Monday, January 7, 2019
Court of Appeal:
Court Says Defect in Contractor’s Cross Complaint Against Subcontractors Not Cured by Fact That Amount of Damages Was Set Forth the Action Against the Contractor
By a MetNews Staff Writer
The Fourth District Court of Appeal has declared that a $2.3 million default judgment on a contractor’s cross-complaint against its subcontractors is void based on a lack of specification of the damages being sought, even though the amount of damages was set forth in the complaint in the case brought by a property owner against the contractor.
The opinion, by Acting Presiding Justice Eileen Moore of Div. Three, was filed Dec. 11 and certified for publication on Friday.
Bann-Shiang Liza Yu was the plaintiff. She hired Automatic Teller Modules, Inc. (“ATMI”), a general contractor, to design and build the Candlewood Suites hotel in Anaheim, and sued it for “not less than $10 million dollars” in damages based on alleged construction defects.
ATMI then sued its subcontractors, seeking “compensatory damages according to proof.”
As part of a settlement between Yu and ATMI, Yu was assigned ATMI’s causes of action against the subcontractors, which included Fitch Construction and Fitch Plastering.
Yu secured a $1,264,604.77 default judgment against what Moore denominated “the Fitch Entities.”
Judge Voids Judgment
Orange Superior Court Judge William D. Claster subsequently voided that judgment—granting some defendants’ motions for summary judgment and others’ motions for judgment on the pleadings—based on a lack of specification in the cross-complaint of the amount being sought, discounting an amount being stated in the complaint. He reasoned:
“[B]ecause the cross-complaint filed by ATMI specifically declined to state the amount of damages sought..., it seems contradictory to basic notions of due process and fairness to find that cross-defendants have been put on notice of their potential damages by virtue of an allegation in a complaint filed not against them, but against cross-complainant ATMI.”
Agreeing, Moore noted that Code of Civil Procedure §425.10(a) requires (with exceptions that did not apply) that in a complaint or cross complaint, “the amount demanded shall be stated.”
She pointed to Code of Civil Procedure §580(a), which provides that “[t]he relief granted to the plaintiff, if there is no answer, cannot exceed that demanded in the complaint,” and to §585, to similar effect.
Supreme Court Decision
The jurist cited the California Supreme Court’s 19867 opinion in Greenup v. Rodman. There, Justice Stanley Mosk said, with approval:
“Reasoning that a default judgment that exceeds the demand would effectively deny a fair hearing to the defaulting party, the Courts of Appeal have consistently read the code to mean that a default judgment greater than the amount specifically demanded is void as beyond the court’s jurisdiction.”
“Here, ATMI’s cross-complaint against the Fitch Entities prayed for ‘compensatory damages according to proof.’ That is, the cross-complaint did not state an ‘amount’ of damages. Since no amount of damages was stated, the Fitch Entities were not put on notice of the amount of the potential default judgment. Further, the default judgment of $1.2 million ‘exceeded’ the ‘amount’ demanded in the cross-complaint ($0). Thus, under the relevant statutes and basic due process considerations, the trial court properly voided the default judgment.”
Yu contended that a specification of damages was incorporated by reference in the cross complaint. Moore said the cross complaint expressly incorporated allegations of the complaint “for identification and informational purposes only” and repeatedly indicated that damages were sought “according to proof.”
The case is Yu v. Liberty Surplus Insurance Corporation, 2019 S.O.S. 86.
Copyright 2019, Metropolitan News Company