Paul Blanco's Good Car Co. v. Superior Court of Alameda Cnty.

• Citation: 56 Cal.App.5th 86,270 Cal.Rptr.3d 164
• Decision Date: 20 October 2020
• Docket Number: A159623
• Court: California Court of Appeals
• Parties: PAUL BLANCO'S GOOD CAR COMPANY AUTO GROUP et al., Petitioners, v. The SUPERIOR COURT OF ALAMEDA COUNTY, Respondent; The People, Real Party in Interest.

56 Cal.App.5th 86

270 Cal.Rptr.3d 164

PAUL BLANCO'S GOOD CAR COMPANY AUTO GROUP et al., Petitioners,

v. The SUPERIOR COURT OF ALAMEDA COUNTY, Respondent;The People, Real Party in Interest.

A159623

Court of Appeal, First District, Division 5, California.

Filed October 20, 2020

Brown, Rudnick; William W. Lockyer, Leo John Presiado, Ronald Rus, Samuel A. Moniz, and Shoshana B. Kaiser, Irvine, for Petitioners.

Xavier Becerra, Attorney General of California; Nicklas A. Akers, Senior Assistant Attorney General; Michael E. Elisofon, Supervising Deputy Attorney General; Hunter Landerholm, Adelina Acuna, and Joseph Ragazzo, Deputy Attorneys General, for Real Party in Interest.

NEEDHAM, J.

Petitioners are several corporations (Entity Defendants) who seek writ relief from a trial court order striking their unverified answer to the civil complaint of the People of the State of California (People). In granting their request for a peremptory writ, we decide two issues of first impression.

The first issue pertains to Code of Civil Procedure section 446, subdivision (a), which provides that an answer to a civil complaint filed by certain government entities must be verified "unless an admission of the truth of the complaint might subject the party to a criminal prosecution."¹ The question is whether this exception to the verification requirement applies to a corporation, who can be "subject ... to a criminal prosecution" but cannot invoke the privilege against self-incrimination under the Fifth Amendment to the United States Constitution. Given the plain meaning of the statutory language, we conclude that the exception applies to corporations.

The second issue relates to section 431.30, subdivision (d), which requires a defendant to answer each material allegation of a verified complaint with specific admissions or denials, but allows a defendant to file a general denial if the complaint is not verified. The question is whether an unverified complaint filed by the People is deemed verified, such that a general denial is insufficient. Given the statutory language, we conclude that the Entity Defendants may file a general denial.

We also take the opportunity to clarify for trial courts that an order to show cause, unlike an alternative writ, does not invite the trial court to change the order challenged by the writ petition. In addition, we reiterate that a judge of the superior court generally may not overturn the order of another judge unless the record shows the other judge is unavailable.

I. FACTS AND PROCEDURAL HISTORY

In September 2019, the People filed an unverified complaint against the Entity Defendants and one of their principals, Paul Blanco, asserting claims for unfair practices in violation of Business and Professions Code section 17200 and false advertising in violation of Business and Professions Code section 17500. The complaint alleged that the defendants perpetrated a number of fraudulent, wrongful and unlawful activities that could be construed to give rise to potential criminal liability, including claims brought under Business and Professions Code section 7500, which imposes criminal penalties for false advertising.

In December 2019, the Entity Defendants and Blanco filed an unverified "Defendants’ Answer to Complaint" in the form of a general denial of the complaint's allegations with affirmative defenses. In a footnote, the defendants asserted that section 446, subdivision (a) "authorizes the filing of an unverified answer."

The People filed a motion to strike the answer as to the Entity Defendants on two grounds. First, the People urged that section 446, subdivision (a) required a verified answer, because corporations, unlike natural persons, are not entitled to assert the Fifth Amendment privilege against self-incrimination. Second, the answer contained only a general denial of the complaint's allegations, whereas section 431.30, subdivision (d) required a specific denial of each allegation.

The Entity Defendants filed an opposition to the motion, contending the literal meaning of section 446 entitled them to file an unverified answer because verifying their answer might subject them to criminal prosecution, and a general denial was sufficient because the People's complaint was not verified. The People filed a reply brief.

A. February 2020 Order

After a hearing, Judge Michael M. Markman entered an order on February 5, 2020, striking the answer as to the Entity Defendants (February 2020 Order), on the grounds that they failed to verify the answer as required by section 446 and asserted only a general denial in contravention of section 431.30, subdivision (d). As to the verification issue, the court concluded that the exception to the verification requirement in section 446, subdivision (a) was coextensive with the Fifth Amendment privilege against self-incrimination, and because a corporation may not invoke that privilege, the exception to verification did not apply. The court granted the Entity Defendants leave to amend their answer.

B. The Entity Defendants’ Petition for Writ Relief

On February 20, 2020, the Entity Defendants filed a petition in this court for extraordinary writ relief from the February 2020 Order, urging that the Entity Defendants could avail themselves of the exception to the verification requirement and file an unverified answer, and they could file a general denial since the People's complaint was not verified. They further alleged that they had no adequate remedy at law and would suffer immediate and irreparable harm if writ relief were not granted.

On February 24, 2020, we stayed the February 2020 Order's requirement that a verified answer be filed and directed that opposition to the writ petition be filed within 15 days. The People filed an opposition to the petition on March 9, 2020. The Entity Defendants filed a reply brief on March 23, 2020.

On April 28, 2020, we issued an order to show cause as follows: "IT IS ORDERED that respondent superior court show cause before this court, when the matter is ordered on calendar, why the relief requested in the petition should not be granted."

On May 13, 2020, the trial court issued an order noting that the case had been assigned "from Department 16 [Judge Markman] to Department 25 [Judge James Reilly]" and setting a hearing in response to our order to show cause, "to allow [the People] to present oral argument on why this Court should not vacate its February 5, 2020 order granting [the People's] motion to strike, and enter a new order denying the motion." The order continued: "[b]ecause the Court is considering changing its February 5, 2020 order, it therefore gives the parties notice and an opportunity to be heard. (See, e.g. Brown, Winfield & Canzoneri, Inc. v. Superior Court (2010) 47 Cal.4th 1233, 1250, fn. 10 [104 Cal.Rptr.3d 145, 223 P.3d 15] [‘if a trial court is considering changing an interim order in response to an alternative writ, it must give the respective parties notice and an opportunity to be heard’].)"²

On May 15, 2020, we received a "Stipulated Joint Application for Extension of Time for Real Party in Interest to File Return etc.," in which the People sought a 30-day extension of time to file a return to the petition. The application was supported by a declaration from Hunter Landerholm, an attorney for the People, averring that the People needed more time to brief the issues. The Landerholm Declaration also informed us about the May 13, 2020 order, which indicated the court was considering changing its February 2020 Order and had set a hearing for May 22, 2020 to allow the People to present oral argument on why the order should not be vacated.

We granted an extension of time for the People to file their return. On May 18, 2020, we issued an order explaining that the extension was granted "due to real party in interest's stated need for additional time to fully brief the issues" and "was not granted in contemplation of the superior court changing the order under review or any potential issue of mootness arising therefrom." We further stated: "The Landerholm Declaration accompanying the stipulated application indicates the superior court is considering changing the order under review in response to this court's order to show cause, even though that order did not contain language inviting the court to reconsider its ruling. [Citations.]" Our order added: "In the event respondent superior court changes its ruling, the parties are ordered to immediately notify this court, which will likely require briefing on the validity of the superior court's action and whether the petition should be retained for decision notwithstanding any question of mootness."

C. Trial Court's May 2020 Order

The hearing before Judge Reilly went forward on May 22, 2020. After the hearing, Judge Reilly issued a new order of that same date, reversing the February 2020 Order that Judge Markman had issued (May 2020 Order).

The May 2020 Order confirmed that on April 24, 2020—while the Entity Defendants’ writ petition was pending in this court, but before we had issued our order to show cause—the case was "reassigned from Department 16 to Department 25." The order did not disclose any reason for the reassignment or whether Judge Markman was unavailable. It also reiterated that the May 22 hearing was held "to allow [the People] to present oral argument on why [the] court should not vacate its February 5, 2020 order ... and enter a new order denying the motion."

The May 2020 Order explained that Judge Reilly was vacating Judge Markman's February 2020 Order because, contrary to what Judge Markman had decided, the plain language of section 446, subdivision (a) meant the Entity Defendants did not need to verify their answer. The order then denied the People's motion to strike the Entity Defendants’ answer.

D. Ensuing Developments in This Writ Proceeding

We were advised of the superior court's May 2020 Order on May 26, 2020. On May 27, 2020, we ordered the parties to...