People v. Hy-Lond Enterprises. Inc.

• Decision Date: 01 June 1979
• Docket Number: HY-LOND
• Citation: 93 Cal.App.3d 734,155 Cal.Rptr. 880
• Parties: The PEOPLE of the State of California, Plaintiff and Respondent, v.ENTERPRISES, INC., a California Corporation, Defendant and Respondent, The Attorney General of the State of California and the California Department of Health, Intervenors and Appellants. Civ. 44736.
• Court: California Court of Appeals Court of Appeals

Page 880

155 Cal.Rptr. 880

93 Cal.App.3d 734

The PEOPLE of the State of California, Plaintiff and Respondent, v. HY-LOND ENTERPRISES, INC., a California Corporation, Defendant and Respondent The Attorney General of the State of California and the California Department of Health, Intervenors and Appellants.

Civ. 44736.

Court of Appeal, First District, Division 1, California.

June 1, 1979.

As Modified June 14, 1979.

George Deukmejian, Atty. Gen., Charlton G. Holland, III, John J. Klee, Jr., Deputy Attys. Gen., San Francisco, for intervenors and appellants.

Peter Aronson, Kathleen L. Drummy, Weissburg & Aronson, Inc., Los Angeles, for plaintiff and respondent.

SIMS, ^* Associate Justice.

The Attorney General and the Department of Health, known since July 1, 1978, as the Department of Health Services (Health & Saf.Code, § 20, as amended Stats.1977, ch. 1252, § 109), hereinafter referred to as "the Department," have appealed from an order of the trial court that denied their motion to set aside and vacate a "Stipulation and Order for Judgment." The stipulation and order was entered as a judgment in an action in which the district attorney of Napa County, by his first amended complaint, sought an injunction, civil penalties and other relief against respondent, the operator of skilled nursing facilities. One count was predicated upon unfair competition under the provisions formerly found in sections 3369 and 3370.1 of the Civil Code (now found in Bus. & Prof.Code, §§ 17200-17208), and a second count was based on false and misleading statements under the provisions of sections 17500 and 17535 of the Business and Professions Code.

The Attorney General and the Department contend that the stipulation and judgment is erroneous and void insofar as it severally precludes both the Attorney General and the Department from performing statutory duties. Implied in the foregoing is the premise that the district attorney, who has not appeared in defense of the order, or judgment, exceeded his authority. Respondent, the operator of the skilled nursing facilities, asserts on several grounds that neither the Attorney General or the Department has standing to attack the judgment, and that in any event the state and the appellants, as an agent and an agency of the state, are barred by the stipulation and judgment because it was entered into under authority conferred on the district attorney by statute.

From an examination of the record we conclude that both the Attorney General and the Department had standing to attack the judgment and that the court erred on the merits in denying their motion. The order must be reversed and the case will be remanded for modification, or, if requested by respondent, vacation of the judgment.

On May 14, 1976, the Department completed a 24-page report setting forth deficiencies and plans of correction for the Hy-Lond Convalescent Hospital in the City of Napa. The report sets forth 87 noncompliances with state and federal law. A copy of the report attached to the first amended complaint indicates that, after passing through the Department's district office in Santa Rosa, it was referred to the Consumer Affairs Division of the District Attorney of Napa County. According to the first amended complaint, an original complaint was filed June 16, 1976.

The first amended complaint alleges that respondent operates 18 skilled nursing facilities in California and two in Washington. In the first cause of action, for unfair competition, the district attorney alleges that commencing at least as far back as January 1, 1974, respondent, as part of a continuing repeated pattern of conduct, violated Department regulations; that each such violation was a misdemeanor under Health and Safety Code section 1290, and an unlawful business practice under former Civil Code sections 3369 and 3370.1. The complaint groups numerous violations under the headings "Commingling of Patient Funds"; "Nursing Care"; "Dietetic Service"; "Pharmaceutical Care"; "Administration"; "Physical Plant"; and "Other Violations." The commingling allegedly occurred in Hy-Lond's main office in Sonoma, Sonoma County, where all patient trust fund money was controlled. With respect to "Nursing," it was alleged, "commencing at least January 1, 1974, on numerous occasions and in numerous Hy-Lond controlled facilities including, but not limited to the Napa, California, facility, defendant Hy-Lond Enterprises, Inc. (followed by particulars)." Similar allegations accompanied the other charges, although some, "Administration," "Physical Plant," and "Other Violations," merely referred to violations in numerous Hy-Lond controlled facilities.

The second cause of action, for false, misleading and deceptive advertising, incorporated the allegations referred to above, and alleged that conditions at the hospitals were misrepresented. It was specifically alleged that an advertisement in the Napa Valley Telephone Directory was false, misleading or deceptive.

Paragraph 25 states that the numerous facilities mentioned include, but are not limited to, a named six of the 18 facilities in California, including the facility in Napa. That facility is the subject of the copy of the report and copy of the advertisement attached to the amended complaint.

The defendant Hy-Lond Enterprises, Inc. filed an answer with a general denial on January 28, 1977, and four affirmative defenses which are not relevant here. The next step revealed by the record is the stipulation and order for judgment approved as to form and content by the Napa County District Attorney and the attorneys for the defendant Hy-Lond Enterprises and by the defendant itself, through its president.

The judgment covers all 18 facilities of Hy-Lond located in 12 counties, including Napa County. It enjoins and restrains respondent "from carrying on or engaging in any acts of unfair competition, which term is defined for purposes of this judgment as failing to be in substantial compliance with Health and Safety Code §§ 1275-1300 and with those provisions of Title 22, Div. 5, Ch. 3 of the California Administrative Code constituting regulations concerning patient care by skilled nursing facilities"; and "from making or disseminating to the public, or causing to be made or disseminated to the public, any untrue or misleading representations relating to the services provided by defendant concerning any circumstances or matter of fact connected with the rendition of said services, which representation defendant knows, or with the exercise of reasonable care should know, to be untrue, or misleading." The stipulated judgment then provides: "3. The injunctive relief provided in paragraphs 1 and 2 hereinabove shall be subject to the following conditions: . . ." The conditions are set forth in the margin. ¹

Defendant agrees to permit state representatives to interview its employees, and to inspect its records. It also agrees to post notices giving patients notice of their right to make complaints, and of the manner in which they may be made. It also undertook to notify its employees of the executory provisions of the injunction. There then follows the paragraph set forth in the margin. ² A further provision reads: "10. In the case of a sale of any of defendant's wholly owned facilities listed above to any entity in which defendant has a 51% Or greater ownership interest, defendant will make the terms of this injunction binding upon such successor in interest as a condition of the sale." ³

Termination is provided for as set forth in the margin. ⁴ The final paragraph reads: "12. Plaintiff and defendant acknowledge that plaintiff's claims as set forth in the complaint and amended complaint filed herein are strenuously disputed by defendant. Defendant, however, as a matter of compromise only and without the admission or inference of any liability on its part, desires to discontinue the within litigation by payment of $40,000.00 to the Treasurer of the County of Napa in full and final satisfaction of all of plaintiff's claims with respect to each of defendant's facilities designated herein except as provided in paragraphs 1 and 2 of the Judgment. Said sum shall be paid by defendant in three annual installments commencing with the payment of the sum of $13,334.00 on or before September 1, 1977, the payment of $13,333.00 on or before September 1, 1978, and the final installment of $13,333.00 on or before September 1, 1979."

On October 12, 1977, the Attorney General on behalf of the director of the Department gave notice of intention to move to set aside and vacate the judgment on the grounds that it was entered against the director because of mistake, inadvertence, surprise or excusable neglect. (See Code Civ. Proc., § 473.) There is no affidavit in support of this motion in the record. It was noticed to be heard on November 18, 1977, but apparently was continued for hearing to March 10, 1978. On February 28, 1978, the Attorney General and the Department gave notice of intention (entitled "Amended Motion to Amend or Vacate Judgment") to move the court for an order either (1) amending the stipulation and order for judgment to the extent it purports to bind governmental officials and agencies who were not parties to the action, or (2) vacating the judgment in its entirety. That notice of motion was accompanied by points and authorities attacking the provisions of paragraph 3a (fn. 1 above), and severally the first, second and third sentences of paragraph 8 (fn. 2 above).

Following a hearing, the trial court denied the motion and set forth its views in a memorandum of decision which is alluded to below. This appeal ensued.

I

The question of the Attorney General's standing to intervene in this action by moving to vacate the judgment on behalf of himself (and the district attorneys in other counties where the respondent may have facilities), and on behalf of the Department, is intertwined with the merits of the...