Campbell v. Campbell

Filed 3/9/06 Campbell v. Campbell CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from a judgment of the Superior Court of Los Angeles County. Jean E. Matusinka, Judge. Affirmed in part and reversed.

Negele & Associates, James R. Negele and Jonathan R. Hickman for Defendant, Cross-complainant and Appellant.

Avila & Peros, Michael F. Avila and John P. Kristensen for Plaintiff, Cross-defendant and Respondent.

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Following defendant, cross-complainant, and appellant Robert Campbell's repeated failures to comply with discovery orders, the trial court imposed terminating sanctions by striking defendant's answer and cross-complaint, entering default, and following a prove-up awarding a default judgment in excess of $7 million in economic and punitive damages, interest, costs, and attorney fees in favor of plaintiff, cross-defendant, and respondent Wm. Campbell, Inc. We reject defendant's argument that terminating sanctions were improperly imposed and further conclude the court did not error by declining to grant discretionary relief from the default judgment under Code of Civil Procedure section 473.^[1] We reduce the award of economic damages to $1.5 million, and reverse and remand the awards of punitive damages, attorney fees, and interest for further proceedings before the trial court.^[2]

PROCEDURAL HISTORY

Because of the nature of the issues presented on appeal, we set forth the procedural history of the action in detail. Plaintiff and defendant entered into agreements to develop three parcels of property with two units on each parcel. When the development did not conclude as planned, plaintiff filed a complaint against defendant alleging 11 causes of action.^[3] The causes of action included breach of contract, foreclosure, accounting, appointment of a receiver, and the torts of breach of fiduciary duty, conversion, and fraud. Defendant's default was entered on August 25, 2003. Defendant filed a motion to set aside the default pursuant to section 473, subdivision (b), based upon an attorney affidavit of fault of Nikola M. Mikulicich, Jr. The motion was accompanied with a proposed answer and cross-complaint. Over plaintiff's opposition, defendant's default was set aside, the motions to file the answer and cross-complaint were granted, and plaintiff's request for sanctions was granted in the amount of $500.

Plaintiff filed a statement of damages pursuant to section 425.115, reserving the right to $5 million in punitive damages and $3,486,671.80 in economic damages (plus interest and penalties).

Defendant filed an ex parte motion for an order staying the deposition of defendant pending determination of a protective order. The deposition was stayed pending hearing on the protective order. On December 1, 2003, the protective order was denied and it was ordered that defendant submit to a deposition within the next 30 days.

Also on December 1, 2003, plaintiff filed a motion to compel initial responses to demand for production, set number one, and for sanctions. On December 8, 2003, plaintiff filed a motion to compel initial responses to form interrogatories, set number one, and a request for sanctions. Both motions were granted on January 7, 2004, and sanctions in the amount of $850, payable within ten days, were jointly ordered against defendant and Mikulicich.

On February 4, 2004, plaintiff filed an ex parte application for sanctions against defendant and his counsel for failure to comply with the January 7, 2004, court order. Defense counsel filed a declaration in opposition to the application.

Plaintiff filed an ex parte application for sanctions against defendant and his counsel for failure to comply with court orders dated January 7 and January 30, 2004. Defense counsel filed an opposition to the application on behalf of defendant.

Plaintiff filed an ex parte application for sanctions against defendant and his counsel for failure to comply with the trial court's orders of January 30, 2004, and February 26, 2004. On March 3, 2004, the trial court granted the ex parte application, ordering defendant to provide verified responses to plaintiff's interrogatories within 10 days without objections and further ordering defendant and Mikulicich to pay sanctions of $1,500.

On March 19, 2004, plaintiff filed an ex parte application for sanctions against defendant and his counsel for failure to comply with the trial court's orders of January 30, February 26, and March 3, 2004. Defendant filed an opposition to the ex parte application for sanctions. The request for sanctions was set for hearing on March 26, 2004. Plaintiff filed supplemental statements in support of the ex parte application for sanctions on March 26, 2004. Defendant filed an opposition on March 26, 2004, supported by a declaration of Mikulicich. The trial court ordered counsel for defendant to pay the previously imposed sanction of $1,500 on March 26, 2004, and further ordered defendant to answer all interrogatories on or before April 2, 2004.

On April 16, 2004, plaintiff moved to strike defendant's answer and cross-compliant for failure to comply with the March 26, 2004 order compelling supplemental responses to special interrogatories. On May 10, 2004, the trial court granted plaintiff's motion to compel additional responses to interrogatories, for sanctions in the amount of $2,275 against defendant, and for an order striking defendant's answer and cross-complaint.

Defendant's default was entered on May 13, 2004. Plaintiff filed a summary of the case in support of a motion for default judgment and declarations of William Campbell, David DePriest, Menelaos Saridakis, and Michael F. Avila. Two hundred twenty-five pages of exhibits were filed by plaintiff in support of the application for default judgment. A memorandum of costs in the amount of $2,541 was filed on July 8, 2004. Plaintiff also filed a supplemental statement in support of default judgment, supporting an award of attorney fees.

The trial court issued the following judgment for plaintiff and against defendant on August 11, 2004: (1) economic damages in the amount of $3,486,671.80; (2) prejudgment interest of $406,778.37; (3) punitive damages of $3 million; (4) attorney fees of $110,700; (5) costs of $4,796.25; and (6) unpaid sanctions of $4,000. The total judgment was for $7,012,946.42. Notice of entry of judgment was filed on August 11, 2004.

Mikulicich filed a motion to be relieved as counsel, with a calendar date of May 28, 2004. The motion was supported by Mikulicich's declaration stating defendant had breached his contractual obligations and rendered the attorney's performance unreasonably difficult. Mikulicich continued to represent defendant up to the point of terminating sanctions. All filings on behalf of defendant were made by Mikulicich during the period of representation. On September 2, 2004, Mikulicich filed a substitution of attorney for defendant.

On October 5, 2004, defendant moved for an order setting aside and vacating the default judgment and orders striking the answer and cross-complaint. Defendant's motion was made under the discretionary relief provisions of section 473, subdivision (b). Defendant argued he had no knowledge of the default and default judgment, which were the result of positive misconduct of Mikulicich. Defendant asserted he was relatively free of negligence.

Plaintiff filed an opposition to defendant's motion, along with evidentiary objections and a request for judicial notice. A reply, evidentiary objections, and declaration of defendant were filed by defendant to the opposition on October 22, 2004. On October 27, 2004, the motion to set aside the default judgment was argued and denied.

Defendant filed a timely notice of appeal from the judgment entered on August 11, 2004, and all orders entered in connection with the judgment, including the order of October 27, 2004, denying the motion to set aside the default judgment, the order entering default, and the order striking defendant's answer and cross-complaint.

Defendant contends on appeal as follows: (1) the trial court abused its discretion in granting terminating sanctions; (2) the trial court abused its discretion in denying defendant's motion to set aside the default judgment and for relief from the terminating sanctions order; and (3) the trial court abused its discretion by awarding excessive damages in the default judgment.

DISCUSSION

I

THE TRIAL COURT DID NOT ABUSE ITS DISCRETION IN

GRANTING THE MOTION FOR TERMINATING SANCTIONS

Defendant argues the trial court abused its discretion in granting terminating sanctions. He contends there was no willful violation of any discovery orders because defendant was unaware of the orders. Defendant argues that although knowledge of an order on the part of an attorney is normally imputed to the client, the rule should not apply because Mikulicich was acting in his own interest and not in defendant's interest. Finally, defendant argues terminating sanctions were excessive in light of the discovery denied. Defendant reasons that the sanction was impermissible punishment, a lesser sanction would have sufficed, and plaintiff received a windfall as a result of the ruling.

A. The Motion for Terminating Sanctions

On April 16, 2004, plaintiff filed a motion to strike defendant's answer and cross-complaint pursuant to section 2023, subdivisions (b)(4) and (c), for failure to comply with the trial court's order of March 26, 2004, compelling further supplemental responses to set one of the special interrogatories. The motion and supporting declaration of plaintiff's counsel detailed the following history of the case.

(1) On January 30, 2004, the trial court issued an order compelling defendant to provide verified responses to plaintiff's special interrogatories, set number one, within ten days and for defendant and his counsel to pay sanctions in the amount of $1,500. Defendant did not comply with this order. The special interrogatories had been served by mail on October 15, 2003.

(2) On February 26, 2004, the trial court ordered defendant and his counsel to comply with the January 30, 2004 order by the close of business on February 27, 2004. They did not comply with the order.

(3) On March 3, 2004, plaintiff filed an ex parte application for terminating sanctions against defendant, for failure to comply with the trial court's orders of January 30 and February 26, 2004. The trial court ordered defendant to provide verified responses to plaintiff's special interrogatories, set number one, and to pay $1,500 in sanctions. Defendant and counsel did not comply with this order.

(4) On March 19, 2004, plaintiff filed an ex parte application for terminating sanctions for failure to comply with the trial court's orders of January 30, February 26, and March 3, 2004. Hearing was set for March 26, 2004. Prior to the hearing, defendant produced evasive, inadequate, and nonresponsive sham responses to plaintiff's special interrogatories, set one, numbers 5-13 and 20-23. As a result, the trial court ordered defendant and counsel to produce verified supplemental responses and pay $1,500 in sanctions before the close of business on March 26, 2004. Defendant did not comply with the order. Counsel for defendant delivered a check in the amount of $1,500, which was returned by the bank for insufficient funds.

(5) On March 31, April 15, and April 16, 2004, counsel for plaintiff left telephone messages for Mikulicich at his office regarding the failure to comply with discovery and the sanctions orders. No response was received from Mikulicich.

Relying upon section 2023, plaintiff argued that defendant engaged in a misuse of the discovery process by failing to respond or submit to an authorized method of discovery, disobeying a court order to provide discovery, and failing to confer in a good faith attempt to informally resolve a discovery dispute. Plaintiff argued defendant and his counsel failed to respond to discovery requests, failed to file timely oppositions to motions to compel, and failed to appear at hearings on the motions to compel. Despite defendant's claims that the requested discovery was extensive and difficult to produce, plaintiff pointed out that in more than four months, defendant had produced â€