Henry v. Murphy CA4/3 ( 2013 )

Filed 3/29/13 Henry v. Murphy CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
DONALD L. HENRY,
Plaintiff and Respondent, G047108
v. (Super. Ct. No. 30-2009-00315861)
TIMOTHY MURPHY, OPINION
Defendant and Appellant.
Appeal from a judgment of the Superior Court of Orange County, David T.
McEachen, Judge. Affirmed.
William H. Shibley and Jonathan G. Shibley for Defendant and Appellant.
Richard V. McMillian for Plaintiff and Respondent.
* * *
Defendant Timothy Murphy appeals from a default judgment in the sum of
approximately $905,000 in favor of plaintiff Donald L. Henry, claiming the complaint
did not provide sufficient notice of the amount of damages plaintiff was seeking. We
disagree and affirm.
FACTS AND PROCEDURAL HISTORY
According to the complaint, defendant represented to plaintiff he was a
principal in defendant Capital Investors, Inc., a company that loaned money to
transportation companies. He also represented Capital needed funds to expand and told
plaintiff that for any money he loaned Capital, Capital would pay him interest of 12
percent per annum. The complaint alleged that, based on such representations, in July
2008 plaintiff entered into a written agreement to loan Capital $250,000 with interest at
12 percent per annum, payable monthly. The loan was collateralized by nine commercial
installment notes with a market value of over $740,000. The loan was due and payable in
four years. Four months later plaintiff loaned an additional $400,000 to Capital on the
same terms. Collateral was eight commercial installment notes valued at $850,000.
Plaintiff and defendant executed a separate contract for this loan. Both contracts
provided that if there was default on an interest payment, repayment of principal could be
accelerated.
As alleged in the complaint, in June 2009 Capital’s interest payment to
plaintiff was returned for insufficient funds. Pursuant to the terms of the agreements,
plaintiff demanded that Capital repay the principal and pay all unpaid interest; Capital
failed to do so.
Plaintiff then filed the complaint against defendant, among others, for
fraud. The prayer sought general and special damages according to proof, as well as
punitive damages and attorney fees. Defendant filed an answer to the complaint.
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Subsequently plaintiff filed a first amended complaint adding new parties;
it did not change the cause of action against defendant. Thereafter plaintiff filed a second
amended complaint; again there were no changes in the allegations against defendant.
Defendant did not answer either complaint.
Defendant and his wife filed a chapter 13 bankruptcy petition. Plaintiff
filed an adversary proceeding in the bankruptcy court. He also filed a notice in this
action that it had been stayed pursuant to the automatic stay issued by the bankruptcy
court. The parties entered into a stipulation, memorialized in an order, giving plaintiff
relief from the automatic stay and allowing him to prosecute the state court action to
judgment against defendant. Plaintiff was prohibited from enforcing the judgment
against defendant but it was to be the claim against defendant in the bankruptcy action.
The order continued, “The plaintiff[,] having filed an amended complaint in the state
court[,] shall take the defendant[’]s default and the defendant shall not participate in the
state court’s proceedings and shall withdraw[] any responsive pleadings that may have
been filed on behalf of the debtor.”
For the next 11 months until the trial date defendant did not withdraw his
answer and plaintiff was unable to take his default. On the day of trial defendant asked
the court to strike his answer. Although he had been subpoenaed to appear, his lawyer
advised the court there was a criminal case pending based on the same issues. Thus,
defendant would not appear and if called to testify would assert his right not to testify
under the Fifth Amendment of the United States Constitution. The court struck the
answer and plaintiff proved up the case against defendant, obtaining a judgment for fraud
in the sum of slightly more than $905,000.
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DISCUSSION
Defendant argues the judgment is invalid because the complaint did not
give him sufficient notice of the amount plaintiff was seeking. Code of Civil Procedure
section 580, subdivision (a) provides, “The relief granted to the plaintiff, if there is no
answer, cannot exceed that demanded in the complaint, in the statement required by
Section 425.11, or in the statement provided for by Section 425.115; but in any other
case, the court may grant the plaintiff any relief consistent with the case made by the
complaint and embraced within the issue.”
“The notice requirement of section 580 was designed to insure fundamental
fairness.” (Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 494.) “If no specific
amount of damages is demanded, the prayer cannot insure adequate notice of the
demands made upon the defendant. [Citation.] Consequently, a prayer for damages
according to proof passes muster under section 580 only if a specific amount of damages
is alleged in the body of the complaint. [Citation.]” (Ibid.; see also Greenup v. Rodman
(1986) 42 Cal.3d 822, 829 [“allegations of a complaint may cure a defective prayer for
damages”].)
Here the prayer seeks damages according to proof. This by itself is
insufficient. Thus, we must examine whether there are adequate facts pleaded in the
body of the complaint to notify defendant of the amount plaintiff sought to recover.
Plaintiff relies primarily on the specific allegations in the fraud cause of action. In and of
themselves they do not suffice. These are merely fact allegations that happen to include
dollar amounts but are not specifically damage claims. (Heidary v. Yadollahi (2002) 99
Cal.App.4th 857, 866 [fact allegations forming “nucleus” of fraud count insufficient to
apprise the defendant of damages sought].)
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But the complaint contained more specific allegations in other paragraphs.
Plaintiff pleaded he loaned defendant the total sum of $650,000 with interest at 12
percent per annum. He also alleged the loan contracts contained a provision allowing
him to demand repayment of the principal and all interest due. Further, he alleged that
after defendant defaulted on an interest payment, plaintiff made several demands for the
principal and past due interest, which plaintiff never paid.
Although this is not the ideal method of pleading, it is sufficient to apprise
defendant of the amount plaintiff sought from him. The complaint alleges defendant
defaulted and plaintiff demanded repayment of principal and interest due, which
defendant did not pay. The principal is fixed at $650,000 and interest is calculable at 12
percent per annum from the date of default. The trial court judge confirmed the award
was comprised of those two elements.
In his reply brief defendant points to boilerplate allegations in the
complaint that the damage amount was currently unknown or not yet ascertained, arguing
that they, along with plaintiff’s failure to allege he had been damaged, “do not prove”
(boldface and capitalization omitted) plaintiff “[suffered] any money damages.” But
plaintiff need not “prove” damages in the complaint, merely allege them, and he did so
adequately.
Since we decide the case on the basis set out above, we have no need to,
and do not, decide any other issues raised by the parties.
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DISPOSITION
The judgment is affirmed. Plaintiff is entitled to costs on appeal.
THOMPSON, J.
WE CONCUR:
O’LEARY, P. J.
ARONSON, J.
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