WETTSTEIN v. CAMETO

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

George WETTSTEIN, Don Cobler and Homer H. Cobler, Plaintiffs, Cross-Defendants and Appellants, v. Anna CAMETO, Defendant, Cross-Complainant and Respondent

Civ. 21350.

Decided: March 31, 1964

Hagar, Crosby & Rosson, Justin M. Roach, Jr., Oakland, for appellants. Nathan Goldwater, John F. Balaam, Oakland, for respondent.

Plaintiffs appeal from order denying their motion to set aside default and default judgment entered on the cross-complaint.

QUESTION PRESENTED.

Was the default judgment on the cross-complaint void? This requires a determination of the question as to whether a default judgment is void on its face, when granted upon failure to answer a pleading which can be either a counterclaim or a cross-complaint.

RECORD.

Plaintiff filed a complaint against defendant on a common count for $5,000 for moneys had and received. On January 18, 1960, defendant filed and served on plaintiffs an ‘Answer and Cross-Complaint.’ The answer in effect was a general and specific denial. It then provided: ‘And for a further, separate and distinct answer to plaintiffs' complaint and by way of cross-complaint, defendant Anna Cameto complains of plaintiffs and alleges,’ that defendant and Leon Cameto, since deceased, as lessors, entered into a lease agreement with plaintiffs, as lessees of certain described premises, together with certain described personal property, for a 5-year term; that as security for the performance of the lease and for any damages beyond reasonable wear and tear plaintiffs deposited with defendant the sum of $5,000; that plaintiffs failed to maintain the personal property and premises in good condition and operation as provided in the lease; and that on the expiration of said term defendant was required to expend certain sums to place the premises and personal property in rentable condition and suffered certain loss of rental use of said premises; wherefore defendant prayed judgment against plaintiffs for $7,484.19 for restoring the premises and equipment against which defendant used the aforesaid $5,000 deposit, leaving a balance of $2,484.19, $3,750 for loss of rental use, and $1,500 for attorney fees. Counsel for defendant thereafter directed several letters and made several telephone calls to plaintiffs' attorney requesting an answer to the cross-complaint. No answer was filed. June 29, 1961, plaintiffs' default on the cross-complaint was entered. Over a year later, July 12, 1962, default judgment was entered in favor of defendant and against plaintiffs for $5,290.35 and attorney's fees of $1,500. In the judgment damages were awarded defendant in the sum of $10,290.35, against which the $5,000 was credited. A writ of execution was issued on August 24, 1962, and plaintiffs' bank account was garnisheed. The execution was returned fully satisfied. November 28, 1962, plaintiffs moved to set aside the default and judgment, on grounds that the default and judgment entered thereon were void. The motion was denied December 17, 1962. On February 11, 1963, plaintiffs moved to have the order denying the motion to set aside vacated. This motion was denied, the court there stating that the responsive pleading was a cross-complaint, because, inter alia, it sought affirmative relief. This appeal is from the order denying the motion to set aside the default and judgment.

WAS THE DEFAULT AND JUDGMENT VOID?

The motion to set aside the default judgment was not based upon section 473, Code of Civil Procedure. (It could not be as it was made approximately one and one-half years after default was entered.)1 The motion was made upon the sole ground that the default and judgment are void, because the ‘cross-complaint’ is both a cross-complaint and a counterclaim, and that as a counterclaim it did not require an answer; hence no default for failure to answer could be entered.

An order void on its face may be vacated on motion made at any time. (Hager v. Hager (1962) 199 Cal.App.2d 259, 261, 18 Cal.Rptr. 695; Myers v. Washington (1963) 211 Cal.App.2d 767, 771, 27 Cal.Rptr. 778; 3 Witkin Cal. Procedure, p. 2117.)

Section 437, Code of Civil Procedure, provides in pertinent part: ‘The answer of the defendant shall contain: 1. A general or specific denial of the material allegations of the complaint controverted by the defendant. 2. A statement of any new matter constituting a defense or counterclaim. * * *’

Section 438, Code of Civil Procedure, provides in pertinent part: ‘The counterclaim mentioned in section 437 must tend to diminish or defeat the plaintiff's recovery and must exist in favor of a defendant and against a plaintiff between whom a several judgment might be had in the action; * * *.’

The matter set up by defendant as ‘a further, separate and distinct answer to plaintiffs' complaint and by way of cross-complaint’ (emphasis added) clearly qualifies as a counterclaim. It obviously tends to diminish or defeat plaintiffs' recovery. It alleges that while defendant has plaintiffs' $5,000 deposit, plaintiffs owe defendant by way of damages a sum in excess of that amount, against which the $5,000 may be offset.

Section 666, Code of Civil Procedure, states: ‘If a counterclaim, established at the trial, exceed the plaintiff's demand, judgment for the defendant must be given for the excess; or if it appear that the defendant is entitled to any other affirmative relief, judgment must be given accordingly. When the amount found due to either party exceeds the sum for which the court is authorized to enter judgment, such party may remit the excess, and judgment may be rendered for the residue.’

2 Witkin, California Procedure, states at pages 1568–1569: ‘The statutory counterclaim established by the codes was an enlargement of both the common law recoupment and the equitable setoff. Thus, though in recoupment no affirmative judgment could be had, the counterclaim allows it; and, though setoff was limited to liquidated demands, the counterclaim is not. [Citations.]’

Upon counterclaim a defendant may recover damages exceeding the plaintiffs' demand.' (Todhunter v. Smith (1934) 219 Cal. 690, 693, 28 P.2d 916.) Thus, the responsive pleading is a counterclaim. It is also a cross-complaint.

Section 442, Code of Civil Procedure, provides in pertinent part: ‘Whenever the defendant seeks affirmative relief against any person * * * relating to or depending upon the contract, transaction, matter, happening or accident upon which the action is brought or affecting the property to which the action relates, he may * * * file * * * a cross-complaint.’ (See generally 2 Chadbour, et al., California Pleading, §§ 1701–1712, p. 657, et seq.) The cross-complaint seeks affirmative relief concededly arising out of the same contract, transaction or matter on which the complaint is based.

It was recognized early that the two forms of responsive pleading may overlap. ‘[U]nder our system of procedure, there is a very shadowy line of distinction between a cross complaint and a counterclaim and a considerable area in which they overlap.’ (Schrader v. Neville (1949) 34 Cal.2d 112, 114, 207 P.2d 1057, 1058.) The situation as to counterclaims and cross-complaints is well stated by Mr. Justice Draper in Taliaferro v. Taliaferro (1957) 154 Cal.App.2d 495, 498–499, 316 P.2d 393, 394, 395, ‘The question then becomes whether the ‘cross-complaint’ here was such in law. A cross-complaint requires an answer. Code Civ.Proc. § 442. A counterclaim requires no answer, and its allegations are deemed controverted without further pleading. Code Civ.Proc. § 462.

‘Under the California statutes, there is a broad area in which there is no true distinction between a cross-complaint and a counterclaim. The cross-complaint affords a broader remedy only in the sense that it may be used to bring new parties into the action (Code Civ.Proc. § 442) whereas the counterclaim must ‘exist in favor of a defendant and against a plaintiff between whom a several judgment might be had in the action,’ (Code Civ.Proc. § 438.) While the counterclaim ‘must tend to diminish or defeat the plaintiff's recovery,’ (Code Civ.Proc. § 438) the code specifically authorizes recovery of an affirmative judgment by defendant where his counterclaim exceeds plaintiff's demand. (Code Civ.Proc. § 666). A cross-complaint may be filed only when the affirmative relief sought by defendant constitutes a claim ‘relating to or depending upon the contract, transaction, matter, happening or accident upon which the action is brought.’ Code Civ.Proc. § 442. Since 1927, there has been no comparable limitation upon the counterclaim, which merely need tend to diminish or defeat plaintiff's recovery. Code Civ.Proc. § 438. Where, as in the case at bar, defendant's claim is based upon the very transaction sued on by plaintiff, tends to defeat plaintiff's claim and involves only the original parties, defendant's claim may be deemed either a cross-complaint or a counterclaim. (3 Stan.L.R. 99; 2 Witkin, Calif.Proc. § 571.) This situation has caused much confusion, which the case law has attempted, with only moderate success, to clear. The true nature of the pleading will be determined from its allegations, regardless of its designation by the pleader as cross-complaint or counterclaim. Terry Trading Corp. v. Barsky, 210 Cal. 428, 434, 292 P. 474, and see cases collected in 2 Witkin, Calif.Proc. § 570. Where the allegations show that the pleading may be either a cross-complaint or a counterclaim, it will be deemed to fall within the classification best designed to reach the most desirable result in the particular case. (2 Witkin, Calif.Proc. 1576.) In general, the pleading will not be treated as requiring an answer, thus avoiding default (see cases collected at 3 Stan.L.R. 101).'

The current case law indicates that, as stated in the above quotation from Taliaferro, where a responsive pleading qualifies as both a counterclaim and a cross-complaint (as is the situation in our case) the courts will construe the pleading, regardless of what the party has designated it, in whichever way will favor litigation on the merits and prevent technical advantage being taken by one party over the other. (See 51 Cal.L.Rev. 494, 505; 3 Stan.L.Rev. 99; 2 Witkin, Cal.Procedure §§ 570–571, pp. 1575–1577; Luse v. Peters (1933) 219 Cal. 625, 28 P.2d 357; Lynch v. Betts (1962) 198 Cal.App.2d 755, 18 Cal.Rptr. 345.)

This brings us to the question as to whether, the responsive pleading being either a counterclaim or a cross-complaint, the judgment is void on its face because entered for failure to answer the cross-complaint.

In Furnival v. Groves (1957) 154 Cal.App.2d 846, 317 P.2d 117, the plaintiff had filed in action against the defendant to quiet title. The defendant filed an answer and cross-complaint asking that the defendant's title be quieted as against the plaintiff. The same facts were pleaded in the answer as in the cross-complaint. Default was taken for failure of the plaintiff to answer the cross-complaint, and default judgment entered. About three years later the plaintiff moved to set aside the default judgment on the ground that the judgment was void. On appeal, the order denying that motion was reversed. The appellate court stated that quiet title actions were peculiar in the sense that one could answer asserting his own title without filing either a counterclaim or cross-complaint seeking affirmative relief. Therefore, since the cross-complaint was unnecessary in view of the allegations of the answer, the clerk had no authority to enter the default. The trial court's order refusing to set aside the default and default judgment was reversed with directions to the trial court to set aside the default and judgment, thereby inferentially holding the default and judgment to be void on their faces.

Furnival is not applicable in the case at bench for the reason that as there said (154 Cal.App. p. 847, 317 P.2d p. 118), ‘Quiet title actions are somewhat peculiar in that a defendant, claiming title in himself to the property described in the complaint, may plead his own title in the answer and without filing a counterclaim or cross-complaint ask for affirmative relief quieting his own title against the plaintiff’; whereas in an action on a common count the defendant may neither offset nor obtain affirmative relief unless he sets up a counterclaim or cross-complaint. Another distinction is that in Furnival there were two separate pleadings under which affirmative relief could be obtained, the answer and the cross-complaint, while here there was only one pleading under which affirmative relief could be obtained, namely, the cross-complaint, which could be either a cross-complaint or counterclaim, and as to which sooner or later the court would have to determine under which designation relief was to be granted. Cross-complainant could not be given relief under both denominations.

Nor is Farish v. Brown (1952) 111 Cal.App.2d 306, 244 P.2d 484, applicable, where the court set aside a default judgment on a pleading denominated ‘and for a separate and further defense and by way of counterclaim and cross-complaint * * *.’ (111 Cal.App.2d p. 307, 244 P.2d p. 485,) holding that the pleading was a counterclaim and did not require an answer. The pleading showed that it was claimed to be a counterclaim as well as a cross-complaint. No such designation appears in our case. More importantly, the pleading set up in two counts matters which had no relationship to the obligation sued upon in the complaint, and which could only be pleaded in a counterclaim and not in a cross-complaint. One of the important distinctions between a counterclaim and a cross-complaint is that the matters claimed in the counterclaim need not arise from the transaction upon which the complaint is based, while a cross-complaint is limited to matters arising from that transaction. In our case the matters set forth in the cross-complaint all arise from the transaction upon which the complaint is based.

In Taliaferro v. Taliaferro, supra, 154 Cal.App.2d 495, 499, 316 P.2d 393, 395, the court said, ‘Where the allegations show that the pleading may be either a cross-complaint or a counterclaim, it will be deemed to fall within the classification best designed to reach the most desirable result in the particular case.’ Although in that case it is stated, ‘In general, the pleading will not be treated as requiring an answer,’ (154 Cal.App.2d p. 499, 316 P.2d p. 395.) where it is so treated, that determination must be final, as against anything but direct attack or a motion within six months under section 473. It will be noted that in Taliaferro the pleading which could be either a cross-complaint or a counterclaim is not treated as both. The court is required to make a choice.

2 Witkin, California Procedure, page 1576, refers to the policy in deciding whether a pleading is a cross-complaint or a counterclaim, in this language: If the pleading ‘comes under more than one classification, the court will treat it as a counterclaim or cross-complaint or affirmative defense to reach the most desirable result in the particular case.’ (See also p. 1577; Tomales Bay Oyster Corp. v. Superior Court (1950) 35 Cal.2d 389, 392–393, 217 P.2d 968.)

In Tomales Bay, supra, in a proceeding in prohibition to prevent the superior court from taking further proceedings on a cross-pleading, the court, after finding that the commission's claim was one which could have been pleaded either as a counterclaim or cross-complaint stated 35 Cal.2d at page 393, 217 P.2d at page 970. ‘It follows that the commission's claim is one which could have been pleaded either as a counterclaim or as a cross-complaint. Under such circumstances, as we have seen, the court may treat it as either, and here, since the commission's pleading meets the requirements for a cross-complaint, and the parties treated it as a cross-complaint after it was filed, there appears to be no good reason why we should not likewise treat it as such.’ It should be noted that the court in Tomales Bay stated that the pleading could be treated either as a counterclaim or cross-complaint, not that it could be treated as both.

In Schrader v. Neville, supra, 34 Cal.2d 112, 114, 207 P.2d 1057, 1058, the court on appeal stated concerning the crosspleading there: ‘The Nevilles' claim was one which could have been pleaded as either a counterclaim or a cross complaint and this court may, in its discretion, treat it as either to the end that substantial justice may be done.’ To hold that a pleading denominated a cross-complaint can at the same time be both a counterclaim and a cross-complaint makes the one pleading repetitious and part of it unnecessary. As a cross-complaint must be answered (or demurred to) (see 2 Witkin, Cal.Procedure, p. 1694; Ross v. San Diego Glazed R. P. Co. (1920) 50 Cal.App. 170, 194 P. 1059), the court to which application for a default judgment because of failure to answer is made, must determine whether the purported cross-complaint is or is not a cross-complaint. If it measures up to the standard of a cross-complaint and the court decides to so treat it, such decision must necessarily be final. Otherwise there can be no finality to a default judgment on a cross-complaint. There might have been a different situation had a counterclaim been set up as a separate pleading from the cross-complaint. Then, when asked to enter default, the clerk, who has no judicial powers, and the court when asked to enter a default judgment, could have seen at a glance that there was a counterclaim which did not require an answer. Here the clerk in performing his ministerial duty is confronted by what appears to be a cross-complaint and is so denominated. He could not refuse to enter default thereon. The court performing its judicial function when a judgment is demanded must determine from an examination of the pleading whether it is to be treated as a cross-complaint or a counterclaim. That determination is final as against collateral attack. There has to be finality to a judgment and hence as a matter of policy it must be held that where a pleading denominated a cross-complaint and having the characteristics of a cross-complaint is treated by the court as a cross-complaint and default judgment entered thereon, such judgment is a final determination of the character of the pleading, even though the pleading may also have the characteristics of a counterclaim. In Taliaferro, supra, 154 Cal.App.2d at page 499, 316 P.2d 393, it was held in effect that the determination of the character of the pleading was a matter of policy; the pleading ‘will be deemed to fall within the classification best designed to reach the most desirable result in the particular case’ (154 Cal.App.2d p. 499, 316 P.2d p. 395); so the finality of the determination by the court at the time of default judgment is likewise a matter of policy.

‘The nature and character of a pleading, however, is to be determined from its allegations, regardless of what it may be called by the parties * * *.’ (Tomales Bay etc. Corp. v. Superior Court, supra, 35 Cal.2d 389, 392, 217 P.2d 968, 970.) While the parties here seem to agree that the pleading in question has the characteristics of both a cross-complaint and a counterclaim, an examination of it shows that on its face it has more of the characteristics of the former than of the latter. Its first paragraph states: ‘For the sake of brevity, wherever the word ‘plaintiffs' is used herein it shall mean to include the word ‘cross-defendants' and wherever the word ‘defendant’ is used herein, it shall mean to include the word ‘cross-complainant.” It then alleges the entry into the lease by the parties and incorporates the lease, and alleges at considerable length the failure of the plaintiffs to comply with the specific terms of the lease, incorporates a notice of the Division of Industrial Safety to the effect that the electrical wiring of the premises which under the lease plaintiffs were required to maintain in good condition was unsafe and that specified corrections must be made, plaintiffs' failure to make the corrections, defendant's notice to plaintiffs to make the corrections, other failure by plaintiffs to comply with the terms of the lease, the costs paid by defendant to make the necessary corrections and repairs to restore the premises, and to replace lost and damaged property. In addition defendant claimed loss of rental in the sum of $3,750 because of the condition in which plaintiffs left the premises, asked for $7,484.19 damages for restoring the premises and equipment, less the $5,000 deposit by plaintiffs, or a balance of $2,484.19, and $1,500 attorney's fees. Thus, the pleading bore more of the characteristics of a cross-complaint than of a counterclaim, thereby supporting the trial court's determination, at time of default judgment, that it was a cross-complaint.

In the affidavits used on the motion to set aside the default and judgment, and on the motion to vacate the order of denial, plaintiffs have set forth facts which indicate misleading conduct upon the part of the then attorney for plaintiff (not either of the attorneys on this appeal) and which probably would have compelled the setting aside of the default and judgment, had an application been made in time under section 473. As this is not such an application, and the question involved here is strictly one of law, we deem it unnecessary to set forth these facts.

The order is affirmed.

FOOTNOTES

1.  See Code Civ.Proc. § 473; Koshi v. U-Haul Co. (1936) 212 Cal.App.2d 640, 28 Cal.Rptr. 398; Kessler v. Hay (1962) 211 Cal.App.2d 164, 27 Cal.Rptr. 106; 3 Witkin, Cal.Procedure, p. 2110, § 58.

BRAY, Presiding Justice.

SULLIVAN and MOLINARI, JJ., concur.

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