Norman v. Berney

— Defendant Ray Bemey appeals from an order denying his motion to set off judgment.

Questions Presented

1. Was the default judgment in Handley v. Norman valid?

2. Did Weingarten acquire an interest under the contingent fee agreement which diminished or defeated defendant Berney’s right to set off the Handley judgment ?

3. Is defendant Berney entitled to set off the Handley judgment or portion thereof against the Norman judgment ?

Record

On August 6, 1962, T.

The court made findings of the facts hereinbefore set forth, and concluded that the default judgment in 53641 was void; that Handley was an assignee for collection and that Berney, as Handley’s assignee, could take no greater rights than his assignors, and was an assignee for collection; that Weingarten acquired an equitable ownership interest in one-third of the 54388 judgment, and his interest was not subject to setoff; that Handley had ceased to pursue and had abandoned his judgment and that the assignment by him to Berney was void; and that the motion to set off should be denied.

Order was entered accordingly.

1. The default judgment.

The ground upon which the court found that the default judgment was void was that the clerk had no power to enter it because (a) the clerk failed to enter default before entering the default judgment, and (b) the action was not an action upon a contract for the recovery of money and damages only.

(a) The failure of the clerk to enter default before entering the judgment did not affect the validity of the judgment. It is settled that a valid default judgment may be rendered by the court even though no formal default has been entered. (Crouch v. H. L. Miller & Co. (1915) 169 Cal. 341 , 345-346 [ 146 P. 880 ] ; Drake v. Duvenick (1873) 45 Cal. 455 , 462-463.) As said in the latter case, “The only purpose of a default is to limit the time during which the defendant may file his answer, and that time never extends beyond a trial and judgment’’ (p. 463). We can see no good reason

(b) The court’s determination that action number 53641 was not for the recovery of money and damages and hence a default judgment could not be entered by the clerk is likewise erroneous. Code of Civil Procedure, section 585,'pro-vides in pertinent part that the clerk may enter judgment “ [i] n an action arising upon contract for the recovery of money or damages only.”

The Handley complaint, while it was entitled “Foreclosure,” sought other relief as well as foreclosure of mechanics ’ liens. The title or designation of a complaint does not determine the character of the action. (Zumwalt v. Hargrave (1945) 71 Cal.App.2d 415 , 418 [ 162 P.2d 957 ].) In addition to setting forth the necessary allegations for foreclosure and that the amounts sought were the reasonable value of the materials furnished and services rendered, the complaint alleged that the Normans orally and expressly agreed to pay plaintiff and his assignors the specific sums claimed for the materials and services. The prayer, in addition to asking foreclosure, also asked for personal judgment against the defendants.

There can be no doubt that it was proper for Handley to plead this alternative contractual theory of recovery. Materialmen and subcontractors who are lien claimants have two remedies which may be pursued simultaneously and are entitled to proceed against the property for the full amount of their liens and to proceed in the same action to obtain a separate personal judgment against those persons personally liable for their respective debts notwithstanding the lien. (See Code Civ. Proc., § 1200 ; Culbertson v. Cizek, (1964) 225 Cal.App.2d 451 , 468 [ 37 Cal.Rptr. 548 ].)

Where a complaint states two or more causes of action and one of said causes falls within the purview of section 585, the clerk properly may enter a default judgment on that cause even though he has no authority to do so on the other cause. In Diamond Nat. Corp. v. Golden Umpire Builders, Inc. (1963) 213 Cal.App.2d 283 [ 28 Cal.Rptr. 616 ], the complaint was in two counts. The first count was on an open book account for goods sold at an agreed price; the second count was for the reasonable value of the goods sold. The clerk entered default judgment. On appeal, it was held that as the first count alleged a cause of action for a sum certain fixed by contract, the clerk was authorized under section 585 to enter default judgment even though he would not have

Plaintiff would distinguish Diamond on the ground of the statement there that the complaint stated but one cause of action in two counts. In our case, there was but one cause of action — the recovery of money for materials supplied and services rendered. The matter of foreclosure and personal judgment dealt with the methods of recovery but the fundamental cause of action is the same.

The Handley complaint, setting forth as it does a cause of action predicated upon oral agreements with each of the lien claimants to pay fixed and definite amounts, brings the action within the scope of section 585, Code of Civil Procedure. It therefore follows that the clerk had authority to enter a personal judgment against the defaulting defendants for the amounts alleged and prayed for.

As pointed out in Lynch v. Bencini (1941) 17 Cal.2d 521 [ 110 P.2d 662 ], the clerk may not enter judgment where evidence is necessary to disclose the correct amount nor when discretion must be exercised. No such situation existed in the case at bench. Even though the action, being for foreclosure of a mechanic’s lien, is a proceeding in equity (see 32 Cal.Jur.2d, Mechanics’ Liens, § 114, p. 742), the cause of action upon which the judgment was entered was one in law —for a money judgment.

The eases cited by plaintiff are not in point. In Farrar v. Steenbergh (1916) 173 Cal. 94 [ 159 P. 707 ], the clerk entered a default judgment on a cross-complaint charging fraud, which judgment ordered a note and mortgage cancelled,

In Kittridge v. Stevens (1860) 16 Cal. 381 , although the court expressed without discussion some doubt on the authority of the clerk to enter default judgment on a promissory note in an action seeking to declare a lien upon real property for the amount of the note, the court did not pass upon the validity of the clerk’s judgment, saying that its validity was not being questioned.

Landwehr v. Gillette (1917) 174 Cal. 654 [ 163 P. 1018 ], held that the clerk has no authority to enter a judgment for attorney’s fees on a promissory note providing for reasonable attorney’s fees, because the determination of what are reasonable attorney’s fees is a judicial and not a ministerial matter.

The clerk’s judgment here was solely one for a money judgment and not for foreclosure.

2. The contingent fee agreement.

The Weingarten contract with Norman provided for the representation of Norman by Weingarten in an action brought by Norman against the Berneys, for which representation Weingarten was to receive a contingent fee. There is no language in the contract indicative of an intent to create a lien upon or equitable assignment of any portion of a judgment which Weingarten might obtain on Norman’s behalf.

While there is no finding that defendant Berney had notice, actual or constructive, of the conditional fee agreement, there is no evidence that defendant did, nor that he should have known of it. In a discussion with the court, defendant’s attorney, who was representing him at the time of the assignment of the Handley judgment against Berney, offered to testify under oath that he had no knowledge of it.

It is well established under the law of this state that an attorney has neither a retaining nor charging lien for compensation on a judgment secured by his services in the absence of a contract containing an agreement for such a lien. (1 Witkin, Cal. Procedure (1954) Attorneys, § 25, pp. 30-32 ; Jones v. Martin (1953) 41 Cal.2d 23 , 27 [ 256 P.2d 905 ] ; Wagner v. Sariotti (1943) 56 Cal.App.2d 693 , 697 [ 133 P.2d 430 ].) Although the parties may create a lien without using the word “lien” in their contract, the decisive question in each case is whether the parties have contracted that the lawyer is to look to the judgment he may obtain as security for his fee. (Wagner v. Sariotti, su'pra,

The contract between Norman and Weingarten is conspicuously lacking in any language indicative of an intent to create a lien upon or an equitable assignment of a portion of any judgment which Weingarten might obtain on Norman’s behalf. The contract in question makes no mention of the word “judgment" and provides only that Weingarten agrees to undertake the case “on a one-third contingent basis, with no fee in the event of no recovery, 50% in event of appeal." Even if this court were not required to construe the contract in favor of the client, this language furnishes no logical basis for the creation of any lien on the judgment. The use of the word “recovery" is of particular significance. In Dalzell v. State Bar (1936) 6 Cal.2d 433 [ 57 P.2d 1300 ], the attorney’s contract of employment provided that he would “collect" certain interests for his clients in return for 25 per cent “of the amount recovered,” which he was authorized to deduct from “the amount of recoveryThe court held that the contract could only be interpreted to warrant the attorney’s retention of 25 per cent “of the amount collected by or realized for his clients" (p. 438). Under the circumstances in our case, it is apparent that any interest which Weingarten acquired under his contract with Norman would attach only to the actual proceeds realized by his client.

“‘A contingent fee agreement vests the attorney with an equitable interest in that part of the client’s cause of action which is agreed upon as the contingent fee. This proposition may be given practical effect by... ruling that neither the client nor the opposite party, if the latter has knowledge of the attorney’s rights under the contingent fee agreement, can so compromise the litigated subject matter as to defeat the attorney’s rights.’ ’’ (Jones v. Martin (1953) 41 Cal.2d 23 , 27 [ 256 P.2d 905 ], quoting from 6 Cal.Jur.2d, Attorneys at Law, §197; italics added.) There is no such knowledge in our case.

Since a judgment is clearly subject to setoff in certain instances and since there was no evidence that Berney was aware of the Weingarten-Norman contract when he purchased the Handley judgment and moved to set the same off against the Norman judgment, it follows that Berney’s right

3. Berney’s right to setoff.

When a debtor recovers a money judgment against his creditor or acquires a third person’s judgment or any other claim against that creditor, the debtor may use the claim as an offset, satisfying in whole or in part the judgment his creditor has against him. One method of asserting such right is by motion of the debtor in the action in which judgment has been given in favor of the creditor. (3 Witkin, Cal. Procedure (1954) Enforcement of Judgment, § 73, pp. 2036-2037.)

However, the courts have recognized certain limitations on the right to obtain setoff. In Harrison v. Adams (1942) 20 Cal.2d 646 , 649-650 [ 128 P.2d 9 ], the court held that a debtor may not set off a judgment or claim which he holds merely as an assignee for purposes of collection. Since mutuality is essential, the debtor must be the beneficial owner of the claim or judgment which he seeks to set off and not merely a trustee on behalf of an assignor who has retained the equitable interest in the thing assigned. It is also the rule that an assignor who is not the beneficial owner of the thing assigned can convey no better right, title or interest to his assignee, who is subject to the same defenses as the assignor. (Embassy Realty Associates, Inc. v. Southwest Products Co. (1954) 126 Cal.App.2d 725 , 730-731 [ 272 P.2d 899 ].) The assignee of a judgment is deemed to have notice of all matters disclosed by the record and proceedings in the action in which the judgment was rendered. (Hobbs v. Duff (1863) 23 Cal. 596 , 626.)

In the instant case, the trial court found that Handley, Berney’s assignor, was the beneficial owner of the judgment against the Normans to the extent of $6,450. Since Berney paid a good and valuable consideration for the assignment of the Handley judgment and acquired the same on his own behalf, there is no reason why Berney could not set off that portion of the judgment commensurate with Handley’s beneficial interest therein against the judgment in favor of Ernest E. Norman.

Although the parties have made no reference thereto in their briefs, the trial court, as above noted, made certain findings of fact and conclusions of law to the effect that Handley had “ceased to pursue and abandoned” action number 53641 because he had written the judgment off for income tax purposes and because his attorney considered the judgment of no value and had discarded most of his files pertaining thereto. Such actions and mental processes on the part of Handley and his attorney could have no bearing whatever on the validity of the judgment against the Normans, and the findings pertaining thereto are irrelevant and lend no support to the order denying Berney's motion te set off the Handley judgment.

For the reasons above stated, the order denying defendant Berney’s motion to set off the Handley judgment against the judgment in favor of Ernest E. Norman is reversed.

Agee, Acting P. J., and Taylor, J., concurred.