Court Opinion

ID: 4578455
Source: CourtListenerOpinion
Date Created: 2020-10-20 05:02:07.609131+00
Date Added: 2024-06-11T13:40:54.618942
License: Public Domain

Filed 10/19/20 Astra Pacific Outdoor v. Sipperley CA2/3
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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

                      SECOND APPELLATE DISTRICT

                                  DIVISION THREE

 ASTRA PACIFIC OUTDOOR, LLC,                                         B300105

          Plaintiff and Appellant,                                   (Los Angeles County
                                                                     Super. Ct. No. BC707754)
          v.

 RAYMOND SIPPERLEY,

          Defendant and Respondent.

      APPEAL from an order of the Superior Court of Los
Angeles County, Michael P. Linfield, Judge. Reversed and
remanded with directions.
      Gary S. Mobley for Plaintiff and Appellant.
      The Law Offices of Nigel Burns, Nigel Burns and Nicholas
Stahl for Defendant and Respondent.

                            _________________________
      Plaintiff and appellant Astra Pacific Outdoor, LLC (Astra)
appeals an order granting a motion brought by defendant and
respondent Raymond Sipperley (Sipperley) pursuant to Code of
Civil Procedure section 473, subdivision (d), to vacate as void a
$970,920 default judgment that Astra obtained against
Sipperley.1
      The trial court vacated the default judgment on the ground
that Astra’s corporate status had been suspended by the
California Secretary of State before it filed suit against Sipperley,
and that Astra was not relieved of the suspension until after the
default judgment was entered.
      We conclude the trial court erred in vacating the default
judgment based on Astra’s corporate incapacity because lack of
capacity, even if established, is merely a technical objection
which is waivable. Lack of capacity is not a jurisdictional defect
and therefore is not a basis for setting aside a judgment as void
under section 473, subdivision (d).
      However, the $970,920 default judgment is void to the
extent it exceeded the $700,000 demand in Astra’s complaint.
Therefore, the order granting Sipperley’s motion to vacate the
default judgment in its entirety is reversed and the matter is
remanded with directions to enter a new default judgment in the
amount of $700,000.

1     Code of Civil Procedure section 473 states in relevant part
at subdivision (d): “The court may, . . . on motion of either party
after notice to the other party, set aside any void judgment or
order.”

      All undesignated statutory references are to the Code of
Civil Procedure.

                                  2
       FACTUAL AND PROCEDURAL BACKGROUND
             1. Pleadings.
      On May 25, 2018, Astra, a California limited liability
company, commenced this action against Sipperley, a New York
resident, in the Los Angeles Superior Court. The complaint
asserted causes of action for declaratory relief (first cause of
action), breach of a partnership agreement (second cause of
action), and breach of fiduciary duty (third cause of action).
      Astra alleged in relevant part that it had entered into a
partnership agreement with Sipperley under which Sipperley
was responsible for securing permits for an outdoor advertising
sign on a certain property in New York, Astra was responsible for
obtaining advertising agreements, and the parties would share
on a 50/50 basis the net revenues derived from the sign.
However, Sipperley failed to finalize the permits, the building
owner brought an unlawful detainer action to evict Astra from
the premises, and the New York Department of Building issued
an order formally revoking Astra’s permits and prohibiting Astra
from continuing to place advertising on its sign.
      Astra alleged that due to Sipperley’s failure to cure the
defects in the permits, Astra had been forced to vacate the
premises and has lost the right to maintain the sign, valued at a
minimum of $650,000, and had also incurred incidental damages
of $50,000 in attorney fees and costs in defending against the
lessor’s unlawful detainer action.
      Astra further pled that in September 2016, despite failing
to serve Astra with the summons and complaint, Sipperley
obtained a judgment against Astra in New York in the amount of
$320,365 plus costs (the New York judgment), and that in 2017
Sipperley had registered the judgment in California, with the

                                3
California judgment amounting to $346,244.49, including interest
and filing fees.
         By way of relief, on the first cause of action Astra sought a
judicial declaration that the New York judgment and the related
California judgment were void. As for damages, on both the
second and third causes of action, Astra sought “general damages
. . . in an amount not less than $650,000.00” and “incidental
damages . . . in an amount not less than $50,000.00.”
         2. Sipperley’s default and his earlier attempts to have the
default set aside.
         On December 1, 2018, Astra personally served Sipperley
with the summons and complaint in New York.2
         Sipperley did not answer the complaint, and on February 5,
2019, pursuant to Astra’s request for entry of default, the clerk
entered Sipperley’s default. That same day, a copy of the request
for entry of default was mailed to Sipperley at the address where
he was served.
         On April 5, 2019, Sipperley entered a special appearance
and filed what would be the first of a series of three motions
attacking the default and subsequent default judgment.
Sipperley’s initial motion sought to quash service of summons for
lack of personal jurisdiction due to a lack of minimum contacts
necessary to subject him, a nonresident, to personal jurisdiction
in California. The motion to quash was supported by Sipperley’s
declaration asserting his lack of contacts with California.
         Astra opposed the motion to quash and filed a declaration
stating that Sipperley had solicited Astra, a California company,
to enter into their partnership agreement, and that Sipperley had

2     Sipperley has not disputed that he was personally served
with the summons and complaint.

                                  4
traveled to California to personally negotiate the agreement at
Astra’s offices in Los Angeles.
      The trial court issued a tentative ruling denying the motion
to quash. Sipperley’s counsel did not appear at the hearing on
the motion, and on May 7, 2019, the trial court adopted its
tentative ruling as its decision in the matter. The trial court
ruled that the entry of Sipperley’s default terminated his right to
take any further affirmative steps in the litigation until such
time as the default is set aside.
      On May 6, 2019, one day before the trial court denied the
motion to quash, Sipperley filed another motion, captioned a
“Motion to Vacate Void Judgment” pursuant to section 473,
subdivision (d), on the ground that the request for entry of
default was void due to a lack of personal jurisdiction. This
motion was based on the same grounds as the motion to quash.
Sipperley argued he lacked the minimum contacts necessary to
subject him to general personal jurisdiction in California and that
his activities were insufficient to subject him to specific personal
jurisdiction in California.
      On the same date, May 6, 2019, Astra filed a request for
entry of a default judgment in the amount of $970,920. On May
13, 2019, the trial court entered a default judgment in that sum
pursuant to Astra’s written declaration.
      On June 18, 2019, Astra filed opposition to Sipperley’s
pending motion to vacate the default judgment. Astra’s papers
included the declarations of two members of Astra, namely,
Hugo Cabrera and Astred Rodriguez. Their opposing
declarations recounted a meeting with Sipperley in 2008, when
he visited Astra’s offices in Los Angeles to negotiate the
partnership agreement.

                                 5
       On July 1, 2019, the trial court denied Sipperley’s motion to
vacate the default judgment, finding that “Sipperley
[purposefully] directed his activities at Astra, a California
resident[,] because he solicited, negotiated, and entered into a
partnership agreement with Astra by contacting it in California
at Astra’s office in Los Angeles and this action [for] a breach of
the partnership agreement and breach of fiduciary duty directly
relate[s] to and arise[s] out of Sipperley’s activities in California.”
       3. Sipperley’s third motion, which is the focus of this
appeal.
       On July 5, 2019, Sipperley filed a third motion, similarly
captioned “Motion to Set Aside Default Judgment Pursuant to
CCP § 473(d).” The trial court’s order granting the motion is the
subject of this appeal.
       In the motion, Sipperley contended the default judgment
was void because Astra was a suspended limited liability
company as of April 11, 2018, one month before it filed this action
against Sipperley, and that it remained suspended by both the
California Secretary of State and the California Franchise Tax
Board (FTB). Additionally, Sipperley argued the $970,920
default judgment must be set aside as void because it exceeded
the $700,000 demand in Astra’s complaint.
       In opposition, Astra argued that Sipperley lacked standing
to raise the issue of Astra’s lack of capacity because his default
had been entered in the action. However, even if the court were
to conclude that Sipperley could raise the issue of Astra’s lack of
capacity, Sipperley could not prevail on this issue because Astra
had paid all past due taxes and had been restored to active status
by both the Secretary of State and the FTB, and the
reinstatement validated any procedural steps taken by Astra

                                  6
while it was under suspension. Astra’s papers included a
Certificate of Revivor from the FTB, which showed that effective
July 23, 2019, Astra had been relieved of its suspension and was
in good standing, as well as a page from the website of the
Secretary of State that similarly showed that Astra had been
restored to active status.
        With respect to the amount of the default judgment, Astra
contended Sipperley could not have been surprised by the amount
of the award because Astra’s complaint sought “general damages
‘in an amount not less than $650,000, according to proof at
trial.’ ” However, if the court were to conclude that the default
judgment exceeded the prayer in Astra’s complaint, “the court
should reduce the judgment to $700,000, which represents the
express amount of general and special damages alleged in the
complaint.”
        On August 6, 2019, after hearing the matter and taking it
under submission, the trial court issued an order vacating the
default judgment in its entirety because Astra’s corporate status
was suspended both at the time it commenced the action and at
the time it obtained the default judgment. The trial court
concluded: “[Astra] was suspended by the California Secretary of
State on April 11, 2018 before it filed its complaint on May 25,
2018. [Astra] was not relieved of suspension until July 23, 2019
. . . which was after [the] default judgment was entered on May
13, 2019. Therefore, [Astra] did not have capacity to file its
complaint nor [to] have [a] default judgment entered in its favor.”
Accordingly, the trial court granted Sipperley’s motion to set
aside the default judgment as void, pursuant to section 473,
subdivision (d).

                                7
      On August 20, 2019, Astra filed a timely notice of appeal
from the order.3
                          CONTENTIONS
      Astra’s sole contention on appeal is that the trial court
erred in vacating the default judgment, given the reinstatement
of Astra’s corporate status.
      However, the threshold issue is whether Astra’s lack of
capacity, even if established, would be a basis for setting aside
the default judgment as void, pursuant to section 473,
subdivision (d). We also address whether the default judgment is
void to the extent it exceeded the demand in Astra’s complaint.4
                           DISCUSSION
      1. Limitations on setting aside a judgment under section
473, subdivision (d); standard of appellate review.
      “Section 473, subdivision (d), provides a trial court ‘may, on
motion of either party after notice to the other party, set aside
any void judgment or order.’ ‘[I]nclusion of the word “may” in the
language of section 473, subdivision (d) makes it clear that a trial
court retains discretion to grant or deny a motion to set aside a
void judgment [or order].’ (Cruz v. Fagor America, Inc. (2007) 146

3      An order granting a statutory motion to vacate or set aside
a default judgment is appealable under section 904.1, subdivision
(a)(2) as an order made after final judgment. (County of
Stanislaus v. Johnson (1996) 43 Cal.App.4th 832, 834; see
Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs
(The Rutter Group 2019) ¶¶ 2:165, 2:166.)

4     With respect to these latter issues, pursuant to
Government Code section 68081, the parties were directed to file
supplemental letter briefs, which this court has read and
considered.

                                 8
Cal.App.4th 488, 495 [(Cruz)].) However, the trial court ‘has no
statutory power under section 473, subdivision (d) to set aside a
judgment [or order] that is not void . . . .’ (Id. at pp. 495–496.)
Thus, the reviewing court ‘generally faces two separate
determinations when considering an appeal based on section 473,
subdivision (d): whether the order or judgment is void and, if so,
whether the trial court properly exercised its discretion in setting
it aside.’ (Nixon Peabody LLP v. Superior Court (2014) 230
Cal.App.4th 818, 822.) The trial court’s determination whether an
order is void is reviewed de novo; its decision whether to set aside
a void order is reviewed for abuse of discretion. (Ibid.; see also
Cruz, at p. 496.)” (Pittman v. Beck Park Apartments Ltd. (2018)
20 Cal.App.5th 1009, 1020, italics added.)
       A judgment is void if the court “ ‘lack[s] fundamental
authority over the subject matter, question presented, or party.’ ”
(Lee v. An (2008) 168 Cal.App.4th 558, 565, quoting In re
Marriage of Goddard (2004) 33 Cal.4th 49, 56; accord, People v.
North River Insurance Co. (2020) 48 Cal.App.5th 226, 233 [a
judgment is void only when the court entering that judgment
lacked jurisdiction in a fundamental sense due to the entire
absence of power to hear or determine the case resulting from the
absence of authority over the subject matter or the parties].)5
When the trial court “has jurisdiction over the party and the
questions presented, but acts in excess of its defined power, the
judgment is [merely] voidable, not void. (In re Marriage of
Goddard, supra, 33 Cal.4th [at p.] 56.)” (Lee v. An, supra,

5     In the instant case, there is no contention that the trial
court lacked subject matter jurisdiction or jurisdiction over the
parties. The issue before us is purely the legal effect of Astra’s
earlier incapacity.

                                  9
168 Cal.App.4th at p. 566.) When a judgment is merely voidable,
a party is not entitled to relief under section 473, subdivision (d).
(Lee v. An, at p. 566.)
        2. Lack of capacity is merely a technical objection that is
waived if not properly pled, rather than a basis for setting aside a
judgment as void.
        Upon de novo review, as explained below, we conclude the
trial court erred as a matter of law in concluding that Astra’s lack
of capacity at the time it filed suit and at the time it obtained the
default judgment rendered the judgment void. Corporate
incapacity is merely a technical objection that is waived if not
properly pled, rather than a basis for setting aside a judgment as
void.
              a. General principles.
        “ ‘There is a difference between the capacity to sue, which is
the right to come into court, and the standing to sue, which is the
right to relief in court.’ [Citation.] ‘Incapacity is merely a legal
disability, such as infancy or insanity, which deprives a party of
the right to come into court. The right to relief, on the other
hand, goes to the existence of a cause of action.’ ” (Color-Vue, Inc.
v. Abrams (1996) 44 Cal.App.4th 1599, 1604 (Color-Vue).)
Suspension of corporate powers results in a lack of capacity to
sue, rather than a lack of standing to sue. (Id. at pp. 1603–1604.)
        A corporation that has had its powers suspended for
nonpayment of taxes lacks legal capacity to prosecute or defend a
civil action during its suspension. (Tabarrejo v. Superior Court
(2014) 232 Cal.App.4th 849, 861–862 (Tabarrejo).) However,
“ ‘[c]orporate incapacity is nothing more than a legal disability,
depriving the party of the right to come into court and represent
its own interests. As such, lack of capacity is not a jurisdictional

                                 10
defect and is waived if not properly raised. [Citation.] . . . . Thus,
the suspended status of corporate powers at the time of filing suit
does not impede the trial court’s jurisdiction to proceed, nor does
a suspension after suit commences but before rendition of
judgment deprive the court of jurisdiction or render the judgment
void.’ [Citations.]” (Id., at p. 863, italics added; accord, Traub Co.
v. Coffee Break Service, Inc. (1967) 66 Cal.2d 368, 371 (Traub)
[“the suspended status of corporate powers at the time of filing of
action by a corporation does not affect the jurisdiction of the court
to proceed”]; American Alternative Energy Partners II v.
Winridge, Inc. (1996) 42 Cal.App.4th 551, 559 [“Lack of capacity
is not a jurisdictional defect and must be properly raised or the
objection may be waived”]; Weil & Brown, et al., Cal. Prac. Guide:
Civ. Pro. Before Trial (The Rutter Group 2020) ¶ 2:81 [“lack of
capacity is not a jurisdictional defect or an element of a cause of
action; it is a technical objection that must be timely raised or is
waived”].)6
       Rather than amounting to a jurisdictional defect, a
corporation’s incapacity by reason of a suspension of its powers
for nonpayment of taxes is merely a plea in abatement. (Traub,
supra, 66 Cal.2d at p. 370.) Such a plea “ ‘must be raised by
defendant at the earliest opportunity or it is waived.’ ” (Color-
Vue, supra, 44 Cal.App.4th at p. 1604, italics added; accord,
V & P Trading Co., Inc. v. United Charter, LLC (2012) 212
Cal.App.4th 126, 133 (V & P Trading).) Further, the lack of

6      Lack of standing, by contrast, is not waived by a failure to
timely object, and a plaintiff’s lack of standing, which goes to the
existence of a cause of action, may be raised at any time, even for
the first time on appeal. (Color-Vue, supra, 44 Cal.App.4th at
p. 1604.)

                                 11
capacity to sue “ ‘is a technical objection and must be pleaded
specifically.’ ” (Color-Vue, at p. 1604.) The proper time to raise a
plea in abatement is in the original answer or by demurrer at the
time of the answer. (Ibid.)7
              b. Sipperley’s objection that Astra lacked the capacity
to sue is not cognizable on a motion under section 473, subdivision
(d), to set aside the default judgment as void.
       The time for Sipperley to have raised his objection that
Astra lacked the capacity to sue would have been in an answer or
demurrer to the original complaint. (Color-Vue, supra, 44
Cal.App.4th at p. 1604.) However, Sipperley failed to respond to
the summons and complaint, resulting in the entry of his default.
The clerk’s entry of default, unless vacated, permanently
precludes the filing of an answer or demurrer. (Parish v. Peters
(1991) 1 Cal.App.4th 202, 209, fn. 8.) Thus, the entry of default
terminated Sipperley’s opportunity to file a responsive pleading
asserting Astra’s lack of capacity.
       Having failed to assert Astra’s lack of capacity by way of an
answer or demurrer, Sipperley moved under section 473,
subdivision (d), to set aside the default judgment as void based on
Astra’s incapacity. However, as we have discussed, incapacity is

7       “A defendant that fails to plead the plaintiff’s lack of
capacity to sue in its answer at the outset of an action may seek
leave to amend the answer to add that objection, but to succeed
on such a motion the defendant must make ‘some showing
tending to relieve it from the effect of the [original] waiver,’ such
as a showing ‘that the defendant had acquired information of the
facts subsequent to the filing of the original answer, or, if it then
knew of them, its failure to interpose them was inadvertent.’
[Citation.]” (V & P Trading, supra, 212 Cal.App.4th at p. 134,
fn. 2.)

                                 12
merely a technical objection that is waived if not specifically pled
at the outset (Color-Vue, supra, 44 Cal.App.4th at p. 1604)—it is
not a jurisdictional defect that would be a basis for setting aside a
default judgment as void. Therefore, the trial court erred as a
matter of law in setting aside the default judgment as void based
on Astra’s corporate suspension.8
       However, the issue remains as to whether the default
judgment is void insofar as it exceeded the demand in Astra’s
complaint. We now turn to that issue.
       3. The default judgment is void to the extent it exceeded the
$700,000 demand in Astra’s complaint.
             a. General principles.
       Section 580 provides in relevant part that “[t]he relief
granted to the plaintiff, if there is no answer, cannot exceed that
demanded in the complaint.” The primary purpose of this section
is to ensure “that defendants in cases which involve a default
judgment have adequate notice of the judgments that may be
taken against them.” (Becker v. S.P.V. Construction Co. (1980)
27 Cal.3d 489, 493 (Becker).) A default judgment “that violates
section 580 is void as beyond a court’s ‘fundamental
jurisdiction.’ ” (Airs Aromatics, LLC v. CBL Data Recovery
Technologies, Inc. (2018) 23 Cal.App.5th 1013, 1022 (Airs
Aromatics).)
       The amount demanded in the complaint is determined both
from the prayer and from the damages allegations of the
complaint. (National Diversified Services, Inc. v. Bernstein (1985)

8     Because Astra’s suspension was not a proper basis for
moving to set aside the default judgment as void, it is
unnecessary to address whether Astra’s revivor retroactively
validated the default judgment.

                                 13
168 Cal.App.3d 410, 417–418.) A complaint’s demand for
damages “in excess of” a certain sum does not provide notice of
unlimited damages. (Electronic Funds Solutions, LLC v. Murphy
(2005) 134 Cal.App.4th 1161, 1173–1174.) Thus, for example, a
prayer for “damages ‘in excess of $20,000’ ” did not provide
adequate notice of defendants’ potential liability for $26,457
(Becker, supra, 27 Cal.3d at pp. 493–494), and an allegation of
damages exceeding the $25,000 jurisdictional threshold supports
a default judgment only up to that amount. (Air Aromatics,
supra, 23 Cal.App.5th at pp. 1018–1019.)
      However, a default judgment is void only as to the excess
amount. (Becker, supra, 27 Cal.3d at pp. 494–495.) “Ordinarily
when a judgment is vacated on the ground the damages awarded
exceeded those pled, the appropriate action is to modify the
judgment to the maximum amount warranted by the complaint.”
(Ostling v. Loring (1994) 27 Cal.App.4th 1731, 1743, italics
omitted; see Weil & Brown et al., supra, ¶ 5:257.)
             b. The complaint’s demand for damages warrants a
default judgment in the reduced amount of $700,000.
      On the first cause of action, which sought declaratory relief,
Astra sought a judicial determination that Sipperley’s $320,365
New York judgment, and the companion California judgment,
were “void, invalid and unenforceable and should be vacated and
set aside” because Sipperley failed to serve Astra with a copy of
the summons and complaint in the New York action.
      On both the second and third causes of action, in which
Astra pled claims against Sipperley for breach of partnership
agreement and breach of fiduciary duty, Astra sought “general
damages . . . in an amount not less than $650,000.00” and
“incidental damages . . . in an amount not less than $50,000.00.”

                                14
These figures appeared both in the substantive allegations of the
complaint and in the prayer. The $650,000 represented Astra’s
alleged damages resulting from the loss of the right to maintain
an outdoor advertising sign on the subject property, and the
$50,000 represented Astra’s alleged damages consisting of the
attorney fees and costs that Astra incurred in defending against
the New York landlord’s unlawful detainer action. Thus, the
maximum amount of damages warranted by the complaint is
$700,000.
      However, in its request for entry of a default judgment,
Astra requested $970,920, including $320,565 to compensate
Astra for the New York judgment that Sipperley had obtained.9
The trial court entered the default judgment as requested, in the
amount of $970,920.
      In light of the amount Astra demanded in its complaint, as
determined both from the prayer and from the damages
allegations (National Diversified Services, Inc. v. Bernstein,
supra, 168 Cal.App.3d at pp. 417–418), the default judgment was
excessive. The trial court erred in including the amount of the
New York judgment in the amount of damages that it awarded to
Astra because Astra’s complaint did not seek an award of
damages on account of the New York judgment. With respect to
the New York judgment, Astra’s complaint solely requested a
judicial declaration that the New York judgment was “void,
invalid and unenforceable.”

9    We note that in moving to set aside the default judgment
below, Sipperley asserted that Astra had never paid the $320,565
New York judgment and therefore Astra could not claim that it
had sustained special damages as a consequence of the New York
judgment. That issue is beyond the scope of this appeal.

                               15
       As we have determined, the maximum amount of damages
warranted by Astra’s complaint is $700,000: $650,000 for the
loss of the right to maintain the sign; and $50,000 for the expense
of defending against the unlawful detainer action. On remand,
the trial court is directed to enter a new default judgment in that
reduced amount. (Becker, supra, 27 Cal.3d at p. 495; Ostling v.
Loring, supra, 27 Cal.App.4th at p. 1743.)10

10    As noted, in its opposition below to Sipperley’s motion to
vacate the default judgment, Astra argued that if the court were
to conclude that the default judgment exceeded the prayer in
Astra’s complaint, “the court should reduce the judgment to
$700,000, which represents the express amount of general and
special damages alleged in the complaint.”

                                16
                         DISPOSITION
      The August 6, 2019 order granting Sipperley’s motion to
vacate the default judgment in its entirety is reversed and the
matter is remanded to the trial court with directions to enter a
new default judgment in the amount of $700,000, consistent with
the demand in Astra’s complaint. The parties shall bear their
respective costs on appeal.

    NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS

                                         EDMON, P. J.

We concur:

                 EGERTON, J.

                 DHANIDINA, J.

                               17