Siry Investment, L.People v. Farkhondehpour ( 2022 )

IN THE SUPREME COURT OF
CALIFORNIA
SIRY INVESTMENT, L.P.,
Plaintiff and Appellant,
v.
SAEED FARKHONDEHPOUR et al.,
Defendants and Appellants.
S262081
Second Appellate District, Division Two
B277750, B279009 and B285904
Los Angeles County Superior Court
BC372362
July 21, 2022
Chief Justice Cantil-Sakauye authored the opinion of the Court,
in which Justices Corrigan, Liu, Kruger, Groban, Jenkins, and
Guerrero concurred.
Justice Groban filed a concurring opinion, in which Justice
Kruger concurred.
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
S262081
Opinion of the Court by Cantil-Sakauye, C. J.
We granted review to address apparent conflicts in the
Courts of Appeal concerning (1) whether a party in default has
standing to file a motion for a “new trial” asserting legal error
relating to calculation of damages and (2) whether a trial court
may award treble damages and attorney’s fees under Penal
Code section 496, subdivision (c)1 in a case involving, not
trafficking of stolen goods, but instead, fraudulent diversion of
a partnership’s cash distributions. The Court of Appeal below
answered “yes,” and “no,” respectively.
We answer yes to both questions — and hence affirm the
appellate court’s judgment in the first respect, and reverse it in
the second. As we will explain, the standing conclusion is
supported by the statutory scheme as construed by well-
reasoned prior appellate decisions and considerations of judicial
economy. Likewise, the second conclusion — that treble
damages and attorney’s fees are available under section 496(c)
when, as here, property “has been obtained in any manner
constituting theft” — is compelled by the statute’s unambiguous
words and our obligation to honor them. If, as the Court of
Appeal below determined, such remedies are problematic as a
1
Hereinafter section 496(c). Future undesignated
statutory citations are to the Penal Code unless otherwise
indicated.
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
matter of policy, the Legislature can be expected to amend the
statute accordingly.
I. FACTS AND PROCEDURE
We set forth the facts and procedural background, as
recited in the Court of Appeal’s decision below (Siry v.
Farkhondehpour (2020) 45 Cal.App.5th 1098, 1109–1113 (Siry)),
with minor adjustments.
In 1998, Moe Siry, Saeed Farkhondehpour
(Farkhondehpour), and Morad Neman (Neman) formed the “241
E. 5th Street Partnership” to renovate and lease space in a
mixed-use building in downtown Los Angeles. The partnership
agreement named one general partner — 416 South Wall Street,
Inc. (of which Farkhondehpour was president) — and four
limited partners — Siry Investment, L.P. (hereinafter plaintiff),
the 1993 Farkhondehpour Family Trust (of which
Farkhondehpour was trustee), the Neman Family Irrevocable
Trust (of which Neman was trustee), and the Yedidia
Investment Defined Benefit Plan Trust (of which Neman was
also trustee). The agreement divided the partnership’s cash
distributions as follows: Plaintiff was to receive 39.60 percent;
the Farkhondehpour Family Trust, 29.70 percent; the Neman
Family Irrevocable Trust, 19.80 percent; and the Yedidia
Defined Benefit Plan Trust, 9.90 percent. A separate entity,
Investment Consultants, LLC (hereinafter Investment
Consultants), was responsible for acting as property manager,
making the required cash distributions, and overseeing the
renovations.
In 2003, Farkhondehpour, 416 South Wall Street, and
Neman (hereinafter defendants) created an entity named DTLA
and required the building’s tenants to pay their rent to DTLA.
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Defendants then began to improperly divert rental income away
from the limited partnership and into DTLA. Farkhondehpour
and Neman also commenced charging personal and other non-
partnership expenses to the partnership. The net effect of these
actions was to direct Investment Consultants to underpay
plaintiff its cash distributions. Farkhondehpour and Neman
ensured that plaintiff remained unaware of the underpayments
by misrepresenting to plaintiff the building’s rental income and
the partnership’s expenses, effectively lying to plaintiff about
what its cash distributions should have been.
A. Plaintiff’s Lawsuit, First Trial, and Reversal
In June 2007, plaintiff sued defendants and the entities
over which they were trustees for underpaying plaintiff and
improperly diverting the partnership’s rental income to their
own coffers.2
The matter proceeded to a jury trial in October 2009. At
that time, plaintiff’s operative second amended complaint
sought (1) dissolution and winding up of the limited partnership;
(2) an accounting; (3) damages for breach of the agreement; and
(4) damages for breach of fiduciary duty. The jury found for
plaintiff, awarding actual damages of $242,975 and punitive
2
As the Court of Appeal below mentioned, “this was the
second lawsuit arising out of the partnership. In 2003,
Farkhondehpour and Neman sued [plaintiff] for breach of a
different agreement” — and plaintiff “cross-claimed for
underpayment of cash distributions from the partnership. After
an arbitrator rejected Farkhondehpour’s and Neman’s claims,
[plaintiff] settled its remaining cross-claims in 2007, with the
requirement that Farkhondehpour and Neman provide an
accounting (and, if warranted, a redistribution) of the
partnership’s profits.” (Siry, supra, 45 Cal.App.5th at p. 1110,
fn. 2.)
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
damages of $1.1 million against Farkhondehpour and $2 million
against Neman. The trial court denied a subsequent motion for
a new trial, but reduced the punitive damages awards to
$728,925 against each Farkhondehpour and Neman.
In late 2012, the Court of Appeal reversed the judgment
because the special verdict form submitted to the jury did not
require the jury to specify whether Farkhondehpour and Neman
were liable to plaintiff individually or as trustees of the various
trusts. (Siry Investment, L.P. v. Farkhondehpour (Dec. 12, 2012,
B223100, B234655) [nonpub. opn.].) The court explained that
this defect rendered the verdict “hopelessly ambiguous” because
“who is liable [was] key” — and hence remanded the matter for
retrial. (Ibid.)
B. Issuance of Terminating Sanctions on Remand
On remand, plaintiff propounded two rounds of discovery
on defendants — in late 2013, and again in early 2014.
Defendants failed to adequately respond to the discovery or to
the trial court’s subsequent orders directing them to do so
without objection.
In 2015, plaintiff served defendants with notices that it
was seeking $4 million in punitive damages against each of
them. Plaintiff subsequently moved for terminating sanctions
based on defendants’ steadfast refusal to respond to plaintiff’s
discovery requests or to obey the trial court’s multiple orders
compelling responses. At that time, plaintiff’s operative fifth
amended complaint sought (1) compensatory damages for
breach of the partnership agreement, breach of an oral contract,
breach of fiduciary duty, aiding and abetting breach of fiduciary
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
duty, and fraud;3 (2) punitive damages; (3) treble damages
pursuant to section 496(c); and (4) attorney’s fees under that
same statute. Plaintiff’s demands for treble damages and
attorney’s fees were new — those remedies had not been sought
in connection with the first trial.
Defendants opposed the motion with extensive briefing
and nearly 1,700 pages of exhibits. The court held two hearings
and eventually issued a written order striking defendants’
answers and entering their default.
C. Default Prove-up and Entry of Judgment
Plaintiff filed more than 2,000 pages of documents in
anticipation of the hearing at which it would prove its damages.
In mid-2016, the trial court issued an order finding that plaintiff
had “met its evidentiary burden as to all claims.” The court
entered default judgment against defendants, awarding
plaintiff (1) actual compensatory damages, with interest, of
$956,487; (2) treble damages of $2,869,461 pursuant to section
496(c); (3) punitive damages of $4 million (plus $1 against only
416 South Wall Street); (4) attorney’s fees totaling
$4,010,008.97; and (5) costs of $187,109.13 — for a total of
$12,023,067.10.
D. Motion for a New Trial and Ensuing Reduction
of Damages
Defendants filed a motion for “new trial” (or, more
precisely, in this setting, a new judgment hearing) premised on
several grounds. Among other things, and as pertinent now,
defendants argued that the trial court had awarded excessive
damages and erred by (1) affording treble damages under
3
Plaintiff later dismissed its breach of contract and aiding
and abetting claims.
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
section 496(c); (2) miscalculating the treble damages award;
(3) granting a constitutionally excessive amount of punitive
damages; (4) allowing plaintiff to collect both treble damages
and punitive damages, rather than requiring plaintiff to elect
between them; and (5) permitting attorney’s fees under section
496(c).
The trial court partially denied and partially granted
defendants’ motion. As a threshold matter, the court ruled that
defendants had standing to move for a new trial despite the
entry of default against them. On the merits, the court ruled
that it had properly awarded treble damages and attorney’s fees
under section 496(c), but had miscalculated the treble damages
award. Similarly, the trial court concluded that its punitive
damages award was constitutionally excessive, and that
plaintiff must choose to collect either treble damages or punitive
damages.
Plaintiff filed a notice electing to collect treble damages,
rather than punitive damages. Thereafter, the trial court
entered an amended judgment against defendants, jointly and
severally, awarding plaintiff (1) actual compensatory damages,
with interest, of $956,487; (2) another $1,912,974, reflecting
trebling pursuant to section 496(c); (3) attorney’s fees totaling
$4,010,008.97; and (4) costs of $187,109.13 — for a total of
$7,066,579.10.
E. The Court of Appeal’s Decision
Defendants appealed from the original default judgment
and from the amended judgment, challenging the trial court’s
award of treble damages and attorney’s fees under 496(c).
Plaintiff cross-appealed from the amended judgment,
challenging defendants’ standing, as parties in default, to file a
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
motion for a new trial asserting legal error relating to
calculation of damages. As noted, the appellate court below
ruled for defendants — finding they had standing, and that
section 496(c) is inapplicable in this setting. We granted review
to address apparently conflicting Court of Appeal decisions
concerning those two issues.4
II. DISCUSSION
A. Standing to Move for a New Trial To Contest
the Amount of the Default Judgment
Code of Civil Procedure section 657 provides that a “party
aggrieved” may ask the trial court to vacate a verdict (or “other
decision”) and grant “a new or further trial” for any of seven
listed “causes . . . materially affecting” the moving party’s
“substantial rights.” As pertinent here, subdivision 5 identifies
“[e]xcessive . . . damages,” subdivision 6 addresses a “verdict or
other decision [that is] against law,” and subdivision 7 specifies
“[e]rror in law, occurring at the trial and excepted to by the party
making the application.” The Court of Appeal framed the issue:
“[M]ay a ‘party’ in default move for a new trial when, by virtue
of the default, there was no trial in the first place?” (Siry, supra,
45 Cal.App.5th at p. 1129.)
As the appellate court below recognized, a party who is in
default is barred from further participation in the proceedings,
4
Thereafter the “Neman parties” (Morad Neman,
individually and as former trustee of the Neman Family
Irrevocable Trust, and the Yedidia Investments Defined Benefit
Plan) filed in this court a notice of nonappearance. The notice
recited that weeks before we granted review of the Court of
Appeal decision below, the Neman parties settled with plaintiff
and would file no further briefs in this matter, nor appear at oral
argument in this court.
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
and hence from “ ‘except[ing] to’ ” any error during the prove-up
hearing itself. (Siry, supra, 45 Cal.App.5th at p. 1129, citing
Christerson v. French (1919) 180 Cal. 523, 525; Devlin v. Kearny
Mesa AMC/Jeep/Renault (1984) 155 Cal.App.3d 381, 385
(Devlin); and Forbes v. Cameron Petroleums, Inc. (1978)
83 Cal.App.3d 257, 262.) Yet, as the Court of Appeal also
observed, a “plaintiff still bears the burden of proving its
entitlement to damages to the court.” (Siry, supra,
45 Cal.App.5th at p. 1129, italics added, citing Barragan v.
Banco BCH (1986) 188 Cal.App.3d 283, 302, and Code Civ. Proc.,
§ 585, subd. (b).) Correspondingly, the appellate court noted, in
this setting the trial court “acts as a ‘gatekeeper,’ not a rubber
stamp,” and remains obligated to ensure that a plaintiff has
established entitlement to damages under “(1) the relevant
statute, contract, or legal doctrine, and (2) the well-[pleaded]
allegations in its operative complaint.” (Siry, supra,
45 Cal.App.5th at p. 1132.)
The appellate court below also explained that entry of
default “does not entirely render a defaulting defendant persona
non grata.” (Siry, supra, 45 Cal.App.5th at p. 1129.) Even a
defaulting defendant who has no right to participate at a prove-
up hearing nevertheless may appeal the resulting default
judgment on grounds that a damages award “(1) ‘is so
disproportionate to the evidence as to suggest that the verdict
was the result of passion, prejudice or corruption’ (Uva v. Evans
(1978) 83 Cal.App.3d 356, 363), (2) ‘is so out of proportion to the
evidence that it shocks the conscience of the appellate court’
([id., at p. 364]), or (3) is ‘contrary to law’ (see Lasalle v. Vogel
(2019) 36 Cal.App.5th 127, 139 [defaulting party may appeal
refusal to set aside verdict on these grounds].” (Siry, supra,
45 Cal.App.5th at pp. 1129–1130.)
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Accordingly, the appellate court reasoned, because it is
established that “a defaulting defendant can appeal a default
judgment” on the three grounds listed above, there is “ ‘no
reason to preclude [defendants] from seeking a new trial (or,
more precisely, a new judgment hearing)’ ” on those same
grounds. (Siry, supra, 45 Cal.App.5th at p. 1130, italics added,
quoting Don v. Cruz (1982) 131 Cal.App.3d 695, 704 (Don)
[citing and applying Code Civ. Proc., § 657 subd. 6]; see also
Misic v. Segars (1995) 37 Cal.App.4th 1149, 1154 (Misic).) The
Siry court observed: “Allowing a defaulting party to bring
excessive damages based on errors in law to the trial court’s
attention in a new trial motion puts those potential errors before
the court with greater familiarity with the case, does so in a
manner likely to yield a faster result, and may thereby
altogether obviate the need for an appeal.” (Siry, supra,
45 Cal.App.5th at p. 1130; see also Don, supra, 131 Cal.App.3d
at p. 705.)
Although some of our older cases articulated a broad rule
that a defaulting defendant is out of court and may not move for
a new trial (see Howard Greer Custom Originals v. Capritti
(1950) 35 Cal.2d 886, 888–889, and cases cited), in Carney v.
Simons (1957) 49 Cal.2d 84, we declined to employ such
preclusive language.5 Thereafter, in Shroeder v. Auto Driveway
5
The Court of Appeal below observed that in Carney v.
Simons, supra, 49 Cal.2d 84, we departed “from Howard Greer’s
sweeping language when it held that a new trial motion is
appropriate in many different situations ‘except possibly in the
case of default judgments . . . where there may be the question
of the right of the moving party to make any objection to the
judgment.’ ” (Siry, supra, 45 Cal.App.5th at p. 1130, quoting
Carney, supra, 49 Cal.2d at p. 90.) The Court of Appeal below
reasoned that because defaulting defendants may appeal the
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Co. (1974) 11 Cal.3d 908, we foreshadowed the determination
reached by the appellate court below. We held that a party may
not “challenge [a] damage award on appeal[] without [first
making] a motion for a new trial” — and that to conclude
otherwise would “unnecessarily burden the appellate courts
with issues which can and should be resolved at the trial level.”
(Id., at p. 919.)
Efficiency and prudent allocation of judicial resources
counsel us to apply the same reasoning in the circumstances of
this case, and to agree with the Court of Appeal below that
defendants’ challenges to the damages awarded in the original
and amended default judgments are properly viewed as
“[e]rror[s] in law” under Code of Civil Procedure section 657,
subdivision 7. As noted, that provision addresses “[e]rror in law,
occurring at the trial and excepted to by the party making the
application.” In context, it is reasonable to view (as apparently
the Court of Appeal did) the prove-up hearing as constituting
the “trial” for purposes of this statutory provision. Although, as
the appellate court below implicitly acknowledged, defendants
did not (and, because they were in default, could not) voice, at
that prove-up hearing, any “except[ion]” (ibid.) to the trial
court’s alleged legal errors regarding damages and attorney’s
fees, for reasons of judicial economy defendants may be seen as
having the right to move for a new trial under that subdivision.
Quite simply, it would waste resources to require an appellate
court to resolve an issue that can and should be resolved at the
damages award of a default judgment in the three
circumstances delineated above, they have the ‘right . . . to make
an[] objection to the judgment’ and thus, under Carney, may also
move for a new trial in those same circumstances.” (Siry, supra,
45 Cal.App.5th at p. 1130.)
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
trial court level. (Don, supra, 131 Cal.App.3d at p. 705 [“It
would be anomalous to hold that the trial court has the power to
grant a new trial where a fairly contested trial has resulted in
an award which is excessive as a matter of law, but may not do
so where the excessive award results from an ex parte
proceeding”]; cf. In re Fosselman (1983) 33 Cal.3d 572, 582
[although Pen. Code, § 1181 (the criminal procedure counterpart
to Code Civ. Proc., § 657) does not list asserted “ineffective
assistance of [trial] counsel” as a ground for a new trial motion,
“in appropriate circumstances justice will be expedited” by
“presenting the issue of counsel’s effectiveness to the trial court
as the basis of a motion for new trial,” and the trial court had
authority to entertain a motion for new trial on such grounds].)
Plaintiff’s other challenges to this conclusion were
properly addressed and rejected in the appellate court’s opinion
below. (Siry, supra, 45 Cal.App.5th at pp. 1130–1131.) For
present purposes, we find it useful to briefly address plaintiff’s
observation that some Court of Appeal decisions, most notably
Brooks v. Nelson (1928) 95 Cal.App. 144, 147–148 and Devlin,
supra, 155 Cal.App.3d at pages 385–386, have asserted that a
defaulting defendant may not file a motion for new trial under
any circumstances. Yet both Brooks and Devlin are
distinguishable: The former never squarely addressed the new
trial motion issue; and the latter’s discussion amounts to
problematic dictum. (See Misic, supra, 37 Cal.App.4th at
p. 1154 [Devlin’s “dictum . . . ‘is unsupported by any recent
authority, and is believed to be incorrect’ ”].) Moreover, and in
any event, as the Court of Appeal below explained, those and
other such decisions are distinguishable for another,
fundamental reason: They “did not consider the rationale . . .
that there is no reason to deprive the trial court of the power to
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
consider challenges to the excessiveness or legal propriety of
damages when those very same issues can undoubtedly be
raised on appeal.” (Siry, supra, 45 Cal.App.5th at p. 1131.)
Ultimately, the Court of Appeal, applying Code of Civil
Procedure section 657, subdivision 7, determined that
defendants’ challenges to the damages awarded in the original
and amended default judgment raised, and constituted,
“[e]rror[s] in law” that were properly brought to the court’s
attention via defendants’ motion to vacate the trial court’s
decision and to grant a new trial / judgment hearing. (Siry,
supra, 45 Cal.App.5th at pp. 1131–1132.)6 We agree, and now
proceed to address the substance of the key alleged legal errors.
6
The Court of Appeal concluded that the trial court’s
“recalculation of treble damages reduced what was effectively
quadrupled damages down to treble damages; the court’s
reduction of the punitive damages award was grounded in . . .
constitutional law defining when such damages become so
excessive as a matter of law as to deny a defendant due process;
and the court’s ruling that [plaintiff] must elect between treble
and punitive damages involved construction of the law. (Cf.
Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 507
[only trial court may sit as a ‘thirteenth juror’ in evaluating the
amount of damages].)” (Siry, supra, 45 Cal.App.5th at
pp. 1131–1132.)
In a footnote appended to the above passage, the appellate
court addressed what it viewed as a misstatement made by the
trial court regarding the applicable subdivision of Code of Civil
Procedure section 657. Namely, the Court of Appeal observed
that the trial court cited that section’s subdivision 5 as the
ground for its decision to reassess damages, whereas the
appellate court concluded that the trial court’s reasoning
showed that it meant to invoke section 657, subdivision 7. (Siry,
supra, 45 Cal.App.5th at p. 1132, fn. 11.)
Like the Court of Appeal below (see Siry, supra,
45 Cal.App.5th at p. 1129, fn. 10), we decline to address the
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
B. Propriety of the Default Judgment’s Treble
Damages and Attorney’s Fees Awards
Section 496, subdivision (a) (section 496(a)) defines the
criminal offense of what is commonly referred to as receiving
stolen property. As amended in 1972 (Stats. 1972, ch. 963, § 1,
p. 1739), it provides in relevant part: “Every person who buys
or receives any property that has been stolen or that has been
obtained in any manner constituting theft or extortion, knowing
the property to be so stolen or obtained, or who conceals, sells,
withholds, or aids in concealing, selling, or withholding any
property from the owner, knowing the property to be so stolen
or obtained,” is subject to incarceration.7
Section 496(c), similar to some provisions in other
statutory schemes,8 articulates a right to special civil remedies
damages calculation issues that plaintiff has raised in its briefs,
or whether it is appropriate to reinstate the original judgment.
In this regard we note that the damages issues presented by
plaintiff substantially intersect with those that we may address
in Los Angeles Unified School Dist. v. Superior Court (2021)
64 Cal.App.5th 549, review granted September 1, 2021,
S269608.
7
The subdivision continues, in two final sentences added in
1992: “A principal in the actual theft of the property may be
convicted pursuant to this section. However, no person may be
convicted both pursuant to this section and of the theft of the
same property.” (§ 496(a), as amended by Stats. 1992, ch. 1146,
§ 1, p. 5374 [the 1992 amendment also redesignated former
subds. 1–5 to be subds. (a)–(e)].) The statute’s subdivision (b)
addresses a variation of the offense applicable to swap meet
vendors and is not relevant in this litigation.
8
As the Court of Appeal below observed (Siry, supra,
45 Cal.App.5th at p. 1137), three prominent statutes provide for
both treble damages and attorney’s fees upon a showing of a
predicate violation. (Bus. & Prof. Code, § 16750, subd. (a)
[Cartwright Act (state antitrust laws)]; Bus. & Prof. Code,
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Opinion of the Court by Cantil-Sakauye, C. J.
when a violation of section 496(a) has occurred. Subdivision (c),
as also amended in 1972, states that any person who has been
injured by a violation of section 496(a) “may bring an action for
three times the amount of actual damages, if any, sustained by
the plaintiff, costs of suit, and reasonable attorney’s fees.”
As explained below, three prior Court of Appeal decisions
have addressed section 496(c) and the issues implicated in the
present proceeding.
1. Bell v. Feibush — Finding Section 496(c) Applies
in the Context of a Loan Scam
In Bell v. Feibush (2013) 212 Cal.App.4th 1041, 1043–1044
(Bell), the defendant induced the plaintiff to loan him more than
$200,000 “based on the false pretense he owned [a specific
trademark] and he needed the money to settle a lawsuit over his
interests in” a related enterprise. But these representations
were lies, and the asserted enterprise “a scam.” (Id., at p. 1044.)
§ 17082 [Unfair Practices Act]; Civ. Code, § 52, subd. (a) [Unruh
Civil Rights Act].) Numerous other statutes do the same. (E.g.,
Pen. Code, § 593d, subd. (f)(2) [governing tampering with cable
video systems]; Welf. & Inst. Code, § 5330, subds. (a)(2) & (d)
[willful release of confidential information or records].) Still
other statutes, as the appellate court also noted, provide for
treble damages, without mentioning attorney’s fees. (E.g., Civ.
Code, § 1719, subd. (a)(2) [passing checks with insufficient
funds]; id., § 3345 [“actions brought by, on behalf of, or for the
benefit of senior citizens or disabled persons . . . to redress
unfair or deceptive acts or practices or unfair methods of
competition”]; Gov. Code, § 12651, subd. (b) [False Claims Act];
Lab. Code, § 230.8, subd. (d) [actions concerning retaliation for
engaging in “child-related activities” protected by statute].)
As observed post, footnote 10, and in part II.B.5, other
jurisdictions also have enacted statutory provisions
substantially similar to section 496(c), providing “civil theft”
remedies of treble damages and attorney’s fees.
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When the plaintiff “asked for her money back, [the defendant]
gave . . . a ‘litany of excuses’ and never repaid her.” (Ibid.)
Following the defendant’s abuse of discovery, the trial
court entered a default judgment against him for breach of
contract, fraud, and treble damages under section 496(c). On
appeal the defendant challenged the treble damages award,
observing that he had not been convicted in a criminal
proceeding of violating section 496(a). The appellate court
concluded, in a preliminary holding that is not challenged in the
present case, that a criminal conviction is not a prerequisite to
recovery of treble damages under section 496(c). (Bell, supra,
212 Cal.App.4th at pp. 1044–1047.) In the course of its
discussion, the court in Bell stated that although it found “no
ambiguity or uncertainty in section 496(c),” its construction was
also “consistent with the statutory purpose expressed in the
legislative history.” (Bell, supra, 212 Cal.App.4th at p. 1046.)
That history was aptly described in Bell as follows:
“ ‘Penal Code section 496 was amended in relevant part in
1972. Prior to the amendment, the statute did not apply to those
who sold stolen property; it applied only to those who purchased,
received, withheld or concealed it. Nor did it include the
language currently found in subdivision (c), which permits any
party injured by a violation of subdivision (a) to bring a civil
action for damages. This language was added by Statutes 1972,
chapter 963, section 1, pages 1739–1740. It was the result of
Senate Bill No. 1068 (1972 Reg. Sess.). The bill was introduced
at the request of the California Trucking Association, with the
goal of eliminating markets for stolen property, in order to
substantially reduce the incentive to hijack cargo from common
carriers. (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 1068
(1972 Reg. Sess.) as amended June 26, 1972.) Yet while an early
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
version of the bill limited the plaintiffs who may bring civil
actions to public carriers injured by the knowing purchase,
receipt, concealment, or withholding of stolen property (Sen. Bill
No. 1068 (1972 Reg. Sess.) as amended in Senate, May 30, 1972),
the bill was subsequently amended to expand the class of
potential plaintiffs to include “[a]ny person who has been
injured by” the knowing purchase, receipt, concealment or
withholding of stolen property. (Sen. Amend. to Sen. Bill
No. 1068 (1972 Reg. Sess.) June 26, 1972.) Moreover, that same
amendment included the sale of knowingly stolen property
within its prohibitions, and allowed any person injured by the
sale of knowingly stolen property to bring a civil action. In other
words, it is apparent that the statute, as enacted, broadly allows
anyone injured by the sale of knowingly stolen property to bring
a civil action against the seller, in order to reduce thefts by
eliminating the market for stolen goods.’ ” (Bell, supra,
212 Cal.App.4th at p. 1047, quoting Citizens of Humanity, LLC
v. Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, 17–18,
disapproved on another ground in Kwikset Corp. v. Superior
Court (2011) 51 Cal.4th 310, 337, fns. omitted in Bell.)
In connection with the 1972 amendment of section 496(c),
there was a national effort, led by Alan Bible, a United States
Senator from Nevada, to address the “$16 billion cost that
American businesses pay yearly for property crime thievery”
and encourage other states to follow “California[’s] . . .
approach” by adopting “treble-damage civil remed[ies].”9
9
Senator Bible Urges Governors to Push for State Laws to
Control Fencing: Asks Support for Justice Department Local-
State-Federal Law Enforcement Effort, Transport Topics
(Dec. 25, 1972), reprinted in Senate Report No. 93-276, 1st
Session, pages 44–45, (1973); see Kossen, Sen. Bible Moves in on
16
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Various states did so, employing, as in section 496(c), similarly
broad language, affording treble damages and attorney’s fees to
“the owner” or “any person” upon a showing of criminal conduct
constituting theft.10
Big Peddlers of Stolen Goods, San Francisco Examiner (May 13,
1973) page 28 (noting recent “parallel” legislation in California).
See generally An Analysis of Criminal Redistribution Systems
and Their Economic Impact on Small Business, Senate Select
Committee on Small Business, Staff Report No. 85-141, 92d
Congress, Second Session (1972) , pages 13–18 (identifying and
analyzing state statutes concerning stolen property and
fencing); Blakey & Goldsmith, Criminal Redistribution of Stolen
Property: The Need for Law Reform (1976) 74 Mich. L.Rev. 1511,
1604 & fn. 482 (noting that “[t]he concept of treble damages,”
which originated in Roman criminal law, is employed in federal
antitrust statutes — and proposing model legislation to be
enacted in each state, imposing such civil liability upon proof of
the elements of a criminal violation).
10
These statutes are, of course, not identical to ours — yet
they are, for present purposes, substantially similar. For
example, Colorado Revised Statutes section 18-4-405, as
amended in 1973 (Colo. Sess. Laws, ch. 154, § 1, p. 536),
provides, regarding “[a]ll property obtained by theft,” that “the
owner may recover . . . three times the amount of the actual
damages . . . and reasonable attorney fees.” See also, e.g.,
Connecticut General Statutes section 52-564 (“Any person who
steals any property of another, or knowingly receives and
conceals stolen property, shall pay the owner treble his
damages”)]; Florida Statutes section 772.11(1) (“Any person who
proves by clear and convincing evidence that he or she has been
injured in any fashion by reason of any violation of [criminal
statutes, including theft, and dealing in stolen property] has a
cause of action for threefold the actual damages sustained and
. . . reasonable attorney’s fees and court costs in the trial and
appellate courts”); Michigan Compiled Laws section 600.2919a
(allowing “a person damaged” to recover treble damages and
attorney’s fees for theft-related offenses concerning property);
Ohio Revised Code section 2307.61(A)(1)(b)(ii) & (A)(2) (allowing
17
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Opinion of the Court by Cantil-Sakauye, C. J.
Regarding California’s statute, the court in Bell
summarized: “This history shows the Legislature believed the
deterrent effect of criminal sanctions was not enough to reduce
thefts. The means to reduce thefts, the Legislature concluded,
was to dry up the market for stolen goods by permitting treble
damage recovery by ‘any person’ injured by the knowing
purchase, receipt, concealment, or withholding of property
stolen or obtained by theft. Requiring a criminal conviction
under section 496(a) . . . before an injured person could recover
treble damages would not advance the stated goal because civil
recovery would be limited to those instances in which law
enforcement authority decided to initiate and complete
prosecutions.” (Bell, supra, 212 Cal.App.4th at p. 1047.)
The appellate court in Bell next addressed whether section
496(a)’s broad phrase, “any manner constituting theft,” includes
theft of funds by false pretense. In holding that it does, the court
examined the defendant’s policy argument that “awarding [the
plaintiff] treble damages under section 496(c) would ‘open[] the
door to any collecting creditor to claim that a breach of contract
action constitutes a fraud, and in turn constitutes a theft, under
[section 496(a)].’ ” (Bell, supra, 212 Cal.App.4th at p. 1047.) The
court responded: “Section 496(a) extends to property ‘that has
“a property owner” to recover treble damages and attorney’s fees
upon proof of a criminal act of theft); South Carolina Code
section 16-13-181 (allowing “[a]ny person” who has been injured
or suffered damages because of a violation of the statutory crime
of receiving or possessing stolen goods or other property to be
awarded treble damages and attorney’s fees); Utah Code section
76-6-412(2) (“Any individual who violates [the statute
criminalizing receiving stolen property] is civilly liable for three
times the amount of actual damages, if any sustained by the
plaintiff, and for costs of suit and reasonable attorney fees”).
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
been obtained in any manner constituting theft.’ Penal Code
section 484 describes acts constituting theft. The first sentence
of section 484, subdivision (a) states: ‘Every person who shall
feloniously steal, take, carry, lead, or drive away the personal
property of another, or who shall fraudulently appropriate
property which has been entrusted to him or her, or who shall
knowingly and designedly, by any false or fraudulent
representation or pretense, defraud any other person of money,
labor or real or personal property, or who causes or procures
others to report falsely of his or her wealth or mercantile
character and by thus imposing upon any person, obtains credit
and thereby fraudulently gets or obtains possession of money, or
property or obtains the labor or service of another, is guilty of
theft.’ (Italics added.) Section 484 thus defines theft to include
theft by false pretense. (People v. Gomez (2008) 43 Cal.4th 249,
255, fn. 4.)” (Bell, supra, 212 Cal.App.4th at p. 1048.)11
11
The court added: “Penal Code section 532 also defines
criminal fraud ‘in terms nearly identical to [section]
484[,subdivision] (a)’ and ‘provides that these acts are
punishable “in the same manner and to the same extent” as
larceny.’ (2 Witkin & Epstein, Cal. Criminal Law (4th ed. 2012)
Crimes Against Property, § 48, p. 76.)” (Bell, supra,
212 Cal.App.4th at p. 1048.)
Relatedly, we have observed that “embezzlement,” which
is defined as “the fraudulent appropriation of property by a
person to whom it is intrusted” (§ 503), “is a recognized form of
theft within the meaning of section 496.” (People v. Kunkin
(1973) 9 Cal.3d 245, 250, fn. 7; see also, id., at p. 250 [§ 496’s
“broad language,” targeting property “ ‘obtained in any manner
constituting theft,’ ” is “intended to include property which has
been obtained not only by theft by larceny (i.e., stealing) but also
by such other forms of theft as embezzlement”].) Moreover, as
we have explained, the term “theft” in section 496 includes forms
of theft listed “in the general theft statute (Pen. Code, § 484),
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Opinion of the Court by Cantil-Sakauye, C. J.
The court in Bell continued, observing that “[i]n 1927, the
Legislature consolidated the separate common law crimes of
larceny, embezzlement, and theft by false pretense in Penal
Code section 484, subdivision (a). [Citation.] The forerunner of
Penal Code section 496, Penal Code former section 496bb, was
added by statute in 1935, after this consolidation. . . . Thus,
when the Legislature enacted section 496(c), it presumably
understood that the phrase ‘a violation of subdivision (a)’ would
include theft by false pretense.” (Bell, supra, 212 Cal.App.4th at
p. 1048, italics added, fn. omitted.) The court in Bell concluded
that on the facts presented, “[t]he evidence established that [the
defendant] violated section 496(a) not only by receiving property
from [the plaintiff] by false pretense, but also by withholding
that property when she asked for it back.” (Id., at p. 1049.)12
i.e., theft committed by means of larceny, embezzlement, or false
pretenses.” (People v. Allen (1999) 21 Cal.4th 846, 863 (Allen);
see also People v. Vidana (2016) 1 Cal.5th 632, 648
[embezzlement is proscribed in both § 503 and in § 484, subd.
(a)].) Section 496(a) expressly targets property “obtained in any
manner constituting theft” (italics added) — and there is no
reason to conclude that this broad phrase should be viewed as
excluding theft by embezzlement. Consistently with this view,
we observe, the federal district court decisions in Allure Labs.,
Inc. v. Markushevska (Bankr. N.D.Cal. 2019) 606 B.R. 51, 55
(Allure), and Otte v. Naviscent (Bankr. N.D.Cal. 2021) 624 B.R.
883, 910–913 (Otte), both applied the statute in the context of
underlying embezzlement. Finally, we observe that whereas
section 514 articulates the criminal punishment for
embezzlement, section 496(c) provides the civil remedies for the
same.
12
In other words, the court in Bell observed, the defendant
in that case violated section 496(a) in alternative ways.
Unpublished federal decisions have interpreted this aspect of
Bell as requiring a showing of “additional conduct” — for
example, conduct such as taking steps to conceal or withhold
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Finally — and again, relevant to the issues in the current
litigation — the Court of Appeal in Bell addressed the
defendant’s contention that permitting recovery of treble
damages under section 496(c) would be “contrary to public policy
and permit[] litigants to circumvent limitations on remedies.”
(Bell, supra, 212 Cal.App.4th at p. 1049.) The court rejected the
argument, responding: “Our decision to affirm the default
judgment is based on straightforward statutory interpretation.
Section 496(a) extends liability to ‘[e]very person who buys or
receives any property that has been stolen or that has been
obtained in any manner constituting theft.’ (Italics added.)
Penal Code section 484, subdivision (a) describes the acts
constituting theft to include theft by false pretense, which is the
embezzled funds. (Grouse River Outfitters Ltd. v. NetSuite, Inc.
(N.D.Cal., Sept. 12, 2016, No. 16-cv-02954-LB) 2016 WL
5930273, pp. *13–*15 (Grouse River) [theft by false pretense];
Agape Family Worship Ctr., Inc. v. Gridiron (C.D.Cal., May 30,
2018, No. 5:15-cv-1465-ODW-SP) 2018 WL 2540274, pp. *4–*5
[breach of fiduciary duty, fraud, and conversion].) At oral
argument both parties appeared to agree with the view
expressed in these cases. We need not, and do not, decide
whether this reading of the statute is correct. We observe,
however, that subsequent federal decisions have criticized, and
refused to follow, Grouse River and Agape. (See Allure, supra,
606 B.R. 51, 63 [observing that Grouse River and Agape
misconstrued the decision in Bell by reading the statute to
impose “as a prerequisite to recovery,” a novel “ ‘additional
conduct’ requirement” not found in the statutory language];
accord, Otte, supra, 624 B.R. 883, 910 [implicitly agreeing with
Allure that § 496 imposes no such requirement].) Ultimately the
United States Court of Appeals for the Ninth Circuit, on review
of the district court’s decision in Grouse River, held the district
court erred by dismissing the plaintiff’s section 496(c) claim, and
by requiring a showing of “ ‘additional conduct’ ” related to that
claim. (Grouse River Outfitters, Ltd. v. Oracle Corp. (9th Cir.
2021) 848 Fed. Appx. 238, 243, fn. 4.)
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Opinion of the Court by Cantil-Sakauye, C. J.
consensual but fraudulent acquisition of property from its
owner. [Citation.] [The defendant] was found liable for fraud,
i.e., for the fraudulent acquisition of property (money) from its
owner ([the plaintiff]). ‘Anything that could be the subject of a
theft can also be property under section 496.’ ”) (Bell, supra,
212 Cal.App.4th at p. 1049.)
The appellate court acknowledged the defendant’s
“concerns about the potential consequences of our interpretation
of section 496(c)” but stressed: “[I]t is the task of the Legislature
to address those policy concerns.” (Bell, supra, 212 Cal.App.4th
at p. 1049.)
2. Lacagnina v. Comprehend Systems, Inc. —
Finding Section 496(c) Inapplicable Concerning
Claimed Theft of Labor in an Employment
Compensation Dispute
The next Court of Appeal decision concerning section
496(c), Lacagnina v. Comprehend Systems, Inc. (2018)
25 Cal.App.5th 955 (Lacagnina), arose in the employment
context. That case concerned a terminated employee who
successfully sued his former employer for, among other things,
breach of contract and breach of the covenant of good faith and
fair dealing, seeking lost salary compensation, commissions,
and other disputed compensation. The employee also claimed
treble damages and attorney’s fees under section 496(c),
asserting “theft” of his “labor.” (Lacagnina, at p. 970.) After a
jury returned a verdict for the employee, the trial court granted
a nonsuit concerning the statutory claim. Upon the employee’s
appeal, the reviewing court affirmed, finding section 496(c)
inapplicable on the facts presented. The court reasoned that
although section 496(a) defines personal property to include
“money,” it makes no reference to “labor,” which “is not ‘property’
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
as that term is used in the Penal Code” (Lacagnina, at p. 969);13
and merely because “labor may be the object of a ‘theft’ does not
transform it into ‘stolen property.’ ” (Lacagnina, supra,
25 Cal.App.5th at p. 969.)14
13
As the appellate court wrote: “ ‘[T]he Penal Code defines
property to include “both real and personal property” and
further defines personal property to include “money, goods,
chattels, things in action, and evidences of debt.” (§ 7, subds.
(10), (12).)’ (People v. Gonzales (2017) 2 Cal.5th 858. 871.) The
statutory definition makes no reference to labor or other
services. Nor is there any indication of any intent to use the
term ‘property’ in section 496 more broadly than the definition
of the same term already provided by the Penal Code. ‘ “ ‘[W]hen
the Legislature uses a term of art, a court construing that use
must assume that the Legislature was aware of the
ramifications of its choice of language.’ ” [Citation.]’ ”
(Lacagnina, supra, 25 Cal.App.5th at p. 969, italics added.)
14
In the latter respect the Court of Appeal rejected the
employee’s reliance on the general theft statute, section 484
(quoted ante, pt. II.B.1.) to support a broad construction of the
term “property.” The appellate court reasoned that although
that statute provides a broad definition of theft that includes
taking “ ‘by any false or fraudulent representation or pretense,
. . . money, labor or real or personal property . . .’ (§ 484, subd.
(a), italics added)[,] [t]he italicized language appears in a clause
codifying the common law crime of theft by false pretense, which
includes defrauding another person of labor by false or
fraudulent representation.” (Lacagnina, supra, 25 Cal.App.5th
at p. 969.) But, the court reasoned, the section “defines theft,
not property” — and the fact “that labor may be the object of a
‘theft’ does not transform it into ‘stolen property.’ ” (Ibid.)
“Indeed,” the court continued, “we find it significant that while
section 484 refers to labor, section 496 does not. The difference
in language between the two statutes, which are found in the
same statutory scheme, is further evidence that the Legislature
did not intend ‘property’ as that term is used in section 496 to
include ‘labor’; otherwise, it would not have used different terms
in the two statutes.” (Ibid.) The court concluded: “The
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SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Addressing and distinguishing Bell, supra,
212 Cal.App.4th 1041, the Lacagnina court noted that the
employee failed to “cite any reported case, nor have we been able
to identify one, in which a court has deemed labor or services a
form of ‘property’ that can be stolen, as distinct from personal
property, whether tangible or intangible.” (Lacagnina, supra,
25 Cal.App.5th at p. 970.)
After finding section 496(c) inapplicable on the facts
presented, the appellate court proceeded to address, in dictum,
alternative bases for its holding. (Lacagnina, supra,
25 Cal.App.5th at pp. 970–971.) First, citing an unpublished
federal district court decision, it asserted that even assuming
“labor” qualifies as property under the statute, the statute
would require that any such labor have already been “ ‘stolen’ at
the time [the defendant] allegedly defrauded him out of the
disputed commission.” (Id., at p. 971, citing Grouse River, supra,
2016 WL 5930273, at p. *14.) That assertion appears to be
erroneous.15 Second, the court proceeded, in dictum within
Legislature showed in section 484 that it knows how to refer to
‘labor’ as an object of ‘theft’ when it wishes to do so, but it did
not use that term in section 496. It follows that labor does not
constitute ‘stolen property’ within the meaning of that statute.”
(Lacagnina, supra, 25 Cal.App.5th at p. 970.)
The present case does not pose whether wage theft might
give rise to a claim for treble damages under section 496(c). We
express no view concerning whether Lacagnina correctly
distinguished between the theft of labor or services and the theft
of other intangible property.
15
As observed ante, footnote 7, the final sentences of section
496(a) provide: “A principal in the actual theft of the property
may be convicted pursuant to this section. However, no person
may be convicted both pursuant to this section and of the theft
of the same property.” This language, which was added in 1992,
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Opinion of the Court by Cantil-Sakauye, C. J.
dictum, to address policy issues that had been alluded to five
years earlier by the court in Bell, supra, 212 Cal.App.4th 1041.
Presaging the view elaborated by the Court of Appeal decision
now under review, the opinion in Lacagnina asserted that
“significant adverse consequences would likely follow . . . [i]f
every plaintiff in an employment or contract dispute could also
seek treble damages and attorney’s fees on the ground that the
defendant received ‘stolen property.’ ” (Lacagnina, supra,
25 Cal.App.5th at p. 972.) The court expressed concern that
was designed to address difficulties of prosecution in the
circumstance in which a thief steals property and then keeps it
until after the statute of limitations has run. (See Allen, supra,21 Cal.4th 846, 858, citing and quoting 4 Stats. 1992, ch. 1146,
§ 2, p. 5375.) In Allen we characterized the resulting statutory
language as “authoriz[ing] a conviction for receiving stolen
property even though the defendant also stole the property,
provided he has not actually been convicted of the theft.” (Allen,
at p. 857.) So viewed, the statutory language is inconsistent
with the assertion in Lacagnina’s dictum that section 496(a)
contemplates that property must already have been stolen when
it comes into the defendant’s hands.
Neither, we observe, does more recent federal authority
support Lacagnina’s dictum. Granted, when Lacagnina was
filed, the cited federal district court’s unpublished decision
construed the statute as requiring a showing that when the
property in question comes into the defendant’s hands, it must
already have the character of having been stolen. But, as
alluded to earlier, on review of the district court’s decision in
Grouse River, the United States Court of Appeals for the Ninth
Circuit appears to have disapproved such a reading of the
statute. (Grouse River Outfitters, Ltd. v. Oracle Corp., supra,848 Fed. Appx. 238, 242–243.) Nor have other federal district
courts, in well-reasoned decisions, mentioned any such asserted
requirement in the course of applying section 496 and
permitting treble damages and attorney’s fees in analogous
“theft of funds” circumstances. (See Allure, supra, 606 B.R. 51,
63–66; Otte, supra, 624 B.R. 883, 911–913.)
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Opinion of the Court by Cantil-Sakauye, C. J.
“such claims would become the rule rather than the exception,
parties would more frequently assert claims for ‘theft’ in run-of-
the-mill commercial disputes, and cases would be harder to
settle” — and the court articulated doubt that “the Legislature
contemplated, much less intended, those consequences when it
enacted section 496[(c)].” (Ibid.)
3. Switzer v. Wood — Finding Section 496(c) Applies
to Claims of Fraud and Breach of Contract in the
Joint Venture / Limited Liability Corporation
Context
In Switzer v. Wood (2019) 35 Cal.App.5th 116 (Switzer),
the third and most recent Court of Appeal decision prior to the
one under review, the appellate court found section 496(c)
applicable in the setting we face in the present litigation — an
equity income sharing dispute between joint venture / limited
liability business partners. As in the opinions rendered in Bell
and Lacagnina, the Switzer court also acknowledged and
addressed the policy implications of its statutory interpretation.
In Switzer, the parties were business partners who sold
medical devices. The plaintiff sued his partner and a related
entity alleging, among other things, breach of contract, fraud,
and breach of fiduciary duty concerning distribution of equity
income funds. The plaintiff also sought the civil remedies
afforded by section 496(c), treble damages, and attorney’s fees.
A jury found by special verdict for the plaintiff and awarded
money damages, but the trial court declined to award additional
remedies under the statute. Consistent with the closing dictum
in Lacagnina, supra, 25 Cal.App.5th at page 972, the trial court
reasoned that even though the plaintiff appeared entitled to
such remedies under the words of section 496(c), “the
Legislature could not have intended to apply the treble damage
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Opinion of the Court by Cantil-Sakauye, C. J.
remedy to wrongful conduct committed in the context of a joint
venture or preexisting business relationship where ordinary
fraud and breach of contract remedies would be available.”
(Switzer, supra, 35 Cal.App.5th at pp. 119–120 [so
characterizing the trial court’s ruling]; see also id., at p. 124
[quoting the trial court].)
The Court of Appeal reversed. It observed, as had the Bell
court, that the language of section 496(c) “is clear and
unambiguous.” (Switzer, supra, 35 Cal.App.5th at p. 126.) “All
that is required for civil liability to attach under section 496(c),
including entitlement to treble damages, is that a ‘violation’ of
. . . section 496[(a)] is found to have occurred. [Citation.]
A violation may be found to have occurred if the person engaged
in the conduct described in the statute.” (Ibid.) The Switzer
court noted that although section 496(a) “covers a spectrum of
impermissible activity relating to stolen property, the elements
required to show a violation of [that section] are simply that
(i) property was stolen or obtained in a manner constituting
theft, (ii) the defendant knew the property was so stolen or
obtained, and (iii) the defendant received or had possession of
the stolen property.” (Switzer, supra, at p. 126.)
The Switzer court also observed that “[a] violation of
section 496(a) may, by its own terms, relate to property that has
been ‘stolen’ or ‘that has been obtained in any manner
constituting theft . . . .” (Switzer, supra, 35 Cal.App.5th at
p. 126.) Like the opinion in Bell, supra, 212 Cal.App.4th at page
1048, the appellate court looked to the general theft statute,
section 484, subdivision (a) (quoted ante, pt. II.B.1.) for the
definition of what constitutes a theft. The Switzer court
highlighted (1) Bell’s “ ‘straightforward [conclusion of] statutory
interpretation’ ” that the “theft [of funds] by false pretenses”
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Opinion of the Court by Cantil-Sakauye, C. J.
proved in that case established a violation of section 496(a) and
triggered treble damages under section 496(c) (Switzer, supra,
35 Cal.App.5th at p. 127), and (2) Bell’s admonition that “ ‘policy
concerns’ ” about inappropriate circumvention of traditional
limits on civil remedies constituted an issue that “would have to
be addressed to the Legislature.” (Switzer, supra, at p. 127.)
The appellate court in Switzer determined that the same
result was appropriate on the facts and claims before it. The
court reasoned: “[I]t is undisputed that the jury specifically and
unequivocally found all the factual elements necessary to
establish that [the defendants] had engaged in conduct
constituting a violation of section 496(a).” (Switzer, supra,
35 Cal.App.5th at p. 127.) Specifically, the court determined,
the jury found “that (i) [the defendants] obtained by theft
property [funds] belonging to [the plaintiff], and concealed or
withheld such property and/or aided in concealing or
withholding such property from [the plaintiff]; (ii) [the
defendants] knew the property was obtained by theft at the time
they received, withheld, concealed, or aided in concealing or
withholding the property from [the plaintiff]; and (iii) [the
defendants’] violation of section 496(a) caused [the plaintiff] to
suffer actual damage, loss, or harm.” (Switzer, at pp. 127–128.)
The court concluded: “These explicit findings of fact by the jury,
which [were not] challenged on appeal, clearly establish
violation(s) of section 496(a).” (Id., at p. 128.) Accordingly,
“under the plain and literal terms of section 496(c), [the
plaintiff] was entitled to an award of three times his actual
damages . . . .” (Ibid.)
The court in Switzer next addressed the defendants’
argument “that section 496(c) should not be applied in a literal
manner because the Legislature could not have intended to
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Opinion of the Court by Cantil-Sakauye, C. J.
extend the statutory treble damage remedy into the context of
an ordinary business dispute where traditional remedies for
breach of contract, fraud and conversion were available.”
(Switzer, supra, 35 Cal.App.5th at p. 128.) The defendants
asserted that “despite the clear and unambiguous wording of the
statutory provision,” a “narrower construction” — such as one
confining treble damages “to theft crimes involving common
carriers’ cargo” — “should be adopted to avoid absurdity.”
(Ibid.) The Court of Appeal disagreed, explaining that pursuant
to fundamental principles of statutory interpretation, under
which a court “ ‘ “look[s] to the intent of the Legislature as
expressed by the actual words of the statute” [citation], “giving
them a plain and commonsense meaning” ’ ” (ibid.), the statute’s
“ ‘ “clear and unambiguous” ’ ” language left “ ‘ “no need for
construction,” ’ ” and the court would “ ‘ “not speculate that the
Legislature meant something other than what it said” ’ ” or
“ ‘ “rewrite a statute to posit an unexpressed intent.” ’ ” (Ibid.,
italics added.)
The Court of Appeal acknowledged a narrow exception to
these standard principles of statutory construction exists when
it can be determined that honoring statutory language “would
frustrate the manifest purpose of the legislation as a whole or
otherwise lead to absurd results.” (Switzer, supra,
35 Cal.App.5th at p. 129, citing California School Employees
Assn. v. Governing Board (1994) 8 Cal.4th 333, 340.) And yet,
the court observed, this limited exception “requires much more
than showing that troubling consequences may potentially
result if the statute’s plain meaning were followed or that a
different approach would have been wiser or better. (In re D.B.
[(2014)] 58 Cal.4th [941,] 948 . . . .) Rather, ‘[t]o justify
departing from a literal reading of a clearly worded statute, the
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Opinion of the Court by Cantil-Sakauye, C. J.
results produced must be so unreasonable the Legislature could
not have intended them.’ (In re D.B., supra, 58 Cal.4th at
p. 948.) Moreover, our courts have wisely cautioned that the
absurdity exception to the plain meaning rule ‘should be used
most sparingly by the judiciary and only in extreme cases else
we violate the separation of powers principle of government.
[Citation.] We do not sit as a “super-legislature.” [Citation.]’ ”
(Switzer, supra, 35 Cal.App.5th at p. 129.)
The appellate court concluded that its understanding of
section 496(c)’s words was not “absurd at all, much less so
absurd in its results that we would be permitted to disregard its
literal wording.” (Switzer, supra, 35 Cal.App.5th at p. 129.)
“The wording of the statute makes no exception for cases
involving preexisting business relationships, nor does it limit
applicability to violations involving common carriers or truck
cargo, and we are not at liberty to insert such omitted terms into
the statute.” (Id., at pp. 129–130.)
The court in Switzer surmised that in light of the language
chosen, the Legislature “apparently believed that any violation
of section 496(a),” if proved, “would warrant the availability of
treble damages.” (Switzer, supra, 35 Cal.App.5th at p. 130.)
The court explained: “The creation of an enhanced civil remedy
for any person injured by the theft-related criminal offenses
defined in the statute is certainly not absurd or unreasonable.
Considering the nature of the offense described by the statute
and the apparent goal of deterring such theft-related conduct,
the provision as literally written of an enhanced civil remedy to
‘any person’ injured by that particular offense constituted a
reasonable legislative policy decision. The fact that the treble
damage remedy may come into play where (as here) the parties
were in a preexisting business relationship in which the
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Opinion of the Court by Cantil-Sakauye, C. J.
remedies at law have traditionally been limited (e.g., for fraud,
conversion, or breach of contract) — while arguably a valid
policy argument — manifestly falls short of establishing the
absurdity exception. In the final analysis, we are unable to
conclude that the results produced by a literal reading of the
statute would be ‘so unreasonable the Legislature could not
have intended them.’ (In re D.B., supra, 58 Cal.4th at
p. 948 . . . .) In other words, the potential results of following
the unambiguous literal wording of section 496(c) are not so
absurd or unreasonable that we would be justified to override
its plain meaning.” (Switzer, supra, 35 Cal.App.5th at p. 130.)
The Court of Appeal acknowledged the recurrent policy
concerns that had first been voiced in Bell, and elaborated upon
on in Lacagnina, regarding the potential consequences of its
interpretation of section 496(c). (Switzer, supra, 35 Cal.App.5th
at p. 130.) Nevertheless, the appellate court concluded, “it is the
task of the Legislature to address those policy concerns.’ ” (Ibid.,
quoting Bell, supra, 121 Cal.App.4th at p. 1049, italics in
original.) The court added: “Of course, as always “[t]he
Legislature . . . remains free to amend [the statute] if the
language it has enacted is now understood to create unintended
consequences.” (Switzer, supra, 35 Cal.App.5th at p. 130.)
The appellate court next confronted the defendants’
assertion that the legislative history (partially set out in Bell,
supra, 121 Cal.App.4th 1041, and described ante, pt. II.B.1.)
supported a contrary understanding of the statute. In rejecting
that view, the court stressed the provision’s amendment history
and that it was designed, not solely to deter theft, but also to
provide a new civil remedy to those who have been injured by a
violation of the statute. (Switzer, supra, 35 Cal.App.5th at
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Opinion of the Court by Cantil-Sakauye, C. J.
p. 131.)16 In the former respect, the court emphasized, the
original 1972 bill was written broadly to authorize “ ‘any
person’ ” injured by a violation of the section to be awarded
treble damages (and attorney’s fees); it was later amended to
limit those civil remedies to “for-hire carriers”; but that version
was “short-lived” — within a few weeks the original broad
version was restored, to read as it does now. (Switzer, supra,
35 Cal.App.5th at p. 131.)
The court summarized: “As the above outline of the
legislative history makes clear, although [the 1972 bill] may
have been briefly amended during the legislative committee
process to have a narrower remedial focus (i.e., for-hire carriers),
the Legislature ultimately restored the wording giving a treble
damage remedy to ‘any person’ who was injured by a violation
of section 496. Therefore, because the Legislature clearly
approved and endorsed the broader scope of the civil remedy as
provided in current section 496(c), we conclude the legislative
history does not support [the defendants’] contention that
section 496(c) was intended to have a narrow focus that would
apply only to common carriers or to situations involving theft in
the cargo industry.” (Switzer, supra, 35 Cal.App.5th at p. 132.)
16
In this regard, the appellate court observed, although
“deterrence of theft” was one goal of the legislation, “another
purpose . . . was expressly stated in the analysis provided by the
Senate Committee on the Judiciary”: “ ‘[E]stablish[ing] a civil
remedy for persons who have been injured by another’s
purchase, concealment, sale, or withholding of property where
such person knows the property has been stolen.’ ” (Switzer,
supra, 35 Cal.App.5th at pp. 131–132, quoting Sen. Com. on
Judiciary, Analysis of Sen. Bill No. 1068 (1972 Reg. Sess.) as
amended June 26, 1972, p. 1.)
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Opinion of the Court by Cantil-Sakauye, C. J.
Accordingly, the Court of Appeal concluded that the
plaintiff was entitled under section 496(c) to an award of treble
damages. (Switzer, supra, 35 Cal.App.5th at p. 132.) In the
unpublished part of its opinion, the appellate court reversed the
trial court’s denial of the motion for attorney’s fees under that
same statute, and directed the trial court to issue a new order
awarding attorney’s fees.
4. The Appellate Decision Below
In this matter, the Court of Appeal framed the issue as
whether section 496(c) authorizes treble damages when, as here,
“the underlying conduct did not involve trafficking in stolen
property, but rather the improper diversion of a limited
partnership’s cash distributions through fraud,
misrepresentation, and breach of fiduciary duty.” (Siry, supra,
45 Cal.App.5th at p. 1133.) The court characterized the three
appellate decisions described above as reflecting different
“approaches to the issue” of section 496(c)’s applicability. (Siry,
supra, 45 Cal.App.5th at p. 1133.) It then explained: “We chart
yet a different path in ruling that treble damages are not
available under [section 496(c)] in cases where the plaintiff
merely alleges and proves conduct involving fraud,
misrepresentation, conversion, or some other type of theft that
does not involve ‘stolen’ property.” (Siry, supra, 45 Cal.App.5th
at p. 1134, italics added.) In other words, as the court later
explicated, it determined that section 496(c) applies generally
when there is evidence that “property” has been the subject of
theft — but the statute does not apply in “theft-related tort
cases” (Siry, supra, 45 Cal.5th at p. 1136) involving fraud,
misrepresentation, or breach of fiduciary duty.
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Opinion of the Court by Cantil-Sakauye, C. J.
Before commencing its statutory construction analysis,
the appellate court below presented a general overview of
statutory interpretation, during which it quoted various truisms
from past decisions of this court. It began: “The ‘first task’ of
any court ‘in construing a statute is to ascertain the intent of the
Legislature so as to effectuate the purpose of the law.’ ” (Siry,
supra, 45 Cal.App.5th at p. 1134, quoting Dyna-Med, Inc. v. Fair
Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386
(Dyna-Med).) The appellate court acknowledged that a statute’s
language usually provides “ ‘ “the most reliable indication of
legislative intent.” ’ ” (Siry, supra, 45 Cal.App.5th at p. 1134.)
Yet, the appellate court noted, the “ ‘ “plain meaning” rule does
not prohibit a court from determining whether the literal
meaning of a statute comports with its purpose.’ ” (Id., at
p. 1135, quoting Lungren v. Deukmejian (1988) 45 Cal.3d 727,
735 (Lungren).)
Next, the appellate court noted, in our own decisions we
have “refused to ‘ “presume that the Legislature intends, when
it enacts a statute, to overthrow long-established principles of
law unless such intention is clearly expressed or necessarily
implied.” ’ ” (Siry, supra, 45 Cal.App.5th at p. 1135, quoting
Brodie v. Workers’ Comp. Appeals Bd. (2007) 40 Cal.4th 1313,
1325 (Brodie), and citing Van Horn v. Watson (2008) 45 Cal.4th
322, 333 (Van Horn).) Moreover, as the Court of Appeal
observed, we have remarked, “ ‘[i]t is doubtful that the
Legislature would . . . institute[] . . . significant change through
silence.’ ” (Siry, supra, 45 Cal.App.5th at p. 1135, quoting
Riverside County Sheriff’s Dept. v. Stiglitz (2014) 60 Cal.4th 624,
646–647 (Stiglitz), and citing In re Christian S. (1994) 7 Cal.4th
768, 782 (Christian S.).) Applying these principles, the
appellate court reasoned that allowing section 496(c) “to
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Opinion of the Court by Cantil-Sakauye, C. J.
authorize an award of treble damages whenever a plaintiff
proves (or, in the case of a default, sufficiently alleges) any type
of theft — whether it be fraud, misrepresentation, conversion,
or breach of fiduciary duty — by which the defendant obtains
money or property would institute [such] a ‘significant change’
[through silence].” (Siry, supra, 45 Cal.App.5th at p. 1135.)
The Court of Appeal proceeded to elaborate on various
grounds for its conclusion. First, it reasoned, a literal and broad
reading of the statute “would transmogrify the law of remedies”
for the torts of fraud, misrepresentation, conversion, and breach
of fiduciary duty. (Siry, supra, 45 Cal.App.5th at p. 1135.) The
court noted that the traditional damages remedy for these torts
has been limited to the amount of actual damages caused by the
perpetrators. (Ibid.) Affording treble damages in such settings,
the appellate court asserted, “would all but eclipse these
traditional damages remedies.” (Id., at p. 1136.)
Second, the Court of Appeal reasoned, construing section
496(c) to apply in theft-related tort cases would impliedly and
effectively “repeal the punitive damages statutes.” (Siry, supra,
45 Cal.App.5th at p. 1136.) The court observed that normally a
plaintiff seeking greater than compensatory damages must
meet strict standards applicable to punitive damages — i.e.,
prove, by clear and convincing evidence, the defendant “ ‘guilty
of oppression, fraud, or malice.’ ” (Ibid., quoting Civ. Code,
§ 3294, subd. (a).) Yet, the appellate court asserted, if section
496(c) applied to these torts, “a plaintiff could obtain treble
damages merely by proving the tort itself by a preponderance of
the evidence.” (Siry, supra, 45 Cal.App.5th at p. 1136.)
Third, the appellate court asserted, because section 496(c)
authorizes attorney’s fees in addition to treble damages,
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Opinion of the Court by Cantil-Sakauye, C. J.
recognizing its application in the present setting (as the court in
Switzer did in closely analogous circumstances) would, in effect,
authorize fee shifting “in nearly every tort case involving fraud,
misrepresentation, or breach of fiduciary duty, thereby creating
a gaping exception to the general rule against such fee shifting.”
(Siry, supra, 45 Cal.App.5th at p. 1136, fn. 12.)
Fourth, the appellate court turned to the same legislative
history recounted earlier, analyzed by the Bell and Switzer
courts — yet drew the opposite conclusion. The court focused on
the history’s recitation of “discussions about how best to achieve
the ‘goal of eliminating markets for stolen property, in order to
substantially reduce the incentive to hijack cargo from common
carriers.’ ” (Siry, supra, 45 Cal.App.5th at p. 1136.) It implicitly
acknowledged that the 1972 bill initially was written broadly,
subsequently was narrowed, and then ultimately reverted to the
present broad phrasing. Still, the appellate court reasoned, the
Legislature’s “focus never strayed from drying up the market for
stolen goods” (id., at p. 1137), and thus, the court could not “infer
any legislative intent” to effectuate the “significant change” that
would result if the statute were construed to afford treble
damages (ibid.). Indeed, the appellate court said, the
“Legislature’s silence” concerning such intent “is even more
deafening when contrasted with other statutes that speak with
a much clearer voice” when “creating the extraordinary remedy
of treble damages.” (Ibid.) In view of all this, the appellate court
determined, it could not “presume that our Legislature intended
to so significantly alter the universe of tort remedies without
saying anything about its desire to do so.” (Ibid.)
Ultimately, the Court of Appeal concluded that section
496(c)’s “language sweeps more broadly than its intent,” and
hence must be understood, despite its unambiguous words, to
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Opinion of the Court by Cantil-Sakauye, C. J.
withhold “the remedy of treble damages for torts not involving
stolen property.” (Siry, supra, 45 Cal.App.5th at p. 1137.) The
appellate court acknowledged that this conclusion conflicts with
the decisions in Bell and especially Switzer, but explained that,
in its view, the present case presents a situation in which
perceived “legislative intent” (to maintain traditional remedies
for torts involving fraud, misrepresentation, or breach of
fiduciary duty) “trump[s] [the] statute’s plain language.” (Ibid.)
And so, the court explained, the “narrower intent” that it
attributed to the Legislature “is controlling” and applies here.
(Ibid.)
The court further determined that in light of its reading of
section 496(c), not only are treble damages unavailable in this
setting, but correspondingly, the statute provides no basis for
the trial court’s award of attorney’s fees. (Siry, supra,
45 Cal.App.5th at p. 1138.)
5. Our Understanding of Section 496(c) as Applied
Here
Viewing the issue independently as a matter of law, we
endorse the analysis of Bell and Switzer — even though, at the
same time, we acknowledge that some of the policy
considerations highlighted in those cases, and elaborated upon
by the appellate court below, give pause. Fundamentally, we
agree with the conclusions of Bell and Switzer that section 496(c)
is unambiguous, and that read together with sections 496(a) and
484, and in conformity with our standard approach to
interpretation (e.g., Smith v. LoanMe, Inc. (2021) 11 Cal.5th
183, 190), section 496(c) must be understood as yielding the
understanding attributed to it in those decisions: A plaintiff
may recover treble damages and attorney’s fees under section
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Opinion of the Court by Cantil-Sakauye, C. J.
496(c) when property has been obtained in any manner
constituting theft.
We also find that section 496(c) applies concerning the
conduct at issue in the present case. The unambiguous relevant
language covers fraudulent diversion of partnership funds.
Defendants’ conduct falls within the ambit of section 496(a):
They “receive[d]” “property” (the diverted partnership funds)
belonging to plaintiff, having “obtained” the diverted funds “in
[a] manner constituting theft.” (Ibid.) Defendants also
conceal[ed]” or “withh[e]ld[]” those funds (and/or aided in
concealing or withholding them) from plaintiff. (Ibid.) They did
all of this “knowing” the diverted funds were “so . . . obtained.”
(Ibid.)
We pause to elaborate on these points, and, specifically,
criminal intent under the statute. Because this litigation comes
to us upon default judgment, defendants are deemed to have
admitted all material allegations, including the allegation that
defendants committed theft. Although we are not asked here to
determine whether plaintiff would have been able to prove theft,
we observe that not all commercial or consumer disputes
alleging that a defendant obtained money or property through
fraud, misrepresentation, or breach of a contractual promise will
amount to a theft. To prove theft, a plaintiff must establish
criminal intent on the part of the defendant beyond “mere proof
of nonperformance or actual falsity.” (People v. Ashley (1954)
42 Cal.2d 246, 264.) This requirement prevents “ ‘[o]rdinary
commercial defaults’ ” from being transformed into a theft. (Id.,
at p. 265.) If misrepresentations or unfulfilled promises “are
made innocently or inadvertently, they can no more form the
basis for a prosecution for obtaining property by false pretenses
than can an innocent breach of contract.” (Id., at p. 264.) In this
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Opinion of the Court by Cantil-Sakauye, C. J.
case, the record appears consistent with a conclusion that
defendants acted not innocently or inadvertently, but with
careful planning and deliberation reflecting the requisite
criminal intent.
Defendants’ violation of section 496(a) caused plaintiff to
suffer actual damage, loss, or harm. (See Switzer, supra,
35 Cal.App.5th at pp. 127–128.) In these circumstances,
plaintiff qualifies under section 496(c) as “[a]ny person who has
been injured by a violation of subdivision (a)” — and hence is
entitled to “bring an action for three times the amount of actual
damages, if any . . . and reasonable attorney’s fees.” Finally, as
the court in Switzer also observed, this construction and
application of the statute cannot be avoided under the so-called
“absurdity exception.”17 (Switzer, supra, 35 Cal.App.5th at
p. 129.)
17
That doctrine, if apt here, would arguably permit a court
to decline to honor section 496(c)’s words, and instead construe
the provision as the Court of Appeal ultimately did — to
withhold, rather than to afford, treble damages and attorney’s
fees in this setting. Yet, as the Court of Appeal below implicitly
acknowledged, section 496(c) is not susceptible to such a
narrowing construction on the basis of an absurdity exception
analysis because, for the reasons well articulated by the court in
Switzer (described ante, pt. II.B.3.), reading section 496(c)’s
words to give them full effect would not “frustrate the manifest
purpose of the legislation as a whole or otherwise lead to absurd
results.” (Switzer, supra, 35 Cal.App.5th at p. 129.) Indeed, as
the court in Switzer concluded, in light of “the offense described
by [section 496(a)] and the apparent goal of deterring such theft-
related conduct, the provision” as written — affording an
enhanced civil remedy to “any person” who is injured by a
violation — may be said to “constitute[] a reasonable legislative
policy decision.” (Switzer, supra, 35 Cal.App.5th at p. 130,
italics added.) In any event, it cannot be said that such an
understanding of the statute as written would reflect an “absurd
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Opinion of the Court by Cantil-Sakauye, C. J.
As noted earlier, in reaching its contrary determination
the appellate court quoted selected language from our decisions
concerning statutory interpretation. (Siry, supra,
45 Cal.App.5th at pp. 1134–1135.) Yet, as we shall explain,
these fundamental statutory construction truisms do not, in the
present circumstances, support the Court of Appeal’s ultimate
conclusion.
To begin with, Dyna-Med, supra, 43 Cal.3d at page 1386,
quoted by the Court of Appeal concerning the need to ascertain
the intent of the Legislature so as to effectuate the purpose of
the law, concerned ambiguous statutory language — and hence
is distinguishable from the present litigation. Similarly, and
most significantly, although the appellate court below cited
Lungren, supra, 45 Cal.3d at page 725, in support of the
proposition that a court may properly inquire whether a literal
meaning of a statute comports with its purpose, close review of
that decision reveals that, in fact, we simply evaluated
constitutional language that was subject to two alternate
constructions, and endorsed the interpretation that avoided
problematic internal inconsistencies within the overall scheme.
In neither of these cases did we do anything similar to what the
appellate court below proposes we do here — construe otherwise
clear and unambiguous standalone language so as to withhold,
rather than afford, that which its full and natural words
provide.
or unreasonable” legislative policy determination. (Ibid., italics
added.) The parties cite no decision, and we are aware of none,
finding the absurdity exception applicable on facts such as those
at issue here.
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Opinion of the Court by Cantil-Sakauye, C. J.
Likewise, although the appellate court below cited cases
such as Brodie, supra, 40 Cal.4th at page 1325, in support of the
proposition that courts should be very reluctant to infer
legislative intent to overthrow long-standing principles of law
(and thereby significantly alter traditional limits on remedies in
the face of legislative silence on that issue, or absent clearly
expressed legislative intent to do so), Brodie and related
decisions are inapt in the current circumstances. In Brodie,
contrasted with the present case, we faced statutory language
that reflected a latent ambiguity. On one hand, the Legislature
clearly intended to modify a discrete aspect of the workers’
compensation law. Yet the statute was silent regarding whether
the Legislature intended also to effectuate a corresponding
broader change that would overthrow long-established
apportionment principles. In that setting, and in the face of
ambiguity concerning the intended scope of the change to the
statute, we invoked the traditional rule, declining to presume
legislative intent to bring about such a major change in the face
of silence — and we concluded, after reviewing the relevant
legislative history, that only the limited, and not any
monumental, change was intended. (Brodie, supra, 40 Cal.4th
at pp. 1325–1332.) By contrast, the words of section 496(c)
present no ambiguity, and the statutory construction issue
before us today poses no interpretive challenge analogous to
that in Brodie or related cases such as Stiglitz, supra, 60 Cal.4th
624, 646–647, Van Horn, supra, 45 Cal.4th 322, 333, and
Christian S., supra, 7 Cal.4th 768, 782.
As observed earlier, the Court of Appeal characterized the
present circumstances as reflecting legislative “silence”
concerning the scope of treble damages and attorney’s fees
remedies created by section 496(c), and it asserted that, in
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Opinion of the Court by Cantil-Sakauye, C. J.
comparison, the Legislature has spoken with appreciably more
clarity in the course of enacting seven other statutes in which it
has afforded such remedies. (Siry, supra, 45 Cal.App.5th at
p. 1137.) Ultimately it appears that the appellate court
discerned authority to give the statute a narrow cast, divorced
from its words — based largely on the assertion that the
Legislature has not spoken with similar or requisite clarity here.
And yet our review of the statutes does not reveal support for
any such distinction.18
Although the appellate court below articulated policy
concerns that affording remedies flowing from section 496(c)’s
language would generally and expansively allow remedies
beyond those traditionally afforded at law for fraud, conversion,
or breach of contract, these policy issues have not been hidden
from the Legislature’s attention, nor are they new. As observed
ante, footnote 10, broadly applicable analogous “enhanced civil
remedies” statutes akin to section 496(c), also allowing recovery
18
Addressing, as representative, the most prominent three
of the other statutes, we observe: Neither Business and
Professions Code section 16750, subdivision (a) (providing treble
damages and attorney’s fees for violations of the Cartwright Act,
articulating our state’s antitrust laws), nor Business and
Professions Code section 17082 (specifying treble damages and
attorney’s fees for violations of the Unfair Practices Act), nor
Civil Code section 52, subdivision (a) (establishing treble
damages and attorney’s fees for the violation of the Unruh Civil
Rights Act), contains any special legislative intent language, in
the process of creating those remedies. Nor do any of these
statutes reference provisions to which such special remedies
apply in order to clarify, limit, or narrow the scope of the causes
of action as to which those remedies are available. Likewise,
none of the other statutes cited by the appellate court (see ante,
fn. 8) appear to contain any such clarifying, limiting, or
narrowing language.
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Opinion of the Court by Cantil-Sakauye, C. J.
of treble damages and attorney’s fees upon a showing of criminal
theft, have been enacted in other jurisdictions. Likewise,
although some out-of-state decisions have, similarly to
Lacagnina, supra, 25 Cal.App.5th 955, construed their own
statutes as not applying in factual circumstances different from
those in the present case,19 courts of those jurisdictions also
have found their statutes do apply in factual circumstances like
those we face here — in which funds were obtained or withheld
in a manner constituting theft. Indeed, courts of other states
have so construed their statutes even in the face of policy-based
admonitions against unduly expanding such remedies.
19
See, e.g., In re Dorland (Bankr. D.Colo. 2007) 374 B.R.
765, 780 (declining to award treble damages and attorney’s fees
under the Colorado statute (quoted ante, fn. 10) because the
plaintiff failed to prove, by a preponderance of the evidence, all
of the elements of theft — specifically, intent to deprive one
permanently of the use or benefit of funds); Merslich v.
Schnellenberger (Fl.Ct.App. 1991) 578 So.2d 725, 725 (trial court
properly exercised discretion in declining to award treble
damages under the Florida statute (described ante, fn. 10) when
the plaintiff failed to prove the requisite mental state on a claim
arising from the defendant’s fraudulent transfer of funds);
Hoffenblum v. Hoffenblum (Mich. App. 2014) 863 N.W.2d 352,
360 (trial court properly exercised discretion in declining to
award children treble damages under Michigan statute
(described ante, fn. 10) on conversion claim against father,
arising from his unlawful withdrawal of money from their trust
accounts, when father’s conduct was undertaken on advice of his
financial advisor); see generally Annotation, What is “Intent to
Deprive” Sufficient to Establish Liability for Civil, or Statutory,
Theft (2018) 35 A.L.R.7th 1 (focusing primarily on decisions
applying the Connecticut statute (quoted ante, fn. 10), and
revealing that Connecticut courts, as well as others applying
similar “civil theft” statutes, have in numerous contexts found
the “intent to deprive” element unsatisfied, and hence have
refused to award treble damages).
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Opinion of the Court by Cantil-Sakauye, C. J.
Cases construing Colorado Revised Statutes, section 18-4-
405 (quoted ante, fn. 10) in circumstances like those we face here
are particularly illuminating. An early decision expressed
policy concerns about subjecting “every trustee, bailee, broker,
or other fiduciary to treble damages and attorney fees,” thus
“supplant[ing] common law conversion claims” — and saw this
as a result the state legislature “could not have contemplated or
intended.” (Itin v. Bertrand T. Ungar, P.C. (Colo.App. 1998) 978
P.2d 142, 145.) But on review the Colorado Supreme Court, in
Itin v. Ungar (Colo. 2000) 17 P.3d 129, disagreed. It held that
although the statute, like ours, had been triggered by trucking
industry interests (id., at p. 134, fn. 8), under the provision’s
broad wording, the plaintiff was properly awarded such
remedies stemming from the illegal diversion of funds. (Id., at
p. 135; accord, e.g., Rhino Fund, LLLP v. Hutchins (Colo.App.
2008) 215 P.3d 1186, 1194 [rejecting assertion that the
“economic loss rule” “ ‘abrogate[s] a legislatively created scheme
designed to extend a civil remedy to those harmed by alleged
criminal activity’ ”]; see also Tisch v. Tisch (Colo.App. 2019) 439
P.3d 89, 103–105 [defendant’s appropriation of company funds
for personal use triggered treble damages for civil theft].)
Most recently, the Colorado Supreme Court held that its
statute applies even in the context of an employee’s breach of
contract — there, by improperly taking confidential proprietary
information from his employer. (Bermel v. BlueRadios, Inc.
(Colo. 2019) 440 P.3d 1150.) The court observed that “[t]he
availability of treble damages and attorney fees for civil theft
reflects the legislature’s displeasure with the proscribed conduct
and its desire to deter it” (id., at p. 1157), and stressed, “it is not
this court’s place to substitute the judiciary’s policy judgments
for those of the General Assembly” (id., at p. 1158). To the
44
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
contrary, the state supreme court said: “Because the
legislature’s intent to provide a statutory remedy to victims of
theft is plain from the face of the statute, no contrary statutory
provision is before us, and there has been no allegation that the
statute is unconstitutional, we are without any basis in law to
limit the remedy it provides” (id., at p. 1159). The Colorado high
court reached these determinations over dissenting objections
that doing so violates the “economic loss rule” and “dramatically
expands [the plaintiff’s] contractual remedies and establishes a
precedent that [may] inappropriately allow many future
contract claims to be asserted as civil theft claims, in pursuit of
otherwise unavailable treble damages and attorney fees
awards.” (Id., at p. 1160 (dis. opn. of Gabriel, J.).)20
As noted ante, part II.B.1–3, the same policy issues
addressed in Colorado over the course of more than two decades
20
Accord, see, e.g., Discovery Leasing v. Murphy (Conn.App.
1993) 635 A.2d 843, 847 (applying the Connecticut statute
(quoted ante, fn. 10), and finding that plaintiff established a
prima facie case of conversion of investment funds and statutory
theft of funds); In re Hamama (Bankr. E.D.Mich. 1995) 182 B.R.
757, 758 (under the Michigan statute (described ante, fn. 10),
debtor who improperly withdrew money from employee’s bank
account was liable for statutory treble damages); New Properties
v. Newpower (Mich.App. 2009) 762 N.W.2d 178, 189–190 (also
under the Michigan statute, corporate investors were entitled to
treble damages from a real estate business defendant who
embezzled and transferred funds for its own use); Department of
Agriculture v. Appletree Marketing, LLC (Mich. 2010) 779
N.W.2d 237, 240–242 (also under the Michigan statute, finding
treble damages appropriate regarding a defendant who
wrongfully spent trust funds on his own debts and failed to remit
funds). Accord, Zinn v. Zinn (Fla.Ct.App. 1989) 549 So.2d 1141,
1142 (implicitly applying the Florida statute (quoted ante,
fn. 10), and affirming an award of treble damages based on “civil
theft” concerning investment funds).
45
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
also have been highlighted in the published opinions in Bell,
Lacagnina, and Switzer. Our Legislature is the appropriate
body to address whether section 496(c) should be altered in light
of our appellate courts’ repeated constructive focus on these and
related policy issues. As alluded to earlier, and especially in
light of the underlying legislative and case law history, any
question we might harbor about how to properly balance such
policy issues “manifestly falls short of establishing the absurdity
exception” (Switzer, supra, 35 Cal.App.5th at p. 130) and leaves
us with no room to decline to honor the words, as written, of
section 496(c).
Although defendants and the Court of Appeal below insist
the Legislature was primarily concerned with the theft of cargo,
as we have observed, “statutory prohibitions ‘often go beyond
the principal evil to cover reasonably comparable evils, and it is
ultimately the provisions of our laws rather than the principal
concerns of our legislators by which we are governed.’ ” (Smith
v. LoanMe, supra, 11 Cal.5th at p. 199.) Moreover, as noted
ante, part II.B.1., during the amendment process for the 1972
bill the Legislature expressly removed narrowing language (that
would have limited coverage to “for-hire carriers”) and replaced
it with the present broad language, “[a]ny person.” In analogous
circumstances concerning this same scheme, we have observed,
“[W]e cannot read [that limitation] back into the resulting
statute.” (Allen, supra, 21 Cal.4th at p. 863.)
For the reasons articulated above, we decline to agree with
the Court of Appeal’s statutory construction analysis or
conclusion. We will not “ ‘ “speculate that the Legislature meant
something other than what it said,” ’ ” and “ ‘ “rewrite [the]
statute to posit an unexpressed intent.” ’ ” (Switzer, supra,
35 Cal.App.5th at p. 128; compare Kopp v. Fair Pol. Practices
46
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
Com. (1995) 11 Cal.4th 607, 615 [describing the very limited
circumstances in which a court has “authority to rewrite a
statute in order to preserve its constitutionality”].)
Perhaps the Legislature will see fit to consider the statute
anew in light of the elaborated criticisms set forth in the Court
of Appeal opinion below, and amend section 496(c) in line with
the short-lived narrowed version that the Legislature briefly
considered in 1972 before again broadening its scope to read as
it does now. In this respect, the Court of Appeal’s decision below
may usefully assist and prompt the Legislature.
In the meantime, however, although “ ‘[w]e are not
unmindful of [the] policy concerns about the potential
consequences of our interpretation,’ ” it is and remains “ ‘the
task of the Legislature to address those policy concerns.’ ”
(Switzer, supra, 35 Cal.App.5th at p. 130, italics omitted,
quoting Bell, supra, 121 Cal.App.4th at p. 1049.)
III. CONCLUSION AND DISPOSITION
The Court of Appeal’s judgment is affirmed to the extent
it recognized and confirmed defendants’ standing to move for a
new trial — more precisely, a new judgment hearing — on the
ground that the trial court committed errors in law when
awarding and calculating damages. The same judgment is
reversed to the extent the appellate court declined to read
section 496(c)’s words in their full and natural manner, by
construing that subdivision to withhold, rather than afford,
treble damages and attorney’s fees when, as here, property “has
been obtained in any manner constituting theft.” (§ 496(a).)
47
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Opinion of the Court by Cantil-Sakauye, C. J.
We remand to the Court of Appeal for proceedings
consistent with our opinion.
CANTIL-SAKAUYE, C. J.
We Concur:
CORRIGAN, J.
LIU, J.
KRUGER, J.
GROBAN, J.
JENKINS, J.
GUERRERO, J.
48
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
S262081
Concurring Opinion by Justice Groban
I concur with the majority opinion’s holdings. I write
separately to address the Court of Appeal’s concern that, if read
too broadly, Penal Code section 4961 could “transmogrify the law
of remedies” in a wide range of tort or breach of contract cases
alleging that the defendant improperly obtained, diverted,
received, or withheld the plaintiff’s money. (Siry Investment,
L.P. v. Farkhondehpour (2020) 45 Cal.App.5th 1098, 1135;
accord, Lacagnina v. Comprehend Systems, Inc. (2018) 25
Cal.App.5th 955, 972 (Lacagnina) [noting the possibility of
“significant adverse consequences” if parties could assert claims
for treble damages under § 496 “in run-of-the-mill commercial
disputes”].) I believe it important to note that the majority
opinion’s interpretation of section 496 will not allow for the
recovery of treble damages in all, or even most, consumer or
commercial disputes involving tort or breach of contract claims,
for the reasons explained below.
This matter comes to us upon a default judgment in the
plaintiff’s favor. Defendants were deemed to have admitted all
material allegations in plaintiff’s complaint and were not
permitted to challenge whether plaintiff has adequately proved
a violation of section 496, subdivision (a) on appeal. (See Steven
M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th
1All further statutory references are to the Penal Code
unless otherwise indicated.
1
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Groban, J., concurring
813, 823.) Given this procedural posture, the majority opinion
rightly does not analyze in depth the elements required to
establish a violation of section 496, subdivision (a) — a violation
of which is required to obtain treble damages under section 496,
subdivision (c).
The majority opinion nevertheless recognizes important
limitations on the scope of section 496. At a minimum, a
plaintiff must prove that a “theft” has occurred to establish a
violation of section 496, subdivision (a). (Maj. opn., ante, at p.
38; see id. at pp. 37–38 [“A plaintiff may recover treble damages
and attorney’s fees under section 496(c) when property has been
obtained in any manner constituting theft” under section 496,
subdivision (a)]; see also § 496, subd. (a) [prohibiting persons
from “buy[ing] or receiv[ing] any property that has been stolen
or that has been obtained in any manner constituting theft”].)
Section 484 defines “theft,” in part, as “feloniously steal[ing]” or
“knowingly and designedly, by any false or fraudulent
representation or pretense, defraud[ing]” a person of money or
property. (Italics added.) Thus, to establish a theft, a plaintiff
must show an intent to steal. (People v. Ashley (1954) 42 Cal.2d
246, 263–264 (Ashley).) “The intent to steal or animus furandi
is the intent, without a good faith claim of right, to permanently
deprive the owner of possession.” (People v. Davis (1998) 19
Cal.4th 301, 305.) A defendant’s good faith but erroneous belief
in the truth of his or her misrepresentation or that the
defendant has a right or claim to the property taken “ ‘negates
the felonious intent necessary for conviction of theft.’ ” (People
v. Kaufman (2017) 17 Cal.App.5th 370, 388, quoting People v.
Tufunga (1999) 21 Cal.4th 935, 938; see also People v. Marsh
(1962) 58 Cal.2d 732, 737 [trial court erred in refusing to admit
2
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Groban, J., concurring
reports from scientists and doctors to show the defendants’ good
faith belief in their false representations that their machines
cured medical ailments].)
As the majority opinion rightly observes, a mere
unfulfilled promise or misrepresentation of fact is insufficient to
establish an intent to steal. (Maj. opn., ante, at p. 39.) “[T]he
defendant’s intent must be proved in both instances by
something more than mere proof of nonperformance or actual
falsity.” (Ashley, supra, 42 Cal.2d at p. 264.) “This requirement
prevents ‘ “[o]rdinary commercial defaults” ’ from being
transformed into a theft.” (Maj. opn., ante, at p. 38 quoting
Ashley, at p. 265.) “If misrepresentations or unfulfilled promises
‘are made innocently or inadvertently, they can no more form
the basis for a prosecution for obtaining property by false
pretenses than can an innocent breach of contract.’ ” (Maj. opn.,
ante, at p. 39, quoting Ashley, at p. 264.) Moreover, the
testimony of a single witness that the defendant obtained the
money or property through a false promise or representation
must be corroborated. (Ashley, at p. 259; see also § 532, subd.
(b).)
In Ashley, we held that the evidence supported the jury’s
finding that the defendant had the requisite felonious intent to
steal. (Ashley, supra, 42 Cal.2d at p. 267.) The defendant
“deliberately set out to acquire the life savings” of multiple
unsophisticated elderly victims by stating that the loaned
money would be used for an ambitious theater project, when in
fact the money was almost immediately used to cover the
expenses of defendant’s failing corporation. (Ibid.) The fact that
the “money acquired was needed and used for the running
expenses of the corporation within a short time of its receipt”
3
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Groban, J., concurring
indicated that the defendant never intended to acquire or build
the promised theater. (Ibid.) In contrast, the evidence in People
v. Hartley (2016) 248 Cal.App.4th 620 did not support a finding
that the defendant had the requisite felonious intent to steal,
even though the defendant acknowledged that he made an
implied promise to pay a fare upon entering a cab and did not
do so. (Id. at p. 628.) As the court explained, the evidence did
not show that the defendant entered the cab intending to renege
on his promise to pay; instead, the defendant “decided not to pay
because of his frustration with the driver and [his] suspicion
that the driver was trying to inflate the fare.” (Id. at p. 629.)
Thus, “his failure to pay the driver was akin to a transaction-
gone-bad or, in the words of Ashley, ‘ “[o]rdinary commercial
default[].” ’ ” (Hartley, at pp. 630–631.)
Consistent with these cases, several courts have recently
concluded that a section 496 claim for treble damages in a civil
action cannot be maintained where the defendant lacked the
requisite felonious intent. In GEC US 1 LLC v. Frontier
Renewables, LLC (N.D.Cal., Sept. 7, 2016, No. 16-CV-1276 YGR)
2016 WL 4677585, for example, the complaint alleged that the
defendants improperly asserted control and ownership over a
joint venture. (Id. at p. *1.) But, since the complaint also
alleged that the defendants believed themselves to be the proper
owners of the joint venture, the court concluded that they lacked
the requisite felonious intent to steal. (Id. at p. *9.) The court
explained that “allowing this claim to proceed on these
allegations would sanction the use of the penal code to redress
ordinary business disputes over ownership interests — an
untenable result.” (Ibid.) The court in Lacagnina similarly
explained that “an essential element of a section 496 violation is
4
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Groban, J., concurring
the defendant’s knowledge that the property was stolen” and
doubted that “a dispute over unpaid commissions and other
compensation qualifies.” (Lacagnina, supra, 25 Cal.App.5th at
p. 971; accord, Gillette v. Stater Bros. Markets, Inc. (C.D.Cal.,
Sept. 23, 2019, No. EDCV19-1292JVS (KKx) 2019 WL 8017735,
p. *9 [allegation that the defendants “ ‘[k]ept [plaintiff’s] pay for
themselves’ ” was not sufficient to state a claim for theft since
there was no indication that the defendants obtained the wages
by false pretenses or knew them to be obtained by false
pretenses].)
There may be other relevant limitations on establishing a
theft in a civil case seeking treble damages under section 496.
Some federal courts have concluded that “[a] cause of action for
civil theft cannot lie where a plaintiff receives legitimate
services based on mutual agreement to pay for those services.”
(Alvarez v. Adtalem Education Group, Inc. (N.D.Cal., Dec. 16,
2019, No. 19-cv-04079-JSW) 2019 WL 13065378, p. *5 [no
section 496 claim where students received an education in
exchange for their tuition payments, even though university
misrepresented postgraduate employment rates].) Several out-
of-state decisions have declined to award treble damages under
their similar theft statutes because the defendant lacked an
intent to permanently deprive the plaintiff of the use or benefit
of the money or property at issue. (Maj. opn., ante, at p. 43, fn.
19.) Further, as noted in the majority, two federal decisions
have held that a plaintiff must show additional conduct beyond
the underlying theft to obtain treble damages under section
496 — though these decisions have been criticized on appeal and
not followed by other federal courts. (Maj. opn., ante, at pp. 20–
21, fn. 12; cf. People v. Allen (1999) 21 Cal.4th 846, 857 [noting
5
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Groban, J., concurring
that the first sentence of a 1992 amendment to § 496 “authorizes
a conviction for receiving stolen property even though the
defendant also stole the property,” which suggests that theft
alone may enable § 496 liability in the civil context]; Bell v.
Feibush (2013) 212 Cal.App.4th 1041, 1049 [raising the issue of
whether the second sentence of the 1992 amendment, which
bars dual convictions of the theft itself and the receipt of stolen
property, operates to bar “ ‘double recovery’ ” in the civil
context].)
Again, we are not called upon in this matter to determine
the precise elements necessary to establish a theft in a civil case
seeking treble damages under section 496, or even whether
plaintiff would have been able to prove these elements had he
not obtained a default judgment. I nevertheless do not believe
the majority opinion’s holding will create a sea change in the
law. If, as a result of the majority opinion’s holding, most
consumer or commercial transactions could now be transformed
into a “theft” case seeking treble damages — including, for
example, every conceivable type of claim premised upon wage
and hour laws, false advertising laws such as the unfair
competition law (Bus. & Prof. Code, § 17200 et seq.) or
Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.),
warranty laws such as the Song-Beverly Consumer Warranty
Act (Civ. Code, § 1790 et seq.), or real estate or mortgage lending
disputes — I might find such a result to be contrary to
legislative intent. But I do not believe it is likely that section
496 will apply in most cases concerning consumer or commercial
transactions, and I do not read the majority’s opinion to suggest
otherwise. And, as the majority notes, if the Legislature finds
the treble damage remedy to be problematic where it does apply,
6
SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR
Groban, J., concurring
the Legislature may amend the statute accordingly. (Maj. opn.,
ante, at pp. 1–2.)
GROBAN, J.
I Concur:
KRUGER, J.
7
See next page for addresses and telephone numbers for counsel who
argued in Supreme Court.
Name of Opinion Siry Investment, L.P. v. Farkhondehpour
__________________________________________________________
Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published) XX 45 Cal.App.5th 1098Review Granted (unpublished)
Rehearing Granted
__________________________________________________________
Opinion No. S262081
Date Filed: July 21, 2022
__________________________________________________________
Court: Superior
County: Los Angeles
Judge: Stephanie M. Bowick and Edward B. Moreton, Jr.
__________________________________________________________
Counsel:
Wilson, Elser, Moskowitz, Edelman & Dicker, Gregory D. Hagen and
Robert Cooper for Plaintiff and Appellant.
Law Offices of Steven P. Scandura and Steven P. Scandura as Amicus
Curiae on behalf of Plaintiff and Appellant.
Knickerbocker Law Firm, Richard L. Knickerbocker; and Mohammad
Fakhreddine for Defendant and Appellant Saeed Farkhondehpour.
Fisher & Wolfe, David Fisher; Greines Martin Stein & Richland,
Robert A. Olson and Edward L. Xanders for Defendant and Appellant
Morad Neman.
Counsel who argued in Supreme Court (not intended for
publication with opinion):
Robert Cooper
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP
555 South Flower Street, 29th Floor
Los Angeles, CA 90071
(213) 330-8950
Richard L. Knickerbocker
Knickerbocker Law Firm
2425 Olympic Boulevard, Suite 4000W
Santa Monica, CA 90404
(310) 260-9060
Mohammad Fakhreddine
Law Office of Mohammad Fakhreddine
1601 Pacific Coast Highway, Suite 290
Hermosa Beach, CA 90254
(310) 698-0804