Bankruptcy Court in San Bernardino in June 1982. In the bankruptcy schedule under "contingent and unliquidated claims" the Danielsons listed potential litigation claims against ITT, Inland, Matlock, Matlock Construction, Distributing Co., Truck Brokerage, and Schwingler for breach of contract, fraud, conversion, interference with business and constructive trust. The bankruptcy court discharged the Danielsons' debts in November 1982, but the bankruptcy trustee did not close the case or pursue the Danielsons' state court litigation claims. The Danielsons filed this state court lawsuit as plaintiffs in pro. per. on December 1, 1982. The trustee did not intervene in or prosecute the action.

In the fall of 1984, the Danielsons engaged an attorney to represent them in the state court litigation. The Danielsons filed a substitution of attorney and a first amended complaint in November 1985 and served all defendants with summons and complaint in late November 1985, days before the running of the three-year statute for service of summons.

ITT brought its motion to dismiss the Danielsons' complaint pursuant to sections 583.410 and 583.420, subdivision (a)(1) for failure to serve within two years. In March 1986 the trial court granted ITT's motion and entered judgment in favor of ITT and against the Danielsons. The trial court denied the Danielsons' subsequent motion to vacate judgment on May 5, 1986, and the Danielsons appealed from the judgment in case number E003310. A month later, in June 1986, Inland brought its motion to dismiss the Danielsons' complaint for failure to serve within two years, which the trial court granted. Later the Danielsons filed an amended notice of appeal in case number E003310, amending to add the appeal from the trial court's granting of Inland's motion to dismiss. ²

In September 1986 the Danielsons brought a motion in bankruptcy court for an order that the trustee had abandoned the Danielsons' state court claims. The bankruptcy court denied the motion, finding that the trustee had not abandoned the lawsuit "Danielson v. Matlock" (this case) pending in San Bernardino County Superior Court and that this lawsuit remained the property of the debtor's bankruptcy estate. In October 1986, in this state court action, Distributing Co., Truck Brokerage and Schwingler brought their motion to dismiss the Danielsons' complaint for failure to serve summons in two years, which the trial court also granted. The Danielsons appealed in case number E003792. The appeal in case number E003792 has been consolidated with the appeals in case number E003310.

Additional facts concerning specific issues are set out in the discussion below.

DISCUSSION

I Stay

The Danielsons contend that the trial court abused its discretion in granting defendants' motions to dismiss for failure to prosecute pursuant to sections 583.410 and 583.420 for failure to serve summons within two years, when it failed to exclude the time during which the action was stayed because it was an asset of their bankruptcy estate.

Dismissals for failure to serve summons within two years are governed by Code of Civil Procedure sections 583.410 and 583.420, which provide that "[t]he court may in its discretion dismiss an action for delay in prosecution ..." (§ 583.410) where "[s]ervice is not made within two years after the action is commenced against the defendant." (§ 583.420, subd. (a)(1).) When ruling on two year discretionary dismissals for failure to serve summons, the court must consider the statutory excuses that apply to computation of time for mandatory dismissals for failure to serve summons in three years (§ 583.420, subd. (b); § 583.240) and the same factors it considers when deciding a motion for delay in bringing a case to trial. (§ 583.420, subd. (b); § 583.310; Cal. Rules of Court, rule 373(e).) Section 583.240, subdivision (b) provides that when computing time within which service is to be made, the court shall exclude the time during which "the prosecution of the action or proceedings in the action was stayed and the stay affected service."

As a general rule, a judgment or order of the lower court is presumed correct (Harris v. City of Compton (1985) 172 Cal.App.3d 1, 9, 217 Cal.Rptr. 884) and " '[a]ll intendments and presumptions are indulged to support it on matters as to which the record is silent....' " (Wilson v. Sunshine Meat & Liquor Co. (1983) 34 Cal.3d 554, 563, 194 Cal.Rptr. 773, 669 P.2d 9, citing Denham v. Superior Court (1970) 2 Cal.3d 557, 564, 86 Cal.Rptr. 65, 468 P.2d 193.) The motion to dismiss for failure to serve summons within two years is addressed to the trial court's sound legal discretion (Code Civ.Proc. § 583.410; Cal. Law Revision Com. com., Deerings Ann. Code Civ.Proc. § 583.420 (1988 pocket supp.) p. 102; see Luti v. Graco, Inc. (1985) 170 Cal.App.3d 228, 215 Cal.Rptr. 902; Salas v. Sears, Roebuck & Co. (1986) 42 Cal.3d 342, 346, 228 Cal.Rptr. 504, 721 P.2d 590) and the burden is on the appellant to establish an abuse of discretion. ( Denham v. Superior Court, supra, 2 Cal.3d at p. 566, 86 Cal.Rptr. 65, 468 P.2d 193.) " '[E]rror must be affirmatively shown.' " ( Wilson v. Sunshine Meat & Liquor Co., supra, 34 Cal.3d at p. 563, 194 Cal.Rptr. 773, 669 P.2d 9, citing Denham v. Superior Court, supra, 2 Cal.3d at p. 564, 86 Cal.Rptr. 65, 468 P.2d 193.) " '[U]nless a...