Petition — Baer Manufacturing, Inc. v. Sheet Metal Workers Pension Plan
Supreme Court brief1983
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Supreme Court, U.S,
83-516 } “YILED “4
2 1983
IN THE SUPREME COURT OF THE UNITED sTAtts ”
Term, 19 Alexander L. Stevas, Clerk *
No.
SHEET METAL WORKERS PENSION PLAN OF
SOUTHERN CALIFORNIA, ARIZONA AND
NEVADA; SHEET METAL WORKERS WELFARE
PLAN OF SOUTHERN CALIFORNIA, ARIZONA
AND NEVADA; and SHEET METAL WORKERS
SAVINGS PLAN OF SOUTHERN CALIFORNIA,
ARIZONA AND NEVADA,
Respondents/Plaintiffs,
vs.
BAER MANUFACTURING, INC., a California
corporation; MARLIN C. BAER, JOSE MONROY,
and RENEE G. BAER, doing business as
BAER MANUFACTURING, INC.; MARLIN C.
BAER, JOSE MONROY, and RENEE G. BAER,
individually and as Shareholders,
Directors, 7° Officers thereof,
Petitioners/Defendants.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
AND APPENDIX
NICOLAS FERRARA, ESQ.
Counsel for Petitioners
3926 Wilshire Boulevard
Suite 303
Los Angeles, California
90010
(213) 381-3704
-i-
QUESTIONS PRESENTED
The Court of Appeals actually did
not issue an opinion or decision as such.
Instead, it made a Memorandum (of decision)
which did not state what the issues on
appeal were. (See Appendix).
Petitioners contend that such
Memorandum is deficient in that respect.
And, moreover, the Memorandum did not
raise and rule on all of the relevant and
material issues raised on appeal, and for
that reason the Supreme Court of the
United States might conclude that there
were no others, which is not the case at
all as will hereinafter appear. Therefore,
petitioners set forth all of the issues
raised on appeal as the questions pre-
sented for review and decision, as follows:
1. (a) Was the preliminary injunction
and the contempt order of the District
Court void and ineffective for any purpose?
(b) If that be true, was the
District Court's order striking petitioners’
- ii-
answer and entering a default judgment
against petitioners for failure to comply
with said injunction and contempt order
clearly erroneous and beyond the authority
of the District Court?
2. Under the circumstances men-
tioned in numbers l(a) and (b) above, and
assuming the default judgment was legally
authorized, in the case of a default
judgment did the District Court have
authority to grant relief outside of or
in excess of the prayer of the complaint?
3. Under the circumstances men-
tioned in number 2, above, was a cause of
action in alter ego stated by the com-
plaint?
4. (a) Are punitive damages recov-
erable in actions founded in contract?
(b) Was the award of $300,000.00
punitive damages in a contract action to
recover $17,000.00 (rounded off) clearly
erroneous, given under passion and
prejudice, and void?
- iii -
5. As to the written contract of
the parties, which provides upon delin-
quency the contrpct "shall be automati-
cally cancelled and terminated without
notice .. .", reinstateable only by (a)
curing the default, (b) posting a bond,
pay 10% and 5% delinquency fees, costs
and attorney's fees, may the plaintiffs-
respondents (Sheet Metal), after delin-
quency occurs and there is no reinstate-
ment, recover delinquency and attorney's
fees?
6. Did the District Court abuse its
discretion in denying petitioners' motion
for relief from the default and default
judgment?
7. Did the District Court abuse its
discretion in denying petitioners' motion
for order extending the time for appeal?
As seen from the Memorandum
(Appendix) the Court of Appeal confined
its alleged opinion to abuse of discretion,
~ ive
being questions presented Nos. 6 and 7,
above.
Although the questions presented
are not necessarily unsettled questions
of law, under the facts and circumstances
here the decisions of the District Court
and the Court of Appeal are so out of
line with authoritative precedent and
the weight of authorities that petitioners
have been clearly deprived of their legal
rights and property through passion and
prejudice and without due process. This
is the opinion of petitioners' counsel.
LIST OF PARTIES-ATTORNEYS OF RECORD
The caption of the case in this Court
contains the names of all parties, except
Jose Monroy who was a party in the
District Court, but is not a party in
this Court. Jose Monroy is included here
for the reasons stated in the Statement
of The Case and in Arguments II,1IX,infra.
Petitioner Baer Manufacturing, Inc.,
a California corporation, will be referred
a y=
to as "Baer Corp."
Petitioners Marlin C. Baer and
Renee G. Baer, respectively, will be
referred to as "Marlin" and "Renee".
In the District Court, Baer Corp.,
Marlin, Renee, and Jose Monroy, defen-
dants, were represented by Jackson E.
Chandler, Esq. Present counsel, Nicolas
Ferrara, Esq., was substituted as counsel
for Baer Corp., Marlin and Renee after
Mr. Jackson disappeared and after entry
of the default judgment in the District
Court, and in the Court of Appeal.
Jose Monroy retained and was repre-
sented by Booth, Mitchel, Strange & Smith
by Hugh H. Helm, Esq., after Mr. Jackson
disappeared and after entry of the
default judgment in the District Court.
In the District Court and in the
Court of Appeal, the Sheet Metal parties
plaintiff-appellees-respondents were
represented by Gilbert, Cooke & Sackman
by Joseph L. Paller, Jr., and Kenneth J.
- vi-
Sackman, a law corporation. Said parties
will be referred to as Sheet Metal.
- vii -
TABLE OF CONTENTS
QUESTIONS PRESENTED ...... «
LIST OF PARTIES-
ATTORNEYS OF RECORD ......s-s
fa ig Gr a 6. we oe
Cee So ice 0 eo 6 ete
PETITION FOR REHEARING .....
Ro ks a
STATEMENT OF THE CASE......
Go) he . er
PRAYER TO COMPLAINT .......
RE ak hvac ey ba 6 berew ee he
TEMPORARY RESTRAINING ORDER
PRELIMINARY INJUNCTION .....
CONTEMPT > . . . . . . . . . . .
INCOMPETENT REPRESENTATION .. .
DEFAULT JUDGMENT ........
MOTIONS FOR RELIEF .......
GROUNDS FOR RELIEF .......
MOTION FOR ORDER EXTENDING TIME
FOR YILING NOTICE OF APPEAL...
DISTRICT COURT'S RULINGS ON
MOTIONS FOR RELIEF AND TO EXTEND
TIME FOR APPEAL . . . oe . . . . .
REASONS FOR ALLOWANCE OF THE WRIT
INTRODUCTION TO ARGUMENTS ....
Oo oOo ws
1l
13
- viii -
PETITIONERS' MOTION FOR EXTENSION
OF TIME TO FILE NOTICE OF APPEAL
WAS TIMELY FILED. IT IS NOT TRUE
AS THE COURT OF APPEAL STATED THAT
THE MOTION WAS UNTIMELY .... 14
II
PETITIONERS' PREDICAMENT BEFORE
THE DISTRICT COURT WAS DUE TO
INCOMPETENT AND INEFFECTIVE
COUNSEL WHOSE OUTRAGEOUS CONDUCT
PREJUDICED PETITIONERS. IT WAS
NOT SIMPLY THAT THEIR COUNSEL
DISAPPEARED AS THE COURT OF
APPEAL STATED . ...+-+-e+-+-e OL7
IIt
1. IN THE CASE OF A DEFAULT
JUDGMENT THE DISTRICT COURT
HAD NO JURISDICTION TO GRANT
RELIEF OUTSIDE OR IN EXCESS
OF THE COMPLAINT. IF THE
COURT DOES, THE. DEFAULT
JUDGMENT MAY BE COLLATERALLY
ATTACKED FOR LACK OF JURIS=-
DICTION AND DUE PROCESS .. 23
2. THE COURT OF APPEAL DID NOT
MENTION OR RULE ON THOSE
ISSUES THOUGH RAISED IN THE
DISTRICT COURT AND ON APPEAL 23
IV
THE COMPLAINT DID NOT STATE
A CAUSE OF ACTION IN ALTER EGO.
NOR WAS ALTER EGO PROVEN. . .
THE COURT OF APPEAL DID NOT
MENTION OR RULE ON THAT ISSUE
THOUGH RAISED IN THE DISTRICT
COURT AND ON APPEAL .... .
V
PUNITIVE DAMAGES ARE NOT
RECOVERABLE IN ACTIONS FOUNDED
IN CONTRACT . . . . > . > . .
ASSUMING A TORT WAS INVOLVED,
THE AWARD OF $300,000.00
PUNITIVE DAMAGES AGAINST THE
CORPORATION AND THE INDIVIDUALS
WAS CLEARLY ERRONEOUS, GIVEN
UNDER PASSION AND PREJUDICE,
ae "Vaan «4.6 43.) 6 ees
THE COURT OF APPEAL DID NOT
MENTION OR RULE ON SUCH
ISSUES THOUGH RAISED IN THE
DISTRICT COURT AND ON APPEAL
vi
THE DISTRICT COURT HAD NO
JURISDICTION TO IMPOSE
PUNITIVE DAMAGES OR SANCTIONS
THE COURT OF APPEAL DID NOT
MENTION OR RULE ON THAT ISSUE
THOUGH RAISED IN THE DISTRICT
COURT AND ON APPEAL .... .
32
32
35
35
35
42
42
Vit
THE PRELIMINARY INJUNCTION
AND THE CONTEMPT ORDER OF THE
DISTRICT COURT WERE VOID AND
ON THAT GROUND DID NOT PROVIDE
A BASIS FOR THE DISTRICT
COURT'S ORDER STRIKING ANSWER,
ORDER FOR DEFAULT JUDGMENT,
AND DEFAULT JUDGMENT. .... 49
THE COURT OF APPEAL DID NOT
MENTION OR RULE ON THOSE
ISSUES RAISED IN THE DISTRICT
COURT AND ON APPEAL ..... 49
VIII
SINCE THE BASIS FOR CONTEMPT
IS THE WILFUL REFUSAL OR FAILURE
TO COMPLY WITH THE PRELIMINARY
INJUNCTION, SHEET METAL HAD THE
BURDEN OF PROVING WILFUL RE-
FUSAL OR FAILURE TO COMPLY WHICH
SHEET METAL FAILED TO SUSTAIN,
AND THE CONTEMPT ORDER WAS VOID
ON THAT GROUND ....-+-.-e 53
THE COURT OF APPEAL DID NOT
MENTION OR RULE ON THOSE
ISSUES RAISED IN THE DISTRICT
COURT AND ON APPEAL ..... 54
Ix
THE DEFAULT JUDGMENT SHOULD
HAVE BEEN VACATED AND RELIEF
PROVIDED TO PETITIONERS IN
ACCORDANCE WITH FRCP 60(b) (1)
AND/OR 60(b)(6) . «+ «© «+ «+ + 57
- xi
Page
THE DISTRICT COURT ABUSED
ITS DISCRETION IN DENYING
PETITIONERS’ MOTION FOR
RELIEF . . . . . * . . . . . 57
THE COURT OF APPEAL ERRED
IN AFFIRMING THE DENIAL
OF RELIEF . . . . . o . . . 57
X
FIVE WRITS OF EXECUTION ON
THE ALLEGED DEFAULT JUDGMENT
WERE ISSUED AND LEVIED OVER
ONE MONTH BEFORE THE DISTRICT
COURT MADE, SIGNED AND FILED
THE DEFAULT JUDGMENT .... 60
THE DISTRICT COURT REFUSED TO
RECALL AND QUASH THE WRITS.
THE COURT OF APPEAL DID NOT
MENTION OR RULE ON THAT ISSUE 60
APPENDIX
Memorandum of United States Court
of Appeal For The Ninth Circuit
- xii -
TABLE OF CASES, STATUTES,
AND TEXT BOOKS CITED
Cases
Ackerman v. United States
340 U.S. 193, 202,95 L.Ed.207 (1950)
Allard v. Church of Scientology etc.
(1976) 58 Cal.App.3d 439,
bee GOAcees: Fel « ee 8 ee lt
Bank of Waukegan v. Freshley
(DC Ind. 1976) 421 F.Supp.1033
Beck v. State Farm (1976)
54 Cal.App.3d 347,126 Cal.Rptr. 602
Becker v. S.P.V. Const. Co., Inc.
(1980) 27 Cal.3d 489, 165 Cal.Rptr.
825 _ . + * J . _ _ _ « eo - eo oo a o
Betty Stein v. Erwin Hassen (1973)
34 Cal.App.3d 294, 109 Cal.Rptr.321
Bronsseau v. Jarrett (1977)
73 Cal.App.3d 864,141 Cal.Rptr. 200
Broughner v. Seeretary of Health,
Education & Welfare, 527 F.2d 976,
978 (3rd Cir. 1978) . . «© « « © « «
Buckert v. Briggs (1971)
15 Cal.App.3d 296,93 Cal.Rptr. 61 .
Burtnett v. King (1949)
33 Cal.2d 805, 205 P.2d 657 ....
Butler .. McKey (CC Calif. 1943)
138 F.2d 373 7, + + + © © © + + *
Colonial Realty Corp. v. Bache & Co.
(24 Cir. 1966) 358 F.2d 178,181,182
42
32
37
24,25
40
- xiii -
Crogan v. Metz (1956)
47 Cal.2d 398, 405;
Daley v. Butte (1964)
ba) of “ROR podrae? 13878
illite
aaah ih525 7°
)
as paPCa1°Rpp.
96 Cal. sp BGM 0 31 P.623 .
303 P.2d 1029
Dryden v. Tri-Valley Growers (1977)
65 Cal.App.3d 990,135 Cal.Rptr.720
Fay v. Noia (US NY)
372 U.S.391, 423
Fishe. v. Kite Sorin
101 F.2d 685
DC 1939)
Goodwin v. Home Buying Inv. Co.
(DC 1973) 352 F.Supp.
413.
Gruenberg v. Aetna Ins.
480, 493
Co.
Haigler v. Donnelly (1941)
18 Cal.2d 674,680, 117 P.2d 331
(1973)
9 Cal.3d 566,586,108 Cal.Rptr.
Hofmayer v. Dean Witter & Co.
(DC 1978) 459 F.Supp. 733.
38
41
Housing Development Co. v. Hoschler
85 Cal.App.3d 379, 389,149 Cal.Rptr.
400 . om 7. . 7 . . . . . . . . . . >.
Hutchins v. Priddy (DC Mo. 1952)
103 F.Supp. 601 7 . . . . . . . . .
Jacuzzi v. Jacuzzi Bros., Inc. (1966)
243 Cal.App.2d 1, 52 Cal.Rptr.147.
Jones v. Kelly (1929)
208 Cal.2S1, 280 9.942 . «© «ee @
- xiv -
Page
Montalvo v. Zamora (1970)
7 Cal.App.3d 69,86 Cal.Rptr.401,405 41
Orange Empire National Bank v. Kirk
(1968) 259 Cal.App.2d 347,353,
G6 Cal. Mpte. 240 . »> se se ee 23
People v. Alves (1958)
155 Cal.App.2d Supp. 870,872
wee ome Gee « + © be 0. © 6-8: 40,54,57
Phillips v. Superior Court (1943)
22 Cal.2d 256,258,137 P.2d 838. . $1,537
Prudential Ins. Co. v. Zimmerer
(DC Nebr. 1946) 66 F.Supp.492 .. 26
Pueblo Trading Co. v. El Camino Irr.
Dist. (CC Calif. 1948)169 F.2d 312 25
Richardson v. Employers Liability
Ass. Corp. (1972) 25 Cal.App.3d
232, 102 Cal.Rptr. 547 o . . . . . 43
Roam v. Koop (1974) 41 Cal. teint 3d 1035,
116 Cal.Rpte. 539 . « « g eas 37,43
Rose v. Lawton (1963)
215 Cal.App.2d 18,20, 29 Cal.Rptr.844 26,35
Seymour v. Hull & Moreland
Engineering, 605 F.2d 1105
(9th Cir. 1979) . + . . . . . . . . 33,34
Swickheimer v. King (1971)
22 Cal.App.3d 220,99 Cal.Rptr.176 40
Thayer Plymouth Center v. Chrysler
Motors Corp. (1967) 255 Cal.App.2d
300, 304, 63 Cal.Rptr. 148 .... 52
Vasey v. California Dance Co.,Inc.
70 Cal.App.3d 742 (1977)
139Cal.Rptr. 72 . . . . . . . . . 33
Werschkull v. UCB (1978)
85 Cal.App.3d 981,
149 Cal.Rptr. 829.
Williams v. Foss (1924)
69 Cal.App.705, 707,
Wulfjen v. Dolton (1944)
231 P.766.
24 Cal.2d 878, 151 P.2d 840 .
Zhadan v. Downtown L.A.
(1976) 66 Cal.App.3d 481,
136 Cal.Rptr. 132.
Motors
25
26,35
26
42
STATUTES, RULES, TEXBOOKS
- xvi -
Calif. Code of Civil Procedure,
Calif.
Section 425.10.
473. +. “w
580 ..
585 (1) (2)
Civil Code
Labor
Section 3097 (k)
3116. .
3294. .
3423(5)
3432. .
3451. .
Code, Section 227 .
FRAP,
FRCP,
3 Witkin Calis. Proced.
Rule 4(a)(1)(5) .
Rule 4 (a) (1)
Rule 40...
Rule 52(c) .
59(e) .
OO wos
60 (a) (b)
60(b) .
60 (b) (1)
60(b) (6). .
62(b) . .
2d
526 subd. (5) .
Ed.
pp. , 2008, 2010
5 Wikin Calif. Proced. 2d Ed.
P-
, sec. 140. .
oO > oe o o o .
“ji -
IN THE SUPREME COURT OF THE UNITED STATES
Term, 19
No.
SHEET METAL WORKERS PENSION PLAN OF
SOUTHERN CALIFORNIA, ARIZONA AND
NEVADA; SHEET METAL WORKERS WELFARE
PLAN OF SOUTHERN CALIFORNIA, ARIZONA
AND NEVADA; and SHEET METAL WORKERS
SAVINGS PLAN OF SOUTHERN CALIFORNIA,
ARIZONA AND NEVADA,
Respondents/Plaintiffs,
vs.
BAER MANUFACTURING, INC., a California
corporation; MARLIN C. BAER, JOSE MONROY,
and RENEE G. BAER, doing business as
BAER MANUFACTURING, INC.; MARLIN C.
BAER, JOSE MONROY, and RENEE G. BAER,
individually and as Shareholders,
Directors, and Officers thereof,
Petitioners/Defendants.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
The above-entitled proceedings in the
U. S. Court of Appeals for the Ninth
Circuit have the following case numbers:
Civil Case No. C.A. 82-5035
DC Central California
No. CV 81-652 MRP
20
INTRODUCTION
Petitioners pray that a writ of certi-
orari issue to review the Memorandum
(Ooinion) of the United States Court of
Appeals for the Ninth Circuit entered
on June 24, 1983.
OPINION BELOW
The Memorandum (Opinion) of the
United States Court of Appeals for the
Ninth Circuit is in the Appendix hereto,
and is not yet reported in the official
reports to petitioners' knowledge.
PETITION FOR REHEARING
On June 24, 1983, the Court of Appeal
filed its Memorandum affirming the
District Court's Orders, which was
received by petitioners' counsel on
June 30, 1983, at a time when the July 4th
holiday weekend intervened. The mail
delivery delay and the holiday consumed
ten days, and the following three days
counsel was court engaged.
- 3-
FRAP, Rule 40 provides that within 14
days the petition for rehearing is to be
filed unless the time is enlarged. Since
counsel had no time left to file a peti-
tion for rehearing, counsel applied for
an enlargement of time which was filed
by mail on July 7, 1983, with the Court
of Appeal. On August 12, 1983, the
application was denied.
Petitioners had a meritorious petition
for rehearing which would have been filed,
except for the denial. Had the time been
enlarged,counsel feels confident that a
rehearing would have been granted, as will
hereinafter appear, and another case load
would have been taken off of the Supreme
Court.
JURISDICTION
The Memorandum (Opinion) in the
Appendix hereto, which is sought to be
reviewed is dated, filed and entered on
June 24, 1983.
The jurisdiction of this Court is
-4-
invoked under Section 1257( 3) of Title 28
of the United States Code.
STATEMENT OF THE CASE
Under a written agreement with the
Sheet Metal Plan, Baer Corp. failed to
make monthly payments required of it who
was the sole signatory to the Sheet Metal
plan.
THE COMPLAINT
When Baer Corp's delinquency continued,
Sheet Metal, on February 10, 1981, filed
a complaint in five counts for breach of
contract against Baer Corp., as the
debtor, to recover $16,960.88, plus
delinquency fees, of at least $5,000.00.
Marlin, Renee and Monroy were sued only in
their capacity as acting officers, direc-
tors and shareholders of Baer Corp. In
the 4th and 5th counts only, Baer Corp.
was alleged to be the alter ego of the
three individuals, and Sheet Metal Plan
sought $300,000.00 punitive damages.
The complaint did not allege fraud and
- § ~
deceit, or any other tort, which is the
basis for an award of punitive damages.
PRAYER TO COMPLAINT
As to Counts l, 2 and 3, Sheet Metal
prayed to recover "in accordance with
proof." No defendants (petitioners) were
named.
As to Counts 4 and 5 S. set Metal prayed
to recover "in accordance with proof"
against Baer Corp., Marlin, Renee and
Monroy, and for $300,000.00 punitive
damages against them.
As to all counts Sheet Metal prayed for
attorney's fees against all defendants
(petitioners and Mbdnroy).
ANSWER
Baer Corp.,Marlin, Renee and Monroy
denied the material allegations of all
counts of the complaint. Certain affirma-
tive defenses were alleged, which will be
referred to infra, if proved necessary.
a a
TEMPORARY RESTRAINING ORDER
PRELIMINARY INJUNCTION
Sheet Metal obtained ex parte a tempo-
rary restraining order (TRO) and order
to show cause (OSC), which was served
only on Renee and Baer Corp. At the
hearing thereon, Jackson E. Chandler (as
counsel for Baer Corp., Marlin, Renee
and Monroy) was present. The District
Court made and issued a preliminary
injunction. The injunction was served
by mail on Mr. Chandler, but was not served
On Baer Corp., Marlin, Renee and Monroy.
CONTEMPT
Thereafter Sheet Metal moved to hold
Baer Corp., Marlin, Renee and Monroy in
contempt for disobedience of the injunction.
The moving papers were served on Mr.
Chandler only. The District Court held
Baer Corp., Marlin, Renee and Monroy in
contempt and entered its contempt order on
May 28, 1981, and awarded Sheet Metal
-7-
$1,500.00 attorney's fees and costs.
INCOMPETENT REPRESENTATION
Mr. Chandler did file a memorandum in
opposition to the contempt motion which
showed on its face that Baer Corp., Marlin,
Renee and Monroy did not have adequate,
competent, effective representation.
The basis for the injunction and con-
tempt order was that Baer Corp. failed to
furnish mechanic lien information for the
delinquency period as allegedly required
by California Civil Code, section 3097 (k).
The contempt order was not served on
Baer Corp., Marlin, Renee and Monroy.
DEFAULT JUDGMENT
Sheet Metal then moved the District
Court to strike the answer and grant a
default judgment for failure to comply
with the contempt order, which the
District Court granted and made an order
striking the answer and order for default
judgment, which was entered on June 30,
1981. On August 31, 1981, the default
judgment was entered.
- § «
MOTIONS FOR RELIEF
Baer Corp., Marlin, Renee, and Monroy
moved the District Court for orders,
1. Vacating the order striking answer.
2. Vacating the order for default
judgment and the default judgment.
3. Granting moving parties leave to
defend Sheet Metal's action, and reinstat-
ing their answers.
4. Vacating the order for default
judgment and the default judgment by
striking therefrom the award of
(a) actual damages of $6,174.91,
plus $10,903.64 liquidated damages;
(b) actual damages of $3,329.94,
plus $5,223.79 liquidated damages;
(c) actual damages of $7,685.26,
plus $7,205.25 liquidated damages;
(d) $300,000.00 punitive damages;
‘(e) $4,750.00 attorney's fees, plus
$372.02 costs,
for the total amount of $17,190.11 actual
damages, $23,332.68 liquidated damages,
- 9 -
$300,000.00 punitive damages, $4,750.00
attorney's fees, and $372.00 costs, as
stated in the default judgment.
5. For order recalling and quashing
five writs of execution issued not on the
judgment, but on the order for judgment
made 60 days previous to the judgment.
GROUNDS FOR RELIEF
1. The complaint was against Baer Corp.
who only signed the Sheet Metal Plan
alleged agreement, and who only breached
the alleged contract.
2. The complaint alleged Baer Corp.
was alter ego of Marlin, Renee and Monroy.
No cause of action in alter ego was alleged.
3. In case of a default judgment the
District Court had no jurisdiction/
authority to grant relief outside of or
in excess of the prayer of the complaint.
4. The preliminary injunction and the
contempt order were void, and no basis
existed for the District Court's order
striking answer, order for default judgment
- 10 =-
and default judgment.
5. Punitive damages are not recover-
able in actions founded in contract.
6. The default and default judgment
were made through mistake, inadvertence,
Surprise, excusable neglect, misconduct
and incompetence of their attorney,
Jackson E. Chandler.
7. Passion and prejudice.
8. The writs of execution were issued
two months before filing and entry of the
default judgment and were void.
In the motions for relief Monroy was
represented by Hugh H. Helm, Esq., and
his separate motion was identical to
petitioners' motions as to motions for
relief Nos. l, 2, 3, and grounds for
relief Nos. l, 2, 3, 4, 5.
MOTION FOR ORDER EXTENDING TIME FOR
FILING NOTICE OF APPEAL
The default judgment was filed/entered
on August 31, 1981. The order for said
judgment was filed/entered on June 30,
1981.
- ll -
On August 28, 1981, petitioners filed
their motion to extend the appeal time,
which was denied on August 3l, 1981, on
procedural grounds.
On September 25, 1981, petitioners
filed their second motion to extend the
appeal time.
DISTRICT COURT'S RULINGS ON MOTIONS
FOR RELIEF AND TO EXTEND TIME FOR APPEAL
The motions for relief were set to be
heard on October 26, 1981. On that date
the District Court continued the hearing
ofsaid motions and the second motion to
extend the appeal time, to November 5,
1981. On that date, the District Court
denied the motions for relief and to extend
the appeal time, but granted the motion for
relief filed by Monroy. As previously
stated Monroy's motion was identical in
substance to petitioners' motion.
REASONS FOR ALLOWANCE OF THE WRIT
The reasons or grounds for allowance of
the Writ are:
1. This Court is urged to settle
- 12 -
important questions and issues of fact and
law. Substantial issues of law and facts
were avoided, ignored, incorrectly stated,
and not considered in the opinion of the
Court of Appeal even though such questions
and issues were raised and briefed by
petitioners in the District Court and on
appeal to the Court of Appeal, as will
hereinafter appear.
2. Had the Court of Appeal considered
all of the questions and issues presented
and ruled thereon, in counsel's opinion
the Court of Appeal would have had to
reverse the orders and judgment of the
District Court. In failing and refusing
to do so, petitioners have been denied due
process in that the District Court made
orders without authority and jurisdiction.
3. It appears necessary to secure
uniformity of decision, or settlement of
important questions of law.
4. The following are further reasons
for allowance of the Writ.
- 13 -
INTRODUCTION TO ARGUMENTS
The Memorandum Opinion of the Court of
Appeals leaves much to be desired. In
deciding the case on review, said Court
overlooked, misapprehended, and mistated,
the facts and the law, and in part decided
main issues on hearsay, all under the
protective cover of the illusive discretion.
The case here involved many material
issues of law challenging the jurisdiction
of the District Court to make the orders by
collateral attack, none of which the Court
of Appeal mentioned or ruled on. And,
moreover, petitioners were represented by
a wholly incompetent and ineffective
attorney whose outrageous conduct preju-
diced the petitioners and Monroy before
the District Court.
Recently, Chief Justice Warren E.
Burger justifiably had much to say about
such incompetent representation. And after
reading this petition and the Memorandum
Opinion of the Court of Appeal, I am confi-
a if 2
dent there will be similar thoughts reach-
ing out in all directions as to whether or
not a litigant is given due process on
appeal. The only way this Court can reach
a justifiable conclusion in that respect
is by reference to the record on appeal
which will show unmistakeably what is
stated in this petition.
This case comes squarely within Part V,
Rule 17, Jurisdiction on Writ of Certiorari,
Considerations Governing Review on
Certiorari, Rules of The Supreme Court of
The United States.
I
PETITIONERS' MOTION FOR EXTENSION OF
TIME TO FILE NOTICE OF APPEAL WAS TIMELY
FILED. IT IS NOT TRUE AS THE COURT OF
APPEAL STATED THAT THE MOTION WAS
UNTIMELY.
FRAP 4(a) (1) (5) authorized the filing
of a motion to extend the time for filing
a notice of appeal. The order for default
judgment was entered on June 30, 1981. On
- 15 -
August 28, 1981, petitioners filed their
first ex parte extension motion which was
denied on August 31, 1981, for not showing
good cause or excusable neglect. On
August 31, 1981, default judgment was
entered. On September 25, 1981, petitioners
filed their second ex parte motion to
extend the appeal time, being within 30
days as provided by FRAP 4(a) (1), based on
fact petitioners had at the same time filed
their motion for relief from the default
and default judgment, which if granted
would make the appeal moot, whereas an
appeal within the 30 days would have made
the motion for relief moot. The District
Court deferred ruling on the extension
motion until October 26, 1981, and on that
date again deferred ruling thereon to
November 5, 1981, at which time the exten-
sion motion as well as the motion for
relief were denied.
As seen from the above, it is undisputed
the extension motion to file an appeal was
timely filed within the 30 days period.
- 16 =-
The issue of good cause and excusable
neglect applies not to the within 30 days
period, but to the 30 days next following.
As further seen, both the District
Court and the Court of Appeal were clearly
erroneous in concluding the extension
motions were filed untimely. There was
good cause to grant the second extension
motion and extend the appeal time, because
of the pending motion for relief and the
second extension motion was specifically
based and grounded on the pending motion
and the facts alleged for relief which was
made under oath/penalty of perjury, which
shows that the holding of both the
District Court and Court of Appeal that
the motion was unsupported is untrue.
What probably happened was that said
courts had the first motion in mind (which
was unsupported and denied on that ground
on August 31, 1981), and totally by-passed
the second extension motion.
Petitioners should not suffer the loss
mii,
of their appeal rights due to the Court's
inadvertence and clearly erroneous
conclusions.
It was legally inappropriate for the
District Court to box petitioners in the
position stated, to prevent review by
denying both the motions for relief and
for extension of time for appeal, which is
certainly not judicial discretion exercised
within the bounds of reason. To deny a
litigant's right to appeal is to deny
due process.
Il
PETITIONERS'PREDICAMENT BEFORE THE
DISTRICT COURT WAS DUE TO INCOMPETENT
AND INEFFECTIVE COUNSEL WHOSE OUT-
RAGEOUS CONDUCT PREJUDICED PETITIONERS.
IT WAS NOT SIMPLY THAT THEIR COUNSEL
DISAPPEARED AS THE COURT OF APPEAL
STATED.
Vea Court of Appeal would have this
/Supreme Court impliedly believe that
petitioners' counsel simply disappeared,
- 18 -
before detault judgment and new counsel
was not replaced until August 27th, after
judgment, which is not the case at all.
What caused the District Court to strike
the answer and enter the default judgment
was in part due to Mr. Chandler's incompe-
tence and outrageous conduct as indicated
in the documents he filed with the District
Court, being CR (DC)19 and CR(DC) 32. Very
briefly in CR_19, Mr. Chandler argued in
opposition to contempt, the Declaration of
Independence, harassment, vendetta, legal
extortion, abusive and coercive action on
part of Sheet Metal and their attorneys.
In CR 32, Mr. Chandler argued, in opposi-
tion to discovery, strike answer and
default judgment, petitioners' rights to
life, liberty and the pursuit of happiness.
The Taft Hartly Act, the poverty problems
of the world imminent at war, economics
and world economy, fiscal problems, extor-
tion, using FRCP as the gun and the Court's
ego as the trigger, what Thomas Jefferson
advocated, and finally, if not last, Mr.
- 19 -
Chandler stated,
"I have advised my clients, the
defendants herein, not to comply
with the Court's orders..." .
The petitioners by new counsel filed
their declarations under oath for relief
Stating that none of the aforementioned
was at any time previously Known or auth-
orized by them, and at no time did Mr.
Chandler advise petitioners not to comply
with the Court's orders. (CR(DC) 49,66,67).
FRCP 60(b) (1) and/or 60(b) (6) warranted
relief. Petitioners should not be held to
Attorney Chandler's personal actions in
declining to fully comply with the Court's
discovery orders based on his own notions
of social policy and civil rights. Since
the District Court granted Monroy relief on
this ground among others, no logical reasons
existed for the same Court to deny relief to
petitioners on the same ground.
The Court of Appeal's further statement
that "no evidence was presented in support
- 20 -
of that contention. There was thus insuffi-
cient 'excuse or explanation' for Baer's
failure to tomply" finds no support in the
record. In their motion for relief peti-
tioners' factual declarations incorporated
the factual declarations of Monroy pertinent
and relevant to that point, and to Mr.
Chandler's declaration to the Court, quoted
above of which petitioners were totally
unaware. That record speaks for itself.
Rule 60(b) (6), which permits the vacating
of a judgment "for any other reason justify-
ing relief", provides an extraordinary
remedy upon a showing of exceptional cir-
cumstances. This rule envisions relief for
a party from "neglect so gross that it is
inexcusable". Such an instance is when an
attorney abandons his client and places
extreme, unexpected hardship on that party.
Ackerman v. United States 340 U.S., 193,
. L.Ed.
Broughner v. Secretar of Health,
Education & Welfare, o55 F.2d 976,978
(3rd Cir. 1978).
Here, there is no question the default
was entered based on attorney Chandler's
- 21-
conscious refusal to comply fully with dis-
covery and the Court's orders for his own
reasons > without consuléing\ his clients,
was so neglectful of his clients' interest,
so outrageous in its character as to consti-
tute che necessary exceptional and extra-
ordinary circumstances required for relief
under Rule 60(b). Attorney Chandler aban-
doned his client's interest to pursue his
own notion of social policy, left his clients
wholly unprotected in the face of the Court's
clear order regarding discovery. This pre-
sents a compelling case for relief under
Rule 60(b). Defendants could not protect,
and had been deprived of an opportunity to
defend, their interest in this lawsuit.
Whether this case falls within Rule 60(b) (1)
or 60(b) (6) or both, their failure was due
to their limited knowledge regarding the
lawsuit, their reliance placed on Attorney
Chandler who took an outrageous position,
5 The reasons expressed by Attorney Chandler
for refusing to comply with discovery orders
are expressed in his Opposition to Motion
for Discovery and Motion to Strike Answer.
(DC 32).
- 22 <-
demonstrate extraordinary and exceptional
circumstances which provide unassailable
grounds for relief under Rule 60(b).
In Douglass v. Todd (1892) 96 Cal.655,
658, defendant's attorney advised he had no
defense. Relying thereon he did not answer.
The Court held that excusable. Defendant
was not guilty of negligence. He went to
a practicing attorney, and had a right to
suppose him to be competent, and was justi-
fied in acting on his advice. This case
has been frequently cited, but never over-
ruled.
Daley v. Butte (1964) 227 Cal.App.2d 380
parallels the instant case. The attorney
was guilty of "gross" misconduct, and not
negligence, or ignorance or mistake of the
law. The Court held no lay person could
be expected to know what goes on in Court
between counsels and the judge, and should
not have to pay the extreme penalty c
account of his counsel's misconduct. In
effect, the plaintiff was deprived of repre-
sentation by her nominal counsel of record.
oe. 23 -
In Buckert v. Briggs (1971) 15 Cal.App.
3d 296, the Court held the attorney did not
represent his clients, as shown by his con-
duct. His misconduct resulted in the
Client's failure to attend trial, was the
product of extrinsic surprise and mistake
without negligence.
In Orange Empire National Bank v. Kirk
(1968) 259 Cal.App.2d 347, 353, attorney
took no action to prevent default or seek
relief from the default judgment. Relief
granted.
Itt
1. IN THE CASE OF A DEFAULT JUDGMENT
THE DISTRICT COURT HAD NO JURISDIC-
TION TO GRANT RELIEF OUTSIDE OR IN
EXCESS OF THE COMPLAINT. IF THE
COURT DOES, THE DEFAULT JUDGMENT MAY
BE COLLATERALLY ATTACKED FOR LACK OF
JURISDICTION AND DUE PROCESS.
2. THE COURT OF APPEAL DID NOT MENTION
OR RULE ON THOSE ISSUES THOUGH
RAISED IN THE DISTRICT COU%T AND
ON APPEAL.
- 24 -
In this case petitioners attacked the
trial court orders and judgment by default
both in the trial court and in the Court of
Appeal by collateral attack. Where the
trial court exceeds its authority it is
subject to collateral attack for lack of
due process.
Becker v. S.P.V. Const. Co., Inc. (1980)
27 Cal.3q 489
Burtnett v. King (1949) 33 Cal.2d 805
The Becker case involved a default judg-
ment which was attacked collaterally for
lack of personal or subject matter juris-
diction, or for granting relief which the
Court had no power to grant. The Becker
court held the trial court had no power to
enter a default judgment other than in con-
formity with California Code of Civil
Procedure, section 580, no relief can be
granted in excess of that demanded in the
complaint, which otherwise is a denial of
due process, citing sections 425.10 and
585(1)(2) of the same code. No recovery
can be had for damages or attorney's fees
- 25 -
"in accordance with proof", if no specific
amount is alleged.
Burtnett v. King (1949) 33 Cal.2d 805,Supra
Werschkull v. UCB (1978) 85 Cal.App.3d 981
FRCP 52(c) in accord.
FRCP 60(a)(b) authorized relief from
orders and judgments by default on grounds
stated in Rules 60 and 62(b) to alter or
amend the judgment.
The 10 days rule (FRCP 59(e) ) and the
six months statute (Calif. C.C.P., sec.473)
do not preclude or bar relief.
Becker case, supra.
Unless the order or judgment conforms to
the complaint the default order or judgment
is a nullity.
Pueblo Trading Co. v. El Camino Irr. Dist.
(CC Calif. 1948) 169 F.2d 312
Fay v. Noia (US NY) 372 U.S. 391, 423
Fishel v. Kite (App. DC 1939) 101F.2d 685
Hutchins v. Priddy (DC Mo. 1952)
103 F.Supp. 601
The complaint may not be supplemented by
a collateral or other document. Thus, in
this case Sheet Metal's notice of motion to
strike answer and for default judgment was
insufficient to obtain relief beyond the
- 26 -
scope of the complaint. The different
relief must be by process personally served
on the defendants, and state law must be
applied.
Hutchins v. Priddy, supra
Prudential Ins. Co. v. Zimmerer (DC Nebr.
1946) 66 F.Supp. 492
The point of law stated in this Argument
is applicable to each of the Arguments set
forth in this petition even in a case where
the complaint or any count therein or part
thereof does not state sufficient facts to
constitute a cause of action.
Thus, a defaulting defendant admits only
facts well pleaded. If no cause of action
is pleaded, or the allegations plaintiff
pleaded do not support the demand for relief,
plaintiff is not entitled to any relief by
default judgment.
Williams v. Foss (1924)
69 Cal.App. 705, 707
Rose v. Lawton (1963)
215 Cal.App.ed 18, 20
The cause of action is distinguished from
the relief sought.
Wulfjen v. Dolton (1944) 24 Cal.2d 89
-~—2, @
The contract (here specifically provided
upon the first delinqlency the contract
"shall be automatically cancelled and
terminated without .. . notice... ."
Sheet Metal alleged in its complaint the
first delinquency occurred in June, 1980,
and the action filed on February 10, 1981,
was to recover delinquent contributions for
June, September, October and November, 1980,
plus delinquency fees for the same period
and attorney's fees. (CR (DC) 1). It
therefore appears that there was no written
contract to sue on when the complaint was
filed, in which case the District Court had
no authority, especially in a default case,
to award delinquency and attorney's fees.
Applying the foregoing to the complaint
herein, it is undisputed the first, second
and third counts were only against Baer Corp.
The prayer No. 1 asked for judgment “in
accordance with proof." Paragraph 1l states
"in at least the following amounts", which
totalled $16,960.98. Paragraph 12 states
- 28 -
the delinquency fees are "at least" $5,000.00.
Since no relief can be had in a default case
beyond the complaint, Sheet Metal can only
recover $10,460.98 ($16,960.98 less
$6,500.00 paid) under said three counts, and
against Baer Corp. only.
The fourth and fifth counts were only
against Baer Corp., except that Sheet Metal
sought to hold the individuals Marlin, Renee
and Monroy as Baer Corp.'s alter ego. Those
two counts were for the same dollars alleged
in the first three counts. Prayer No. 2
asked for judgment on those two counts against
all defendants for only general damages ‘in
accordance with proof." No amount of
general damages was alleged in the complaint
Or prayer. Under those two counts Sheet
Metal can recover only against Baer Corp.
the sum of $10,460.98. No general damages
can be awarded in any amount.
Prayer No. 3 asks for punitive damages
only, against all defendants, for $300,000.00
"or in accordance with proof." To recover
punitive damages in any amount the complaint
- 29 -
must state a cause of action in tort, and
in alter ego if recovery is sought against
Marlin, Renee and Monroy. If no cause of
action in tort and alter ego is stated no
recovery can be had in any amount. Since
the complaint does not state a cause of
action in tort and alter ego, no recovery is
allowed. See Arguments IV,V,VI infra,which
deals with this subject matter exclusively.
Prayer No. 6 asks for attorney's fees.
No amount is stated in the complaint or in
the prayer. No attorney's fees can be
awarded in any amount.
As to delinquency fees and attorney's
fees, none can be recovered, because the
contract which provided for same automati-
cally cancelled and terminated without notice
upon the first delinquency which occurred
sometime in June, 1980, more than nine
months prior to filing the complaint.
That the District Court exceeded its
authority appears from the Court's order
for default judgment and the default judgment
(CR (DC) 36, 46) which show:
- 30 -
1. For contributions owed (damages),
$17,190.11 was awarded for the period from
June, 1980 to January, 1981, against all
defendants jointly and severally.
That amount is $6,729.13 more than the
amount alleged in the complaint less the
amount paid; and no amount was alleged for
December 1980, and January 1981. Since no
cause of action in alter ego was stated, no
such recovery can be had against the
individuals.
2. The sum of $23,332.68 was awarded as
and for liquidated damages for the period
from July 1978 through January 1981, against
all defendants jointly and severally.
The complaint alleged delinquency fees,
not liquidated damages, in at least $5,000.00
for the period alleged from June 1980 through
November 1980. There was no allegation of
any other periods or of any other amounts
alleged in the complaint, and it is obvious
the District Court had no authority to make
an award for any period prior to June,1980,
- 31 -
and subsequent to November 1980, assuming
the Court had authority to make an award
which would be limited to $5,000.00 in any
event. But since there was no contract in
existence, as aforesaid, the Court had no
authority to make an award in any amount.
And since no cause of action in alter ego
was stated there could be no award against
Marlin and Renee.
3. The Court awarded $4,750.00 attorney
fees against all defendants.
As to Nos. 2 and 3, above, since the
contract was cancelled automatically some
nine months before action was filed, and
since the complaint did not allege anv
amount of fees and liquidated damages, no
basis existed for such awards; and since no
cause of action in alter ego was stated, no
such recovery can be had in any event
against the individuals.
When exercising its diversity jurisdic-
tion, a Federal District Court is, in effect,
another State Court and is compelled to
- 32 -
follow State law.
DC Ind. F.Supp. 1033
Under the circumstances stated, the
District Court had no jurisdiction to grant
relief in a default judgment. Although
each of the above was raised in the trial
court and on appeal, the Court of Appeal
did not mention or rule on any of those
points in its Memorandum Opinion.
IV
1. THE COMPLAINT DID NOT STATE A CAUSE
OF ACTION IN ALTER EGO. NOR WAS
ALTER EGO PROVEN.
2. THE COURT OF APPEAL DID NOT MENTION
OR RULE ON THAT ISSUE THOUGH RAISED
IN THE DISTRICT COURT AND ON APPEAL.
Marlin and Renee, and Monroy were sued
as officers. directors and shareholders of
Baer Corp., and in the 4th and 5th counts,
Sheet Metal alleged that Baer Corp. was
the alter ego of Marlin, Renee and Monroy
in that (a) there existed unity of interest
and ownership; (b) separateness ceased to
exist; (c) individuals guazanteed Baer
- 33-
Corp.'s debts; (d) managed Baer Corp.
assets for personal use and convenience,
to evade Baer Corp. to pay its debts and
prevent creditors from enforcing their
personal guarantees; (e) conceal mechanic
lien information; (f) failure to pay
contributions. (Complaint pars. 30,32;
CR (DC) 1).
Sheet Metal has alleged alter ego as a
legal conclusion and on hearsay that the
individuals have guaranteed and engaged
in unspecified obligations and manipulation
of corporate assets for personal reasons,
which form the only basis for the claim of
such liability. The following cases hold
that no cause of action in alter ego was
alleged and a ju“ ment in alter ego liability
was reversed.
California Dance Co., Inc.,
~Rptr. 72(1977)
-App. 1
seymour v. Hull & Moreland Engineering,
. t r.
The Vasey court held the allegation was
Vasey v.
conclusory and the evidence presented was
- 34 -
insufficient to show alter ego. Although
by default the allegations are admitted,
the admission is only as to facts well
pleaded. The default judgment in alter
ego was set aside.
The™Seymour court denied recovery in
alter ego. The facts are similar to the
within Sheet Metal case, a suit to recover
contributions due employees'trust funds.
The court refused to pierce the corporate
veil, finding the more egregious forms of
abuse =- commingling of personal and cor-
porate funds and personal use of corporate
assets - were not present.
In this case at bench there was no
evidence at all presented to prove alter
ego liability.
In Seynour the court went on to say
that assuming the corporation is rendered
insolvent that does not show that some
injustice might result if the veil is not
pierced. An uncollectible judgment does
not of itself constitute an inequitable
result.
- 3§ -
From the above, it appears clear that
no cause of action in alter ego was stated
or proven, and the judgment against the
individuals may not stand.
Where the complaint does not state a
cause of action, the Court has no juris-
diction in a default case to grant relief
by default judgment.
Williams v. Foss, supra
Rose v. Lawton, supra
V
PUNITIVE DAMAGES ARE NOT RECOVERABLE
IN ACTIONS FOUNDED IN CONTRACT.
ASSUMING A TORT WAS INVOLVED, THE
AWARD OF $300,000.00 PUNITIVE
DAMAGES AGAINST THE CORPORATION AND
THE INDIVIDUALS WAS CLEARLY ERRONEOUS,
GIVEN UNDER PASSION AND PREJUDICE,
AND VOID.
THE COURT OF APPEAL DID NOT MENTION
OR RULE ON SUCH ISSUES THOUGH RAISED
IN THE DISTRICT COURT AND ON APPEAL.
The complaint alleged an action for
- 36 -
breach of contract. In addition, Sheet
Metal alleged that by reason of alter ego,
refusingto pay contributions and conceal-
ing mechanic lien information, petitioners’
actions were wilful, wanton, malicious
and oppressive, violated California Civil
Code, section 3097(k), and justifies
$300,000.00 punitive damages.
At the motion hearing for default judg-
ment, the only evidence presented was in
documentary form which requested the
amount due under the agreement, which
was the relief awarded by the Court.
(CR (DC) 31, 34, 35, 36, 38). No request
for punitive damages in any specified
amount was requested by Sheet Metal. The
order for default judgment "added"
$300,000.00 punitive damages for failure
to provide mechanic lien information and
failure to pay contributions. The default
judgment was for $17,190.11 actual damages
(amount owed for contributions), plus
$23,332.68 liuqidated damages, and
- 37 -
$300,000.00 punitive damages. (CR (DC) 46).
Punitive damages may not be recovered
in actions founded in contract, no matter
how wilful, or malicious, or fraudulent,
except where the wrongful act is also a
tort.
Hofmayer v. Dean Witter & Co. (DC 1978)
459 F. Supp. 733
Roam v. Koop (1974)41 Cal.App.3d 1035
Jones v. Kelly (1929) 208 Cal. 251
Haigler v. Donnelly (1941)
18 aot 3a 674, 680
’
Crogan v. Metz (1956)
al. , 405; 303 P.2da 1029
Dryden v. Tri-Valley Growers (1977)
65 Cal.App.3aq 990
Civil Code, section 3294
Sheet Metal's and the Court's conclu-
sive characterization of petitioners' con-
duct as intentional, wilful, fraudulent,
was patently insufficient to show a tort.
Proof of violation of good faith or fair
dealing is insufficient.
Bronsseau v. Jarrett (1977)
73 Cal.App.3d 864
Beck v. State Farm (1976)
54 Cal.App.3q 347
Alleging facts on information and belief
in the 4th and 5th counts are hearsay and
may not support a default judgment. In
- 38 -
said counts, the purported facts alleged
are obviously not within the personal
knowledge of Sheet Metal or their counsel
and are hearsay.
Butler v. McKey (CC Calif. 1943)
i oe
The allegation that petitioners have
withheld facts helpful to Sheet Metals'
case is a complaint that petitioners
refused to help Sheet Metal prove its
case, which is not required.
Goodwin v. Home Buying Inv. Co. (DC 1973)
352 F. Supp. 413
Sheet Metal alleged petitioners have
preferred other creditors of Baer Corp.
That is not a tort even if it be true.
It is not a breach of contract, nor proves
alter ego, and not a basis for punitive
damages. It is valid even though it makes
the creditor insolvent.
Calif. Civil Code, sections 3432,3451
5 Witkin, calit. Proced. 2d Ed.
Pp. , sec.
The Court of Appeal stated in a few words
that Baer Corp. ceased operations and
- 39 -
pledged its entire property and accounts
receivable to a lender. But that was the
sole unsubstantiated contention of Sheet
Metal, and obviously a hearsay allegation
in the complaint having been alleged on
information and belief. (par. 29, CR (DC)
1). No evidence of that was ever presented
to the Court.
But the Court of Appeal failed to point
out that such a statement was hearsay,
which Sheet Metal's counsel stated was
made by a person who was not a party to
this case and outside of Court, and
obviously a hearsay allegation, and further
failed to point out that California statute,
Civil Code, sec. 3432, authorizes such a
preference, to give one creditor security
for the payment of his demand in preference
to another. (CR (DC) 26, p.8). My records
show that the motion to strike answer and
for default judgment intervened and was
granted and the motion in which that alleged
statement was made was never heard and ruled
on.
- 40 -
Alter ego does not raise issues in tort.
If established, it merely transfers liabil-
ity to the alter ego.
California Civil Code, section 3097 (k)
and Labor Code, section 227, alleged by
Sheet Metal in its complaint do not entitle
Sheet Metal to punitive damages, even if
such sections were violated.
In any event, a violation of said
Statutes does not give rise to civil
liability. Such statutes are regulatory
and disciplinary in nature, a valid exercise
of police power, not applicable in civil
actions for damages.
Swickheimer v. King (1971)
22 Cal.App.3d 220, 99 Cal.Rptr. 176
Cf Colonial Realty Corp. v. Bache & Co.
24 Cir. 1966) 358 F.2d 178,181,182
Housing Development Co. v. Hoschler
85 Cal.App.3d TEP 389, 149 Cal.Rptr.400
People v. Alves (1958)
155 Cal.App.2d Supp. 870, 872
3 Witkin, Calif.Proced. 2d Ed.
Pp. 1971-1972, 2006,2008,2010
The use of the words wrongfully, wil-
fully, fraudulently, oppressively, and
maliciously adds nothing to the pleadings
= 62 =
or default judgment, except to convey a
sense of outrage on the part of the
pleader or judge.
Gruenberg v. Aetna Ins. Co. (1973)
9 Cal.3d 566, 586, 108 Cal.Rptr.
480,493
The Gruenberg court stated that such
embellishments do not derogate from the
contractual character of the pleading;
that the liability sought to be imposed
arises upon contract.
$300,000.00 was awarded as punitive
damages without presenting any evidence
at the trial or hearing, as to which
Montalvo v. Zamora applies here (7 Cal.
App.3d 69, 86 Cal.Rptr. 401, 405 (1970).
That Court said:
", . . The amount of exemplary damages,
if any, to be determined, not on the
pleadings, but on the facts developed
at the trial."
Here there was no trial; a default case.
As to punitive damages, the following
courts had to say that if there is no
- 42 -
allegation and no evidence of defendants’
net worth, no punitive damages may be
awarded, and, moreover, any such damages
which exceed one-third of defendants' net
worth could not be justified, except to
put defendants out of business, bankrupt
defendants, or be so enraged resulting in
feeling of animosity rather than dis-
passionate determination of an amount
necessary to assess defendants for pur-
poses of deterence.
Zhadan v. Downtown L. A. Motors (1976)
66 Cal.App.3d 481
Allard v. Church of Scientology etc.
(1976) 58 Cal.App.3d 439
Under the circumstances here, the
District Court had no jurisdiction to
award punitive damages in any amount.
VI
1. THE DISTRICT COURT HAD NO
JURISDICTION TO IMPOSE PUNITIVE
DAMAGES OR SANCTIONS.
2. THE COURT OF APPEAL DID NOT MENTION
OR RULE ON THAT ISSUE THOUGH RAISED
IN THE DISTRICT COURT AND ON APPEAL.
- 43 -
In awarding $300,000.00 the District
Court stated in its Order for default
judgment that defendants shall pay
$300,000.00 "as and for punitive damages,
for their wilful, malicious and oppressive
failure to provide mechanic lien informa-
tion and failure to pay contributions
with fraudulent intent... .".
From the above it appears uncertain
whether punitive damages or sanctions
were awarded.
Punitive damages are awarded by way of
punishment, for sake of example, in a tort
case. Not for breach of contract no matter
how wilful, malicious, oppressive, or
fraudulent. (Argument V)
Calif. Civil Code, sec. 3294
Richardson v. Employers Liability
Ass. Corp. (19 Cal.App. 32,
Cal.Rptr. 547
Roam v. Koop, supra
Sanctions are imposed in discovery cases,
to enable a party to obtain the objects of
discovery he seeks. But the Court may not
impose sanctions which are designed not to
- 44 -
accomplish discovery, put to impose
punishment.
Betty Stein v. Erwin Hassen (1973)
34 Cal.App.3dq 294, 109 Cal.Rptr.32l
Jacuzzi v. Jacuzzi Bros., Inc. (1966)
243 Cal.App.2d 1, 52 Cal.Rptr. 147
The clear meaning of the District Court
was to punish petitioners by the $300,000.00
assessment or award in addition to imposing
the ultimate sanction of striking the
answer and entering a default judgment.
The $300,000.00 award was clearly
erroneous and beyond the jurisdiction of
the District Court to impose, whether it
was imposed as a discovery sanction or as
punitive damages under the complaint.
The point is supported by competent
authorities as shown in Argument V herein,
and as follows:
Petitioners were sanctioned $1,500.00
in the court's contempt order for alleged
refusal to comply with the preliminary
injunction. :
The contempt order further ordered
petitioners to comply with the preliminary
oa
- 45 -
injunction by April 17, 1981.
But the preliminary injunction was void,
(a) because the District Court had no
jurisdiction to enjoin or prevent the
breach of a contract.
Calif. Civil Code, section 3423(5)
(b) because the injunction was never
served on petitioners.
(c) because the TRO and OSC enjoined
petitioners from "concealing and failing
or refusing to disclose to plaintiffs any
of the following" information itemized
and the OSC was why the Court should not
make such an order. The Court's findings
and conclusions of law at the hearing were
completely outside the scope of the TRO
and OSC, except for finding No. 12 which
recited the TRO (CR (DC) 8,9). The pre-
liminary injunction ordered petitioners
to produce and deliver to plaintiff
certain described mechanic lien informa-
tion by 5:00 P.M. on February 17, 1981.
It is manifestly apparent that the Court
- 46 =-
made an entirely different order (prelim-
inary injunction) than the one the TRO
and OSC requested and gave notice of, and
because of lack of notice and due process
the Court had no jurisdiction to make the
alleged injunction. And, moreover, all
of the alleged facts alleged to obtain
the TRO, OSC and injunction occurred prior
to the commencement of the instant action.
Plaintiffs had no right to discovery
before filing their action. After filing
the action plaintiffs had not requested
discovery, and since there was no refusal
to provide discovery the Court had no
jurisdiction to order petitioners to comply
with an unrequested discovery, or compel
petitioners to comply with a request for
records made prior to commencement of
their action.
Because the preliminary injunction was
void, so was the contempt order. The
Court may not hold petitioners in contempt
for refusing to comply with a void order.
« 67 «
The contempt order was also void for the
reasons given in Arguments VII and VIII.
When plaintiffs moved to strike the
answer and for default judgment, the grounds
for their motion was refusal or failure to
comply with the injunction and contempt
order. In their motion, plaintiffs re-
quested attorney's fees and costs, in
addition to contributions and delinquency
fees. No sanctions were requested.
(CR (DC) 31, 34, 35, 38). Assuming proper
notice was given of the motion, petitioners
had no notice that sanctions would be
requested and therefore the lack of such
notice was a denial of due process and gave
the Court no jurisdiction to impose
$300,000.00 sanctions or any other amount.
Moreover, since the grounds of that
motion were refusal to comply with the
injunction and the contempt order both of
which were void, no grounds existed for the
Court to strike the answer ard enter a
default judgment, and the Court's orders
- 48 -
to that effect are void.
Moreover, when the answer was struck,
the Court lost jurisdiction of the peti-
tioners (defendants) who were no longer
before the Court and who no longer had a
voice in the proceedings, and therefore
the Court could not sanction petitioners,
and make an award beyond the scope of the
complaint.
Moreover, and as to punitive damages,
in the motion to strike and for default
judgment no punitive damages were requested,
and no evidence was produced to justify an
award of punitive damages in any amount,
and for that reason and for the reasons
given in Argument V, the Court had no
authority to award punitive damages.
- 49 -
VII
1. THE PRELIMINARY INJUNCTION AND THE
CONTEMPT ORDER OF THE DISTRICT
COURT WERE VOID AND ON THAT GROUND
DID NOT PROVIDE A BASIS FOR THE
DISTRICT COURT'S ORDER STRIKING
ANSWER, ORDER FOR DEFAULT JUDGMENT,
AND DEFAULT JUDGMENT.
2. THE COURT OF APPEAL DID NOT MENTION
OR RULE ON THOSE ISSUES RAISED IN
THE DISTRICT COURT AND ON APPEAL.
That petitiqners were "properly" found
in contempt for failure to comply with the
preliminary injunction, as the Court of
Appeal stated, was a clearly erroneous
conclusion. And, moreover, the District
Court did not impose a "fine" for that
reason. An award of $1,500.00 attorney's _
fees payable to counsel can never be a fine.
A fine is payable to the Court.
The record shows without dispute that
the TRO and OSC were served only on Baer
Corp. and Renee. The preliminary injunction
- 50 -
was served only on Mr. Chandler.
Moreover, Sheet Metal's motion for a
contempt order for failure to comply with
the preliminary injunction was served by
mail only on Mr. Chandler, and no order
was made authorizing service by mail.
The contempt order was based on failure
to comply with the preliminary injunction.
The contempt order was not served on
Baer Corp.,Marlin and Renee. It was served
by mail on Mr. Chandler only, there being
no order to serve by mail.
Personal service was required, the
absence of which does not give the Court
jurisdiction over the party not served.
It is necessary that one charged with a
preliminary injunction and contempt have
knowledge of both. Here, there was no
service of the (a) preliminary injunction,
(b) the motion for contempt, and (c) the
contempt order, on petitioners. The fact
petitioners are parties does not charge
them with knowledge, nor may the declaration
- 51-
of a party to be held in contempt supply
the deficiencies in the moving party's
declaration, nor by proof upon hearing.
A defective declaration as well as no
service do not give the Court jurisdiction
to proceed in contempt, which renders the
proceedings void ab initio, and the contempt
order null and void.
Phillips v. Superior Court (1943)
22 Cal.2d 256, 258, 137 P.2d 838
The conclusion to be drawn from the
above is that the District Court had no
jurisdiction to strike the answer, order
a default judgment, and enter a default
judgment.
The Court of Appeal seems to find
support in that Renee was (a) served writs
of execution, (b) attended one hearing,
and (c) March 9 did comply in part with
the preliminary injunction by supplying
Sheet Metal with 43 documents. But that
appears only on the surface. As to (a)
the writs were served after the order for
- 52 -
default judgment was made and filed on
June 30, 1981; as to (b) the hearing was
held in chambers between judge and counsel
only; as to (c) Baer Corp. and not Marlin
or Renee furnished 43 documents to Sheet
Metal stating under oath that in substance
Baer Corp. had no other records showing
mechanic lien information with explanations.
CR (DC) 19.
A preliminary injunction can not be
granted to prevent the breach of a contract.
Calif. Civil Code, sec. 3423(5)
Calit. Code of Civil Procedure,
sec. 5260, second subd. (5)
Thayer Plymouth Center v. Chrysler
Motors corp. (1967) 255 cal.App.cd 300,
’ Cal.Rptr. 148
The failure to pay contributions and to
furnish the mechanic lien information
records, both required by the alleged
contract, amounts to a breach of contract,
no matter how wilful or malicious or
fraudulent.
A relevant and important fact is that
the delinquency occurred in June, 1980,
- §3 -
which continued thr»ugh November, 1980.
Since Sheet Metal had 90/30 days to file
a mechanic lien (Calif. Civil Code,
sec. 3116) the lien was barred at the
time the action was filed on February 10,
1981, which bar continued and became
certain on February 18, 1981, at the time
the preliminary injunction was issued, and
prior to May 28, 1981, when the contempt
order was entered. Thus, the issue of
mechanic lien information became moot, and
no action exists in contempt or injunction
to enforce a moot issue.
VII.
1. SINCE THE BASIS FOR CONTEMPT IS THE
WILFUL REFUSAL OR FAILURE TO COMPLY
WITH THE PRELIMINARY INJUNCTION,
SHEET METAL HAD THE BURDEN OF PROVING
WILFUL REFUSAL OR FAILURE TO COMPLY
WHICH SHEET METAL FAILED TO SUSTAIN,
AND THE CONTEMPT ORDER WAS VOID ON
THAT GROUND.
- 54 -
2. THE COURT OF APPEAL DID NOT MENTION
OR RULE ON THOSE ISSUES RAISED IN
THE DISTRICT COURT AND ON APPEAL.
The word "wilful" implies that subject
party has the ability to comply, for if he
lacks ability there is no wilful failure
on his part.
People v. Alves, supra.
The underlying basis for the TRO, OSC
and preliminary injunction was for peti-
tioners to furnish Sheet Metal mechanic
lien information to enable Sheet Metal to
file mechanic liens to secure payment of
delinquent contributions.
The relevant facts are on December 29,
1980, Sheet Metal for the first time gave
written notice to Baer Corp. demanding
payment of delinquent contributions or
mechanic lien information. Since full
payment was not made Sheet Metal filed
Suit on February 10, 1981, demanding
mechanic lien information for the delinquent
- 55 -
period June to November, 1980. A TRO and
OSC were obtained on February 10, 1981, to
obtain mechanic lien information, which
were served only on Baer Corp. and Renee.
The Court ordered personal service. On
February 17, 1981, at the hearing the
Court found Baer Corp. was delinquent for
said period, and that upon written notice
Baer Corp. was obligated to furnish mechanic
lien information for the delinquency period.
Only Baer Corp. and Renee were served. Baer
Corp., Renee, Marlin and Monroy failed and
refused to comply therewith. Mechanic
liens must be filed within 90 days after
completion and Sheet Metal may be barred
from filing such liens. On February 18,
1981, the preliminary injunction was issued
ordering Baer Corp., Marlin, Renee and
Monroy, by February 17, 1981, to furnish
all mechanic lien information described
therein, which was served only on Mr.
Chandler, attorney.
On March 9, 1981, Baer Corp. supplied
- 56 =-
Sheet Metal with 43 doucments, which Sheet
Metal deemed insufficient, and on March 24,
1981, filed a motion to hold all defendants
in contempt, set for April 6, 1981. The
supporting papers alleged that the 43
documents were insufficient, no further
records were supplied, and that they failed
or refused to supply the appropriate lien
information records.
In response, on behalf of Baer Corp.,
Renee, under penalty of perjury, stated
she made a reasonable search and sent to
Sheet Metal all the records she could find
and gave reasonable explanations why the
records sent were incomplete, and to cooper-
ate and show good faith she sent and assign-
ed to Sheet Metal two collectible accounts
receivables totalling $14,905.00 which
approximated the amount alleged in the
complaint.
Although the Court's contempt order
(CR (DC) 29) states defendants are found
to be in willful and deliberate contempt
- 57 -
and violation of the Court's preliminary
injunction, there is no evidence to support
that finding. At no time did Sheet Metal
or its attorneys state under oath that
(a) petitioners had knowledge of the pre-
liminary injunction; (b) appropriate lien
records exist; (c) defendants have posses-
sion, control and ability to produce same;
(d) but wilfully refused or failed to do so.
Under those circumstances the contempt
order is void, and subject to collateral
attack.
People v. Alves, supra
Phillips v. Superior Court, supra
Ix
1. THE DEFAULT JUDGMENT SHOULD HAVE
BEEN VACATED AND RELIEF PROVIDED
TO PETITIONERS IN ACCORDANCE WITH
FRCP 60(b) (1) AND/OR 60(b) (6).
2. THE DISTRICT COURT ABUSED ITS
DISCRETION IN DENYING PETITIONERS'
MOTION FOR RELIEF.
3. THE COURT OF APPEAL ERRED IN
AFFIRMING THE DENIAL OF RELIEF.
- 58 -
The FRCP Rules cited above permits
relief from a final judgment if the movant
demonstrates justifiable grounds of mis-
take, inadvertence, surprise, excusable
neglect or "any other reason justifying
relief from the operation of the judgment,
including a meritorious defense.
It appears without dispute that peti-
tioners have a meritorious defense to the
claims asserted in plaintiffs' complaint,
for instance a meritorious defense is
shown herein in
1. Argument IV as to the claim of alter
ego, as to which no cause of action was
stated.
2. Argument V as to the claims under
Civil Code, section 3097(k) and Labor Code,
section 227 which were irrelevant and not
applicable.
3. Argument V as to the claim of
punitive damages, which was not allowable
and no jurisdiction to award.
4. Argument II as to the petitioners’
- 59 -
attorney, Mr. Chandler, whose incompetence
and outrageous conduct, and his abandonment
of petitioners' cause, prejudiced any
defense petitioners had.
5. Argument III as to the claim for
damages and other relief beyond and in
excess of the allegations of the complaint,
as to which the Court had no jurisdiction.
6. Arguments VI and VII, as to the
claim of refusal to comply with the Court's
injunction and contempt order, both being
void.
7. Argument X as to the claim the
default judgment was valid, when Arguments
II to VIII show that since the injunction
and contempt order were void, the Court had
no jurisdiction to strike the answer and
enter a default judgment.
A leading case in California is Deyo v.
Kilbourne (1978) 84 Cal.App.3d 771, 149
Cal.Rptr. 499, a 21 page decision which
reviewed almost every imaginable discovery
problem. As to the imposition of the
- 60 -
ultimate sanction of dismissal (or striking
answer and entering a default judgment,
both being the same in principle) the Deyo
court stated that it is error to dismiss
the entire claim (defense) where the
documents sought did not go to a disposi-
tive issue. The sanction should not
operate to put the plaintiff in a better
position than he would have had if dis-
covery had been made which would have been
completely favorable to his cause. There
are 12 relevant factors which must be
examined before the ultimate sanction is
imposed. Judicial discretion implies
absence of arbitrary determination,
capricious disposition, or whimsical
thinking. It imports the exercise of
discriminating judgment within the bounds
of reason.
- 61 -
X
1. FIVE WRITS OF EXECUTION ON THE
ALLEGED DEFAULT JUDGMENT WERE
ISSUED AND LEVIED OVER ONE MONTH
BEFORE THE DISTRICT COURT MADE,
SIGNED AND FILED THE DEFAULT
JUDGMENT.
2. THE DISTRICT COURT REFUSED TO RECALL
AND QUASH THE WRITS. THE COURT OF
APPEAL DID NOT MENTION OR RULE ON
THAT ISSUE.
It appears that the said Writs are void,
there being no legal basis for their issu-
ance and levy upon the real property of
Marlin and Renee to satisfy a corporate
debt.
= 62 «
CONCLUSION
As seen from the above, it is
respectfully submitted that this
petition for a writ of certiorari
should be granted.
NICOLAS FERRARA, ESQ.
Counsel for Petitioners
3926 Wilshire Boulevard
Suite 303
Los Angeles, California
90010
Gilbert, Cooke & Sackman
A Law Corporation
400 South Beverly Drive
Suite 305
Beverly Hills, California 90212
Counsel for Respondents
APPENDIX
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 82-5035
D.C. # CV 81-652 MRP
SHEET METAL WORKERS PENSION PLAN OF
SOUTHERN CALIFORNIA, ARIZONA AND
NEVADA; SHEET METAL WORKERS WELFARE
PLAN OF SOUTHERN CALIFORNIA, ARIZONA
AND NEVADA; and SHEET METAL WORKERS
SAVINGS PLAN OF SOUTHERN CALIFORNIA,
Plaintiffs/Appellees,
vs.
BAER MANUFACTURING, INC.,
a California corporation;
MARLIN C. BAER; and RENEE B. BAER,
Defendants/Appellants.
MEMORANDUM
-2-
Appeal from The United States District
Court for the Central District of
California, Honorable Mariana R. Pfaelzer,
District Judge, Presiding; Argued and
Submitted December 9, 1982
Before: TANG and POOLE, Circuit Judges,
and EAST,* District Judge
We affirm the district court's
denials of motions by Baer Manufacturing,
Inc., and its acting officers and direc-
tors Marlin Baer and Renee Baer
(collectively "Baer"), for extensions of
time to file notices of appeal and to
vacate default judgment.
Baer failed to make the monthly
payments required of employérs who were
signatories to the Sheet Metal Workers
Pension Plans. Baer then ceased opera-
tions and pledged its entire property and
‘accounts receivable to a lender. On
February 10, 1981, Sheet Metal sued Baer
for delinquent payments, requested an
*The Honorable William G. East, Senior
United States District Judge for the
District of Oregon, sitting by designation.
-3-
order requiring Baer to make future
payments and to provide mechanics lien
information.
At the hearing on a temporary
restraining order, Baer was represented
by counsel but offered no opposition. A
preliminary injunction was thereafter
issued. Baer next failed to comply with
the order that the information be furnish-
ed by February 17. Three weeks later Baer
filed an answer to the complaint denying
that any money was owed to Sheet Metal.
Baer supplied some but not all of the
documents required by the order.
In view of this conduct, the district
court properly found Baer in contempt for
having "willfully and deliberately”
violated the preliminary injunction by
providing inadequate information. The
court entered an order of contempt
imposing a fine against Baer and ordering
compliance with the preliminary injunction.
-4-
Baer failed to pay or comply. On Sheet
Metal's motion the court struck Baer's
answer and entered a default judgment.
Baer's counsel disappeared and was
not replaced by a new attorney until
August 27. The new counsel filed a
motion for extension of time in which to
file a notice of appeal. He furnished no
Supporting affidavits or documents and
the district court denied this motion for
failure to show good cause for the
extension. Final judgment was entered on
August 31. Subsequent motions for exten-
sion of time to file notice of appeal and
to vacate default judgment were denied on
November 24.
Denials of extension of time to
appeal and refusals to set aside default
judgment will not be disturbed unless the
court has abused its discretion. National
Industries v. Republic National Life
Insurance Company, 677 F.2d 1258, 1264
(9th Cir. 1982).
- 5-
We find no abuse of discretion in
the court's decisions to deny extension
of time and to vacate the default judgment.
All such motions were untimely. The facts
clearly indicated that Baer was aware of
the default judgment before it was
entered, was aware of the pending lawsuit
and of the court orders *efore the default
had. been Solnens. Defenuants Renee Baer
and Baer, Inc. were both served with the
complaint and temporary restraining order.
Renee Baer was served writs of execution
and had attended at least one hearing.
Baer was represented by counsel at the
February 17 hearing and on March 9 did
comply in part with the preliminary
injunction by delivering some 43 documents
to Sheet Metal. Although Baer claims that
the failure to respond to the district
court's orders was due to an unauthorized
excursion by counsel, no evidence was
presented in support of that contention.
There was thus insufficient "excuse or
- 6-
explanation" for Baer's failure to comply.
AFFIRMED.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.