Filed 5/17/22 Nguyen v. Le CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

Appeal from a judgment of the Superior Court of Orange County, Derek W. Hunt, Judge. Reversed.

Benice Law and Jeffrey S. Benice for Plaintiff and Appellant.

No appearance for Defendants and Respondents.

* * *

Ngan Ha Nguyen appeals from a judgment dismissing his case after defendants’ defaults were taken. The court’s order dismissing the case incorrectly stated Nguyen had been given three opportunities to submit written evidence proving-up damages; in fact, he had only been given two. The dismissal order came three days after a minute order was issued assuring Nguyen he would be notified if the court had any further requirements for entry of the judgment he sought.

This sequence of events is unfortunate because “to perform its high function in the best way, ‘justice must satisfy the appearance of justice.’” (In re Murchison (1955) 349 U.S. 133, 136.) In this case, while the court led Nguyen to believe its policy was to provide litigants with notice of any deficiencies in a default prove-up package, and a meaningful opportunity to cure the deficiency, it did not adhere to that policy.

To be sure, the written prove-up package was insufficient to establish Nguyen’s measure of damages. But not incurably so. And the court’s minute order rejecting Nguyen’s initial prove-up package without prejudice did not effectively identify what additional information it required. If the court determined the case was not amenable to a written prove-up, the court should have scheduled a prove-up hearing at which Nguyen could have presented live testimony to address the court’s concerns about any confusing or incomplete aspects of the written evidence. This is the type of feedback a plaintiff often gets when he or she has a court trial. The default process should not automatically deprive a plaintiff of an equivalent opportunity.

We consequently reverse the judgment and remand the case to the trial court with directions to allow Nguyen to resubmit his prove‑up package with particular attention paid to providing evidence supporting the damages claimed. If the court is not satisfied with Nguyen’s written submission, it shall either detail with specificity what additional information it needs and give Nguyen an opportunity to cure the problems identified, or schedule a prove-up hearing at which Nguyen can offer live testimony.

FACTS

Nguyen filed his complaint in July 2019, alleging fraud and breach of fiduciary duty against defendants Lan Le, Sang Tieu, and Eastwest Lending, Inc. (Defendants).

The complaint alleges “Defendant Lan Le is a real estate sales person. Defendant Sang Tieu is a real estate broker and operates Defendant East West Lending, Inc. as a real estate/lending business. On or about January 2018, Defendants were retained by Plaintiff to refinance a $193,956.84 loan on his principal residence located [in] Santa Ana, CA 92704. At the time of the refinance Plaintiff’s loan was subject to a 4% interest rate. Plaintiff’s purpose in obtaining a refinance was to obtain a lower interest rate. Defendants, and each of them, specifically represented and agreed that they would obtain a more favorable loan. Unknown to Plaintiff, Defendants thereafter obtained a loan on Plaintiff’s property at an interest rate of 9.990%, higher than Plaintiff’s existing rate. At all times alleged herein, Defendants concealed this wrongful conduct from Plaintiff. Plaintiff only discovered this wrongful conduct on or about January, 2018 when he received a monthly invoice at his home from a new lender named “Core Lending” identifying a 9.990% interest rate. Plaintiff thereafter demanded that Defendants immediately rescind the unauthorized and fraudulently obtained loan. Defendants refused to do so.”

The complaint also alleged that as a proximate cause of the fraud, Nguyen had suffered general and special damages in an amount believed to exceed $100,000.

Defendants failed to answer the complaint; on November 27, 2019, the court clerk entered their default.

Nguyen filed his default prove-up evidence and request for default judgment application on September 18, 2020. He sought a total of $35,411 in damages, consisting of $10,469 in closing costs for the new loan, a 10% fee to the new lender ($9,070), interest in the amount of $2,648 for the month of April 2018, and in the amount of $1,595 for each of the months of May and June 2018, $2,608 in interest charged by the new lender for the original loan, a lending fee of $2,812 charged by defendant Eastwest Lending, $1,520 for a “check written to [defendant] Lan Le by Plaintiff,” and $119 per month in higher interest paid since August 2018.

Nguyen’s declaration in support of the application stated the same facts alleged in the complaint and that he had suffered each of the items of damages he sought to recover. His declaration lists each of the items of damage; it fails, however, to detail when and under what circumstance Nguyen incurred or paid these amounts. The declaration also fails to explain how the interest amounts were calculated or why they differ from month to month.[1]

Nguyen’s declaration also referenced attached exhibits, including: (1) documents described as evidencing his relationship with Defendants, which include a December 1, 2017 check for $1,520.81 written by Nguyen to Eastwest Lending, Inc., an undated email (with no identified sender or recipient) that references an expected loan, and a January 26, 2018 check written by Eastwest Lending, Inc. to Nguyen for $8,938.97; (2) a 2017 document summarizing the terms of his original loan agreement with the 4 percent interest rate; (3) loan documents reflecting the terms of his new loan as well as a written exchange with the new lender questioning the higher interest rate; and (4) a copy of what is characterized in Nguyen’s declaration as a text exchange with defendant Le, seeking to rescind the loan agreement. Most of the text exchange is in Vietnamese, along with what is apparently either a handwritten English translation or a summary description of the exchange. Nguyen’s declaration does not precisely identify or authenticate any of the documents attached, some of which are only partially legible.

On September 21, 2020, the court issued a minute order identified as an “Order to Show Cause re: Dismissal.” It states “[d]efault prove up documents have been received by the Court. [¶] Counsel will be notified by minute order if issues arise.”

On September 24, the court issued a minute order rejecting the prove up package without prejudice, stating “[a]lthough the complaint seeks damages for an alleged fraud brokerage by three separate defendants, the fraud is not described with particularity, either in the complaint or the 585 package.[[2]] The court recognizes that damages sought in the prove-up package are significantly less than what was requested in the complaint, but it has nonetheless been unable to detect the plaintiff’s basis for recovery of any sums against any of the three defendants.”

Nearly four months later, on January 11, 2021, the court held a status conference at which Nguyen’s counsel appeared telephonically. As documented in the court’s minute order, during the conference Nguyen’s counsel informed the court Nguyen had been out of the country and had not yet returned a signed declaration, but that a “signed declaration can be obtained this week.” Consequently, the court continued the Status Conference to January 19, 2021.

On January 19, the date of the continued status conference, Nguyen filed a supplemental declaration with exhibits. The declaration (which is missing page two out of four) appears to contain additional detail about Nguyen’s interactions with Defendants, as well as the timing of his loan. However, Nguyen again simply listed the damage amounts he claimed; he provided no additional information about how and when he incurred the listed damages or how those damages were calculated. He did not, for example, explain how he incurred $2,648 in interest damages for April 2018, $1,595 for the months of May and June 2018, then apparently had no interest charge in July 2018, but began incurring $119 per month in interest damages thereafter. He offers no documentation to support or explain any of those claimed damages.

Nguyen’s counsel appeared telephonically at the status conference. The court’s minute order acknowledges the filing of the new default package and states the court will review the recently filed documents and concludes: “Counsel to be notified by minute order of any further requirements.”

The court dismissed the case with prejudice three days later. In its minute order, the court stated, “Plaintiff’s prove up package, which has twice previously been rejected by the court without prejudice, has still not been submitted to the court in any admissible form which would permit a judgment. The court now hereby dismisses the case with prejudice.”

DISCUSSION

1. Default Judgments

Code of Civil Procedure section 585 (section 585) sets forth the two options for obtaining a default judgment. If the plaintiff’s complaint seeks compensatory damages only, in a sum readily ascertainable from the allegations of the complaint or statement of damages, the clerk may enter the default judgment for that amount. (Code Civ. Proc., § 585, subd. (a).) A clerk’s judgment is appropriate only in cases where the determination of damages is a purely ministerial act, i.e., where there is “some definite, fixed amount of damages or where such may be ascertained by computation made by the clerk. If evidence must be taken to establish the amount due . . . , the clerk may not render judgment.” (Ford v. Superior Court (1973) 34 Cal.App.3d 338, 342.)

If the relief requested in the complaint is more complicated, i.e., either nonmonetary relief, or monetary relief in amounts which require either an accounting, additional evidence, or the exercise of judgment to ascertain (such as emotional distress damages, pain and suffering, or punitive damages), the plaintiff must request entry of judgment by the court. (Code Civ. Proc., § 585, subd. (b).)

In such cases, the plaintiff must affirmatively establish his entitlement to the specific judgment requested. “The court shall hear the evidence offered by the plaintiff, and shall render judgment in the plaintiff’s favor for that relief, not exceeding the amount stated in the complaint, . . . as appears by the evidence to be just.” (Code Civ. Proc., § 585, subd. (b).)

Section 585 suggests that when damages must be proved to a court, the court is required to “hear” the relevant evidence. However, as the California Supreme Court has observed, use of the words “hear” and “hearing” in a statute does not necessarily require an oral presentation before a judge. (Lewis v. Superior Court (1999) 19 Cal.4th 1232, 1247–1248.) It can refer to “‘the consideration and determination of a cause by the court or by a judge, as distinguished from a trial of a cause, which is a term more properly predicated of its determination by a jury.’” (Id. at p. 1248.)

In this case, subdivision (d) of section 585 suggests that a hearing with live testimony is the presumptive procedure for proving damages since that section gives the court “discretion” to depart from such a procedure by permitting instead “the use of affidavits, in lieu of personal testimony, as to all or any part of the evidence or proof required or permitted to be offered, received, or heard in those cases.” Section 585, subdivision (d), then states that when affidavits are used, “[t]he facts stated in the affidavit or affidavits shall be within the personal knowledge of the affiant and shall be set forth with particularity, and each affidavit shall show affirmatively that the affiant, if sworn as a witness, can testify competently thereto.” (Code Civ. Proc., § 585, subd. (d).)

This language suggests that, if the court concludes the affidavits or other written evidence it allowed to be submitted in lieu of in-person testimony are insufficient to prove the plaintiff’s damages, a reversion to live testimony may be required before the case is dismissed.

2. Sufficiency of the Allegations

In its minute order rejecting Nguyen’s initial default prove-up, the court stated “[a]lthough the complaint seeks damages for an alleged fraud brokerage by three separate defendants, the fraud is not described with particularity, either in the complaint or the 585 package.” The court indicated it was “unable to detect the plaintiff’s basis for recovery of any sums against any of the three defendants.”

It is not clear what the court meant by this, but the order suggests the court was unconvinced the allegations of the complaint were insufficient to state a cause of action. We review that issue de novo. (Neilson v. City of California City (2005) 133 Cal.App.4th 1296, 1305 [determining whether a pleading alleges facts sufficient to state a cause of action is a question of law].)

We agree that a default judgment cannot stand unless the complaint states a proper cause of action. (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 282; Bristol Convalescent Hosp. v. Stone (1968) 258 Cal.App.2d. 848, 859 [On appeal, ‘“[a]n objection that the complaint failed to state facts sufficient to constitute a cause of action may be considered”’].) A cause of action for fraud, which is what Nguyen labeled his, must be pleaded with specificity. As explained in Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, “‘[t]his particularity requirement necessitates pleading facts which “show how, when, where, to whom, and by what means the representations were tendered.’””

In evaluating the sufficiency of a pleading, we disregard the labels placed upon it by the plaintiff and consider whether it states a cause of action under any theory. (Foster v. Sexton (2021) 61 Cal.App.5th 998, 1020 [“We, like the trial court, are required to look past the pleading’s label and examine its substance”].) In this case, the facts alleged by Nguyen can also be construed as stating a cause of action for breach of contract—an interpretation which is supported by the fact he eschewed any claim for punitive damages in his prove-up.

And when viewed as a claim for breach of contract, Nguyen’s pleading is subject to the more forgiving rule that “‘“‘a plaintiff is required only to set forth the essential facts of his case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action.’”’” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) Nguyen’s pleading meets that test.

We do not share the court’s inability to “detect the plaintiff’s basis for recovery of any sums against any of the three defendants.” Nguyen pleads that Defendants “and each of them,” committed the same wrong: i.e., they “specifically represented and agreed that they would obtain a more favorable loan.” And that Defendants “thereafter obtained a loan on Plaintiff’s property at an interest rate of 9.990%, higher than Plaintiff’s existing rate[, and they] concealed this wrongful conduct from Plaintiff.” Those allegations create a basis for Nguyen to recover from Defendants, jointly and severally, the added expense of the unauthorized loan obtained in violation of their promise.

We conclude Nguyen’s pleading is sufficient to support a default judgment in his favor on a breach of contract theory.

3. Sufficiency of the Evidence

The sufficiency of Nguyen’s evidence to prove damages does not fare as well.

The plaintiff in a default proceeding need not provide substantial evidence to prove the factual allegations of the complaint because “‘[t]he judgment by default is said to “confess” the material facts alleged by the plaintiff, i.e., the defendant’s failure to answer has the same effect as an express admission of the matters well pleaded in the complaint.’” (Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 823; see Bristol Convalescent Hosp. v. Stone, supra, 258 Cal.App.2d at p. 859 [“The default of the defendant in an ordinary action of this character admits, so far as such defaulting defendant is concerned, the absolute verity of all the allegations of the complaint giving rise to liability”].)

Nonetheless, “[p]laintiffs in a default judgment proceeding must prove they are entitled to the damages claimed.” (Barragan v. Banco BCH (1986) 188 Cal.App.3d 283, 302; see Ostling v. Loring (1994) 27 Cal.App.4th 1731, 1745-1746 [insufficiency of damage evidence is grounds for appeal from a default judgment].)

In this case, Nguyen did not provide in his prove‑up package sufficient evidence of the damages he suffered as a consequence of being saddled with a loan he did not authorize. He simply lists a series of sums, identified in the most cursory way without providing context, explanation, or detail. More explanation is needed. The court needs an evidentiary basis to determine that Nguyen’s claimed damages were caused by Defendants’ breach of contract.

The evidence submitted in a written default prove-up is an alternative to live testimony given during a court hearing; it should provide the court with a similar level of detail. A plaintiff must prove his or her entitlement to the damages claimed. If Nguyen wishes to rely upon documents, he must identify and authenticate those documents with sworn testimony. Similarly, if he wishes to rely on the content of messages written in a foreign language, he needs to provide a translation, in admissible form, of that content.

4. Remand

We agree that Nguyen’s default prove-up is insufficient to support the judgment he seeks, but he has not yet received a meaningful opportunity to supplement his evidence of damages. We remand the case with directions to afford Nguyen that opportunity.

DISPOSITION

The judgment is reversed. The case is remanded to the trial court with directions to allow Nguyen to resubmit his prove up package with particular attention paid to providing evidence supporting the damages claimed. If the court is not satisfied with that written submission, it shall either detail in writing what information is lacking and give Nguyen an opportunity to cure in writing the problems identified or schedule a prove-up hearing at which Nguyen can offer live testimony and respond to any additional questions the court may have. Nguyen shall bear his own costs on appeal.

GOETHALS, J.

WE CONCUR:

MOORE, ACTING P. J.

ZELON, J.**

*Retired Justice of the Court of Appeal, Second Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

[1] Nguyen’s declaration describes the final damage amount on the list—$1,520—as “Lan Le stole my check for,” rather than “[c]heck written to Lan Le by Plaintiff,” as stated in his application.

[2] Code of Civil Procedure section 585 governs the procedure for obtaining a default judgment.