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Court of Appeal, Second District, Division 1, California.

Dawit MIKAIL, Plaintiff and Appellant, v. Ruth E. SAUERWALD, Defendant and Respondent.

No. B039341.

Decided: February 02, 1990

Alan Jule Schultz, Beverly Hills, for plaintiff and appellant. Gilbert, Kelly, Crowley & Jennett, Clifford H. Woosley, Peter J. Godfrey, and Gregg T. Lenahan, Los Angeles, for defendant and respondent.

Plaintiff, Dawit Mikail (Mikail), appeals from the order setting aside a $250,000 default judgment in his favor against defendant Ruth Sauerwald (Sauerwald) and reducing the award to $25,000.   We agree with Mikail that the trial court erred in amending the judgment, and reverse.1


On April 8, 1984, while Mikail was stopped at a red traffic light, Sauerwald “rear-ended” his auto.   On September 19, 1984, Mikail filed suit, seeking unspecified damages within the trial court's jurisdiction.   Sauerwald, who was insured and represented by counsel, filed her answer on March 12, 1985.   On November 6, 1985, Mikail filed an at-issue memorandum that requested arbitration and waived damages in excess of $25,000.  (Former Code Civ.Proc., § 1141.11, subd. (a);  Code Civ.Proc., § 1141.12.) 2

On April 2, 1986, the trial court granted Mikail's motion to strike Sauerwald's answer because of repeated failure to comply with discovery.   On June 16, 1986, Mikail served Sauerwald's attorney and insurer with a statement of damages alleging $250,000 in general damages.   Mikail filed the statement of damages on June 23.   On June 26, the court denied Sauerwald's motion to reconsider the order striking the answer.   In support of the motion to reconsider, Sauerwald's attorney declared that Mikail's demand was $250,000, and Sauerwald had moved to an unknown address and could not be found.   At the June 26, 1986, hearing, Sauerwald's attorney stated Mikail “is alleging hundreds of thousands of dollars worth of damage[s].”  When the court noted that Sauerwald had disappeared, her attorney stated:  “Right.   And we don't even know if it was willful.   We just can't find her.   I have investigators out.   I have located various members of her family.   They say they don't know where she is.”

On November 16, 1987, the court granted Mikail's request to enter default, which had been served on Sauerwald's attorney.   After a default “prove-up” hearing held on February 19, 1988, the court ordered a $250,000 default judgment entered in favor of Mikail.   Mikail did not serve Sauerwald or her attorney with notice of the February 19 hearing.

On September 14, 1988, Sauerwald moved to set aside and amend the default judgment, claiming Mikail's arbitration election limited him to a $25,000 award and Mikail failed to properly serve her with the statement of damages and notice of the default prove-up hearing.   Mikail's attorney denied the allegation of Sauerwald's attorney that counsel had agreed notice of any default hearing would be provided.   On November 18, 1988, the trial court ordered the judgment amended “nunc pro tunc” to $25,000.


Mikail contends:  (I) striking Sauerwald's answer permitted him to recover damages in excess of those allowed in arbitration;  and (II) the statement of damages was properly served on Sauerwald's attorney, and Mikail was not required to serve notice on Sauerwald of the February 19, 1988, default prove-up hearing.   Sauerwald contends Mikail could withdraw from arbitration only by a formally noticed motion and, having failed to so move, he was bound by the arbitration damages limit.   Sauerwald also contends Mikail was required to personally serve her with the statement of damages, and Mikail's failure to serve notice on her counsel of the default prove-up hearing violated an express agreement as well as accepted standards of professional courtesy.



 Mikail's contention that striking Sauerwald's answer permitted him to recover damages in excess of those allowed in arbitration is well taken.  Section 1141.12, subdivision (b)(ii) permits a plaintiff to elect arbitration if he waives recovery of an award in excess of the jurisdictional limit specified in section 1141.11.  Section 1141.12, subdivision (c) provides in relevant part:  “Any election by a plaintiff shall be filed no sooner than the filing of the at-issue memorandum․”   California Rules of Court, rule 209(a)(3) provides:  “No civil case shall be placed on the civil active list or be set for a trial until it is at issue and a party has served and filed an at-issue memorandum stating ․ [¶] (3) that all essential parties have been served with process or appeared and that the case is at issue as to those parties․”   California Rules of Court, rule 210 defines cases on the civil active list as those “in which an at-issue memorandum has been filed.”

Sauerwald does not dispute that when her answer was stricken, the case was no longer at issue or eligible for the civil active list.   No arbitration date was set, and the case was never arbitrated.   At oral argument, counsel stated an arbitrator was selected, but the record does not contain any reference to such selection.   Sauerwald did not seek to set aside the default.   She contends only that Mikail should have moved the court to withdraw from arbitration, and impliedly concedes that, had Mikail done so, the court could, or indeed should, have granted such a motion.   Having failed to so move, Sauerwald concludes, Mikail cannot recover damages in excess of those permitted in arbitration.

Sauerwald cites Invicta Plastics, U.S.A., Ltd. v. Superior Court (1981) 120 Cal.App.3d 190, 174 Cal.Rptr. 476, in which Division Two of this court upheld the trial court's grant of the plaintiff's motion to withdraw from arbitration.   Sauerwald claims Invicta requires a formal motion to withdraw from arbitration under all circumstances.   However, in Invicta, the case was properly subject to arbitration, and “[t]here was no independent ‘unilateral’ action by the plaintiff in the trial court․  [¶] Obviously the integrity of the judicial process does not permit litigants to play fast and loose with legal procedures.   Accordingly, in the absence of express authority giving a party the right to some change or amendment, a court should not permit a change sought by a party solely for the purpose of procedural advantage or leverage.”  (Id. at pp. 192–193, 174 Cal.Rptr. 476.)

Sauerwald also cites Robinson v. Superior Court (1984) 158 Cal.App.3d 98, 204 Cal.Rptr. 366, in which Division Seven of this court held that where the plaintiff elected arbitration and, after a hearing, received the maximum award permitted in arbitration, she was not entitled to a trial de novo to try to prove greater damages.  (Id. at pp. 100, 102–107, 204 Cal.Rptr. 366.)  Robinson, citing Invicta, stated that where a plaintiff discovers his damages exceed the arbitration limit, fairness to the defendant requires that the plaintiff move to withdraw from arbitration before the hearing occurs.  (Robinson v. Superior Court, supra, 158 Cal.App.3d at pp. 106, fn. 12, 108, 204 Cal.Rptr. 366.)   Because the record did not suggest the plaintiff was acting in bad faith, Division Seven remanded for the trial court to determine whether the plaintiff should be excused from failing to so move.   (Id. at pp. 106, 108, 204 Cal.Rptr. 366.)   Unlike our case, however, the Robinson case already had been properly arbitrated, and neither party sought an unfair advantage.

In the present case, Sauerwald's repeated failure to respond to discovery frustrated the rapid and economical case resolution that arbitration would have provided.   That failure properly led to the striking of Sauerwald's answer and the resulting default.   Sauerwald, not Mikail, then sought procedural advantage by limiting Mikail to the arbitration award limits when Sauerwald alone prevented the case from being arbitrated.   While, as in Robinson, we could remand for the trial court to determine whether Mikail should be excused from moving to withdraw from arbitration, we need not do so because striking Sauerwald's answer made the case ineligible for arbitration.   The case was not arbitrated or assigned for arbitration.   Moreover, unlike either party in Robinson, Sauerwald, not Mikail, sought advantage through procedural manipulation.   Mikail would have been entitled to withdraw from arbitration had he so moved.   Requiring a hearing or penalizing Mikail merely for failing to so move would frustrate the policy behind arbitration and reward Sauerwald for preventing speedy case resolution.

We hold that where plaintiff elects arbitration and defendant's answer is then stricken before the arbitration hearing, plaintiff need not formally move to withdraw from arbitration to attempt to recover damages in excess of those permitted in arbitration.   Thus, the trial court erred in ruling that Mikail was not eligible to receive damages in excess of those permitted in arbitration.


 Mikail's related contentions that Sauerwald was properly notified of the statement of damages and was not entitled to notice of the default prove-up hearing also are well taken.   Sauerwald does not challenge the validity of the default, and did not move to set it aside.   Moreover, Sauerwald concedes that Mikail served her counsel with the statement of damages and was not required to notify her of the default prove-up hearing.   Sauerwald contends Mikail was required to personally serve her with the statement of damages, and had agreed to notify her counsel of the default prove-up hearing.

Sauerwald cites Engebretson & Co. v. Harrison (1981) 125 Cal.App.3d 436, 178 Cal.Rptr. 77, in which the defendant was personally served with a complaint seeking unspecified damages but did not appear to answer.   A statement of damages was mailed to the defendant.   The defendant refused to accept a subsequently mailed amended statement of damages, request to enter default, and notice of motion for default judgment.   A default judgment for the amount claimed in the amended statement of damages was entered.   The appellate court affirmed the trial court's subsequent determination that the default was valid but the judgment was void because the statements of damages were amendments to the complaint requiring personal service and the judgment exceeded the amount requested in the complaint.  (Id. at pp. 439–444, 178 Cal.Rptr. 77.)

Sauerwald also cites Plotitsa v. Superior Court (1983) 140 Cal.App.3d 755, 189 Cal.Rptr. 769, in which the defendants were formally served with a complaint seeking unspecified damages but did not appear or answer.   A request to enter default, including a $250,000 demand, was mailed to the defendants.   The next day, a default was entered.   The trial court denied the defendants' motion to set aside the default.   Division Four of this court reversed, holding that the defendants were entitled to personal service of the statement of damages and 30 days within which to respond.  (Id. at pp. 758–761, 189 Cal.Rptr. 769.)   Relying on Engebretson, Division Four explained its ruling:  “Nonappearing and defaulting defendants, having determined to allow default in the amount originally prayed for, are more likely to fail to adequately examine an amendment to a complaint served by mail, believing it to be merely a procedural step toward obtainment of judgment in the amount originally sought.   Employees of such defendants are more likely to fail to recognize the importance of such mail and misplace it.   Also, documents sent by mail are more likely to be lost.  [Citation.]  ․ [¶] Requirement of personal service of the statement of damages in these circumstances will not result in plaintiffs being unable to obtain default because the defendant is not locatable.   Plaintiffs have the same protection as exists with service of summons on original complaints.   Sections 415.20 and 415.50 provide for substituted service and service by publication if reasonable diligence in effecting personal service is not successful.”  (Plotitsa v. Superior Court, supra, 140 Cal.App.3d at pp. 760–761, 189 Cal.Rptr. 769.)

In Greenup v. Rodman (1986) 42 Cal.3d 822, 231 Cal.Rptr. 220, 726 P.2d 1295, a defendant's answer to a complaint seeking unspecified general and $100,000 in punitive damages was stricken and a default entered because of repeated failure to comply with discovery orders.   Not until a month later did the plaintiff file a request to enter a default judgment, which stated for the first time the amount of damages sought.   Apparently, the request to enter default judgment was not served personally or by mail on the defendant or his attorney.  (See id. at p. 827, 231 Cal.Rptr. 220, 726 P.2d 1295.)   At the default prove-up hearing, the defendant was not present in person or by counsel.   The trial court awarded the plaintiff $338,000 in compensatory and $338,000 in punitive damages.  (Id. at pp. 825–826, 231 Cal.Rptr. 220, 726 P.2d 1295.)   The Supreme Court reversed, stating that “due process requires formal notice of potential liability;  actual notice may not substitute for service of an amended complaint” (id. at p. 826, 231 Cal.Rptr. 220, 726 P.2d 1295, citing Engebretson & Co. v. Harrison, supra, 125 Cal.App.3d at p. 443, 178 Cal.Rptr. 77), and rejected the plaintiff's attempt to distinguish defaults where the defendant never answered from those where the answer was stricken (Greenup v. Rodman, supra, 42 Cal.3d at pp. 826–829, 231 Cal.Rptr. 220, 726 P.2d 1295).   The Supreme Court gave the plaintiff the option of accepting a modified judgment for $15,000 in compensatory damages (the minimum amount of compensatory damages in controversy under the allegations of her complaint) and $100,000 in punitive damages or filing and serving the defendant with an amended complaint specifying the amount of damages sought and permitting the defendant to answer.  (Id. at pp. 830–831, 231 Cal.Rptr. 220, 726 P.2d 1295.)

The three cases discussed above are factually distinguishable from the instant case.   In Engebretson, the defendant was not represented, and refused documents served by mail.   Thus, the defendant lacked counsel to defend and knowledge of the amount of damages.   In Plotitsa, the defendants were not represented in the action, lacked notice of the amount of damages sought, and, in any event, could not have responded within a day to the mailed request for default.   In Greenup, notice of the amount of damages sought was apparently neither personally served nor mailed to the defendant or his counsel.   In the present case, Sauerwald's counsel received formal notice of the amount of Mikail's claimed damages before the hearing on Sauerwald's motion to reconsider the order striking the answer, and referred to the figure in the supporting declaration and oral argument.   Finally, because Sauerwald continued to be represented by counsel, Mikail reasonably could expect to communicate with her through counsel.   The rationale underlying Engebretson, Plotitsa, and Greenup is that a defaulting defendant who is unrepresented, unaware of his potential maximum liability, or both cannot have a judgment entered against him until the plaintiff notifies him of the limits of his monetary exposure.   That rationale is not applicable here because Sauerwald's counsel had formal notice and actual knowledge of the amount of damages sought by Mikail.   As against Mikail, counsel's knowledge was reasonably imputed to Sauerwald.  (See Sullivan v. Dunne (1926) 198 Cal. 183, 192, 244 P. 343;  Powell v. Goldsmith (1984) 152 Cal.App.3d 746, 751, 199 Cal.Rptr. 544.)

The trial court made no finding regarding the alleged agreement to provide notice of the default prove-up hearing, and the conflicting declarations do not permit us to resolve the matter.   As Sauerwald concedes, Mikail was not required to provide such notice.   Given Sauerwald's repeated attempts to frustrate resolution of the matter, we cannot fault Mikail for not providing such notice as a matter of courtesy.

On these unique facts, we conclude that the trial court erred in amending the judgment.


We reverse the order amending the judgment.   The matter is remanded to the trial court with instructions to vacate its order amending the judgment and to reinstate the original $250,000 default judgment.

Mikail is entitled to costs on appeal.


1.   Sauerwald moved to set aside the default judgment and amend it “nunc pro tunc” to show a $25,000 award for Mikail.   In a minute order, the court granted the motion “as prayed.”   No amended judgment was entered.   In the interest of fairness and judicial economy, we deem the order granting the motion an amended $25,000 judgment for Mikail and modify the judgment accordingly.  (See Molien v. Kaiser Foundation Hospitals (1980) 27 Cal.3d 916, 920–921, 167 Cal.Rptr. 831, 616 P.2d 813.)

2.   The jurisdictional limit for arbitration later was raised to $50,000.  (Code Civ.Proc., § 1141.11.)All further statutory references are to the Code of Civil Procedure.

ORTEGA, Associate Justice.

SPENCER, P.J., and L. THAXTON HANSON, J., concur.