Greenup v. Rodman

• Decision Date: 13 November 1986
• Citation: 726 P.2d 1295,42 Cal.3d 822,231 Cal.Rptr. 220
• Court: California Supreme Court
• Parties: , 726 P.2d 1295 Eileen GREENUP, Plaintiff and Respondent, v. Dale W. RODMAN et al., Defendants and Appellants. L.A. 32093.

Page 220

231 Cal.Rptr. 220

42 Cal.3d 822, 726 P.2d 1295

Eileen GREENUP, Plaintiff and Respondent, v. Dale W. RODMAN et al., Defendants and Appellants.

L.A. 32093.

Supreme Court of California In Bank.

Nov. 13, 1986.

Rehearing Denied Dec. 31, 1986.

Maureen Doyle, Long Beach, Horvitz & Levy, Ellis J. Horvitz and S. Thomas Todd, Encino, for defendants and appellants.

Moore & Myers by John C. Moore and Loring M. Myers, Manhattan Beach, for plaintiff and respondent.

MOSK, Justice.

As a sanction for wilful and deliberate refusal to obey discovery orders, the trial court in this case struck the answer and entered a default judgment in an amount exceeding the prayer of the complaint. We granted review to consider whether a default judgment entered as a discovery sanction is excepted from the general rule that "if there be no answer" filed, the plaintiff's relief "cannot exceed that which he shall have demanded in his complaint...." (Code Civ.Proc., § 580.) ¹ We conclude that in all default judgments the demand sets a ceiling on recovery.

Plaintiff filed a complaint in August 1980 against Dale W. Rodman, individually and as majority shareholder of Rodair, Inc. and sole shareholder of Rodman Aviation, Inc., and against Rodman Aviation. She alleged that defendant Rodman had used involuntary dissolution procedures to transfer assets fraudulently from Rodair, Inc., in which she held a 20 percent minority interest, to Rodman Aviation, a corporation solely owned by Rodman. Charging fraud and conspiracy to defraud, concealment of assets, breach of fiduciary duty, conversion, and intentional infliction of emotional distress, plaintiff claimed damages "in a sum that exceeds the jurisdictional requirements of this court." In her prayer, however, the only specific sum requested was $100,000 in exemplary and punitive damages: all other damages were to be "subject to proof at time of trial" or "as the court deems just."

Following unsuccessful demurrers, defendants answered and plaintiff commenced discovery. Rodman was recalcitrant throughout this process, actively resisting both document production and deposition. After repeated failures to appear and numerous postponements, he appeared at a deposition on February 12, 1981, rescheduled at his request, only to refuse to answer questions because it was Lincoln's Birthday--assertedly a "legal holiday." At a June 1981 deposition, on a court order to appear with records at the office of plaintiff's counsel, Rodman produced an assortment of papers in a box filled with straw and horse excrement, which he laughingly dumped on the table. After counsel and the court reporter had inspected the documents for an hour, Rodman announced they must be sure to wash their hands thoroughly because the straw had been treated with a toxic chemical readily absorbed through the skin. The reporter, five months pregnant, asked to be excused, and the session was terminated by plaintiff's counsel.

On November 6, 1981, plaintiff moved to strike the answer and enter a default judgment. The court ordered defendants to pay $1,000 in sanctions (adding $500 to an earlier sanction that Rodman had failed to pay) and to appear at the office of plaintiff's counsel with the requested documents on December 23, 1981. When Rodman again refused to comply, plaintiff renewed her motion, demanding that a default be entered.

On August 24, 1982, the court granted plaintiff's motion to strike the answer and enter a default. However, it was not until September 24, 1982,--i.e., a month after the default had been entered--that she filed a request to enter a default judgment (Cal.Rules of Court, rule 982(a)(6)), stating for the first time the amount of damages she claimed. After several continuances at plaintiff's request, an ex parte "prove-up" hearing was held. (Code Civ.Proc., § 585, subd. (b).) Plaintiff put on evidence in support of her claim of damages; defendants were not present either in person or by counsel. The court found defendants liable for $338,000 in compensatory damages and $338,000 in punitive damages, and entered judgment in the amount of $676,000. Defendants appealed, contending inter alia that the court lacked jurisdiction to award damages in an amount exceeding the prayer. Holding this default for discovery violations exempt from the limit on damages in default judgments set by the code, the Court of Appeal affirmed the judgment.

I

Section 580, and related sections 585, 586, 425.10 and 425.11, aim to ensure that a defendant who declines to contest an action does not thereby subject himself to open-ended liability. Reasoning that a default judgment that exceeds the demand would effectively deny a fair hearing to the defaulting party, the Courts of Appeal have consistently read the code to mean that a default judgment greater than the amount specifically demanded is void as beyond the court's jurisdiction. (Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 202 Cal.Rptr. 204; Ludka v. Memory Magnetics International (1972) 25 Cal.App.3d 316, 101 Cal.Rtpr. 615; Gudarov v. Hadjieff (1952) 38 Cal.2d 412, 240 P.2d 621.)

We affirmed that strict construction of section 580 in Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 165 Cal.Rptr. 825, 612 P.2d 915. We held that the primary purpose of the section is to guarantee defaulting parties adequate notice of the maximum judgment that may be assessed against them. As we observed, "The notice requirement of section 580 was designed to insure fundamental fairness. Surely, this would be undermined if the door were opened to speculation, no matter how reasonable it might appear in a particular case, that a prayer for damages according to proof provided adequate notice of a defaulting defendant's potential liability." (Id. at p. 494, 165 Cal.Rptr. 825, 612 P.2d 915.) Since Becker, the Courts of Appeal have insisted that due process requires formal notice of potential liability; actual notice may not substitute for service of an amended complaint. (E.g., Engebretson & Co. v. Harrison (1981) 125 Cal.App.3d 436, 443, 178 Cal.Rptr. 77.)

Nevertheless, plaintiff here maintains that the court acted within its jurisdiction in granting her increased award. She first argues that the terms of her complaint amply notified defendants of the extent of damages she would claim. While conceding that she omitted to state an amount of damages in her demand for judgment as section 425.10, subdivision (b), requires, she points to the usual inconsequence of such error. It is true that a general demurrer will not lie for a defective prayer alone. (Miller v. Superior Court (1922) 59 Cal.App. 334, 338-339, 210 P. 832; Hoffman v. Pacific Coast Const. Co. (1918) 37 Cal.App. 125, 130, 173 P. 776.) And in the ordinary case in which the litigation proceeds to trial, such a deficiency would carry no adverse consequences: the plaintiff would be permitted liberal amendment to the prayer to conform to proof. Furthermore, section 580 specifically provides that the court is not bound by the demand of the complaint, but may award any relief consistent with the case made by the plaintiff. (Fn. 1, ante.)

It is precisely when there is no trial, however, that formal notice, and therefore the requirement of section 425.10, become critical. Notice is at the heart of the provision, as the Legislature underscored by adding section 425.11, which provides that in the single instance in which the amount of damages shall not be specified in the complaint--an action for personal injury--"the plaintiff shall give notice to the defendant of the amount of special and general damages sought" before obtaining a default judgment. (See, e.g., Jones v. Interstate Recovery Service (1984) 160 Cal.App.3d 925 at pp. 929-930, 206 Cal.Rptr. 924.) It would undermine this concern for due process to allow the judgment herein to stand despite plaintiff's failure to meet the requirements of sections 425.10 or 425.11.

Plaintiff's more substantive claim, and the central issue before us, is that the foregoing limits on default judgments do not, either as a matter of statutory language or policy, apply in the present context. She concedes that section 580 governs the judgment even when, pursuant to section 2034, subdivision (b)(2)(C), a court strikes an answer and enters a default judgment for refusal to make discovery. She would construe the language of section 580, however, to permit unlimited damage judgments when an answer is stricken as a discovery sanction. She asserts that the first clause of the section--i.e., "The relief granted to the plaintiff, if there be no answer, cannot exceed that which he shall have demanded in his complaint"--applies only to "ordinary" defaults, presumably defaults at the pleading stage. And she concludes that when, as here, a default is entered after the defendant has filed his answer, the judgment falls within the more liberal rule of the second clause of section 580, i.e., "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."

In effect, plaintiff maintains that defendants entered irreversibly into an adversarial contest by filing a sufficient answer; having crossed that threshold, they may no longer claim the protection of section 580. In this way, plaintiff attempts to exclude answers stricken for discovery violations from the long line of precedents viewing a failure to answer as including the case in which an answer is filed but is later stricken by the court. (Brown v. Ridgeway (1983) 149 Cal.App.3d 732, 736, 197 Cal.Rptr. 327; Arata v. Tellurium G. & S.M. Co. (1884) 65 Cal. 340, 342, 4 P. 195, 344; Lattimer v. Ryan (1862) 20 Cal. 628, 633.)

We are unpersuaded. The rationale stated in Brown, i.e., that striking the answer renders it a nullity (see Brown v. Ridgeway, supra, 149 Cal.App.3d at p. 736, 197 Cal.Rptr. 327), applies equally when the answer is...