People v. Morse, Nos. A058935

CourtCalifornia Court of Appeals
Writing for the CourtCHIN; MERRILL, Acting P.J., and WERDEGAR
Decision Date22 December 1993
PartiesThe PEOPLE, Plaintiff and Respondent, v. Ivan O.B. MORSE, Defendant and Appellant (Two Cases).
Docket NumberNos. A058935,A060033

Page 816

25 Cal.Rptr.2d 816
21 Cal.App.4th 259
The PEOPLE, Plaintiff and Respondent,
v.
Ivan O.B. MORSE, Defendant and Appellant (Two Cases).
Nos. A058935, A060033.
Court of Appeal, First District, Division 3, California.
Dec. 22, 1993.
Review Denied March 17, 1994.

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[21 Cal.App.4th 262] Ralph D. Hughes and C. Timothy Genovese, Law Firm of Hughes & Associates, Pleasanton, for defendant and appellant.

Daniel E. Lungren, Atty. Gen., Roderick E. Walston, Chief Asst. Atty. Gen., Herschel T. Elkins, Sr. Asst. Atty. Gen., [21 Cal.App.4th 263] Laura W. Kaplan, Deputy Atty. Gen., Sacramento, and John J. Meehan, Alameda County Dist. Atty. and Lawrence C. Blazer, Deputy Dist. Atty., Oakland, for plaintiff and respondent.

CHIN, Associate Justice.

In these consolidated appeals, Ivan O.B. Morse challenges the trial court's issuance of a preliminary injunction that enjoined him from mailing to the public solicitations concerning

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homestead declarations without complying with Business and Professions Code section 17537.6, 1 and a subsequent judgment that granted a permanent injunction, imposed $400,000 in civil penalties for Morse's violation of section 17537.6, and ordered that Morse pay $400,000 in cy pres restitution. He raises both constitutional and nonconstitutional challenges to the court's actions. Because the issuance of the judgment moots the appeal from the order granting a preliminary injunction, we dismiss that appeal. We also affirm the court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

At least since January 1988, Morse, a licensed attorney, has mailed solicitations to homeowners offering assistance in the filing of homestead declarations. Between January 1988 and January 1992, he mailed approximately 4 million of these solicitations to California homeowners who had recently recorded trust deeds on their homes. As a result of these mailings, Morse prepared over 88,000 homestead declarations and received over $1.8 million in fees.

On August 8, 1991, after unsuccessfully requesting that Morse stop mailing solicitations, respondent People of the State of California filed a "COMPLAINT FOR INJUNCTION, CIVIL PENALTIES, RESTITUTION AND OTHER RELIEF" against Morse, both individually and doing business as Morse and Associates. The complaint's first cause of action alleged that Morse had violated section 17537.6, which regulates solicitations in connection with the operation of a homestead filing service. Among other things, the complaint alleged that Morse's solicitations contained untrue and misleading statements insofar as they (1) suggested that recordation of a homestead declaration would in some manner prevent the forced sale of a judgment debtor's dwelling, (2) suggested that the advantages of the homestead exemption statutes are available only to those who record a homestead declaration, (3) suggested that Morse had a file or record pertaining to the person receiving [21 Cal.App.4th 264] the solicitation, and (4) failed to make the statutorily required disclosures. 2 The complaint requested that the court permanently enjoin Morse from violating section 17537.6, and requested imposition of civil penalties and restitution.

In a motion for a preliminary injunction filed July 31, 1992, respondent requested that the court enjoin Morse from violating section 17537.6 in connection with his mailing of solicitations to the public. In opposing the motion, Morse attacked the constitutionality of section 17537.6 on a variety of grounds. The court rejected Morse's constitutional arguments and granted the motion. It issued a preliminary injunction enjoining Morse from performing or failing to perform certain acts in accordance with section 17537.6. On August 20, 1992, Morse filed a notice of appeal from the preliminary injunction order.

On October 8, 1992, respondent moved for summary judgment or, in the alternative, summary adjudication. In opposition to the motion, Morse conceded that his solicitations failed to comply with a number of the requirements of section 17537.6, but again attacked the constitutionality of the statute and argued that respondent had failed to present any evidence that his statements were misleading. 3 In light of this concession, the court granted summary adjudication on respondent's claim for violation of section 17537.6. 4 It entered a judgment permanently

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enjoining Morse from violating the statute in connection with sending written solicitations to the public. The judgment also orders Morse to pay $400,000 in civil penalties under section 17536, and $400,000 in cy pres restitution. Morse then filed an appeal from this judgment. We consolidated the appeal with his appeal from the preliminary injunction.
DISCUSSION

Initially, we dismiss the appeal from the order granting the preliminary injunction. The subsequent judgment, which included a permanent injunction, moots that appeal. Therefore, we will not address the propriety of [21 Cal.App.4th 265] granting the preliminary injunction. (People v. Rath Packing Co. (1978) 85 Cal.App.3d 308, 314, 149 Cal.Rptr. 431.) We thus turn to the appeal from the final judgment.

I. Constitutionality of Section 17537.6

A. First Amendment

Morse's primary argument on appeal is that section 17537.6, which he admittedly violated, is an unconstitutional restraint of "his rights to free commercial speech under the First Amendment...." He states that "[t]here is no question here but that ... [section] 17537.6 regulates commercial speech, since it both mandates and prohibits certain speech." He further argues that, because the written solicitation materials that he distributed were nondeceptive, accurate, and truthful, they constituted protected commercial speech that section 17537.6 unconstitutionally regulates.

The first step in a commercial speech case is to "determine whether the expression is protected by the First Amendment." (Central Hudson Gas & Elec. v. Public Serv. Comm'n (1980) 447 U.S. 557, 566, 100 S.Ct. 2343, 2351, 65 L.Ed.2d 341.) "The First Amendment's concern for commercial speech is based on the informational function of advertising. [Citation.] Consequently, there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity." (Id., at p. 563, 100 S.Ct. at p. 2350.) "The States and the Federal Government are free to prevent the dissemination of commercial speech that is false, deceptive, or misleading [citation]...." (Zauderer v. Office of Disciplinary Counsel (1985) 471 U.S. 626, 638, 105 S.Ct. 2265, 2275, 85 L.Ed.2d 652; see also Central Hudson, supra, 447 U.S. at p. 563, 100 S.Ct. at p. 2350 ["government may ban forms of communication more likely to deceive the public than to inform it"].) Thus, for commercial speech to receive First Amendment protection, "it at least must concern lawful activity and not be misleading." (Central Hudson, supra, at p. 566, 100 S.Ct. at p. 2351.) Whether the inherent character of a statement places it beyond the protection of the First Amendment is a question of law which we must determine after independently reviewing the record. 5 (Peel v. Attorney Disciplinary Comm'n of Ill. (1990) 496 U.S. 91, 108, 110 S.Ct. 2281, 2291-92, 110 L.Ed.2d 83 (plur. [21 Cal.App.4th 266] opn. of Stevens, J.); Ohralik v. Ohio State Bar Assn. (1978) 436 U.S. 447, 463-464, 98 S.Ct. 1912, 1922-23, 56 L.Ed.2d 444.)

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Having reviewed the record, we agree with respondent that Morse's advertisements are deceptive and misleading in a number of ways, and therefore are not entitled to First Amendment protection. Initially, Morse's complete failure to explain that, under Code of Civil Procedure sections 704.710-704.850, homeowners automatically receive a homestead exemption even if they do not record a homestead declaration renders his solicitation materials misleading. The materials variously refer to "a Homestead," "THE HOMESTEAD EXEMPTION," a "DECLARED HOMESTEAD," and a "Declaration of Homestead," and purport to discuss the benefits of "record[ing] a Homestead" and "recording a Declaration of Homestead." However, the materials never explain that, under California law, there is a difference between "the Homestead Exemption," which refers to the automatic exemption under Code of Civil Procedure sections 704.710-704.850, 6 and a "Declared Homestead," 7 or that the benefits of the homestead exemption are available even to those who do not record a homestead declaration. Rather, the materials use these terms essentially interchangeably. 8 By using the terms interchangeably without identifying the automatic homestead exemption or discussing its benefits, the materials incorrectly suggest that the homestead exemption and a declared homestead are the same thing and that [21 Cal.App.4th 267] anexemption applies only if there is a recorded homestead. 9 They therefore are deceptive and misleading. 10

Morse's materials are also misleading in their discussion of a homeowner's protection against the forced sale of the home. The very first paragraph of the "HOMESTEAD INFORMATION SHEET" (Information Sheet) that Morse distributed states: "WHAT IS THE PURPOSE OF HOMESTEAD EXEMPTION? The policy underlying all homestead laws is to provide a place for the family where they [sic ] may reside and enjoy the comforts of a home, free from the anxiety that it may be taken away from them [sic ]." This statement of purpose suggests that the recording of a homestead declaration necessarily prevents the forced sale of a family's home; otherwise, the family

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could not be "free from the anxiety that it may be taken away...." However, even where a homeowner records a homestead declaration, a creditor may force the sale of a home through a levy pursuant to a writ of execution. (See Code Civ.Proc., §§ 704.740-704.800, 704.970.) 11 Morse's statement is misleading [21 Cal.App.4th 268] in suggesting otherwise. 12

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23 practice notes
  • Part II
    • United States
    • Federal Register December 12, 2003
    • December 12, 2003
    ...of Sec. 11.701. Like the communications found violative in Leoni v. State Bar, supra, 39 Cal.3d 609 (Cal. 1985) and People v. Morse, 21 Cal.App.4th 259, fn. 13 (1993), affd. In re Morse, 11 Cal. A4th 184 (Cal. 1995) they have potential to mislead members of the public. In Leoni v. State Bar......
  • Practice and procedure: Patent and trademark cases rules of practice; representation of others before Patent and Trademark Office,
    • United States
    • Federal Register December 12, 2003
    • December 12, 2003
    ...of Sec. 11.701. Like the communications found violative in Leoni v. State Bar, supra, 39 Cal.3d 609 (Cal. 1985) and People v. Morse, 21 Cal.App.4th 259, fn. 13 (1993), affd. In re Morse, 11 Cal. A4th 184 (Cal. 1995) they have potential to mislead members of the public. In Leoni v. State Bar......
  • People v. Beaumont Inv., Ltd., No. H021971.
    • United States
    • California Court of Appeals
    • August 11, 2003
    ...191 [no error in basing penalty on more than 500,000 misleading car rental contracts plus other conduct]; People v. Morse (1993) 21 Cal.App.4th 259, 273, 25 Cal.Rptr.2d 816 [no error in calculating violations based on number of people solicited by defendant-attorney for legal However, as a ......
  • County of San Diego v. State of California, No. S046843
    • United States
    • United States State Supreme Court (California)
    • March 3, 1997
    ...order and (2) entry of final judgment. (Sheward v. Citizens' Water Co. (1891) 90 Cal. 635, 638-639, 27 P. 439; People v. Morse (1993) 21 Cal.App.4th 259, 264-265, 25 Cal.Rptr.2d 816; Art Movers, Inc., supra, 3 Cal.App.4th at p. 647, 4 Cal.Rptr.2d Finally, the state requests that we reverse ......
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21 cases
  • People v. Beaumont Inv., Ltd., No. H021971.
    • United States
    • California Court of Appeals
    • August 11, 2003
    ...191 [no error in basing penalty on more than 500,000 misleading car rental contracts plus other conduct]; People v. Morse (1993) 21 Cal.App.4th 259, 273, 25 Cal.Rptr.2d 816 [no error in calculating violations based on number of people solicited by defendant-attorney for legal However, as a ......
  • County of San Diego v. State of California, No. S046843
    • United States
    • United States State Supreme Court (California)
    • March 3, 1997
    ...order and (2) entry of final judgment. (Sheward v. Citizens' Water Co. (1891) 90 Cal. 635, 638-639, 27 P. 439; People v. Morse (1993) 21 Cal.App.4th 259, 264-265, 25 Cal.Rptr.2d 816; Art Movers, Inc., supra, 3 Cal.App.4th at p. 647, 4 Cal.Rptr.2d Finally, the state requests that we reverse ......
  • Kasky v. Nike, Inc., No. A086142.
    • United States
    • California Court of Appeals
    • March 20, 2000
    ...129 L.Ed.2d 118; Edenfield v. 93 Cal.Rptr.2d 859 Fane (1993) 507 U.S. 761, 768, 113 S.Ct. 1792, 123 L.Ed.2d 543; People v. Morse (1993) 21 Cal.App.4th 259, 265, 25 Cal. Rptr.2d 816; People v. Superior Court (Olson), supra, 96 Cal.App.3d at p. 191, 157 Cal.Rptr. To distinguish between commer......
  • People v. Johnson & Johnson, D077945
    • United States
    • California Court of Appeals
    • April 11, 2022
    ...circumstances, total circulation can be a reasonable method to determine the number of statutory violations. In People v. Morse (1993) 21 Cal.App.4th 259, 25 Cal.Rptr.2d 816 ( Morse ), the People filed a civil enforcement action against an attorney who mailed false and misleading solicitati......
  • Request a trial to view additional results

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