Pasadena Medi-Center Associates v. Superior Court

• Decision Date: 26 July 1973
• Docket Number: MEDI-CENTER
• Citation: 511 P.2d 1180,108 Cal.Rptr. 828,9 Cal.3d 773
• Court: California Supreme Court
• Parties: , 511 P.2d 1180 PASADENAASSOCIATES et al., Petitioners, v. The SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; Richard E. HOUTS, as Trustee, etc. Real Party in Interest. L.A. 30075.

Page 828

108 Cal.Rptr. 828

9 Cal.3d 773, 511 P.2d 1180

PASADENA MEDI-CENTER ASSOCIATES et al., Petitioners, v. The SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent Richard E. HOUTS, as Trustee, etc. Real Party in Interest.

L.A. 30075.

Supreme Court of California In Bank.

July 26, 1973.

Gibson, Dunn & Crutcher and Gary D. Stabile, Los Angeles, for petitioners.

No appearance for respondent.

Bunn & Peterson and Robert M. Peterson, Los Angeles, for real party in interest.

TOBRINER, Justice.

Petitioners ¹ seek writs of certiorari and mandate to compel the Los Angeles Superior Court to grant their motions to quash service of summons and to vacate a default judgment and levy of execution against defendants, a corporation, and a partnership in which the corporation was general partner. Defendant corporation's application to the Commissioner of Corporations for a permit to issue stock stated that Albert Binney, Sr., was it secretary-treasurer; plaintiff, relying on the corporation's application, attempted to serve defendants by delivery of summons to him. Defendants now maintain that since Binney, Sr., was not in fact the corporation's secretary-treasurer, service upon him failed and plaintiff's judgment, founded on that service, is void.

We conclude, however, that by representing that Binney, Sr., was its secretary-treasurer, defendant corporation conferred on him ostensible authority to accept service on the corporation's behalf; consequently service upon Binney, Sr., sufficed to establish personal jurisdiction over defendant corporation. We therefore deny the writ of certiorari and the peremptory writ of mandate, and discharge the alternative writ of mandate previously issued by the Court of Appeal.

1. Summary of facts.

On February 24, 1971, plaintiff filed an action on two promissory notes, totaling $15,000, against defendant corporation and Pasadena Medi-Center Associates. The next day plaintiff attached real property owned by the corporation.

Plaintiff's counsel then attempted to serve process upon defendants. Discovering that the corporation maintained no general office for the transaction of business and had not filed the list of officers and agents authorized to accept service required by Corporations Code section 3301, he arranged to examine the corporation's file with the Commission of Corporations. He there observed a 1968 application for a permit to issue stock filed by defendant corporation, which listed the following corporate officers and directors: George E. DuNah, president and director; Carl A. DuNah, vice president; Albert A. Binney, Sr. secretary-treasurer and director; Boyd L. Jefferies, director; and Albert A. Binney, Jr., director. After each listed name, the application state the individual's address and summarized his business experience.

Unknown to plaintiff's counsel, the application filed by defendant corporation with the Commissioner of Corporations was erroneous. Albert Binney, Sr., although a corporate director, was not and had never been secretary-treasurer; his son, Albert Binney, Jr., was in fact the secretary-treasurer and acting president of the corporation. Sometime thereafter, the Medi-Center partnership, as distinct from the corporation, did prepare an offering circular which correctly listed Binney, Jr., as the secretary-treasurer. Among other prospective investors plaintiff personally received a copy of the circular, but the record fails to show that he delivered it to his counsel. Although the partnership sent the commissioner a copy of the circular, it was filed under the partnership name and, in the course of the examination by plaintiff's counsel, did not come to his attention.

Plaintiff's counsel knew that George DuNah, listed as corporate president, had died; counsel therefore directed Mr. Webb, his process server, to serve Carl DuNah as vice president. When Webb could not locate Carl DuNah, counsel asked him to serve Albert Binney, Sr., at 885 La Loma Road, Pasadena, the address listed in the defendant's stock permit application. On March 13, 1971, Webb served Binney, Sr., at this address and completed a return showing service upon defendants by serving Albert Binney, Sr., as secretary-treasurer of defendant corporation.

Upon receiving the summons and complaint, Binney, Sr., said nothing to the process server, but he notified Binney, Jr., of the suit. Binney, Jr., discussed the case with the other directors; all agreed that since the defendants apparently owed the sum plaintiff claimed, and since they lacked the funds to finance a defense they should not contest the action. On April 23, 1971, plaintiff entered default against defendants and on May 27 obtained a default judgment. Although notified of these events, defendants took no action.

Meanwhile, on March 31, defendant corporation sold the property attached by plaintiff, the only remaining corporate asset, to one Allen Robbins. Since Robbins required title insurance against plaintiff's lien, Boyd Jefferies, the limited parrtner of the defendant partnership and a former director of the corporation, gave the title company a personal indemnity for the amount of plaintiff's attachment.

When plaintiff obtained judgment and levied on the property, the title company demanded that Jefferies make good the indemnity. Jefferies' attorneys, however, discovered that plaintiff had served his summons upon Albert Binney, Sr., instead of Binney, Jr. ² Although this error might have served to vacate the judgment and the subsequent levy of execution, defendants still faced the encumbrance of the prejudgment attachment. With our decision in Randone v. Appellate Department (1971) 5 Cal.3d 536, 96 Cal.Rptr. 709, 488 P.2d 13, the prejudgment attachment was also subject to attack. The vacating of the judgment and liens, then, would have cleared the title; Jefferies would have been freed of the indemnity, and plaintiff would have had only a cause of action against a judgment-proof corporation.

Jefferies therefore, on September 29, 1971, brought a motion in defendants' name to quash service of summons and to vacate the default judgment and the levy of execution. After hearing testimony and receiving documentary evidence, the court denied defendants' motions. Finding that Binney, Sr., was not in fact the corporation's secretary-treasurer, the court nevertheless held that defendants had waived any deficiency in service of process and that, in addition, defendants' motion to vacate the judgment had not been timely brought. Plaintiff contended that by reason of his reliance upon the corporation's application for a stock permit defendants should be estopped to deny Binney, Sr.'s, authority to accept service. The court did not, however, render a specific finding on that issue.

2. Since defendant corporation conferred upon Albert Binney, Sr., ostensible authority to accept service of process, plaintiff's service upon him constitutes service upon defendants.

As we shall explain, we find that defendant corporation's designation in its application for a stock permit of Binney, Sr., as its secretary-treasurer, clothed him with ostensible authority to accept service of process. Because service upon a corporate agent with ostensible authority to accept service suffices to acquire jurisdiction over the corporation, we conclude that defendant corporation has been properly served and can present no viable reason for setting aside the default judgment enntered against it. ³

Recognizing 'the serious need to update California's jurisdiction and service of process statutes' (Li, Attorney's Guide to California Jurisdiction and Process (Cont.Ed.Bar 1970) p. 1), the California Judicial Council and State Bar, following a joint study, recommended a comprehensive revision of the California stautes. (See 1969 Judicial Council Report, pp. 27--96; Report of the State Bar Committee on Administration of Justice (1969) 44 Cal.State Bar J. 681--684.) The suggested changes, including section 416.10, which governs service upon corporations, were enacted by the 1969 Legislature. Although some decisions under pre-1969 statutes required strict and exact compliance with the statutory requirements (see 2 Witkin, Cal.Procedure (2d ed. 1970), pp. 1390, 1413--1415), the provisions of the new law, according to its draftsmen, 'are to be liberally construed. . . . As stated in the Nov. 25, 1968, Report of the Judicial Council's Special Committee on Jurisdiction, pp. 14--15: 'The provisions of this chapter should be liberally construed to effectuate service and uphold the jurisdiction of the court if actual notice has been received by the defendant, and in the last analysis the question of service should be resolved by considering each situation from a practical standpoint. . . .' The liberal construction rule, it is anticipated, will eliminate unnecessary, time-consuming, and costly disputes over legal technicalities, without prejudicing the right of defendants to proper notice of court proceedings.' (Li, Attorneys Guide to California Jurisdiction and Process (Cont.Ed.Bar 1970) pp. 57--58.)

The case at bar demonstrates the desirability of liberal construction of the new statutes. Defendants here had their opportunity to press the merits of any possible defense; they presented none; they actually have none. Recognizing their liability, they deliberately decided to permit plaintiff to obtain a default judgment. Yet they now seek to invoke a technical defect in service to set aside that judgment, not to present a defense, but, by vacating the judgment, to nullify plaintiff's lien upon the last remaining asset of the corporation and thereby leave plaintiff powerless to collect an acknowledged debt.

Bearing in mind the caveat of the draftsmen of section 416.10 of the Code of Civil Procedure that it be liberally construed, we find that the section designates a secretary or treasurer, or a combined secretary-treasurer as a proper person to receive...