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 Post subject: Mansdorf: Default Judgment For Fraudulent Transfer Stands Up
PostPosted: Thu Oct 27, 2011 7:33 am 
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McClanahan v. Mansdorf, Unpublished (Cal.App.Div.2, Case No. B224466, Oct. 21, 2011).

JANICE M. McCLANAHAN, Plaintiff and Respondent,

v.

HAROLD MANSDORF, Defendant and Appellant.

No. B224466.

Court of Appeals of California, Second District, Division Five.

Filed October 21, 2011.

Quinn Emanuel Urquhart & Sullivan, Daniel H. Bromberg, Timothy A. Butler; and John R. Mullen for Defendant and Appellant.

Pine & Pine, Norman Pine, Beverly Tillett Pine, Janet R. Gusdorff; Law Offices of Thomas P. Cacciatore, Thomas P. Cacciatore; and Timothy Bruce Sottile for Plaintiff and Respondent.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KRIEGLER, J.

In this fraud action, the trial court denied the motion of defendant and appellant Harry Mansdorf (Mansdorf), made pursuant to Code of Civil Procedure section 473, subdivision (d),[1] to set aside the orders permitting service by publication of a statement of damages, entry of default, and default judgment in favor of plaintiff and respondent Janice M. McClanahan. Mansdorf contends denial of his motion was an abuse of discretion, because the judgment was void in that service of the statement of damages by publication was improper and the default judgment exceeded the amount of damages requested in the complaint. We affirm.

STATEMENT OF FACTS AND PROCEDURE

I. Complaint and Service of Complaint

On December 18, 2006, McClanahan filed a complaint against Mansdorf[2] for damages for fraud and deceit, breach of fiduciary duty, and intentional infliction of emotional distress relating to McClanahan deeding her interest in real property to Mansdorf on December 19, 2003. McClanahan's longtime boyfriend, Lee Mansdorf (Lee), Mansdorf's brother, who died in 2003, had put the property in McClanahan's name. Mansdorf did not pay McClanahan for the property, telling her the property was virtually worthless and needed to be sold to pay taxes owed by Lee's estate. Mansdorf did not tell McClanahan he had sold the property on December 5, 2003, for $600,000.

As to each cause of action, the complaint alleged McClanahan was entitled to an award of punitive damages under Civil Code sections 3294 and 3295 "in an amount according to proof at trial[.]" The damages sought in the prayer for relief of the complaint consisted of: "1. Damages according to proof; [para.] 2. Punitive damages in an amount to punish and make an example of defendants; [para.] . . . [para.] 6. Any further relief the court finds just and appropriate."

Mansdorf was personally served with a summons and complaint on March 26, 2007, at his home in Beverly Hills, by McClanahan's private investigator, Gregory J. Garrett. Mansdorf did not answer the complaint.

II. Statement of Damages and Service of Statement of Damages

On July 24, 2007, McClanahan filed an ex parte application for an order of publication of statement of damages pursuant to section 415.50, after serving Mansdorf with a copy of the application on July 23, 2007, by mail, addressed to him at his Beverly Hills home. In the application, McClanahan alleged Mansdorf could not with reasonable diligence be found and served in person (sec. 415.10), by substituted service (sec. 415.20), or by mail service (sec. 415.30). In a supporting declaration, Garrett stated he made 14 attempts to serve the statement of damages upon Mansdorf at his Beverly Hills home between June 7 and July 18, 2007. He was not able to contact anyone and serve the document at the address.

On July 24, 2007, the trial court granted the ex parte application, finding, inter alia, Mansdorf could not with reasonable diligence be served by mail. The court stated, "[Mansdorf] cannot be served with reasonable diligence in any other manner set forth in . . . [sections] 415.10 through 415.30." The court ordered service by publication in the Metropolitan News. On four dates in August 2007, the Metropolitan News published the following: "Statement of Damages (Personal Injury or Wrongful Death)[:] 1. General damages. [para.] (a) Pain, suffering, and inconvenience $500,000. [para.] (b) Emotional distress $500,000. [para.] 2. Special damages. [para.] i. Other (specify) value of property taken $1,000,000. [para.] 3. Punitive damages: Plaintiff reserves the right to seek punitive damages in the amount of (specify) when pursuing a judgment in the suit filed against you. $10,000,000."

III. Entry of Default and Default Judgment

On September 27, 2007, McClanahan mailed a copy of a request for entry of default to Mansdorf at his Beverly Hills home address. On October 2, 2007, a default was entered by the clerk as requested.

On November 1, 2007, McClanahan mailed a copy of a request for judgment in the amount of $12 million, consisting of $10 million as the "demand of the complaint," $1 million in special damages, and $1 million in general damages, plus costs of $922, to Mansdorf at his Beverly Hills address. Mansdorf did not oppose the request. The request for judgment was filed in the trial court on January 23, 2008. A default judgment was entered on January 23, 2008, in favor of McClanahan and against Mansdorf in the sum of $12 million, plus $922 in costs.

IV. Proceedings on Motion to Set Aside Order for Publication, Entry of Default, and Default Judgment

A. Motion To Set Aside Order for Publication, Entry of Default, and Default Judgment

On January 21, 2010, Mansdorf filed a motion under section 473, subdivision (d), to set aside the order for publication of the statement of damages, entry of default, and default judgment, and for permission to file a proposed answer to the complaint. Mansdorf contended the order for publication was void for two reasons that are relevant to this appeal. First, the declaration in support of the application for publication did not state McClanahan had attempted to mail serve him under section 415.30. Second, the judgment exceeded the amount prayed for in the complaint, in that the causes of action for fraud, breach of fiduciary duty, and intentional infliction of emotional distress sought no dollar amount of damages, and no statement of damages for the cause of action for intentional infliction of emotional distress was validly served.

In his declaration in support of the motion, Mansdorf stated that in April 2008, he received a copy of an abstract of McClanahan's $12 million judgment from the Ventura County Recorder. He stated that he had never received any court papers in the case by mail prior to receiving the abstract of judgment. He also contended he was not personally served with the summons and complaint[3] and was not aware a process server tried to serve him at his house in June and July 2007.

B. Opposition to Motion

McClanahan contended Mansdorf's motion to set aside the entry of default and default judgment was not timely filed pursuant to section 473.5, and the judgment was not void. Attached to the opposition were the following documents.

1. The Request for Entry of Default, filed October 2, 2007, with proof of service by mail on Mansdorf at his Beverly Hills home address on September 27, 2007.

2. The default package, including the request for a $12 million judgment, the proposed $12 million judgment, the proof of service by publication of the statement of damages, and proof of service of the default package by mail on Mansdorf at his Beverly Hills home address on November 1, 2007.

3. A declaration of McClanahan's attorney, in which he stated the default package mailed to Mansdorf was returned to him with a handwritten notation on the envelope, "not at this address."

4. An abstract of the $12 million judgment in favor of McClanahan, issued in April 2008, indicating a "lien notice" was mailed to Mansdorf at his Beverly Hills home address.

5. The complaint in McClanahan v. Mansdorf et al., superior court docket No. BC389522, which sought to set aside the fraudulent conveyance of property owned by Mansdorf or the Trust to third parties,[4] served on Mansdorf on May 4, 2008. Also included was correspondence in June and July 2008, between the attorneys for Mansdorf and McClanahan in docket No. BC389522, with Mansdorf's participation, concerning settlement of the $12 million default judgment.

C. Trial Court's Ruling

On March 15, 2010, after considering the pleadings and arguments of counsel, the trial court denied the motion. The court found that service of the summons and complaint by personal and substituted service, and service of the statement of damages via publication, were proper. The court further found the motion was untimely, because the judgment was not void on the face of the official court records and Mansdorf's declaration in support of the motion did not show that his delay in filing the motion was reasonable. Further, "the entire judgment was not shown to be void for including damages stated in a statement of damages served by publication service, where at least some amount was sufficiently set forth in the pleading served by personal and substituted service, of which [Mansdorf] had notice (see, e.g., Complaint, [para.] 19 (`which property [Mansdorf] knew to be worth $600,000.00 . . . .')." "A remedy for addressing a default judgment providing for excessive damages is to amend the judgment by reducing the amount of which the defendant had notice, and not to void the entire judgment."

DISCUSSION

I. Publication Service of Statement of Damages Did Not Render the Judgment Void

Mansdorf does not challenge the finding that the summons and complaint were properly served. He contends the default and default judgment were void under section 473, subdivision (d),[5] and due process because the trial court erred in ordering service of the statement of damages by publication when Mansdorf's mailing address was known. As the order for service of the statement of damages by publication was not an abuse of discretion, we reject this challenge to the default judgment.

A. Standard of Review

"`A motion to vacate a default and set aside [a] judgment (sec. 473) "is addressed to the sound discretion of the trial court, and in the absence of a clear showing of abuse . . . the exercise of that discretion will not be disturbed on appeal." [Citations.] The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. [Citation.]' [Citation.]" (Strathvale Holdings v. E.B.H. (2005) 126 Cal.App.4th 1241, 1249.) Whether the evidence is oral testimony, affidavits, or documents, when there is conflicting evidence, the trial court's express and implied factual determinations are not disturbed on appeal if supported by substantial evidence. (Id. at p. 1250; Kulko v. Superior Court (1977) 19 Cal.3d 514, 519, fn. 1.) "`"So far as it has passed on the weight of evidence or the credibility of witnesses, [the trial court's] implied findings are conclusive. . . ." [Citations.] When an issue is tried on affidavits, the rule on appeal is that those affidavits favoring the contention of the prevailing party establish not only the facts stated therein but also all facts which reasonably may be inferred therefrom, and where there is a substantial conflict in the facts stated, a determination of the controverted facts by the trial court will not be disturbed.' [Citations.]" (Kulko v. Superior Court, supra, 19 Cal.3d at p. 519, fn. 1.)

B. Requirement That a Statement of Damages Be Served

Mansdorf contends McClanahan was required to serve a statement of damages before the default was entered. McClanahan agrees. A complaint must state the amount, if any, of damages demanded, except in actions for damages for personal injury and when punitive damages are claimed. (sec. 425.10, subds. (a)(2), (b); Civ. Code, sec. 3295, subd. (e).) Before default may be entered in an action to recover personal injury damages or seeking punitive damages, a statement of damages must be served in the same manner as a summons. (secs. 425.11, subds. (c), (d)(1), 425.115, subds. (f), (g)(1).) We assume a statement of damages was required. (Compare Jones v. Interstate Recovery Serv. (1984) 160 Cal.App.3d 925, 930 ["plaintiffs' nonpersonal injury claims are tied so closely to the personal injury claims that section 425.11 applies to all causes of action[]"] and Schwab v. Rondel Homes (1991) 53 Cal.3d 428, 432 [an emotional distress claim that is incidental to the cause of action will not render the cause of action an action "to recover damages for personal injury" under sec. 425.11].)

C. The Order for Publication Was Not an Abuse of Discretion

Section 415.50 provides in pertinent part: "(a) A summons may be served by publication if upon affidavit it appears to the satisfaction of the court in which the action is pending that the party to be served cannot with reasonable diligence be served in another manner specified in this article[.] [para.] (b) The court shall order the summons to be published in a named newspaper, published in this state, that is most likely to give actual notice to the party to be served."

Section 415.30, governing service by mail, provides in pertinent part: "(a) A summons may be served by mail as provided in this section. A copy of the summons and of the complaint shall be mailed (by first-class mail or airmail, postage prepaid) to the person to be served, together with two copies of the notice and acknowledgment provided for in subdivision (b) and a return envelope, postage prepaid, addressed to the sender. . . . [para.]. . . [para.] (c) Service of a summons pursuant to this section is deemed complete on the date a written acknowledgment of receipt of summons is executed, if such acknowledgment thereafter is returned to the sender."

Section 415.50 requires service by mail if service by mail can with reasonable diligence be effected on the party. (See Watts v. Crawford (1995) 10 Cal.4th 743, 749, fn. 5 [dictum].)

Substantial evidence supports the trial court's finding that Mansdorf could not with reasonable diligence be served by mail under section 415.30. McClanahan's private investigator went to Mansdorf's Beverly Hills home at various times of day on 14 occasions during the six weeks ending one week before the court ruled in July 2007 on the publication request, to effect personal[6] or substitute[7] service, but was not able to contact anyone at the address. Mansdorf took no action in the case in response to being served in person with the complaint and by mail with the ex parte application for publication of statement of damages. Mansdorf declared he did not receive any court papers in 2007 by mail at his home address. From this evidence, it was reasonable to infer that, had service of the statement of damages been attempted by mail, Mansdorf would not have executed and returned a written acknowledgement of receipt of service as required before service by mail is complete. (See sec. 415.30, subd. (c).) Thus, it was reasonable to conclude the statement of damages could not be served by mail.[8] (Compare Transamerica Title Insurance v. Hendrix (1995) 34 Cal.App.4th 740, 744-745 [where the defendant's home address was not know but his post office address was known, it was error to conclude that service by mail was not required before ordering notice by publication, because "a post office box is a sufficient address for compliance with [] section 415.30"].)

To the extent Mansdorf contends service by publication violated due process, we disagree with the contention. Based on Mansdorf's failures to respond when personally served with the complaint, or when served by mail with the application for order for publication of the statement of damages, and on the fact that no one at the house responded when the process server attempted to serve the damages statement, it was reasonable to conclude that service by mail was not "reasonably calculated, under all the circumstances," to apprise Mansdorf of the statement of damages. (Mullane v. Central Hanover Bank & Trust Co. (1950) 339 U.S. 306, 314.)[9]

Accordingly, we conclude the default and default judgment are not void for improper service of the statement of damages.

II. Mansdorf's Motion to Vacate Was Time-Barred

"Where a party moves under section 473, subdivision (d) to set aside `a judgment that, though valid on its face, is void for lack of proper service, the courts have adopted by analogy the statutory period for relief from a default judgment' provided by section 473.5, that is, the two-year outer limit. (8 Witkin, Cal. Procedure (5th ed. 2008) Attack on Judgment in Trial Court, sec. 209, pp. 814-815 . . .; see Rogers v. Silverman (1989) 216 Cal.App.3d 1114, 1120-1124 . . . .)" (Trackman v. Kenney (2010) 187 Cal.App.4th 175, 180.) Section 473.5, subdivision (a) provides in pertinent part: "The notice of motion [to set aside the default or default judgment] shall be served and filed within a reasonable time, but in no event exceeding the earlier of: (i) two years after entry of a default judgment against him or her; or (ii) 180 days after service on him or her of a written notice that the default or default judgment has been entered."

Mansdorf contends the time limits in section 473.5 do not apply because the judgment is facially invalid, in that the request for publication shows publication was improper because his address was known. As we have concluded that the request for publication shows a proper basis for ordering publication service, the judgment is not void on this ground.

Applying the time limits of section 473.5 to this case, we hold that Mansdorf's motion to vacate was untimely. The default judgment was entered against Mansdorf on January 23, 2008. In April 2008, Mansdorf received an abstract of judgment notifying him of McClanahan's $12 million judgment. One hundred eighty days after April 2008 is earlier than two years after January 23, 2008. Mansdorf filed the motion to vacate on January 21, 2010. Having been filed more than 180 days after service of notice of the default judgment, the motion to vacate was time-barred. (sec. 473.5, subd. (a).)

Even if Mansdorf's receipt of the abstract of judgment is not construed as written notice the default judgment was entered within the meaning of section 473.5, subdivision (a), the trial court did not abuse its discretion in finding the motion to vacate was untimely in that it was not filed within a reasonable time. There was evidence Mansdorf was actively engaged, and represented by counsel, in other lawsuits in 2008 regarding the Trust's property. He acknowledged learning about the default judgment in April 2008, and, in June and July 2008, he attempted to compromise it. This is substantial evidence that Mansdorf's delay in filing was unreasonable, providing the trial court with discretion to deem the motion to vacate time-barred under section 473.5.

DISPOSITION

The judgment is affirmed. The parties are to bear their own costs on appeal.

ARMSTRONG, Acting P. J., concur.

MOSK, J., Concurring.

I concur.

As here, if the defendant has not appeared in the action, before any default judgment on a claim for personal damages may be entered, the statement of damages must be served "in the same manner as a summons." (Code Civ. Proc., sec. 425.11, subd. (d)(1).) Code of Civil Procedure section 415.50, subdivision (a) says, "A summons may be served by publication if upon affidavit it appears to the satisfaction of the court in which the action is pending that the party to be served cannot with reasonable diligence be served in another manner specified in this article . . . ." That requirement was satisfied here.

The Judicial Council comment to Code of Civil Procedure section 415.50 states, "Section 415.50 provides a method for effecting service upon a defendant whose whereabouts are unknown and who has no known fixed location where service can be otherwise effected in a manner specified in this article." (Italics added.) Those requirements were not met here because defendant's address was known to plaintiff. It would seem that service by mail under these circumstances would be constitutionally required. (See Mennonite Board of Missions v. Adams (1983) 462 U.S. 791, 800.) As our Supreme Court has stated, service by publication should be "utilized only as a last resort." (Watts v. Crawford (1995) 10 Cal.4th 743, 749, fn. 5.)

Our Supreme Court has also stated, "If a defendant's address is ascertainable, a method of service superior to publication must be employed . . . ." (Watts v. Crawford, supra, 10 Cal.4th at p. 749, fn. 5.) But the court did not specify whether more than one superior method must be used. Aside from personal service, other such means could be by mail pursuant to Code of Civil Procedure sections 415.20, subdivision (b) and 415.30.

Plaintiff made diligent efforts to serve defendant personally under Code of Civil Procedure section 415.10. Plaintiff's investigator did not assert he attempted to effect substituted service under Code of Civil Procedure section 415.20, subdivision (b) or by mail under Code of Civil Procedure section 415.30. Because the statute, as literally read, specifies that just another method of service be attempted and not multiple methods, I am reluctant to interpret the statute as defendant suggests, even though I believe that such an interpretation would lead to a fairer result.

I also have concerns that there was no showing that the publication here was a newspaper most likely to give the defendant actual notice, as seemingly required by Code of Civil Procedure section 415.50, subdivision (b). It is a fiction that publication can give actual notice. (See Watts v. Crawford, supra, 10 Cal.4th at p. 749, fn. 5 ["`it is generally recognized that service by publication rarely results in actual notice'"].) This being so, perhaps it does not matter what the publication because no publication is likely to give a party actual notice. The provision for service by publication originally was enacted in 1872 as section 412 of the then Code of Civil Procedure. Perhaps in those days, there were a few widely read publications, so that such a publication might give notice. That is not true today. The practice seems to be that there is no requirement to show likelihood of actual notice from a publication. Whatever the requirement, appellant seemed to abandon at oral argument any contention concerning the showing of this requirement.

These are issues that deserve further clarification, either by the Legislature or the courts.

[1] All statutory references are to the Code of Civil Procedure, unless otherwise specified.

[2] Mansdorf was sued individually and as trustee of the Mansdorf Family Revocable Trust ("Trust"). Mansdorf's siblings Mildred and Norman were also named as defendants. However, Mildred died on March 5, 2007. Norman died before the suit was filed.

[3] Service of the summons and complaint is not an issue in this appeal.

[4] McClanahan sought to have Mansdorf's property returned to Mansdorf so that he would be able to satisfy McClanahan's $12 million judgment.

[5] "[T]he court . . . may, on motion of either party after notice to the other party, set aside any void judgment or order." (sec. 473, subd. (d).)

[6] "A summons may be served by personal delivery of a copy of the summons and of the complaint to the person to be served. Service of a summons in this manner is deemed complete at the time of such delivery." (sec. 415.10.)

[7] "If a copy of the summons and complaint cannot with reasonable diligence be personally delivered to the person to be served, as specified in Section . . . 416.90 [that is, an adult who is not a ward, conservatee, or political candidate], a summons may be served by leaving a copy of the summons and complaint at the person's dwelling house . . . in the presence of a competent member of the household . . . and by thereafter mailing a copy of the summons and of the complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left." (sec. 415.20, subd. (b).)

[8] We reject Mansdorf's contention McClanahan should have called him on the telephone. "[F]ormal notice of the defendant's potential liability, by service in the same manner as a summons [is required]. . . . Actual notice is insufficient." (Schwab v. Southern California Gas Co. (2004) 114 Cal.App.4th 1308, 1321.)

[9] To the extent Mansdorf contends that the default judgment should be vacated for failure of the complaint to demand a specific amount of punitive, general, and special damages, we disagree with the contention. The damages awarded in the judgment were specified in the statement of damages, which, as we have concluded, was properly served. Relief may be granted up to the amount specified in the statement of damages. (sec. 585, subd. (b); see also sec. 580, subd. (a).) McClanahan did not materially amend the complaint, and thereby open up the default, by seeking in the statement of damages an amount of damages materially greater than alleged in the complaint. The $10 million in punitive damages and $1 million in personal injury damages were not specifically pleaded in the complaint, because pleading of punitive and personal injury damages is prohibited under section 425.10, subdivision (b) and Civil Code section 3295, subdivision (e).

= = = = = = = = J U D G M E N T E N F O R C E M E N T = = = = = = = =

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