Wanke, Indus., Commercial, Residential, Inc. v. AV Builder Corp.
| Decision Date | 19 February 2020 |
| Docket Number | D074392 |
| Citation | 258 Cal.Rptr.3d 715,45 Cal.App.5th 466 |
| Court | California Court of Appeals Court of Appeals |
| Parties | WANKE, INDUSTRIAL, COMMERCIAL, RESIDENTIAL, INC., Plaintiff and Respondent, v. AV BUILDER CORP., Defendant and Appellant. |
Certified for Partial Publication.*
Greco Traficante Schulz & Brick and Peter J. Schulz, and Williams Iagmin and Jon R. Williams, San Diego, for Defendant and Appellant.
Lindborg & Mazor, Peter F. Lindborg and Irina J. Mazor, Glendale, for Plaintiff and Respondent.
Wanke, Industrial, Commercial, Residential, Inc. (Wanke) obtained a judgment against Scott Keck and WP Solutions, Inc. (WP Solutions).
To collect, Wanke filed a creditor's suit against third party AV Builder Corp. (AVB) to recover $109,327 that AVB owed WP Solutions in relation to five construction subcontracts. Following a bench trial, the court entered judgment in Wanke's favor for $83,418.94 after largely rejecting AVB's setoff claims.
Invoking assignment principles, AVB contends that Wanke lacked the ability to sue given judgment debtor WP Solutions's corporate suspension. Next, it claims Wanke's suit was untimely under section 708.230 of the Code of Civil Procedure.1 Finally, it challenges the court's denial of its request for warranty setoffs under section 431.70. Rejecting each of these contentions, we affirm the judgment.
Wanke is a company that installs waterproofing systems. It sued Keck and another of its former employees in 2008 for trade secret misappropriation after they left Wanke to form a competing business, WP Solutions.2 The parties entered into a stipulated settlement and later litigated Keck's alleged breach of that settlement agreement. (See Wanke, Industrial, Commercial, Residential, Inc. v. Keck (2012) 209 Cal.App.4th 1151, 1156-1162, 147 Cal.Rptr.3d 651.) In 2013, the court entered judgment in favor of Wanke, holding Keck and WP Solutions jointly and severally liable for $1,190,929.
Meanwhile, general contractor AVB had hired WP Solutions as a waterproofing subcontractor on five residential and commercial construction projects.3 Keck completed his work around June 2014 when, facing the sizable judgment, he declared bankruptcy and dissolved WP Solutions. Wanke served a writ of execution and notice of levy on AVB that month. In examination proceedings of AVB's president, Wanke learned that AVB owed WP Solutions $109,327 under the subcontracts. Wanke filed this creditor's suit in July 2016 seeking to recover that amount toward its outstanding judgment.
The case proceeded to a two-day bench trial in June 2018. The parties stipulated as follows: Wanke obtained a judgment of $1,190,929 against WP Solutions and Keck; Keck discharged his debts in bankruptcy; and after serving a notice of levy on third-party AVB, Wanke learned that AVB owed $109,327 to WP Solutions. The sole issues presented to the court were AVB's setoff claims (§ 431.70) and Wanke's ability to collect given WP Solutions' incapacity.
Wanke presented no affirmative evidence, resting on the stipulated facts. AVB presented four witnesses. Employee Robert Canup described the scope of his repairs at the Point Loma project, where Keck's waterproofing system failed due to his use of incompatible materials. Keck testified about warranty obligations built into the subcontracts that WP Solutions could not perform after its 2014 suspension.4 As AVB was Keck's largest customer, Keck continued to honor warranty calls through his new company for minor repairs.
Antonio Madureira, AVB's president and founder, testified that any money AVB owed should be offset by the value of bargained-for warranty work that WP Solutions could no longer perform. Although AVB had received warranty calls on each project, Madureira was unsure what repairs were needed or how much AVB had spent. He did know that AVB spent $57,055.95 to repair damage from Keck's use of incompatible materials on the Point Loma project.
AVB's final witness was Jan Bagnall, a Pli-Dek representative. By stipulation of the parties, the court read deposition excerpts indicating that damage at the Point Loma project was caused by an installation issue that would not have been covered under its manufacturer's warranty.
After AVB rested, Wanke presented one rebuttal witness. Forensic architect Paul Kushner offered expert testimony on AVB's setoff claims. As relevant here, Kushner concluded AVB's warranty setoff claims were inflated by an overestimation of the years remaining on each warranty.
The court entered judgment in Wanke's favor. In a detailed statement of decision, it concluded AVB was entitled to offset moneys expended to repair the pool deck at Point Loma but otherwise rejected AVB's setoff claims. After offsetting the allowed amount, the court entered judgment in favor of Wanke and against AVB for $83,418.94.
AVB appeals the entry of judgment in Wanke's creditor's suit. We provide a brief outline of the legal framework before turning to the standing, statute of limitations, and setoff claims it raises on appeal.
After entry of a money judgment, the judgment creditor may obtain a writ of execution requiring the levying officer to enforce the judgment. (§ 699.510, subd. (a); Vineyard v. Sisson (1990) 223 Cal.App.3d 931, 939, 272 Cal.Rptr. 914.) If property subject to levy is in a third party's possession, the levying officer serves a copy of the writ of execution and notice of levy on that person, who may not refuse to comply absent a showing of good cause. (§§ 700.040, subd. (a), 701.010.) A third party's failure to deliver property without good cause renders it directly liable to the judgment creditor for the lesser of the judgment debtor's interest in the property or debt, and the amount required to satisfy the money judgment. (§ 701.020, subd. (a).) "[A] judgment creditor may enforce the liability imposed by section 701.020 either pursuant to examination proceedings ... or by way of a separate creditor's suit ...." ( National Financial Lending, LLC v. Superior Court (2013) 222 Cal.App.4th 262, 271, 166 Cal.Rptr.3d 88.)
Examination proceedings (§§ 708.110–708.205) "permit the judgment creditor to examine the judgment debtor, or third persons who have property of or are indebted to the judgment debtor, in order to discover property and apply it toward the satisfaction of the money judgment." ( Imperial Bank, supra , 33 Cal.App.4th at pp. 546–547, 39 Cal.Rptr.2d 432 ; see Evans v. Paye (1995) 32 Cal.App.4th 265, 280, 37 Cal.Rptr.2d 915 ( Evans ).) Pursuant to section 708.120, a judgment creditor may "discover and specify property of the judgment debtor in the third person's possession, and [ ] obtain an order, on motion, determining any claim of exemption asserted by the judgment debtor." ( Ilshin Investment Co., Ltd. v. Buena Vista Home Entertainment, Inc. (2011) 195 Cal.App.4th 612, 626, 125 Cal.Rptr.3d 680 ( Ilshin ).) "When the third person claims no interest in the property or debt, such a motion procedure may be all that is required in order for the judgment creditor to obtain satisfaction of its judgment in whole or in part." ( Ibid. )
However, "[w]hen the claims require a contested adjudication, the parties are entitled to have the issues determined in an independent creditor's action, rather than by the motion procedure under section 708.120, subdivision (d)." ( Ilshin, supra , 195 Cal.App.4th at p. 626, 125 Cal.Rptr.3d 680.) Pursuant to section 708.210, "[i]f a third person has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor, the judgment creditor may bring an action against the third person to have the interest or debt applied to the satisfaction of the money judgment." "This action commonly is referred to as a creditor's suit." ( Evans, supra , 32 Cal.App.4th at p. 276, 37 Cal.Rptr.2d 915 ; see generally, §§ 708.210–708.290.) A creditor's suit may be filed in the first instance without resorting to other procedures. (See Cal. Law Revision Com. com., 17 West's Ann. Code Civ. Proc. (2009 ed.) foll. § 708.210, p. 348.)
In this case, Wanke filed a notice of levy on AVB in June 2014. Thereafter it conducted examination proceedings and learned from AVB's president that AVB owed WP Solutions $109,327. Both the levy lien and examination lien expired. (§§ 697.710 [], 708.120, subd. (c) [].) In July 2016, Wanke filed a creditor's suit against AVB, seeking to recover $109,327. The trial court's judgment for Wanke and its denial of certain setoff claims form the basis for AVB's appeal.
AVB argues Wanke lacks standing because it stands in the shoes of WP Solutions, a suspended corporation. Although AVB did not raise this argument below, a lack of standing is a jurisdictional defect and may be claimed for the first time on appeal. ( Common Cause of Calif. v. Board of Supervisors of Los Angeles County (1989) 49 Cal.3d 432, 438, 261 Cal.Rptr. 574, 777 P.2d 610.)
"Every action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute." (§ 367.) "A ‘real party in interest’ is generally defined as ‘the person possessing the right sued upon by reason of the substantive law.’ " ( Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, 1172, 135 Cal.Rptr.2d 834.) In other words, it is...
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