Berger v. Castro

Filed 8/29/07 Berger v. Castro CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of San Bernardino County. Thomas A. Peterson, Judge. (Retired judge of the L.A. Super. Ct. assigned by the Chief Justice pursuant to art. VI, 6 of the Cal. Const.) Reversed.

Juan C. Castro, in pro. per., for Cross-defendant and Appellant.

Law Offices of Donald P. Brigham, Donald P. Brigham; Ward & Ward and Alexandra S. Ward for Cross-complainant and Respondent.

Cross-defendant and appellant Juan C. Castro (Castro) challenges the default judgment rendered against him in favor of cross-complainant and respondent Paul Berger (Berger) in a matter involving an agreement to subordinate one judgment lien to another. As discussed below, we agree with both parties that the default judgment should be reversed and the underlying default set aside. This is because neither the cross-complaint nor the first amended cross-complaint alleged an amount of damages, and Castro was not served with a statement of damages as required by Code of Civil Procedure section 580.^[1] Castro argues that this court should also order the action dismissed with prejudice on the merits because Berger did not properly plead the fraud cause of action and cannot establish that a valid contract existed between them. Because these issues were not fully litigated in the trial court, we decline to address them on appeal.

Statement of Facts and Procedure

In 2001, Berger obtained a judgment against Robert Cullen (Cullen) in the amount of $311,604.93 in the Tuolumne County Superior Court. That same year, Berger recorded an abstract of judgment in Los Angeles County, where Cullen then resided. The judgment was never satisfied. In 2003, James Davis (Davis) contacted Berger and stated that in 2003 he himself had obtained a large judgment against Cullen, then doing business as Corona Aircraft Sales. Davis proposed that Berger subordinate his judgment lien to Daviss judgment lien in exchange for $40,000 and a percentage of any money obtained from enforcing the liens through a pending sheriffs sale of Cullens property in Los Angeles County. After negotiations, Berger, his wife, and Davis entered into a Subrogation and Collection Agreement (agreement) in December 2004. In this agreement, Davis agreed to pay the Bergers $40,000 and a percentage of any money collected from the sheriffs sale. Berger and his attorney allege that Bergers attorney delivered the agreement to Castro at Daviss request. Castro was to keep the agreement until Davis obtained a loan against the proceeds of the sheriffs sale and made the $40,000 payment. Bergers attorney gave Castro written instructions that he was not to deliver or give any effect to the agreement until the payment was made. A week after the parties entered into the agreement, Davis told Bergers attorney that he was unable to obtain the loan. Berger never received the payment. Both Berger and his attorney allege that they assumed the agreement was cancelled.

In April 2005, Berger was served with a complaint for damages, alleging abuse of process and credit libel. The plaintiff was Teresa Cullen, Robert Cullens wife. The basis of the complaint was Daviss efforts to collect on both judgments pursuant to the agreement. In May 2005, Berger cross-complained against Davis and against Castro,^[2]individually and doing business as Point Financial,^[3]for indemnification, declaratory relief, breach of fiduciary duty, and fraud. Berger alleged in the cross-complaint that Castro, acting as an escrow agent, delivered the subordination agreement to Davis without obtaining the promised $40,000 payment, contrary to Bergers instructions. Berger did not allege a specific amount of damages in the cross-complaint.

The trial court sustained Castros demurrer to the cross-complaint as to the claims for breach of fiduciary duty and fraud. Berger then filed a first amended cross-complaint alleging the same four causes of action for indemnification, declaratory relief, breach of fiduciary duty, and fraud, plus an additional claim for negligence. Again, Berger did not allege a specific amount of damages, but rather prayed for indemnity, compensatory damages according to proof, and punitive damages, costs of suit and such other and further relief as the court deems just and proper.

Castro did not respond to the first amended cross-complaint, and so the trial court entered a default against Castro. The court denied Castros motion to set aside the default. Berger moved for summary judgment on the first amended complaint. Castro did not file any opposition, and so the trial court granted the motion, along with a default judgment for $62,265.35 in general damages and $100,000 in punitive damages. This appeal followed.

Discussion

Castro argues that the default judgment and underlying default are rendered void because Berger failed to state any amount of damages in his first amended complaint and did not serve him with a statement of damages as required by section 580. Berger agrees.

Section 580, subdivision (a) provides, The relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115 . . . . Here, as explained above, neither the cross-complaint nor the first amended cross-complaint demanded a specific amount of damages. Further, Berger did not serve Castro with a statement of damages as required by section 580. Therefore, the judgment is void and must be reversed and vacated because Castros due process rights were violated. (Schwab v. Southern California Gas Co. (2004) 114 Cal.App.4th 1308, 1324-1325 [Section 580 deprives a trial court of jurisdiction to enter judgment against a defaulting defendant that exceeds the amount formally demanded; failure to give a defendant formal notice may deprive the defendant of due process].)

Castro further requests that we order the trial court to dismiss the case with prejudice because the first amended complaint does not properly plead the fraud cause of action, and because the affidavits attached to Bergers motion for summary judgment establish that no contract or agreement ever existed to support the causes of action for indemnification, declaratory relief, breach of fiduciary duty and negligence. We decline to address these issues. [W]e do not address questions raised by respondent that were not decided by the trial court . . . . Since a reversal is required, we do not address other grounds for reversal raised by appellant. (Buchanan v. Maxfield Enterprises, Inc. (2005) 130 Cal.App.4th 418, 427, citing Natter v. Palm Desert Rent Review Com. (1987) 190 Cal.App.3d 994, 1001.)

Disposition

The default judgment is reversed. The trial court is directed to set aside Castros default. Castro shall recover his costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ McKinster

Acting P.J.

We concur:

/s/ Richli

J.

/s/ King

J.

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^[1]All further statutory references are to the Code of Civil Procedure unless otherwise indicated.

^[2]Berger and his attorney learned that Davis had resigned from the State Bar and was convicted of income tax evasion and other charges in Federal Court, and that Castro was also an attorney who had resigned from the State Bar with charges pending.

^[3]The demurrer to the cross-complaint identifies Point Financial as an independent mortgage company.