A. Groppe & Sons Glass Co., Inc. v. Fireman's Fund Ins. Co.
Decision Date | 12 July 1991 |
Docket Number | No. H006971,H006971 |
Citation | 283 Cal.Rptr. 352,232 Cal.App.3d 220 |
Court | California Court of Appeals Court of Appeals |
Parties | A. GROPPE & SONS GLASS CO., INC., Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant and Respondent. |
Kimball J.P. Sargeant, Schleicher & Sargeant, Sacramento, for plaintiff and appellant.
Michael J. Timpane, Frederick J. Northrop, Knecht, Haley, Lawrence & Smith, San Francisco, for defendant and respondent.
Plaintiff A. Groppe & Sons Glass Company, Inc., appeals from a judgment entered after the trial court granted the motion of defendant Fireman's Fund Insurance Company to dismiss the action for failure to serve summons and complaint within two years. (Code Civ.Proc., §§ 583.410, 583.420(a)(1).) 1 We conclude the trial court did not abuse its discretion in granting this discretionary dismissal and, accordingly, we affirm the judgment.
Defendant Dusan Slepcevic, the owner of certain real property in Gilroy, California, hired defendant Carl N. Swenson Co., a general contractor, to construct two commercial buildings on his land. Swenson, in turn, hired plaintiff to do the glass work and glazing of the buildings. For work and materials, plaintiff was to receive a total of $1,012,644.00.
Swenson did not pay plaintiff $427,843.56 due under the contract. On December 18, 1985, plaintiff filed and recorded a mechanic's lien for the unpaid balance. The lien was removed on January 17, 1986, when defendant Fireman's Fund Insurance Company recorded a mechanic's lien release bond under Civil Code section 3143, undertaking to pay any sum plaintiff was owed.
On September 5, 1985, plaintiff filed a bankruptcy petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code. At that point, title to all the corporation's assets, including causes of action, vested in plaintiff as the debtor in possession. (11 U.S.C. §§ 541, 1108.) On March 10, 1986, plaintiff filed the instant complaint for breach of contract and foreclosure of mechanic's lien. Plaintiff did not serve the complaint, however.
On May 21, 1986, a trustee was appointed to oversee plaintiff's reorganization. At that point, the trustee took charge of the corporation's affairs and Arthur Groppe, his sons, and other officers of the plaintiff corporation lost the ability to write checks.
The trustee asked plaintiff's counsel to file an amended complaint, correcting an error in the value of the materials claimed to have been furnished and the amount due from Swenson. This was done on September 2, 1986, but again the complaint was not served.
At some unspecified time after that, the trustee decided to stop prosecuting the lawsuit. According to Arthur Groppe, the trustee had referred the matter to his attorney for a legal opinion. That attorney apparently advised the trustee that the suit was not worth pursuing because defendants could assert cross-claims against plaintiff. We are not told when the decision to stop prosecuting the action was made. Groppe stated that he urged the trustee to continue with the lawsuit because he felt it had substantial merit.
In any event, on November 2, 1987, plaintiff's Chapter 11 bankruptcy was converted to a liquidation proceeding pursuant to Chapter 7 of the Bankruptcy Code. At that time a new trustee was appointed. On October 10, 1988, the new trustee conveyed plaintiff's cause of action to plaintiff's successor in interest.
On March 6, 1989, plaintiff served defendant Fireman's Fund with summons and copies of the March 10, 1986, complaint and September 2, 1986, amended complaint. Dusan Slepcevic was served the next day. 2 Swenson, which had gone out of business, was never served.
On September 29, 1989, after giving plaintiff time to amend its complaint, Fireman's Fund filed its motion to dismiss for failure to bring the action to trial within three years (§§ 583.410, 583.420, subd. (a)(2)(A)), failure to serve within two years (§§ 583.410, 583.420, subd. (a)(1)), and failure to bring an action to enforce a mechanic's lien to trial within two years (Civ.Code, § 3147). The court granted the motion based on the failure to serve within two years. In its order, the court noted,
Code of Civil Procedure section 583.420, subdivision (a)(1) gives a court discretion to dismiss a case for failure to serve a defendant within two years. In exercising its discretion, the court must consider, among other things, the statutory excuses that apply to mandatory motions for dismissal based on failure to serve summons within three years. (§ 583.420, subd. (b).) 3 Section 583.240, subdivision (d) provides that the period for service and return of summons is tolled for any time during which "[s]ervice, for any other reason, was impossible, impracticable, or futile due to causes beyond the plaintiff's control." This excuse "should be strictly construed in light of the need to give a defendant adequate notice of the action so that the defendant can take necessary steps to preserve evidence." (Cal.Law Revision Com. com. to West's Ann.Code Civ.Proc., § 583.240; see also Valerio v. Boise Cascade Corp. (1986) 177 Cal.App.3d 1212, 1220, 223 Cal.Rptr. 592.)
When a trial court has ruled on a motion to dismiss for failure to serve, a reviewing court may not substitute its opinion for that of the trial court and thereby divest it of its discretionary power unless a clear case of abuse is shown and unless there has been a miscarriage of justice. (Denham v. Superior Court (1970) 2 Cal.3d 557, 566, 86 Cal.Rptr. 65, 468 P.2d 193; Blank v. Kirwan (1985) 39 Cal.3d 311, 331, 216 Cal.Rptr. 718, 703 P.2d 58.) Moreover, the trial court has broad discretion in determining whether one of the statutory excuses has been proved by plaintiff. (Tresway Aero, Inc. v. Superior Court (1971) 5 Cal.3d 431, 436, 96 Cal.Rptr. 571, 487 P.2d 1211.) Discretion " " (Barajas v. USA Petroleum Corp. (1986) 184 Cal.App.3d 974, 987-988, 229 Cal.Rptr. 513; Lopez v. Larson (1979) 91 Cal.App.3d 383, 404, 153 Cal.Rptr. 912.) The burden is on the plaintiff 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; Clark v. Stabond Corp. (1987) 197 Cal.App.3d 50, 242 Cal.Rptr. 676.) Additionally, the plaintiff must show that he exercised reasonable diligence throughout the entire three-year (for mandatory dismissals) or two-year (for discretionary dismissals) period. (Adelson v. Hertz Rent-A-Car (1982) 133 Cal.App.3d 221, 183 Cal.Rptr. 779.)
On appeal, plaintiff contends that its status as a debtor in Chapter 11 bankruptcy proceedings rendered prosecution of this action "impossible, impracticable, or futile due to causes beyond the plaintiff's control." Plaintiff acknowledges that in the context of Chapter 7 bankruptcy proceedings, the pendency of the bankruptcy petition does not toll the period for serving summons because the bankrupt has the means to force the trustee to prosecute the action or abandon it to the bankrupt. (Danielson v. ITT Industrial Credit Co. (1988) 199 Cal.App.3d 645, 245 Cal.Rptr. 126; see also Lauriton v. Carnation Co. (1989) 215 Cal.App.3d 161, 263 Cal.Rptr. 476 [ ].) However, in this Chapter 11 bankruptcy, plaintiff argues that there was nothing plaintiff could do from the time the Chapter 11 trustee decided that further litigation was not in the estate's best interest 4 until a new trustee was appointed in November 1987 when plaintiff's bankruptcy proceedings were converted to Chapter 7. We disagree.
The contentions in this case virtually mirror the contentions in Danielson, and we believe the outcome should be the same. In Danielson, plaintiffs argued "that the trial court should not have counted the two years, eleven months (or, at a minimum, eleven months) during which it was impossible for them to serve defendants ... because the Danielsons' claim was an asset of the bankruptcy estate and they did not have standing to prosecute it." (199 Cal.App.3d at p. 655, 245 Cal.Rptr. 126.) Here plaintiff argues that the trial court should not have counted the 17 month period during which the Chapter 11 trustee controlled the cause of action during which it was impossible for plaintiff to serve defendants because plaintiff's claim was an asset of the bankruptcy estate and plaintiff did not have standing to prosecute it.
In response, the defendants in Danielson argued (199 Cal.App.3d at p. 656, 245 Cal.Rptr. 126.) Here defendants respond that once plaintiff filed the lawsuit, it was incumbent upon plaintiff to petition the bankruptcy court to compel the trustee to maintain the action, and thus service was within plaintiff's control.
Plaintiff contends that two...
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