PEOPLE v. PACIFIC LAND RESEARCH COMPANY

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Court of Appeal, Fifth District, California.

The PEOPLE, Plaintiff and Respondent, v. PACIFIC LAND RESEARCH COMPANY et al., Defendants and Appellants.

Civ. 2881.

Decided: November 16, 1976

Lipofsky & Schulman, Louis A. Lipofsky and William S. Brunsten, Los Angeles, for defendants and appellants. Evelle J. Younger, Atty. Gen., Arthur C. de Goede, Asst. Atty. Gen., Dennis M. Klimmek, Deputy Atty. Gen., Albery M. Leddy, Dist. Atty., and H. Dennis Beaver, Deputy Dist. Atty., for plaintiff and respondent.

OPINION

This action is of a species popularly known as a consumer protection suit. It was commenced in the name of the People of the State of California, acting through the Attorney General of the State of California and the District Attorney of Kern County, co-counsel, pursuant to statutory authority, against Pacific Land Research Company, Federated Land Research Company, American Land Research Company, Southern California Land Research Company, General Land Research Company (collectively hereinafter referred to as ‘Land Research Companies'), Louis L. Fleishman, Rose Fleishman, Ben Fleishman, Alex J. Myers and Marion Myers, and others.1

In sum, the complaint alleges that the defendants were the owners or the agents for the owners of numerous parcels of real property in Kern and Riverside Counties, including the following specifically described parcels in Kern County: Sections 14, 24 and 26, Township 29 South, Range 22 East, M.D.B.& M., County of Kern, State of California.. It is alleged that sections 24 and 26 are contiguous in that they touch at the corner. Continuing, the complaint alleges that as part of a common scheme and plan the defendants subdivided land in Kern and Riverside Counties into five or more lots or parcels for the purpose of sale in violation of section 11000 et seq. of the Business and Professions Code2 (hereinafter referred to as the ‘Subdivided Lands Act’), and the property above described in Kern County has been divided by transactions among the various defendants and sold to over 50 purchasers, thus creating a land project within the meaning of section 11000.5.

In another cause of action the complaint alleges that defendants made numerous misrepresentations of the use and investment potential of the land in an effort to sell it, in violation of section 17500, and in another cause of action that such false advertising and illegal subdivision activity constituted unfair competition as defined in Civil Code section 3369.3

The complaint seeks injunctive relief and the imposition of civil penalties pursuant to sections 11029.1 and 17536 and Civil Code section 3370.1. The complaint further prays for restitution to the purchasers pursuant to section 17535 and Civil Code section 2224 and that the defendants be restrained from appropriating moneys being received from purchasers of real property for their own use or for any purpose that would not benefit the purchasers.

Upon the filing of the complaint, the People caused an order to show cause to be issued directing the appellants to show cause why a preliminary injunction should not issue on the terms hereinafter set forth. At the show cause hearing oral evidence was not offered or received and the cause was submitted upon the complaint and 11 supporting declarations filed by the People, the verified answer of the appellants and 4 declarations in opposition. The court thereupon issued a preliminary injunction which, as modified, in substance restrains and enjoins the appellants from: (1) making specified misrepresentations when selling land, in violation of section 17500; (2) carrying out any acts of unfair competition in violation of Civil Code section 3369 and other specified sections; (3) selling any subdivided land without complying with the Subdivided Lands Act as set forth in section 11000 et seq.; (4) from ‘[s]pending, transferring, encumbering, or removing from California any monies received in payment for lands sold under contracts or agreements of sale where said land was sold without complying with the requirements of the Subdivided Land Law as set forth in section 11000 et seq. of the Business and Professions Code except that defendants may use the money received to pay off underlying deeds of trust as obligations on said deeds become due and payable, and defendants may use the money received to pay real property taxes as they become due. . . .’

At the hearing on the preliminary injunction appellants' counsel unequivocally stated that appellants were not engaged in any of the activities to which the first three paragraphs of the injunction are directed and therefore did not resist the issuance of a preliminary injunction encompassing these matters. On this appeal appellants' arguments are addressed primarily to the claimed invalidity of paragraph 4 of the preliminary injunction quoted above.

The two focal points of appellants' attack upon the injunction around which their arguments cluster are (1) there was insufficient evidence which was admissible and admitted to support and establish the elements necessary for the injunctive relief ordered in paragraph 4 of the injunction and (2) an action brought under section 17535 for restitution to the vendees of the individual contracts of sale must be treated as a class action, and the issuance of the relief prayed for in paragraph 4 is invalid without compliance with the constitutionally mandated procedural safeguards, including notice to members of the class, required in private class actions. We find merit in both contentions and accordingly will modify the preliminary injunction by ordering paragraph 4 thereof stricken from its terms.4

SUFFICIENCY OF THE EVIDENCE BEFORE THE TRIAL COURT

Appellants urge a number of procedural and substantive objections to the complaint and declarations. The procedural objections will be discussed first.

Appellants argue that the failure of the respondents to formally move for admission of and the court to admit the complaint and declarations into evidence is fatal to the cause. Under the circumstances of this case the point must be decided against appellants.

Contrary to appellants' contention, they never objected to the use of the declarations and complaint on the specific ground that they had not been formally offered in evidence. As will hereinafter appear, their objections were directed at improper execution of the declarations under Code of Civil Procedure section 2015.5, and were on the grounds that they contain hearsay, opinion or conclusional statements or that they were not the best evidence. It is evident that both court and counsel treated the complaint and declarations as part of the record before the trial court and that they were considered by the trial court in its decision. While a writing should be offered in evidence, the failure to use express words of a formal offer into evidence is not necessarily fatal where the offering party and the court understand and treat a document to be in evidence and both parties treat it as being in evidence. (Estate of Connolly (1975) 48 Cal.App.3d 129, 132, fn. 4, 121 Cal.Rptr. 325; Walsh v. Walsh (1952) 108 Cal.App.2d 575, 239 P.2d 472; Witkin, Cal.Evidence (2d ed. 1966) Introduction of Evidence at Trial, § 1142, p. 1060; see also Waller v. Waller (1970) 3 Cal.App.3d 456, 465, 83 Cal.Rptr. 533.)

Appellants next attack seven of the declarations as not being executed in accordance with the requirements of Code of Civil Procedure section 2015.5, which in pertinent part requires a declaration to be in writing, ‘stating the date and place of execution within this State and which is subscribed by him and certified or declared by him to be true ‘under penalty of perjury,’ which certification or declaration may be in substantially the following form: I certify (or declare) under penalty of perjury that the foregoing is true and correct.'5

Of the seven declarations attacked upon this ground, it is conceded that those of Jean Waller and Josephine S. Siple cannot be considered since they are not dated. We have examined the five others that are challenged—those of Richard D. Carlson, John Folpmers, Randall L. Abbott, Glenn Kaufman and Mrs. Charles Murphy—and have concluded they sufficiently comply with the provisions of section 2015.5 to be admitted and insofar as they contain evidentiary facts are authorized to be considered by the court.

In upholding these five declarations against appellants' technical objections, we take the liberal view that does not unduly exalt form, having in mind that the statute itself expressly states that a ‘. . . declaration may be in substantially the following form . . ..’ (Emphasis added.) (See Pacific AirLines, Inc. v. Superior Court (1965) 231 Cal.App.2d 587, 589, 42 Cal.Rptr. 68; People v. Walker (1967) 247 Cal.App.2d 554, 562, 55 Cal.Rptr. 726; Hirschman v. Saxon (1966) 246 Cal.App.2d 589, 593, 54 Cal.Rptr. 767; McCauley v. Superior Court (1961) 190 Cal.App.2d 562, 564–565, 12 Cal.Rptr. 119.)6

The alleged defects in the declarations are these:

Glenn Kaufman. That the declaration is verified on ‘information and belief’ and thus is defective because it fails to subject the declarant to the penalty of perjury if the facts set forth therein are not true or not known by the declarant to be true. (Ancora-Citronelle Corp. v. Green (1974) 41 Cal.App.3d 146, 150, 115 Cal.Rptr. 879.) Appellants distort the facts. The declarant certifies that it is ‘true of my own knowledge, except as to the matters which are therein stated upon my information or belief. . . .’ Nowhere in the declaration is any fact stated to be upon information or belief.

Richard D. Carlson. That the declaration does not state the place of execution within California. The upper left hand corner contains the words:

‘STATE OF CALIFORNIA

ss.'

COUNTY OF SACRAMENTO

The declarant identifies himself as the Chief Deputy Real Estate Commissioner of the State of California, placed the seal of the Real Estate Commissioner over his signature, and has under his signature the words ‘Sacramento, California.’ It seems to us that it would be hypertechnical in the extreme to hold that this does not comply with that part of Code of Civil Procedure section 2015.5 requiring a statement of the ‘place of execution within this state.’ (Hirschman v. Saxon, supra, 246 Cal.App.2d 589, 593, 54 Cal.Rptr. 767; McCauley v. Superior Court, supra, 190 Cal.App.2d 562, 564–565, 12 Cal.Rptr. 119.)

Mrs. Charles Murphy. That the declaration fails to state the place of execution within California and that although certified ‘under penalty of perjury,’ the declaration does not expressly state the facts set forth are true. The declaration gives Mrs. Murphy's address as Fillmore, California, which address is stated immediately following her signature. Thus the authorities and reasoning under the same objection to the declaration of Carlson meet this objection.

As to the second objection, we rely upon Pacific AirLines, Inc. v. Superior Court, supra, 231 Cal.App.2d at page 589, 42 Cal.Rptr. at page 69, where the court said:

‘Every statement in the document before us is declared ‘under penalty of perjury’, and clearly is vouched for by declarant. It would be undue exaltation of form to hold that it falls short of stating that its contents are true.'

Accordingly, the declaration meets the requirements of Code of Civil Procedure section 2015.5.

John Folpmers and Randall L. Abbott. That these declarations do not sufficiently indicate the place of execution, they fail to set forth that the facts are true, and only the first paragraph relating to place of employment and job responsibility is made under penalty of perjury. The first two objections are adequately answered by the reasoning and authorities heretofore cited. As to the third objection, it appears that the form of both declarations is the same. The first paragraph states: ‘I . . . certify under penalty of perjury that I am employed by the County of Kern as an assistant planner. . . .’ The second paragraph commences with the words, ‘I further certify that . . ..’ Appellant would have the certification under penalty of perjury apply only to the first paragraph.

Considering the document as a whole, however, and in accordance with the rules laid down in the cases heretofore cited, we believe it would be contrary to the obvious intent and purpose of the declarant and unjustifiably restrictive to hold that the declaration under penalty of perjury was not intended to and does not apply to the entire contents of the writing. Accordingly, we hold that the declaration meets the requirements of the section.

We next turn to appellants' argument that the complaint and declarations do not contain sufficient admissible evidentiary statements to support the conclusion that appellants violated the Subdivided Lands Act and that respondent failed to show that there is a reasonable probability that they will ultimately prevail. (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528, 67 Cal.Rptr. 761, 439 P.2d 889.) As we have indicated, the appellants made a timely objection to the contents of the various declarations and the complaint on the grounds that they contain opinions, conclusions, hearsay, and there is an insufficient foundation for certain parts thereof and that Glenn Kaufman's declaration violated the best evidence rule.

It is, of course, elementary that the declarations and complaint (insofar as relied upon) must set forth admissible evidence; and where materials are incorporated by reference or referred to they must conform to the rules of evidence, including the best evidence rule. (Dugar v. Happy Tiger Records, Inc., supra, 41 Cal.App.3d 811, 815–816, 116 Cal.Rptr. 412; Miley v. Harper (1967) 248 Cal.App.2d 463, 468, 56 Cal.Rptr. 536; Miller & Lux, Inc. v. Bank of America (1963) 212 Cal.App.2d 719, 725, 28 Cal.Rptr. 401; Riviello v. Journeymen Barbers etc. Union (1948) 88 Cal.App.2d 499, 503, 199 P.2d 400—hearsay; Willis v. Lauridson (1911) 161 Cal. 106, 108, 118 P. 530—conclusions; Estate of Powers (1947) 81 Cal.App.2d 480, 485, 184 P.2d 319—opinions.)

Before subjecting the complaint and declarations to the rigors of these tests, it is essential to our analysis to synopsize the salient provisions of the Subdivided Lands Act upon which paragraph 4 of the injunction is based. The purpose of the Subdivided Lands Act (§ 11000 et seq.) is to protect individual members of the public who purchase lots or homes from subdividers and to make sure that full information will be given to all purchasers concerning public utility facilities and other essential facts with reference to the land. (Westbrook v. Summerfield, Roberts, etc., Inc. (1957) 154 Cal.App.2d 761, 766, 316 P.2d 691; 42 Cal.Jur.2d, Records and Recording Laws, § 72.) The law was adopted in the exercise of the police power to prevent fraud, misrepresentation, and sharp practices. (In re Sidebotham (1938) 12 Cal.2d 434, 436, 85 P.2d 453; 19 Ops.Cal.Atty.Gen. 65, 66 (1952); 3 Miller & Starr, Current Law of Cal. Real Estate (1971) p. 240; Guide to Cal. Subdivision Sales Law (Cont.Ed.Bar, 1974) p. 1.)

Division of land or lands into five or more parcels creates a subdivision. (§ 11000.) Before subdivision parcels may be offered for sale or lease, a notice of intention must be filed with the Real Estate Commissioner. (§ 11010.) The subdivider must apply for and obtain a subdivision public report (§ 11018.2); and if the subdivision is approved by the commissioner, the subdivider must furnish prospective purchasers with a copy of the report (§ 11018.1). (See generally) 3 Witkin, Summary of Cal. Law (8th ed. 1973) Real Property, § 25, p. 1792.)

Division of lands in rural areas into 50 or more unimproved parcels creates a land project. (§ 11000.5.) The subdivider who creates a land project is required to give a public report to any person who requests one. (§ 11027.) He must give a purchaser 14 days to rescind (§ 11028), and he must submit quarterly reports to the Real Estate Commissioner, specifying names of purchasers and those who have rescinded (§ 11029). (See generally 3 Witkin, Summary of Cal. Law (8th ed. 1973) Real Property, § 25, pp. 1792–1793.)

In contrast to the Subdivision Map Act (§ 66424), which requires the subdivided parcels to be contiguous, the Subdivided Lands Act applies to both contiguous and noncontiguous parcels. (§§ 11003, 11003.1; Cal.Admin.Code, tit. 10, § 2803; 3 Miller & Starr, Current Law of Cal. Real Estate (1976 Supp.) p. 33; Guide to Cal. Subdivision Sales Law (Cont.Ed.Bar, 1974) pp. 13, 15.) The Real Estate Commissioner as a matter of administrative practice will apply the law to subdivisions of noncontiguous parcels if the parcels are in close proximity to each other and are offered as part of a single project. (3 Miller & Starr, Current Law of Cal. Real Estate (1971) p. 242; Guide to Cal. Subdivision Sales Law (Cont.Ed.Bar, 1974) p. 15.) Moreover, there is no time frame within which the subdivision of lands into five or more lots or parcels must occur. (§ 11000; 3 Miller & Starr, supra, at p. 241.) Thus, if the other requirements are met, it matters not what period of time transpires between the sales. It must be shown, however, that the division of the land took place ‘for the purpose of sale or lease or financing.’ (§ 11000.) Thus, there must be an intent to make a sale of land that is subdivided (Westbrook v. Summerfield, Roberts, etc., Inc., supra, 154 Cal.App.2d 761, 765, 316 P.2d 691; Guide to Cal. Subdivision Sales Law (Cont.Ed.Bar) p. 12.)

Finally, underopriate circumstances a preconceived evasive scheme to avoid tht Subdivided Lands Act followed by an apparent division into less than five lots or parcels by any one owner may violate the law, if the ultimate result of a series of transactions is to divide into five or more parcels. (See, for example, Pratt v. Adams (1964) 229 Cal.App.2d 602, 40 Cal.Rptr. 505; 27 Ops.Cal.Atty.Gen. 66 (1956); 3 Miller & Starr, Current Law of Cal. Real Estate, supra, pp. 241–242.)

Returning to the sufficiency of the complaint and declarations to establish violation of the Subdivided Lands Act, it must be kept in mind that the issuance of a preliminary injunction upon declarations involves the exercise of an awesome power to effectively curtail or regulate activity without, in most instances, the party against whom the power is exercised having had the opportunity to conduct cross-examination—this in the face of judicial recognition that affidavits are an untrustworthy foundation for judicial action. (Pezold v. Amalgamated etc. Workmen (1942) 54 Cal.App.2d 120, 129, 128 P.2d 611.) For this reason a court of equity should issue a preliminary injunction with great caution. (See Santa Cruz F. B. Assn. v. Grant (1894) 104 Cal. 306, 37 P. 1034; People v. Paramount Citrus Assn. (1957) 147 Cal.App.2d 399, 412, 305 P.2d 135; see also West v. Lind (1960) 186 Cal.App.2d 563, 565, 9 Cal.Rptr. 288.) Certainly the court should be meticulously careful to assure that no information is considered which which would be excluded upon objection were the declarant testifying in open court.

To establish a violation of the Subdivided Lands Act, respondent relied primarily upon the declarations of Glenn Kaufman and Randall Abbott and upon the unverified7 complaint.

In his declaration Kaufman identified himself as a certified puplic accountant, emploved in the department of Justice of the State of California. He then offered evidence of the number of sales made by the appellants in sections 14, 24 and 26 of Township 29 South, Range 22 East, Kern County, and the number of 10 and 20 acre parcels into which the land had been divided by testifying from his examination of a plat map prepared by the Kern County Planning Department, agreements of purchase and sale of real estate, grant deeds, Kern County Assessor's maps and an ‘Ag. Preserve-Map 97-Preserve No. 2’ plat map. There was no further foundation laid for the introduction of any of these documents, nor is there any indication they weere produed in court. The testimony relating to these writings was central to the issues and was manifestly introduced to prove the truth of the statements contained therein. (See Taylor v. Continental Southern Corp. (1951) 104 Cal.App.2d 435, 437, 233 P.2d 583.) Kaufman's statements and conclusions were patently inadmissible because (1) there was an insufficient, if not a total lack of, foundation for the admission of the documents upon which his testimony was based (Evid.Code, § 1400 et seq.), and (2) assuming such a foundation had been laid, the documents, when properly authenticated, were the best evidence of their contents. (Evid.Code, § 1500 et seq.; Dugar v. Happy Tiger Records, Inc., supra, 41 Cal.App.3d 811, 815–818, 116 Cal.Rptr. 412; Miley v. Harper (1967) 248 Cal.App.2d 463, 468, 56 Cal.Rptr. 536.) There was no effort to establish that the testimony came within any exception to the rule. It follows that Kaufman's declaration must be disregarded as evidence.

Abbott identified himself as the Division Head Planner of the Kern County Planning Commission, Agricultural Preserve Division. In summary, he indicated that a possible violation of the agricultural exclusive zoning with a minimum lot size of 20 acres came to his attention as a result of an inquiry from a realtor concerning the sale of a 2 1/2 acre parcel of land to one of the realtors' clients by appellant Pacific Land Research Company. He then related lengthy telephonic communication from another realtor (Connors), who purported to represent Pacific Land Research Company,8 concerning the manner in which the Kern County sections of land heretofore referred to had been divided and sold. Based on this conversation and a review of correspondence and personal interviews with buyers, Abbott relates what had been told to him concerning representations by some of the appellants and the manner in which the land was divided, concluding with his opinion regarding the fraudulent nature of the representations, the manner in which buyers were misled, and observations regarding the unethical sales practices that appellants were engaging in.

A cursory examination of this declaration makes plain that the contents are being introduced for the truth of the statements contained and are in large measure rank hearsay (Evid.Code, § 1200 et seq.; Riviello v. Journeymen Barbers etc. Union, supra, 88 Cal.App.2d at p. 503, 199 P.2d 400), conclusions and opinions (Willis v. Lauridson, supra, 161 Cal. at p. 108, 118 P. 530; Estate of Powers, supra, 81 Cal.App.2d at p. 485, 184 P.2d 319) and for any purpose useful to respondent must be disregarded as not being legally admissible evidence.

Examination of the complaint reveals that there is very little contained therein that can qualify as admissible factual statements to which a plaintiff, over objection, could competently testify. That such shortcomings exist in the complaint is not surprising in view of the obvious fact that this complaint, like most pleadings, was never intended to meet the stringent requirements of evidentiary allegations. The statements are what they purport to be, that is, statements of what the plaintiff's attorneys hope to be able to show at trial, allegations of ultimate fact and conclusions, and not statements of what the evidentiary facts actually were.9

Falling into this category are averments such as those stating the acts alleged to have been committed by the appellants were committed ‘pursuant to a common plan and scheme among all defendants' and each of the defendants acted ‘as the agent for each and all of his co-defendants and pursuant to and in furtherance of said common plan and scheme’; allegations such as that ‘defendants and each of them were the owners or agents for the owners of numerous parcels of real property in the County of Kern . . .’; that ‘Ted F. Connor, Robert Campbell-Taylor and Kenneth Allen each divided part of their respective portions of the property pursuant to a preconceived plan, scheme and design to divide the property into lots or parcels for ultimate sale to the general public and with the intention and for the purpose of evading provisions of [the Subdivided Lands Act] . . .’; that ‘said parcel[ ] . . . has been divided by transactions amongst the various defendants and sold to over fifty purchasers'; that ‘[t]he activities of defendants, alleged in [prior paragraphs], have created subdivisions within the meaning of section 11000 . . .’; and that ‘[t]he activities of defendants, as alleged [in prior paragraphs], have created a land project within the meaning of section 11000.5. . . .’

As we shall now point out, if the nonevidentiary allegations of the complaint and the declarations of Kaufman and Abbott are disregarded, the remainder of the declarations and the answer of the appellants do not establish a sufficient evidentiary basis to support a violation of the Subdivided Lands Act.

Those remaining declarations establish only that the reports required by the Subdivided Lands Act as to sections 14, 24 and 26 were never submitted to the Real Estate Commissioner and that Murphy, the Brixes and Gustafson each purchased one 2 1/2 or 5 acre parcel of property located within these sections on contracts of sale from appellant Pacific Land Research Company, doing business at 8816 Burton Way, Beverly Hills, California. Pacific Land Research Company was represented by appellants Ben and Louis Fleishman and other salesmen.10

Appellant Alex Myers' declaration admits that some of the appellants purchased 640 acres of land in sections 14, 24 and 26 from Campbell-Taylor, Connors and Allen as a result of arm's length business negotiations, that appellants have never been agents, partners or joint venturers with those persons, and that there were never any transfers of the property between the appellants. The relationship between Campbell-Taylor, Connors and Allen and the relationship to the appellants, or any of them, other than as sellers is not established by any other admissible evidentiary statements. The lack of such a relationship would seem to be substantiated by the fact that the respondent voluntarily dismissed the action as to Allen and Campbell-Taylor and did not join Connors or his personal representative as a defendant.

Some type of common relationship between the appellants is established by the following: the fact that some of the individual appellants were officers common to more than one of the corporate appellants, which officer status is admitted in appellants' answer to the complaint and in their declarations; that some of the corporations and individuals were doing business from the same address; the Think Land Think Money, written by appellant Alex Myers, was advertised and furnished free to some prospective purchasers, and Myers was also an officer of several of the corporations; some of the individual appellants' declarations speak on behalf of all of the corporate appellants.

The aforementioned proof, however, falls far short of establishing a violation of the Subdivided Lands Act. There were only three sales, not five or more. Nor did the admissible proof show the creation of a land project by the division into 50 or more parcels. The properties not being contiguous, the proof that the lands were offered as part of a single project is weak. The necessary proof is lacking that the division into three parcels only was done with the intent and purpose of violating, evading and circumventing the Subdivided Lands Act.

Accordingly, the conclusion is compelled that paragraph 4 of the injunction lacks evidentiary support.11

CLASS ACTION

Section 17535 provides:

‘Any person, corporation, firm, partnership, joint stock company, or any other association or organization which violates or proposes to violate this chapter may be enjoined by any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person, corporation, firm, partnership, joint stock company, or any other association or organization of any practices which violate this chapter, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of any practice in this chapter declared to be unlawful.

‘Actions for injunction under this section may be prosecuted by the Attorney General or any district attorney, county counsel, city attorney, or city prosecutor in this state in the name of the people of the State of California upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person acting for the interests of itself, its members or the general public.’

In addition to the express legislative authority to grant restitutory relief under this section, it has also been held that in the action by the Attorney General the court has inherent power to order the defendants to make restitution as a form of ancillary relief. (People v. Superior Court (Jayhill Corporation) (1973) 9 Cal.3d 283, 286, 107 Cal.Rptr. 192, 507 P.2d 1400.)

Appellants contend that the part of the action herein brought under the provisions of that section seeking restitution to the vendees in the individual contracts of sale must be treated as a class action and that the issuance of the relief prayed for in paragraph 4 of the injunction is invalid without compliance with the procedural safeguards, including notice to members of the class required in private class actions.12

There is no question that a private class action could be commenced to redress the alleged injuries to the vendees by one or more of those vendees apart from the provisions of section 17535 (Code Civ.Proc., § 382; People v. Superior Court (Good) (1976) 17 Cal.3d 732, 131 Cal.Rptr. 800, 552 P.2d 760; Vasquez v. Superior Court (1971) 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964), and that plaintiff vendees in such a private action could intervene in the litigation at bench. In holding that such an intervention is authorized in an analogous context, in was stated in Good, ‘[b]oth complaints seek restitution to the investors based on the same underlying facts' (17 Cal.3d at p. 736, 131 Cal.Rptr. at 803, 552 P.2d at 763), and because ‘[t]he direct interests of intervening parties may be harmed or even defeated as surely by judgment following compromise as by judgment following trial.’ (17 Cal.3d at p. 737, 131 Cal.Rptr. at 803, 552 P.2d at 763.)

It is also settled that in a private class action the defendants have a constitutional due process right to have all potential members of the plaintiff class given appropriate notice (see Cartt v. Superior Court (1975) 50 Cal.App.3d 960, 124 Cal.Rptr. 376 for what constitutes required notice) of the pendency of the action, and this right extends to the adjudication by means of a preliminary injunction. (Eisen v. Carlisle & Jacquelin (1974) 417 U.S. 156, 177 [94 S.Ct. 2140, 2152, 40 L.Ed.2d 732]; Home Sav. & Loan Assn. v. Superior Court (1974) 42 Cal.App.3d 1006, 117 Cal.Rptr. 485; Home Sav. & Loan Assn. v. Superior Court (1976) 54 Cal.App.3d 208, 126 Cal.Rptr. 511.)

The rationale for requiring prior notice to members of the class is defendant's right to know the full potential consequences and liability that may attach to the determination of any substantive issue and plaintiffs' right to know what is being done in their names and for their benefit. (Home Sav. & Loan Assn. v. Superior Court, supra, 54 Cal.App.3d 208, 126 Cal.Rptr. 511; see also Cooper v. American Sav. & Loan Assn. (1976) 55 Cal.App.3d 274, 127 Cal.Rptr. 579.) Permitting a determination of a defendant's liability before notice to class members gives class members an unfair advantage and presents defendant with an open-ended lawsuit that cannot be conclusively defeated, settled, or adjudicated. (Home Sav. & Loan Assn. v. Superior Court, supra, 42 Cal.App.3d 1006, 117 Cal.Rptr. 485.) If no notice is given, potential class members may reserve decision to join as parties until they are able to ascertain whether the class action is favorable to their interests. If there is no notification of potential class members, and a result adverse to the defendant occurs at trial, the defendant may be collaterally estopped to deny liability in subsequent litigation brought by class members who were not notified. If a verdict favorable to defendant occurs at trial, class members who were not notified will not be barred in subsequent proceedings since they did not receive notice of the first action. (Home Sav. & Loan Assn. v. Superior Court, supra, 42 Cal.App.3d 1006, 1011, 117 Cal.Rptr. 485; 4 Witkin, Cal. Procedure (2d ed. 1971) Judgment, § 231, p. 3363.)

If there is no notification of potential class members, the interests of the class members are also jeopardized. Should only several of many class members be named and notified, a judgment or settlement will inure only to their benefit and may render a defendant incapable of responding in damages or making restitution to the other class members. (See People v. Superior Court (Good), supra, 17 Cal.3d 732, 735, 737, 131 Cal.Rptr. 800, 552 P.2d 760.)

Notice also has the salutary effect of preventing ‘burdening the courts with multiple claims where one will do.’ (Cartt v. Superior Court, supra, 50 Cal.App.3d 960, 970, 124 Cal.Rptr. 376, 383.)

The action authorized by section 17535 is not a traditional class action because the plaintiff (respondent herein) is not a member of the class and that requirement has been repeatedly held to be an essential prerequisite to the maintenance of a class action. (La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 875, 97 Cal.Rptr. 849, 489 P.2d 1113; Cal. Gas. Retailers v. Regal Petroleum Corp. (1958) 50 Cal.2d 844, 850, 330 P.2d 778; Powers v. Ashton (1975) 45 Cal.App.3d 783, 791, 119 Cal.Rptr. 729; Greater Westchester Homeowners Assn., Inc. v. City of Los Angeles (1970) 13 Cal.App.3d 523, 91 Cal.Rptr. 720.) The rationale for this requirement is expressed in La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d at page 875, 97 Cal.Rptr. at page 855, 489 P.2d at page 1119:

‘The requirement that the representative be a member of the class derives from the principle that joinder of plaintiffs in a class action should consist of those sharing ‘a well-defined ‘community of interest’ in the questions of law and fact involved' [citation].' (Fn. omitted.)

The case of Kugler v. Romain (1971) 58 N.J. 522 [279 A.2d 640] has been said to be ‘the first appellate interpretation of the standing of any state attorney general, under a statute extending the power of an attorney general so as to authorize him to secure restitution for a defrauded class of consumers, to bring an action for restitution on behalf of a class of defrauded buyers.’ (Clarkin, Consumer Protection: Public Class Actions: New Hope for Defrauded Consumers, 76 Dickinson L.Rev. 342, 343 (1972).) In that case, the New Jersey Supreme Court found that the public purpose of the New Jersey Consumer Law,13 which is similar to California's law, ‘can be accomplished effectively only by recognizing the authority of the Attorney General to intervene in behalf of all consumers similarly affected . . ..’ (279 A.2d at p. 654.) It was further held that the Attorney General has the authority to bring an action in the public interest under the consumer protection statutes ‘either on behalf of specifically named buyers . . . or in the nature of a class action on behalf of all similarly situated buyers.’ (279 A.2d at p. 649; emphasis added.) The court did not pass on the procedural aspects of a public class action but did note in passing that ‘. . . guidance may be found in [New Jersey statutes] which relate generally to class actions.’ (279 A.2d at p. 649.)14

As we have said, it appears that the principal difference between a private de jure class action and the type of action authorized by section 17535, wherein the Attorney General is suing on behalf of a class and seeks restitution as in this case, is that the plaintiff is not a member of the class. However, the failure to give notice to the prospective members of the plaintiff class results in a deprivation of the defendants' identical due process rights whether or not the plaintiff is a member of the class. Certainly, a right so fundamental as the constitutional due process rights of the defendants in such an action cannot be made to depend on this superficial distinction. Whether it is a private or nominally in the nature of a public class action, the defendants' rights are equally affected by failure to give notice. The inevitable and compelled conclusion is that though such an action is in fact, though not by law, a class action, appropriate notice must be given to prospective members of the class. As such, the notice requirements to prospective members of the class applicable to private class actions ought to be and we hereby hold they are applicable to an action for restitution prosecuted by the Attorney General under the provisions of section 17535. (See California Corporations Code Section 25530(b): Government Agency Suit Versus the Private Class Action, 27 Hastings L.J. 265, 273–280 (1975).) Since no notice was given in this case, that part of the injunction contained in paragraph 4 purporting to give restitutory relief to the individual vendees as a class is invalid.

The preliminary injunction is modified by striking paragraph 4 from the injunction, and as so modified the judgment is affirmed. Appellants to recover costs on appeal.

FOOTNOTES

1.  As to the other individual defendants, it appers S. Roy Segal, Morrie Meunitz, and David and Louise Jacoby have not appeared in the action. The cause has been dismissed as to Philip and Ruth Katsof, Robert Campbell-Taylor and Kenneth Allen.

2.  All references to code sections will be to the Business and Professions Code unless otherwise indicated.

3.  It is also alleged that defendants' activities constituted a violation of Kern County zoning ordinances. However, those allegations do not form the basis for any injunctive relief herein.

4.  In view of this result, it is unnecessary to reach or resolve appellant's further contention that paragraph 4 is invalid because it is so vague that it does not give appellants notice of what precise conduct it proscribes.

5.  Respondent argues both with respect to the objection relating to noncompliance with Code of Civil Procedure section 2015.5 and other objections hereinafter to be discussed that appellants did not make clear the specific grounds of their objection. (Evid.Code, § 353; People v. Dorsey (1974) 43 Cal.App.3d 953, 960, 118 Cal.Rptr. 362.) While it is not entirely clear that when a matter is tried on declarations any objection must be made to preserve an evidentiary point for appeal (see Dugar v. Happy Tiger Records, Inc. (1974) 41 Cal.App.3d 811, 817, 116 Cal.Rptr. 412; cf. Alvarez v. Eden Township Hospital Dist. (1961) 191 Cal.App.2d 309, 313, 12 Cal.Rptr. 661), we have examined the record herein and have concluded the objections were sufficiently specific.Respondent also argues that the appellants waived the objections when they failed to press for and receive a ruling from the trial judge, it appearing that the cause was taken under submission without a ruling on the objections having been made or expressly reserved. It apperars to us, however, that by taking the entire cause under submission the court impliedly reserved its ruling on the objections, and, because the trial judge could have issued the preliminary injunction only in reliance upon the complaint and declarations, it is certain he must have considered them as the basis of his decision. By deciding the case in favor of respondents, the court impliedly overruled the appellants' objections and admitted the evidence. (See Stanwood v. Carson (1915) 169 Cal. 640, 646, 147 P. 562.) The cases of Goodale dale v. Thorn (1926) 199 Cal. 307, 315, 249 P. 11, and Fibreboard Paper Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 698, 39 Cal.Rptr. 64, are distinguishable because in those cases the court was dealing with the oral evidence of a live witness and the objecting party, by his conduct in failing to continue to press his objections, clearly waived the initial objection that he had made. (Witkin, Cal.Evidence (2d ed. 1966) Introduction of Evidence at Trial, § 1302, p. 1205.)

6.  We decline to follow Baron v. Mare (1975) 47 Cal.App.3d 304, 308, 120 Cal.Rptr. 675, insofar as the views therein are inconsistent with those we express.

7.  There is no merit to appellants' contention that because the complaint is not verified it cannot be used. A governmental entity need not verify a pleading (Code Civ.Proc., § 446), and it may be utilized in determining whether a preliminary injunction should issue. (California State University, Hayward v. National Collegiate Athletic Assn. (1975) 47 Cal.App.3d 533, 545, 121 Cal.Rptr. 85.)

8.  The extrajudicial statements as to what Connors told him were not only hearsay (see Evid.Code, § 1200) but the declaration of the agent, Connors, could not be used to establish the agent's relationship with Pacific Land Research Company or the extent of his authority. (3 Cal.Jur.3d § 166, p. 238 et seq.)

9.  It is undoubtedly for these reasons that a party's pleading is totally disqualified from being used to support or oppose that party's position upon a motion for a summary judgment. (Joslin v. Marin Mun. Water Dist. (1967) 67 Cal.2d 132, 148, 60 Cal.Rptr. 377, 429 P.2d 889; Dugar v. Happy Tiger Records, Inc., supra, 41 Cal.App.3d at p. 818, 116 Cal.Rptr. 412.)

10.  The Gentile and French declarations establish purchase of land in sections 21 and 6, located respectively in Township 25 South, Range 19 East, and Township 25 South, Range 21 East. These sections are not otherwise described, located or referred to in the complaint or in the declarations; hence, these sales are properly disregarded.

11.  Respondent also argues that paragraph 4 of the injunction can be supported on the basis of violation of section 17500 (false or misleading statements) and Civil Code section 3369, subdivision 3, authorizing the court to enjoin conduct in violation of section 17500. However, as issued, the restriction on disposition of the proceeds from the sales does not apply to any proceeds other than from those sales made in violation of the Subdivided Lands Act. Moreover, the order to show cause as issued did not include any reference in paragraph 4 to the violation of section 17500 or Civil Code section 3369, and at the hearing the trial judge refused to permit an amendment to include a reference to section 17500. Thus, the issue was considered and rejected by the trial judge, and respondent, having failed to appeal from the preliminary injunction, has no standing to urge the trial court erred in denying the request to amend its petition during the hearing. (Toole v. Richardson-Merrell, Inc. (1967) 251 Cal.App.2d 689, 717, 60 Cal.Rptr. 398; Hager v. Hager (1959) 174 Cal.App.2d 546, 550, 345 P.2d 68; 6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 332, p. 4309.)

12.  While this objection was not raised in the trial court, the issue relates to a question of law only and includes not only an issue of first impression but one of substantial public interest. We therefore reach it on this appeal. (Burdette v. Rellefson Construction Co. (1959) 52 Cal.2d 720, 725–726, 344 P.2d 307; Bayside Timber Co. v. Board of Supervisors (1971) 20 Cal.App.3d 1, 4–5, 97 Cal.Rptr. 431; Burns v. State Compensation Ins. Fund (1968) 265 Cal.App.2d 98, 104, 71 Cal.Rptr. 326; 6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 280, p. 4269.)

13.  As of 1974, 27 states had provided for restitution for victims of deceptive trade practices. (Annot., Validity of Express Statutory Grant of Power to Seek, or Court to Grant, Restitution of Fruits of Consumer Fraud (1974) 59 A.L.R.3d 1222, 1227.)

14.  The respondent cites Kugler v. Koscot Interplanetary, Inc. (1972) 120 N.J.Super. 216, 293 A.2d 682. That case holds that while the New Jersey rules provide that in a class action notice shall be given to members of the class, there is no direction requiring the Attorney General to give such notice when he commences an action for restitution under the New Jersey Consumer Fraud Act. Rather the New Jersey appellate court held that notice could be postponed until the time of entry of judgment. (293 A.2d at p. 693.)We disapprove of such a belated notice in that it permits ‘one way intervention’ by potential class members. Obviously, aggrieved consumers will join in and be bound by the class judgment only if such judgment is favorable to their interests; but they will elect not to join in and be bound if such judgment is not favorable, leaving them free to initiate subsequent proceedings on their own. See discussion infra.

GEO. A. BROWN, Presiding Justice.

GARGANO and THOMPSON*, JJ., concur.

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