Key Decisions

June 2012 – Default Judgement On A Contract

(filed under: | June 16, 2012)

A Plaintiff Was Entitled To A Default Judgment On A Contract With Definite, Fixed Damages

HSBC Bank Nevada, N.A. v. Aguilar
(App. Div. Los Angeles Sup. Ct.), filed April 16, 2012, modified May 15, 2012

KEY FACTS

HSBC Bank of Nevada sued Lizet Aguilar for breach of contract and common counts of open book account and account stated. It did so based on Aguilar’s failure to make her credit card payments. It sought $2,290.37 plus interest and attorney fees according to proof.

HSBC Bank used the California Judicial Council-approved form for pleading its causes of action, and checked the appropriate boxes on the form.

Aguilar failed to respond to the complaint. HSBC Bank sought entry of default and a clerk’s judgment. The clerk entered Aguilar’s default, but refused to enter judgment. The clerk’s reject sheet referenced California Rules of Court, rule 3.1806, and instructed HSBC Bank to submit either the “original promissory note or contract” or, if the original were not available, to submit “a declaration of lost original.”

When HSBC failed to do so, the court dismissed its case.

HOLDING & REASONING

The Appellate Division of the Superior Court reversed and ordered the trial court to order the court clerk to enter a default judgment per HSBC Bank’s request.

The Appellate Division of the Superior Court framed the question as to whether HSBC Bank was required to present any proof in order to obtain a default judgment against Aguilar. In answering this, it noted that California Rules of Court, rule 3.1806 applies to negotiable instruments, and is not applicable to contracts or open book accounts. It explained that the purpose of rule 3.1806 is to ensure that, where the parties’ rights on a written instrument are merged into a judgment, the clerk clearly indicates the merger on the face of the instrument so that the instrument cannot be passed on to another who might seek to collect on it.

Code of Civil Procedure section 585(a), provides in pertinent part:

In an action arising upon contract or judgment for the recovery of money or damages only, if the defendant has . . . been served, other than by publication, and no answer, . . . has been filed with the clerk of the court within the time specified in the summons, . . . the clerk, upon written application of the plaintiff, and proof of the service of summons, shall enter the default of the defendant . . . so served, and immediately thereafter enter judgment for the principal amount demanded in the complaint, . . . or a lesser amount if credit has been acknowledged, together with interest allowed by law or in accordance with the terms of the contract, and the costs against the defendant, . . .

As a result, Aguilar’s default admitted that HSBC Bank’s complaint was on open book account with $2,290.37 due and owing. All that was left to do was for the clerk to enter judgment in the amount of the open book account as alleged in the complaint.

ANALYSIS

In publishing this decision, the Appellate Division of the Superior Court undertook to assist the Court of Appeal in deciding whether to order the case transferred to the court on the court’s own motion under rules 8.1000-8.1018.

The decision makes sense and is not inconsistent with the decision of the Court of Appeal for the Fourth Appellate District in Kim v. Westmoore Partners, 201 Cal.App.4th 267 (2011). Although the court admonished that “it is incumbent upon plaintiff to prove-up his damages, with actual evidence,” it did so in the context of an action in which the plaintiff sought damages beyond some definite, fixed amount or a sum that could be ascertained by computations made by the clerk.