ROTTER v. BERNEMAN (1991)

This is an appeal from the trial court's judgment reinstating a default judgment against defendant and appellant Norma Berneman.   We find it was within the court's authority to reinstate the default after appellant's attorney failed to comply with the court's order to pay attorney's fees and costs under the mandatory provisions of Code of Civil Procedure 473.   We therefore affirm the judgment.

FACTS AND PROCEEDINGS BELOW

On November 11, 1987, plaintiff and respondent, Sam Rotter, filed his complaint to quiet title to real property and for damages, alleging payment in full of all principal and interest due on an underlying note and deed of trust executed in 1981.

On January 21, 1988, defendant and appellant, Norma Berneman, filed her answer and a cross-complaint for fraud, misrepresentation, punitive damages and for breach of contract based on acts and omissions by Mr. Rotter and his attorneys involving the promissory note and deed of trust.

Trial was set for December 2, 1988, but was continued until January 27, 1989, on appellant's motion.

On the date set for trial neither appellant nor her attorney were present in the court room either time the case was called.   Plaintiff and respondent proved up his case and the court entered a judgment by default and dismissed appellant's cross-complaint.

On February 14, 1989, appellant filed a motion under Code of Civil Procedure section 473 for relief from default, claiming “excusable neglect, mistake and inadvertence on the part of this defendant.”   Submitted with this motion were declarations from appellant's then attorney of record, Mr. Berneman, as well as from Mr. Kanter, the attorney Mr. Berneman associated to represent appellant at the trial.

The attorneys' declarations explained they were absent from court as a result of a mix-up of messages given to the court clerk.   Mr. Berneman notified the clerk by telephone the previous day he would be unable to appear until 10:00 A.M.   The court was not aware Mr. Kanter was present because the clerk indicated his appearance under the wrong case number.   When the case was called, Mr. Kanter was outside with appellant but the clerk, not knowing this, did not send for him.   Mr. Kanter learned of the entry of default when he spoke with respondent's attorneys as they exited the court room.

At the hearing March 8, 1989, on appellant's motion for relief from default, the court granted appellant's motion and imposed attorneys' fees and costs of $1,500 against appellant's counsel to be paid to respondent's counsel within 30 days.   Trial was rescheduled for June 9, 1989.

The minute order vacating the default fails to mention the 30–day payment period.   However, the notice of ruling sent out by respondent's counsel states payment of the $1,500 in attorneys' fees and costs on or before April 7, 1989, was “a condition of being relieved of default.”   Upon receipt of this notice of ruling, appellant's counsel sent out his own notice of ruling eliminating any language concerning payment of the sanctions as a condition for relief from the default judgment.

Appellant's counsel did not pay the $1,500 in attorneys' fees and costs.

On June 9, 1989, the new trial date, the court acknowledged appellant's objection to payment of the sanctions as a condition precedent to vacating the default.   It noted, however, its intent for the condition was clear from the notice of ruling, from previous argument on the issue and from the overall context of the case and the transcript from the hearing.

The court then reinstated the January 27, 1989, default judgment against appellant and this appeal followed.

DISCUSSION

Code of Civil Procedure section 473 allows a party to make application for relief from a default judgment.¹ ,²  The court may, in the furtherance of justice, relieve a party from a default judgment caused by mistake, inadvertence, surprise or excusable neglect on the part of the litigant or his or her attorney.   The granting of relief is discretionary with the court and may be conditional or not as justice requires.  (See e.g., Carroll v. Abbott Laboratories, Inc. (1982) 32 Cal.3d 892, 187 Cal.Rptr. 592, 654 P.2d 775 [as a condition of relief, the trial court ordered plaintiff's counsel to pay defendant's counsel attorneys' fees and costs within 20 days of service of order.].)

In Carroll v. Abbott Laboratories, Inc., supra, the Supreme Court held because attorney fault was imputed to the client, a client was not entitled to relief from default where the attorney neglect was inexcusable, unless the neglect was so gross it amounted to abandonment of the client and obliteration of the attorney-client relationship.  (Id. at p. 900, 187 Cal.Rptr. 592, 654 P.2d 775.)   The client's suggested recourse was a malpractice action against the negligent attorney.  (Ibid.)

Several commentators criticized the decision for its harsh treatment of innocent clients who were relegated to more and expensive litigation as a remedy for their attorney's neglect.   The commentators also noted the difficulty lower courts would have drawing distinctions between excusable neglect (relief under § 473), inexcusable neglect (no relief) and positive misconduct (relief from default authorized by the Carroll decision).  (See, e.g., Thrasher & Blate, Positive Misconduct:  Excusing an Attorney's Inexcusable Neglect (1988) 15 Western St.L.R. 667;  King, Catch–22 for Attorney Neglect (1984) 7 L.A. Lawyer 32.)

Partially in response to the Carroll decision, the Legislature amended section 473 to provide for mandatory relief from default when an attorney's sworn affidavit accompanies the request for relief attesting to the attorney's mistake, inadvertence, surprise or neglect.   This amendment became effective January 1, 1989.³

The first reported decision construing the 1988 amendment is Beeman v. Burling (1990) 216 Cal.App.3d 1586, 265 Cal.Rptr. 719, in which the court held the provisions did not apply retroactively.   Before reaching this decision, the court analyzed the legislative history of the 1988 amendment and concluded the language was intended to be construed quite literally.⁴  (See also, Billings v. Health Plan of America (1990) 225 Cal.App.3d 250, 275 Cal.Rptr. 80 [holding in part because the 1988 amendments refer strictly to default judgments, mandatory relief due to attorney neglect is not available to plaintiffs whose complaints are dismissed due to attorney neglect.].)

Thus, under the amendment the court must relieve the party of the default judgment regardless if the neglect is excusable or not.   Additionally, the court must order the attorney to pay to the opposing counsel or party reasonable attorneys' fees and costs.

Moreover, under the 1988 amendment, after granting relief from a default judgment, the court may:  1) impose a fine no greater than $1,000;  2) direct the offending attorney to pay the State Bar Client Security Fund an amount not to exceed $1,000;  or 3) grant such other relief as is appropriate.  (Code Civ.Proc., § 473.)

Appellant's assertion the court construed her motion and her attorneys' affidavits as a request for relief from default due to attorney neglect is supported by the record.   Thus, the 1988 amendment to section 473 is applicable in this case.⁵

Appellant also asserts section 473 should be read literally.   She contends, however, the only conditions authorized by that section before relief must be granted are the application must be:  1) timely;  2) in proper form;  and 3) accompanied by an attorney's sworn affidavit of fault.   Appellant recognizes the literal language of section 473 requires the court to impose compensatory attorney's fees and costs as an additional prerequisite to relief.   She does not challenge the propriety or reasonableness of the sanctions imposed on counsel.   Appellant's sole argument on appeal is, because relief from default is mandatory when based on an attorney affidavit of fault, relief cannot be made conditional on an additional term, i.e., actual payment of the attorney fees and costs to opposing counsel.

This argument must fail.   It assumes any time an attorney admits fault, his or her client is automatically and without restriction, entitled to relief.   In this scenario, an attorney admitting fault could refuse to pay the sanctions yet continue to request, and be entitled to, mandatory relief under section 473 over and over again.   This anomalous situation could force a court to waste even more judicial resources and taxpayers' money by having to hold contempt hearings to enforce its orders.

The Legislature surely could not have meant to authorize imposition of sanctions by the courts without also expecting collection of such sums to be the natural and obvious purpose of the provision.   The plain language of the statute cannot be construed otherwise:  “The court shall, ․ direct the attorney to pay ․”  (Italics added.)

That the Legislature intended a negligent attorney to pay the mandatory sanctions under section 473 is further evidenced by a review of the legislative history.   When the bill was first introduced, the Legislative Counsel's Digest described the amendment as “authoriz[ing] the court to impose sanctions upon the offending attorney” because the sanction as originally written was discretionary with the court.  (Legislative Counsel's Digest of SB 1975 as introduced February 9, 1988.)   As later amended and enacted, the payment of attorneys' fees and costs by the offending attorney became mandatory.   As described in the subsequent Legislative Counsel's Digest, “The bill would require the court ․ to direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties.”  (Section 473, as amended by SB 1975, ch. 1131, statutes of 1988.)  (Italics added.)

“Since the Legislative Counsel is a state official ․ who is required by law to give such consideration to and service concerning any measure before the Legislature as circumstances will permit, and which is in any way requested by ․ the Senate or Assembly, ․ it would seem by analogy that it is reasonable to presume that the Legislature adopted [the amendment to section 473] with the intent and meaning expressed in this digest of the bill.”   (Maben v. Superior Court (1967) 255 Cal.App.2d 708, 713, 63 Cal.Rptr. 439.)

We recognize the strong policy of favoring trial on the merits.  (See e.g., Carroll v. Abbott Laboratories, supra, 32 Cal.3d at p. 900, 187 Cal.Rptr. 592, 654 P.2d 775;  Weitz v. Yankosky (1966) 63 Cal.2d 849, 854, 48 Cal.Rptr. 620, 409 P.2d 700;  Daley v. County of Butte (1964) 227 Cal.App.2d 380, 389, 38 Cal.Rptr. 693.)   We also recognize the importance of enabling trial courts to manage the litigation before them.  (Millholen v. Riley (1930) 211 Cal. 29, 33, 293 P. 69;  § 128.)

Appellant had the opportunity to litigate this matter not only once, but twice.   At appellant's request the trial court did vacate the default judgment.   Appellant was given a new trial date contingent on her attorney's payment of $1,500 in attorneys' fees and costs to opposing counsel.   Appellant's counsel, however, failed to comply with the court's order.   In this circumstance the statutory exception of section 473 is inapplicable.

Nor is the case law exception for attorney negligence amounting to positive misconduct applicable.   Appellant does not assert, nor is there any evidence in the record to suggest, counsel's failure to pay the $1,500 was a result of neglect, as opposed to an intentional refusal to pay.   As a consequence, the general rule the conduct of the attorney is imputed to the client controls.   (Carroll v. Abbott Laboratories, Inc., supra, 32 Cal.3d at p. 898, 187 Cal.Rptr. 592, 654 P.2d 775;  Daley v. County of Butte, supra, 227 Cal.App.2d at p. 391, 38 Cal.Rptr. 693.)

Therefore it was within the court's authority to reinstate the default judgment against appellant for failure of her attorney to satisfy the condition precedent to relief from default.

Because appellant has failed to demonstrate prejudicial error, or indeed any error by the trial court, we affirm the judgment reinstating the default judgment against appellant.

DISPOSITION

The judgment is affirmed.

FOOTNOTES

1.   The unamended portion of section 473 of the Code of Civil Procedure provides in pertinent part:“The court may, upon such terms as may be just, relieve a party or his or her legal representative from a judgment, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect․”

2.   All further statutory citations are to the Code of Civil Procedure unless otherwise indicated.

3.   The 1988 amendment to section 473 provides in pertinent part:  “Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is timely, in proper form, and accompanied by an attorney's sworn affidavit attesting to his or her mistake, inadvertence, surprise or neglect, vacate any resulting default judgment entered against his or her client unless the court finds that the default was not in fact caused by the attorney's mistake, inadvertence, surprise or neglect.   The court shall, whenever relief is granted based on an attorney's affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties․”

4.   The court in analyzing the legislative history stated:  “A memo concerning the amendment prepared by the Senate Committee on the Judiciary states that the purpose of the amendment is to ‘provide a basis for deterring the occurrence of default judgments.’   Another memo, prepared by the Senate Rules Committee, states that the bill would ‘properly burden [ ] the party whose inaction resulted in default’ and concludes that ‘requiring an erring attorney to pay a sum to the client security fund will generally prove more satisfactory than precipitating yet more litigation in the form of malpractice suit[s].’  Finally, a memo by the Assembly Committee on the Judiciary states that the author of the bill, Senator Ed Davis, has asserted that because of increased case loads, courts have become reluctant to grant relief from default;  Senator Davis, is quoted as stating that the amendment will help ensure that a party ‘who is truly not at fault will not be held vicariously liable for an attorney's indiscretion.’   All of these materials support a literal interpretation of the amendment, i.e., that relief from default is mandatory once an attorney attests that his failure caused the default.”  (Beeman v. Burling, supra, 216 Cal.App.3d at p. 1605, fn. 14, 265 Cal.Rptr. 719.)

5.   “MR. SHELL:  [counsel for plaintiff and respondent]:  I am sure the court has read the papers.   I won't belabor it.   The defendant Norma Berneman is requesting relief from default, and she didn't submit a declaration setting forth even one fact why it was her mistake, inadvertence or inexcusable neglect that this matter proceeded in her absence.   She was right outside.“THE COURT:  The problem is realistically counsel runs these lawsuits.   Unless you have a very active joint co-counsel called a litigant— .    .    .    .    .“She might be outside with Mr. Kanter thinking they're waiting and she's okay.   She's got a lawyer. .    .    .    .    .“You requested some sanctions?“MR. SHELL:  Yes, your honor.   The new rule that went under effect January 1st, if the default is set aside because an attorney's statement that it was his fault that the matter went, then the court has two requirements.“First, there is a mandatory requirement that the defaulting party's counsel pay reasonable costs and attorneys' fees.   That's one requirement.“The second section of the sanctions is a sanction which requires that the—either the party or the defaulting attorney—in this case I believe it is the attorney, since we don't know what the party thought—pay a fee to the plaintiff or plaintiff's attorney, and also the court can impose a sanction which is paid to the State Bar Security Fund, Client Security Fund, and we've requested the court go the full boat on the whole thing. .    .    .    .    .“THE COURT:  Unfortunately, with the busy calendars and a lot of lawyers, it is very difficult, but some people do it all the time [notify opposing counsel of possible delays or calendar conflicts.]“I am just going to impose sanctions of $1500 of attorneys fees to be paid to counsel.   That's it.”“Default set aside. .    .    .    .    .“Now we'll set a date for trial.“MR. SHELL:  Fine.   Can I—in the order that I am going to present to the court, can we have a time limit within the sanctions should be paid?“THE COURT:  I would think 30 days would be reasonable.“MR. SHELL:  These are imposed against—“THE COURT:  Counsel, certainly.”

JOHNSON, Associate Justice.

LILLIE, P.J., and FRED WOODS, J., concur.