Sass v. Cohen

• Citation: 10 Cal.5th 861,272 Cal.Rptr.3d 836,477 P.3d 557
• Decision Date: 24 December 2020
• Docket Number: S255262
• Court: United States State Supreme Court (California)
• Parties: Deborah SASS, Plaintiff and Respondent, v. Theodore COHEN, Defendant and Appellant.

10 Cal.5th 861

477 P.3d 557

272 Cal.Rptr.3d 836

Deborah SASS, Plaintiff and Respondent,

v.Theodore COHEN, Defendant and Appellant.

S255262

Supreme Court of California.

December 24, 2020

Snell & Wilmer, Keith M. Gregory, Daniel G. Seabolt, Los Angeles, and Todd E. Lundell, Costa Mesa, for Defendant and Appellant.

Law Offices of Robert S. Gerstein, Robert S. Gerstein ; Law Offices of James P. Wohl, James P. Wohl, Los Angeles, and Eileen P. Darroll, El Segundo, for Plaintiff and Respondent.

Opinion of the Court by Cantil-Sakauye, C. J.

Section 580, subdivision (a) of the Code of Civil Procedure provides that "[t]he relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint ...."¹ Thus, "in all default judgments the demand sets a ceiling on recovery," and a judgment purporting to grant relief beyond that ceiling is void for being in excess of jurisdiction. ( Greenup v. Rodman (1986) 42 Cal.3d 822, 824, 231 Cal.Rptr. 220, 726 P.2d 1295 ( Greenup ).) In an accounting action, however, a plaintiff does not know the sum certain owed by the defendant. (See, e.g., Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179, 92 Cal.Rptr.3d 696 ( Teselle ) ["An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation"].) As such, a complaint seeking an accounting cannot state the precise amount of damages sought.

At issue in this case is how to reconcile the restrictions of section 580 with the limitations inherent in an action for accounting. Specifically, we must resolve whether a court may award monetary damages in a default judgment to a plaintiff who seeks an accounting when the complaint does not demand a specific amount of monetary damages but instead asserts a proportional interest in specified property.

Applying our usual rubrics of statutory construction, we conclude that in cases where plaintiffs seek monetary relief, the mere fact that they have pleaded an accounting action does not insulate them from the obligation to notify defendants of the dollar amounts sought before such relief may be granted in default. True, the text of section 580 does not point unerringly to this result. Nonetheless, when section 580 is considered in light of its purpose — "to guarantee defaulting parties adequate notice of the maximum judgment that may be assessed against them" ( Greenup , supra , 42 Cal.3d at p. 826, 231 Cal.Rptr. 220, 726 P.2d 1295 ) — and in conjunction with other statutes related to pleadings and default judgments, we find the most reasonable interpretation of section 580 is that it requires plaintiffs to have alleged their "relief" in terms of dollars if they are to receive monetary recovery. ( § 580, subd. (a).)

Our conclusion is bolstered by other considerations. Among these is the recognition that despite their relative lack of knowledge about the precise amounts owing, plaintiffs bringing accounting claims (1) are generally able to estimate their damages, (2) must ultimately prove the sums to which they are entitled after default, and (3) may request that the trial court take an accounting in circumstances where an accounting is necessary to discover the information needed to determine the amount owing. In other words, plaintiffs’ inability to state a precise amount of damages does not justify allowing pleadings that, in the event of defaults, will not have apprised defendants of the maximum dollar amounts to which they may be held liable.

Accordingly, we hold, consistent with the Court of Appeal below, that a plaintiff seeking an accounting is not excused from section 580 ’s requirement to state a specific dollar amount to support a default judgment granting monetary relief. In particular, it is not enough that the complaint identifies the assets in a defendant's possession and requests some fraction of their value.

The Court of Appeal reached a second, subsidiary issue as to which we also granted review: the proper method by which a court determines whether the amount awarded in a default judgment exceeds that demanded. (See Sass v. Cohen (2019) 32 Cal.App.5th 1032, 1035, 244 Cal.Rptr.3d 441 ( Sass ) [holding that "the amounts of damages awarded and demanded are to be compared on an aggregate basis"].) On closer examination, however, we find we need not resolve that question in order to dispose of the matter before us. As we shall explain, neither the trial court's nor the Court of Appeal's calculation of damages implicated the aggregate versus claim-by-claim subsidiary issue. This case does not raise that question, and although we offer some words of guidance to the courts, we reserve judgment on that issue for another day.

I. BACKGROUND

The facts of this case are taken from plaintiff Deborah Sass's second amended complaint, the operative pleading upon which she obtained a default judgment. (See, e.g., Title Ins. & Trust Co. v. King Land & Improv. Co. (1912) 162 Cal. 44, 46, 120 P. 1066 ( Title Insurance ) [" ‘A default confesses all the material facts in the complaint’ "]; 7 Witkin, Cal. Procedure (5th ed. 2019) Proceedings Without Trial, § 176 ["the defendant's failure to answer has the same effect as an express admission of the matters well pleaded in the complaint"].)

In 2006, while still married, defendant Theodore Cohen met and began a romantic relationship with plaintiff. In an attempt to persuade plaintiff to move to Los Angeles with him, Cohen made a number of promises. Plaintiff committed to moving after reaching an "agreement" with Cohen that he "would pay for all her living expenses for the rest of her life" and that "all property and income acquired by them during their relationship would be joint property." During this time, Cohen told plaintiff he was "buying us a house." Cohen then proceeded to purchase a property on Hollywood Boulevard (the Hollywood property).

A short time thereafter, plaintiff moved to Los Angeles. Cohen initially kept his promises, including by providing plaintiff with a credit card and paying "all of the bills and all of Plaintiff's expenses." Cohen also formed a company, Tag Strategic LLC (Tag). Plaintiff "help[ed] out" at Tag, generating through her efforts "approximately $1.4 million revenue for Tag." Despite her work, Cohen did not share Tag's profits with plaintiff. Instead, he told her he "was going to pay her $5,000 a month as a ‘token gesture.’ " Cohen, however, did not honor that promise and instead paid plaintiff $2,000 a month for a span of ten months.

By April 2011, plaintiff had become dissatisfied with the relationship and left Los Angeles. In response to Cohen's importuning her to return, plaintiff sent Cohen an e-mail with "a list of items that needed to be satisfied for her to consider returning to him." Cohen "agreed to Plaintiff's list." Plaintiff understood from this that "Tag would be owned 50% by her and Cohen, equally, as was all of the other income and property obtained during the relationship."

Mollified, plaintiff returned to Los Angeles, at which point Cohen told her, "I am buying you a house." Cohen then purchased a house located on Oakley Drive (the Oakley property). Sometime thereafter, Cohen sold the Hollywood property. "Upon information and belief," plaintiff alleged that Cohen "made a profit of more than $300,000" from the sale.

At around the same time that Cohen bought the Oakley property, plaintiff "purchased $25,000 worth of Class B shares in Rock & Reilly's LLC," a company located in Los Angeles. Although plaintiff made the purchase, the shares were held in Cohen's name.

Despite the couple's various financial entanglements, Cohen still had not divorced his wife. In December 2012, plaintiff moved out of the Oakley property. For a while thereafter, Cohen "continued to perform his agreement to provide Plaintiff with financial support and pay all of her expenses." Eventually, Cohen stopped paying. Plaintiff sued.

Plaintiff's complaint, brought against Cohen, Tag, and multiple Doe, alleged seven causes of action. The first asserted that Cohen breached the couple's so-called Marvin agreement, or a contract between nonmarital partners. (See Marvin v. Marvin (1976) 18 Cal.3d 660, 665, 134 Cal.Rptr. 815, 557 P.2d 106 ( Marvin ) [holding that "courts should enforce express contracts between nonmarital partners"].) Although demanding consequential damages for that breach "in an amount to be determined at trial," plaintiff also requested "a constructive trust over (1) all of the property purchased during the term of the relationship, (2) all of the income earned by Tag since May 30, 2006, and (3) all income earned by [Cohen] since May 2006."

Plaintiff's second cause of action was brought against Tag for its "failure to pay wages." Plaintiff also brought a claim for the "waiting time penalties" she alleged she was "entitled to [under] Labor Code § 203, equal to thirty (30) days wages." Plaintiff next asserted a claim for quantum meruit against all defendants, seeking to "recover the reasonable value of the services she provided to Tag."

Plaintiff's next claim is the focus of this case. In this cause of action, she demanded "an accounting of all property purchased and income earned during the relationship, including but not limited to: (1) the Hollywood House, (2) the Oakley House, (3) the Rock & Reilly stock, (4) Tag, and (5) all income earned by [Cohen]."

Plaintiff's final causes of action were for fraud and fraudulent transfer of assets from Tag to Cohen. She alleged within these causes of action that Cohen "repeatedly" made false representations to her. As a result of Cohen's misrepresentations, plaintiff asserted she "suffered actual damages in a sum to be determined at trial, which Plaintiff alleges is in excess of at least the sum of $700,000, which represents 50% of the revenue brought to Tag by Plaintiff, along with an unknown sum which represents 50% of all profits earned by Tag, and the additional sum of no less than...