Siu v. M&M Construction

Filed 4/26/07 Siu v. M&M Construction CA1/4

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

After respondent Andy Siu obtained a $221,088.46 default judgment, appellant M&M Construction moved to set aside that default judgment. The trial court denied the motion to set aside, but modified the judgment to reduce the principal amount to $151,742.72. On appeal, M&M contends that the default judgment must be set aside as void because it was not limited to the type and amount demanded in the complaint. As we find that the trial court failed to properly recalculate the amount of prejudgment interest when it reduced the underlying award, we reverse that part of the judgment and remand to the trial court for further modification, but otherwise affirm the judgment.

I. FACTS

A. The Dispute

Respondent Andy Siu met Oscar Martineza loan broker and a contractorin 1999. Martinez arranged for Siu to purchase a dilapidated home on Lisbon Street in San Francisco in October 1999 for $290,000. He obtained two loans for Siu for the total purchase price of the property. Martinez received a loan brokers fee for this service when the house closed.

Siu intended to live in the house with his mother, but it was uninhabitable. The walls were falling apart and the carpeting was full of mildew. The house also lacked insulation, making it very cold. Appellant M&M Constructiona partnership operated by Oscar Martinez and Fred Harold Meisneragreed to do initial painting and carpeting work to help render the house livable. M&M received $10,071 for this anticipated work when the sale closed.

The house needed more work, so Siu had agreed that M&M would make additional improvements to the Lisbon Street house. At closing, M&M had received $4,700 as a deposit on these planned improvements. This sum represented 10 percent of the expected cost of these improvements. In December 1999, M&M began work. Despite Sius repeated requests, M&M did not provide Siu with a written home improvement construction contract until April 2000. The contract did not notify Siu of his right to cancel, nor did it note a commencement or completion date. Siu was not given notice about mechanics liens, lien releases or bonding requirements.

Martinez also brokered a construction loan to help Siu pay for the home improvement construction costs. From the proceeds of that loan, Siu paid M&M a lump sum of $40,760 at or near the time when the home improvement construction contract was executed, although the work had not been completed. Siu also executed a $14,046.33 promissory note^[1]in favor of M&M, to pay for work done pursuant to the home improvement construction contract. M&M did not provide Siu with any notices required by California law for a promissory note.

Eventually, Siu concluded that M&Ms work did not comply with applicable building standards and standards of good workmanship. When he demanded that M&M comply with these standards, M&M abandoned the work. Siu spent $3,664 to correct some of the work that M&M completed. He obtained an estimate of $90,150 from another contractor as the cost to correct and complete the same scope of work that M&M agreed to do. Siu later hired this new contractor to do this work.

In March 2002, Siu filed a complaint against Martinez and M&M Construction, alleging causes of action for declaratory relief; cancellation of illegal contracts; restitution; violation of the state Consumer Legal Remedies Act (CLRA); unfair business practices; negligent construction; breach of fiduciary duty; constructive fraud; accounting; and breach of contract. (See Bus. & Prof. Code,  17200; Civ. Code,  1750-1784.) He alleged that he paid a $4,700 deposit on the home improvement construction contract. He further alleged that the value of the construction services that M&M provided did not exceed $25,000, but that he was induced to pay more than $50,000 for them. Siu also alleged that M&M did not complete work on the home improvement construction contract and that some of the work that was done was defective. He alleged that breaches of the home improvement construction contract damaged him in an amount in excess of $30,000. Siu sought declaratory and injunctive relief, restitution, exemplary and monetary damages, accounting and disgorgement, and attorney fees as allowed by law and by contract.

In October 2002, Siu filed an amendment to his original complaints cause of action for violation of the CLRA. (See Civ. Code,  1750-1784.) The amended prayer relating to this cause of action sought actual monetary and punitive damages in an amount to be ascertained at trial, rescission of the contract, and restitution of all amounts that Siu paid in excess of the reasonable value of the services provided. (See id.,  1770, subd. (b)(1).)

B. Proceeding Against Martinez

In April 2002, Martinez answered the complaint. He answered Sius October 2002 amendment in August 2003 and sought a jury trial in the matter. In early November 2003, Martinez filed for Chapter 13 bankruptcy and gave notice of a bankruptcy stay. Trial of the case against Martinez has been regularly continued while the bankruptcy matter proceeded.

C. Proceeding Against M&M

M&M did not file an answer to the March 2002 complaint or the October 2002 amendment to it. In 2002, Martinez told Siu that the M&M partnership had been dissolved. On January 29, 2003, Siu requested and obtained entry of a default judgment against M&M. Siu proceeded against M&M at an uncontested prove-up hearing on November 24, 2003. The trial court heard Sius testimony and received documentary evidence from him at the prove-up hearing setting out the sums M&M received, the cost to repair its work, and the legal costs associated with this legal action.

The trial court made a series of findings. First, it rescinded the home improvement construction contract between Siu and M&M, ruling that the contract violated state law. (See Bus. & Prof. Code,  7159, 7163; Civ. Code,  1689.6, subd. (c), 1689.7.) It awarded restitution to Siu on this rescinded contract, finding that he was entitled to all amounts paid to M&M pursuant to the rescinded contract. It set that amount at $55,531^[2]in damages with an additional award of $20,572.31 in prejudgment interest.^[3] (See Bus. & Prof. Code,  7163; Civ. Code,  1692, 1780, subd. (a)(3).) Second, the trial court awarded Siu $93,814.74^[4]in damages for the cost to correct M&Ms defective work. Finally, it assessed $51,170.41^[5]in reasonable attorney fees and costs, pursuant to statute and to the promissory notes attorney fees clause.^[6] (See Civ. Code,  1780, subd. (d), 1811.1.) Thus, Siu obtained a $221,088.46 judgment against M&M.

In October 2005, M&M moved to set aside Sius November 2003 default judgment. M&M argued that the default judgment was in excess of the amount demanded in Sius complaint, rendering it void. It urged the trial court to set aside all or part of the judgment. M&M filed an amended motion later that month. Siu opposed the motion, arguing that if the full judgment was improper, it should be modified to specify $151,742.72^[7]in damages rather than vacated. In January 2006, the trial court agreed with Sius reasoning and denied the motion to vacate the judgment in part, but modified and reduced the November 2003 judgment nunc pro tunc from $221,088.46 to $151,742.72 for damages and attorney fees. Siu gave notice of entry of this order in February 2006.

II. DISCUSSION

On appeal, M&M first argues generally that the trial court should have set aside the default judgment as void in its entirety, rather than merely modifying and reducing it. We disagree. When the defendant does not answer the complaint, the relief granted to the plaintiff in a default judgment cannot exceed the amount demanded in the complaint.^[8] (Former Code Civ. Proc.,  580, subd. (a).) However, a default judgment issued in excess of that amount is only partially in excess of the trial courts jurisdiction. Thus, it is not rendered void, but should be modified to reduce the amount of the judgment to save that aspect of it that was valid. (Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 495 (Becker); see Greenup v. Rodman (1986) 42 Cal.3d 822, 829-830; Ostling v. Loring (1994) 27 Cal.App.4th 1731, 1743.) This is precisely what the trial court did in January 2006 when it ordered the November 2003 default judgment to be modified and reduced nunc pro tunc.

Having failed in its more general attack, M&M turns to its challenges of specific aspects of the modified default judgment, contending that the modified judgment was not properly limited to the type and amount demanded in the complaint. The trial courts modified judgment awarded $80,000 of the total judgment based on allegations that Siu paid amounts in excess of $50,000 on the home improvement construction contract for which he was entitled to restitution and in excess of $30,000 in damages for defective repairs. By law, an allegation that a plaintiff suffered damages in excess of a specific amount will support a default judgment for no more than the specific amount stated. (See Becker, supra, 27 Cal.3d at pp. 492-494.) Thus, the $80,000 award contained in the modified judgment was proper.

Next, M&M attacks the inclusion of an award for prejudgment interest when this relief was not expressly sought in the complaint. Prejudgment interest is awarded to compensate a party for the loss of use of property. It is properly awarded in both tort and contract actions. (Big Bear Properties, Inc. v. Gherman (1979) 95 Cal.App.3d 908, 914; see Civ. Code,  3287, subd. (a).) The complaint did not specifically pray for prejudgment interest. However, when interest is allowable, a judgment may include it even if interest is not prayed for in the complaint. (Deaux v. Trinidad Bean & Elevator Co. (1935) 8 Cal.App.2d 149, 152; see Perry v. Magneson (1929) 207 Cal. 617, 622.)

Although M&M does not raise this specific challenge to the modified judgment, we find that the amount of prejudgment interest must be reduced. The $20,572.31 in prejudgment interest included in the November 2003 judgment was calculated on the basis of the $55,531 damage award. As that underlying damage award was reduced to $50,000 in the modified judgment, the trial court should have recalculated the amount of prejudgment interest accordingly. To rectify this minor error, we reverse the judgment and remand the matter to allow the trial court to recalculate the correct amount of prejudgment interest and to modify the judgment nunc pro tunc.

The only remaining aspect of the modified judgment was the award for attorney fees. The complaint prayed for attorney fees as allowed by contract and law. (See Becker, supra, 27 Cal.3d at p. 494 [attorney fees award improper when complaint failed to pray for them].) The promissory note that M&M obtained from Siu contained a promise to pay reasonable attorney fees and costs if an action was brought on the note, as was Sius action. Thus, attorney fees could be awarded on the basis of the contract alone.

The complaint also alleged that the home improvement construction contract and the promissory note were made in violation of the CLRA. (See Civ. Code,  1750-1784.) Under that provision, a trial court must award attorney fees and costs to a prevailing plaintiff in litigation filed under the CLRA. (Id.,  1780, subd. (d).) Even if the promissory note had not contained an attorney fees clause, we are satisfied that the potential for an attorney fees award and the allegations of the complaint specifically related to the CLRA also put M&M on notice of the possibility that the judgment would require it to pay Sius attorney fees. (See ibid.)

Finally, M&M argues that it did not receive adequate notice of the amount of potential judgment based on allegations of damage that were buried in the body of the complaint rather than cited in the prayer. On this ground, it asserts that the entire November 2003 default judgment was void. Again, we disagree. A defective prayer for damages may be cured if the body of the complaint alleges specific amounts of damages. (Greenup v. Rodman, supra, 42 Cal.3d at p. 829; see Becker, supra, 27 Cal.3d at p. 494 fn. 2.) Sius complaint alleged sufficient damages to give M&M notice of its potential exposure and to support the amount of the modified judgment. M&M is not entitled to a finding that the modified default judgment is void. (See, e.g., Becker, supra, 27 Cal.3d at p. 495.)

The January 2006 modified and reduced judgment is reversed and remanded to the trial court for recalculation of prejudgment interest. The trial court shall issue a new modified and reduced judgment nunc pro tunc to November 2003. In all other respects, the judgment is affirmed. As we find so little merit in this appeal, the respondent shall recover its costs on appeal.

_________________________

Reardon, J.

We concur:

_________________________

Ruvolo, P.J.

_________________________

Rivera, J.

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^[1]Siu did not sign the deed of trust against the Lisbon Street property that M&M provided him, because the person who cosigned on the loan was not available to sign it at the same time.

^[2]This is the sum of the $4,700 deposit, the $10,071 for painting and carpeting and the $40,760 lump sum payment about which Siu testified at the prove-up hearing.

^[3]Interest was determined at the legal rate, calculated from the dates that payments were made on the home improvement construction contract until the date of the judgment. It also ruled that M&M would owe additional interest at the legal rate, calculated from the date of the judgment until the date when restitution was made in full.

^[4]This is the sum of the $3,664 that Siu spent and the $90,150 required to correct M&Ms defective work.

^[5]Siu testified that he owed attorney fees and costs in this amount for work on this matter.

^[6]The trial court also invalidated the promissory note obtained from Siu by M&M because it violated state law. (See Bus. & Prof. Code,  7163; Civ. Code,  1689.6, subd. (c), 1770, subd. (b)(1), 1801-1812.20.)

^[7]This is the sum of $50,000 in restitution prayed for in the complaint, $20,572.31 in prejudgment interest calculated by the trial court at the time of the November 2003 default judgment, $30,000 in compensatory damages for defective construction prayed for in the complaint, and attorney fees of $51,170.41.

^[8]That provision also refers to a mandatory statement of damages required in a personal injury or wrongful death case, but those causes of action were not alleged in the case before us. (See former Code Civ. Proc.,  425.11, subd. (b) [as amended by Stats. 2001, ch. 812,  2], 580, subd. (a) [as amended by Stats. 1998, ch. 931,  78]; Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294, 1302 [no due process issue if type of action and complaint put defendant on notice of amount demanded]; Cassel v. Sullivan, Roche & Johnson (1999) 76 Cal.App.4th 1157, 1163-1164 [no danger that other defaulting defendants will lack notice of potential for judgment because they possess information necessary to calculate potential exposure]; see also Johns, Cal. Damages (5th ed. 2006) Personal Injuries,  1.2(b), pp. 1-16 to 1-19.)