Benassi v. JWN,
Inc.

 

 

 

Filed 12/16/13 
Benassi v. JWN, Inc. CA4/3

 

 

 

 

 

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

 

 

 

 

California Rules of Court, rule 8.1115(a),
prohibits courts and parties from citing or relying on opinions not certified
for publication or ordered published, except as specified by rule
8.1115(b).  This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.

 

 

 

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

FOURTH
APPELLATE DISTRICT

 

DIVISION
THREE

 

 
>

CAROL BENASSI,         Cross-complainant and Respondent,               v.   JWN, INC.,         Cross-defendant and Appellant.

G048451            (Super. Ct. No. 30-2009-00305929)            O P I N I O N

 

                        Appeal
from a judgment of the Superior Court of
Orange County, James

Di Cesare, Judge.  Reversed
and remanded.

                        Law
Offices of Richard R. Therrien and Richard R. Therrien for

Cross-defendant and Appellant.

                        Carol
Benassi, in pro. per., for Cross-complainant and Respondent.

 

 

 

                        The trial court entered
a default judgment totaling over $300,000 in favor of Carol Benassi (Benassi)
and against her former business partner, JWN, Inc. (JWN).  On appeal, JWN raises several arguments to
support its theory the judgment is void. 
We conclude one has merit; the trial
court lacked authority to strike JWN’s answer to the cross-complaint and
enter its default simply because JWN failed to appear for trial.  (Heidary
v. Yadollahi (2002) 99 Cal.App.4th 857.) 
For this reason, the judgment is void on the face of the record and must
be reversed and remanded.

I

                        This
case concerns a dispute between two companies, each owning a 50 percent
interest in Coast Consulting LLC (Coast Consulting),
and each complaining about a perceived misuse of funds.  Because href="http://www.sandiegohealthdirectory.com/">the record on appeal is
sparse, and the briefing fails to give an adequate account of the underlying
facts, we have gathered the following background facts primarily from Benassi’s
cross-complaint.  Benassi, the sole owner
of C Benassi Architecture, LLC (CBA), provides architecture services and
consulting.  Judith Neal (Judith) is the
primary shareholder of JWN.  She and her
husband John Neal (John) operate JWN, providing consulting services to the
construction industry.  

                        The
cross-complaint alleged that in 2006, CBA and JWN created Coast Consulting for
the purpose of providing construction related consulting services to the legal
and insurance industries.  They
frequently provided expert witness
services to customer embroiled in construction defect cases.  They were each entitled to an equal share of
the profits (50:50).

                        Sometime
in June 2008, John, Benassi, Richard Therrien, Yeota Christie, and several
others decided to create “Asset Holding Corporation,” designed to own three
subsidiary corporations:  (1) Asset
Technology Systems, Inc.; (2) Asset Guardian Plan, Inc.; and (3) Coast
Consulting.  The cross-complaint alleged John
and Benassi agreed to finance the formation of the new corporations, under
certain conditions, through Coast Consulting.

                        Several
months later, John and Christie announced their intention to form a loan
modification company.  Benassi objected to
John using Coast Consulting’s funds to finance this new venture.  In her cross-complaint, Benassi asserted John
falsely promised to procure a line of credit to finance the loan modification
company but instead wrongfully took funds from Coast Consulting.  Benassi asserted this wrongful diversion of
funds violated Coast Consulting’s operating agreement.  Benassi later learned John was depositing
checks payable to Coast Consulting into a separate bank account.

                        The
cross-complaint alleged that on April 6, 2009, Benassi was locked
out of the Coast Consulting offices.  John
sent her a text message stating he had taken her computer and records.  A few days later, Benassi was escorted into
the office by a

loan modification company employee to retrieve a few personal belongings
and several projects Benassi had been working on.

                        The
cross-complaint alleged John retained approximately $5,000 worth of personal
possessions, including CBA’s accounting records, a computer, and other office
equipment.  She also alleged John
retained all the client information and income generated from Coast Consulting,
valued at over $460,000.  Benassi
asserted she had contacted JWN and John “about their misappropriation of Coast
[Consulting] funds in an effort to secure the return of those funds.”  In addition, Benassi alleged she had
requested “an accounting of the funds taken,” but she received no response.

                        The
record on appeal contains little information about what transpired after
Benassi was locked out of her office.  We
were able to piece together the basis for JWN’s lawsuit only because our record
includes a California State Bar order disciplining Benassi’s counsel, Gary C.
Wykidal, and the order explains how the litigation between Benassi and John started.  The State Bar’s order states that in April
2009 (the same month Benassi claims she was locked out of Coast Consulting),
Benassi obtained several checks totaling $34,221.50, made payable to Coast
Consulting.  Sometime between April 2009
and August 2009, Benassi turned these checks over to her attorney, Wykidal, who
deposited them in his client trust account.  When John learned about this, he threatened
legal action and demanded return of the funds. 
John’s counsel sent Wykidal a copy of the proposed complaint.  Wykidal was disciplined by the State Bar for returning
the money to Benassi on September 10, 2009, via a check
made payable to her solely owned corporation, CBA. 

                        The
appellant’s appendix does not contain a copy of John and JWN’s complaint but
includes the 59-page register of action from the trial court.  The register states John and JWN filed their
complaint on September
25, 2009, a few weeks after threatening
legal action.  The complaint was filed against
CBA, Benassi, Wells Fargo Bank, and Coast Consulting.  We have no further information as to the facts
or allegations underlying John and JWN’s complaint.

                        On March 29, 2010, six months after the complaint was filed, Benassi filed a
cross-complaint alleging one cause of action for accounting and damages against
JWN, and John, individually.href="#_ftn1"
name="_ftnref1" title="">[1]  The register of actions
indicates JWN and John filed a demurrer (our record does not contain a copy).  The court’s minute order, dated July 15, 2010, stated the demurrer was unopposed. 
The court sustained the demurrer, finding the arguments raised to be “well
taken,” and gave Benassi 14 days leave to amend.

                        On July
29, 2010, Benassi, individually and as a self-represented litigant, filed her
first amended cross-complaint (FACC) alleging the following eight causes of
action against JWN, John, and Judith: 
(1) breach of fiduciary duty; (2) fraud;

(3) conversion; (4) negligence; (5) unfair business practices; (6)
breach of fiduciary duty against Judith; (7) accounting; and (8) constructive
trust.  The court’s December 2, 2010, minute order shows the court considered two separately filed demurrers
to the FACC (neither were included in our record).  The court sustained JWN and John’s demurrer
as to the accounting cause of action with leave to amend.  As for the remaining causes of action, the
court sustained the demurrer without leave to amend but “without prejudice to .
. . Benassi’s right to file a duly noticed [m]otion for [l]eave to amend which
seeks court permission to add additional causes of action.”  The court explained the original

cross-complaint alleged only one cause of action and the court’s
prior order sustaining the demurrer did not give Benassi leave to file seven
new causes of action.

                        For
this same reason, the court also sustained Judith’s demurrer without leave to
amend.  It stated the demurrer was
sustained without prejudice and Benassi could file a motion for leave to amend,
seeking the court’s permission to add Judith as a

cross-defendant.

                        Rather
than file a motion for leave to amend, Benassi, as a self-represented litigant,
filed a second amended cross-complaint (SACC) on December 17, 2010, alleging one cause of action for accounting against JWN, Coast
Consulting, and Does 1-50.  She recited the
same facts contained in her prior complaint, and incorporated allegations that
would support multiple causes of action but all placed under a single heading, titled
“Accounting.”  

                        For
example, the first paragraph of the accounting cause of action asserted, “The
transfers of funds by [c]ross-defendants . . . were wrongful, fraudulent, and
improper, and [they] interfered with [her] interests in the funds by
misappropriating and otherwise wrongfully and illegally converting said funds
without permission.”  Benassi also alleged,
“Unless cross-defendants are enjoined from continuing to utilize Coast
[Consulting’s] funds for their own use . . . and unless they are enjoined from
continuing to collect, receive, interfere with, meddle with, or dispose of said
funds of Coast [Consulting, Benassi] will suffer great and irreparable harm . .
. .” 

                        On January 18, 2011, JWN filed an answer to the SACC.  In June 2012, the court granted the Weintraub
Law Group’s request to be relieved as JWN’s counsel on the grounds it had not
paid attorney fees and costs.   

                        On October 15, 2012, the trial court issued a minute order stating the trial was
scheduled to begin at 9:15
a.m., and there was no appearance by JWN.  The order indicated Benassi was present as a
self-represented litigant.  The court
ordered JWN’s answer stricken and default entered.  The court scheduled the default prove-up
hearing for November
16, 2012. 
Our record does not contain a reporter’s transcript of this hearing.

                        On November 16, 2012, Benassi appeared in court and submitted documents to support the
default prove-up.  The court continued
the hearing to

January 25, 2013.

                        On January 25, 2013, the court issued a minute order stating the following:  Benassi, “self-represented,” was present with
attorney Wykidal.  The court considered
testimony from Benassi and Wykidal.  The
court accepted seven exhibits that included income summaries and bank account
receipts.  The minute order stated, “The
[c]ourt having fully considered the arguments of all parties, as well as the
evidence presented, now rules as follows:  [¶]  The
[c]ourt finds judgment for [c]ross-[c]omplainant . . . Benassi against . . .
JWN . . . in the amount of $289,567.09 plus $5,000, plus interest and attorney
fees pursuant to [the] default attorney fee schedule.”

                        On February 1, 2013, Wykidal prepared a judgment and a statement of decision for the
trial court to sign.  A few days later,
JWN hired Richard R. Therrien, who immediately filed an “objection” to the
proposed judgment and statement of decision.

                        JWN
alleged the judgment was void because the cross-complaint only alleged one
cause of action for accounting, which is not a stand-alone cause of
action.  In addition, JWN noted the
statement of decision referred to a breach of fiduciary duty, but there was no
such cause of action alleged in the SACC. 
Finally, JWN argued the statement of decision was incoherent and
discussed matters beyond what was raised in the cross-complaint (namely Benassi
and Wykidal’s “money laundering” scheme). 
JWN stated it filed a formal complaint with the State Bar against
Wykidal, he was disciplined in 2011, and he prepared a statement of decision
contrary to the State Bar’s findings and conclusions.  JWN asserted the statement of decision is a “misrepresentation
and fraud” upon the court.

                        The
court scheduled a hearing for March 14, 2013.  The reporter’s transcript of this hearing
indicates the court stated it scheduled the hearing to consider JWN’s objection
to the statement of decision.  At the
hearing, Wykidal argued JWN did not have the ability to make an objection
because on October
15, 2012, the court struck JWN’s answer and
entered its default.  JWN’s counsel
argued it had standing to object because a default judgment can be set aside
within six months if it is void under Code of Civil Procedure section 473,
subdivision (d).href="#_ftn2"
name="_ftnref2" title="">[2]

                        The
court stated, “But that is not before me.  I’m not going to issue a statement of
decision.  It’s a default matter.”  The court told Wykidal there was no right to
a statement of decision. 

                        JWN
asked the court to consider its objection to the judgment.  The court stated the arguments presented in JWN’s
opposition lacked merit, and in any event, the arguments could not be presented
after a default had been entered.  The
court signed the judgment, which was filed on March 22, 2013.

                        The
judgment stated the court found in favor of Benassi on her accounting cause of
action against JWN.  It ordered JWN to
pay $301,283.09.  It calculated this
figure based on the following evidence presented at the prove up hearing: 

“A.  Unaccounted withdrawals
by [John] $59,278.85[;]  [¶]  B.  Advances
to

[John]-controlled entities from [Coast Consulting’s] account $57,983.64[;]  [¶]  C.
 Value of computers and furnishings at [the
time of] Benassi lock-out $23,039.11[;] 
[¶]  [and]

D.  Accounts receivables of
[Coast Consulting] on [April 1, 2009] $438,832.57[.]”

                        The
court determined the above totaled $579,134.17, of which Benassi was entitled
to 50 percent ($289,567.09), plus $5,000 for the loss of her personal
possessions from when she was locked out of Coast Consulting, plus $6,716 in
costs.  These figures comprised the final
judgment of $301,283.09.  JWN filed an
appeal from the March 22, 2013, default judgment.

II

>A.  The Judgment is Void on the Face of the
Record

                        JWN
argues the default judgment is void on its face because the court lacked
authority to strike its answer to the SACC and enter its default simply for
failing to appear for trial.  We agree.

                        We find
instructive Heidary, supra, 99
Cal.App.4th 857, a case written by a different panel of our colleagues at this
court.  In that case, “Farzad Yadollahi
and Fariborz Biyazaei appeal[ed] from the denial of their motion to set aside a
$943,000 default judgment entered against them jointly on a cross-complaint.  Appellants contend[ed] the judgment is void
because their default was improperly based upon their failure to appear at a
trial for which they were given no notice.” 
(Id. at p. 859.)  The court concluded, “Even assuming
appellants had been given proper notice of the trial (which they were not) the
court had no authority to enter their defaults for failure to appear.”  (Ibid.)

                        In >Heidary, the court explained appellants
were not governed by section 473, subdivision (b) (permitting parties to
seek relief from their own mistake or excusable neglect), but rather appellants
were seeking relief from a void judgment. 
(Heidary, supra, 99
Cal.App.4th at p. 862.)  The court noted
it was well settled the court has authority to set aside a void judgment at any
time.  (Ibid.; citing Rochin v. Pat
Johnson Manufacturing Co. (1998) 67 Cal.App.4th 1228, 1239 [judgment void
on its face subject to collateral attack any time]; Plotitsa v. Superior Court (1983)

140 Cal.App.3d 755, 761 [default void on face of record subject to
challenge at any time irrespective of lack of diligence in seeking to set it
aside within six-month period of section 473].)

                        The
court concluded, “And in this case, the record does show the default order, and
hence the judgment, was void on its face. 
Simply stated, the court had no power to order the entry of appellants’
default when they failed to appear for trial. 
[Citations.]”  (>Heidary, supra, 99 Cal.App.4th at p.
862.)  The court found analogous the
decision in Wilson v. Goldman (1969)
274 Cal.App.2d 573, stating, “In >Wilson, the facts are nearly identical to this case.  The only distinguishing factor is that the
defendant in that case did receive
proper notice of the trial.  When he did
not appear, the court entered a default at the request of plaintiffs.  The plaintiffs then chose to wait until
another day to prove up their damages, so no trial was held.  The plaintiffs subsequently proved damages on
an ex parte basis, without notice to defendant. 
[¶]  The >Wilson court affirmed the order vacating the judgment . . . .”  (Heidary,
supra, 99 Cal.App.4th

at pp. 862-863.) 

                        Like
our colleagues in Heidary, we find
the Wilson opinion
explains the governing law quite clearly: 
“Section 585^[href="#_ftn3" name="_ftnref3" title="">[3]^] . . . does not authorize the entry
of any default in cases where an answer is on file, whether the defendant does or does not appear at the time the action is
called for hearing.  [Citations.]  Where the defendant who has answered fails to
appear for trial ‘the plaintiff’s sole remedy is to move the court to proceed
with the trial and introduce whatever testimony there may be to sustain the
plaintiff’s cause of action.’  [Citation.]  In such case a plaintiff is entitled to
proceed under the provisions of . . . section 594, subdivision 1,^[href="#_ftn4" name="_ftnref4" title="">[4]^] and he may do so in the absence of
the defendant provided the defendant has been given at least five days notice
of the trial.  Section 594 does not
authorize the entry of the default in the event the defendant fails to appear,
and a hearing held pursuant to that section under such circumstances is
uncontested as distinguished from a default hearing.  [Citations.]  [¶]  Where
a defendant has filed an answer, neither the clerk nor the court has the power
to enter a default based upon the defendant’s failure to appear at trial, and a
default entered after the answer has been filed is void [citations], and is
subject to expungement at any time either by motion made pursuant to . . . section
473 or by virtue of the court’s inherent power to vacate a judgment or order
void on its face.  [Citations.]  Here the plaintiffs did not proceed to trial
on the date set and for which notice of trial had been served.  Instead they obtained an entry of defendant’s
default beyond the power and authority of the court to grant.  Such a void ‘entry of default’ cannot excuse
compliance with . . . section 594, subdivision 1.  Defendant’s answer placed in issue factual
questions concerning liability and damages.  When the trial of those matters actually took
place at plaintiffs’ instance on October 16, 1967, some five months after the trial date, defendant was not in
default and was entitled to notice of the hearing as provided in the code
section.  No such notice was given.  A judgment made after a trial held without the
notice prescribed by . . . 594, subdivision 1 is not merely error; it is an act
in excess of the court’s jurisdiction.  [Citation.]” 
(Wilson, supra, 274 Cal.App.2d
at pp. 576-577.)

                        The >Heidary court explains that since the >Wilson> case, “the Legislature has expanded the law pertaining to default,
which now specifically allows an answer to be stricken and a default entered as
a sanction for the defendant’s extreme misuse of the discovery process.  (§ 2023, subd. (b)(4); see, e.g., >Greenup v. Rodman (1986)

42 Cal.3d 822.)  However, that
provision has no application to the situation where defendant simply fails to
appear at trial.  Moreover, even if the
default here could otherwise be properly characterized as a ‘sanction,’
analogous to the discovery sanctions, it could not be sustained.  Section 2023 specifically requires notice to
the affected party and an opportunity to be heard before imposition of any sanction.  (§ 2023,

subds. (b) & (c).)”  (>Heidary, supra, 99 Cal.App.4th at p.
864.) 

                        In the
case before us, like the Wilson and> Heidary cases, the trial court had no
authority to enter JWN’s default when it failed to appear at the trial.  Of course, the court’s error in >Heidary “was compounded by the fact
appellants were never given notice of the trial,” however, that court concluded
the lack of notice was “irrelevant in establishing their right to relief.”  (Heidary,
supra, 99 Cal.App.4th at p. 864.)  In
Heidary, the court concluded, “Even
assuming appellants had been properly noticed, the court’s only options when
they did not appear were to proceed with the trial in their absence, or to
continue the trial.”  (>Ibid.) 
It reasoned that because the court chose to continue the trial and
allowed the plaintiff to put on their proof of damages at a later date, the
appellants were entitled to notice of what amounted to a continued trial date.  â€œBecause they did not receive any, the
judgment entered against them is void.” 
(Ibid.)

                        Similarly,
here the court’s only options when JWN did not appear at the trial was to
proceed with the trial or continue the trial. 
The court had no authority to strike JWN’s answer and enter a default
based on its failure to appear at trial. 
The resulting judgment is void on the face of the record.  (Heidary,
supra, 99 Cal.App.4th at p. 862.) 

 

B.  The
Accounting Claim

                        Because
we have determined the matter must be reversed and remanded, we will address
JWN’s second issue on appeal only because it is likely to be raised again below.  JWN argues the default judgment is void on
its face because a claim for an accounting does not state a cause of action for
which relief can be given.  Not so. 

                        A claim
for an accounting may take the form of either a legal remedy or an equitable
claim.  If alleged as a legal remedy, the
“request for a legal accounting must be tethered to relevant actionable claims.”  (Hafiz
v. Greenpoint Mortgage Funding, Inc. (N.D. Cal. 2009) 652
F.Supp.2d 1039, 1043.)  The cases cited
by JWN discuss this form of accounting claims. 
(See Batt v. City and >County> of >San Francisco> (2007)

155 Cal.App.4th 65 [taxpayer brought class action against city for
tax refund], disapproved on other
grounds in McWilliams v. City of Long
Beach (2013) 56 Cal.4th 613; >Duggal v. G.E. Capital Communications Services,
Inc., (2000) 81 Cal.App.4th 81 [causes of action barred by the Federal
Communications Act’s “filed rate doctrine” and, therefore, right to accounting
also fails because claim was derivative to underlying claims].)

                        However,
if alleged as an equitable claim, a plaintiff need only allege that (1) “a
relationship exists between the plaintiff and defendant that requires an
accounting”; and (2) “some balance is due the plaintiff that can only be
ascertained by an accounting[.]”  (>Teselle v. McLoughlin (2009) 173
Cal.App.4th 156, 179 [dispute over partnership assets basis for equitable
accounting claim].)  The relationship
between the parties need not be fiduciary; “[a]ll that is required is that “some
relationship” exists that requires an accounting.  [Citation.] 
The right to an accounting can arise from the possession by the
defendant of money or property which, because of the defendant’s relationship
with the plaintiff, the defendant is obliged to surrender.  [Citation.]” 
(Id. at pp. 179-180.)  “An action for accounting is not available
where the plaintiff alleges the right to recover a sum certain or a sum that
can be made certain by calculation. 
[Citation.]”  (>Id. at p. 179.)

                        Such
was the case here.  Benassi’s SACC pled a
claim for equitable accounting.  Based on
her partnership relationship, Benassi asserted she is entitled to an accounting
of her share of the Coast Consulting profits. 
She requested financial information to determine how much she was owed
after being locked out of the offices. 
Benassi claimed she was not in possession of the materials necessary to reduce
her claim to a sum that could be made certain by a few simple calculations.  She could only estimate she was owed over
$460,000 in lost income.  Based on the
above, we conclude Benassi’s SACC raises a viable equitable accounting claim
for which a judgment could be entered. 

>C.  No Fraud Upon the Court

                        JWN
asserts the judgment is void because Wykidal made misrepresentations to the
trial court and committed fraud by willfully concealing the State Bar’s factual
findings about Benassi and Wykidal’s scheme to take over $34,000 from Coast
Consulting.  This argument is based >entirely on the information contained in
the proposed statement of decision prepared
by Wykidal.  JWN argues the
misstatements and “other egregious representations” are inconsistent with the
State Bar’s opinion and could not be adopted by the trial court.  JWN asserts the court ignored its objections
to the statement of decision and judgment. 
The record belies this contention. 


                        First,
the record clearly shows the court rejected the statement of decision.  There is no evidence, and JWN points to none,
suggesting the court adopted, approved, or condoned any of the statements
contained therein.  Rather, the court
told Wykidal a statement of decision was not permitted when there is a default
judgment.  Second, the court rejected on
the merits (and did not ignore) JWN’s argument a default judgment could not be
entered on a claim for an equitable accounting. 
As explained earlier in the opinion, the trial court was right on this
point.  

                        Contrary
to JWN’s contention, we found nothing in the court’s final judgment or in the
record that supports the theory the court agreed with or condoned Wykidal’s
decision to directly distribute $34,221.50 to Benassi/CBA from his client trust
account, knowing there was an ongoing dispute regarding Coast Consulting’s
funds.  Nor is there any language
suggesting the court intended to “overturn[] the factual findings of the State
Bar . . .” that concluded Wykidal’s distribution was wrongful.href="#_ftn5" name="_ftnref5" title="">[5]  The trial court’s final
judgment only concerns evidence of John’s “unaccounted withdrawals” and “advances,”
and the value of Benassi’s wrongfully taken property and possessions. 

>D.  Capacity to Sue

                        In its
final argument, JWN asserts Benassi is not the lawful assignee of CBA’s causes
of action and CBA is no longer in good standing and lacked the capacity to
sue.  To support this argument, JWN
included in the appellant’s appendix a document that appears to be generated by
the Nevada Secretary of State’s website and states CBA’s limited liability
company status was “[p]ermanently [r]evoked.” 
This purported “status” document is actually included twice in the
appendix.  It is first found on page 139,
where it does not appear to be attached to any supporting declaration or
authenticating document.  It is also
found on page 176, attached as one of the exhibits supporting JWN’s objection
to the judgment.  Again it was not
authenticated or otherwise supported by a declaration.  Benassi argues this evidence was not properly
before the trial court or this court. 

                        We will
not address this issue because we have resolved the appeal on other
grounds.  The question of Benassi’s
standing to sue JWN, and CBA’s status can be raised by the parties and
addressed, in the first instance, by the trial court.

III

                        The
judgment is reversed and remanded.  In
the interests of justice, both parties shall bear their own costs of appeal.

 

 

                                                                                   

                                                                                    O’LEARY,
P. J.

 

WE CONCUR:

 

 

 

MOORE, J.

 

 

 

ARONSON, J.