Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County, Ct. No. SC051985 Gerald Rosenberg, Judge.
Law Offices of Thomas Swallow and Thomas Swallow for Defendant and Appellant.
Michael J. Buley for Plaintiffs and Respondents.
EPSTEIN, P.J.
Michael Allen appeals from the order denying his motion to vacate renewal of a judgment. We conclude that with one small exception, the motion was properly denied, and affirm the order as modified.
FACTUAL AND PROCEDURAL SUMMARY
A large portion of the factual statement is drawn from our decision in California Coastal Com. v. Allen (2008) 167 Cal.App.4th 322 (Allen II).
Allen was the owner of a residence in Malibu (the property). In 1998, the California Coastal Commission (Commission) brought an action against him for violation of a cease and desist order (California Coastal Commission v. Allen (Super. Ct. L.A. County, 1999, No. 51985). The Commission obtained a default judgment against him in April 1999, and in June 1999, recorded an abstract of judgment in the amount of $1,469,000. Allen challenged the default judgment in the trial court, and then on appeal. In November 2000, this court affirmed the judgment in a nonpublished opinion (California Coastal Com. v. Allen (Nov. 29, 2000, B137728) (Allen I)).
As we set out in detail in section II of our discussion, this actually was the third lawsuit by the Commission against Allen for unpermitted development of the property.
The Radoseviches obtained a judgment against Allen in the amount of $67,903.77 on May 20, 1999. They recorded an abstract of judgment for that amount on April 20, 2000.
Allen filed a voluntary petition for bankruptcy in April 2002. He was granted a discharge in bankruptcy in July 2002. In July 2003, Allen recorded a grant deed transferring title to the property to Trans America Property & Investment, Inc., a Delaware corporation.
By August 2005, there were at least three liens on the property. These were, in order of priority, a first trust deed obligation to Washington Mutual Bank for $430,000, the Commission’s abstract of judgment for $1,469,000, and the Radoseviches’ abstract of judgment in the amount of $67,903.77. The property was valued at approximately $2,250,000, and the burden on the property senior to the Radoseviches’ claim, with accrued interest, amounted to $2,865,157.
Given this burden and their third priority position, the Radoseviches realized they would recover nothing under a judicial foreclosure of their judgment lien. They approached the Commission and negotiated an assignment of its judgment against Allen. The parties agreed to the temporary assignment of the judgment lien in August 2005. The Radoseviches were required to “take all legal steps necessary to cause, in a timely manner, a sale of the Property.” The agreement guaranteed that the Commission would receive $750,000 out of any sale proceeds, and an additional 20 percent of any sale price over $1,600,000. The assignment was temporary, in that it was limited to a period of two years, which could be, and was, extended by mutual agreement.
The Radoseviches obtained a writ of execution on the assigned Commission judgment in the amount of $2,435,157 in December 2005. The court issued an order for sale in July 2006, but an error occurred in the Los Angeles County Sheriff’s first attempt to levy on the property, and the sale order lapsed.
The Radoseviches filed a new application for order for sale of real property in October 2006. Allen opposed the order, challenging the validity of the assignment. He also asserted his entitlement to the homestead exemption for the property. After hearing and supplemental briefing, the trial court granted the application and issued an order for sale of dwelling in January 2007. Allen appealed this order.
In Allen II, filed in October 2008, this court affirmed the order for sale. We concluded the assignment was sufficient for the Radoseviches to obtain standing as judgment creditors under the Enforcement of Judgments Law, pursuant to Code of Civil Procedure sections 681.020 and 673. (167 Cal.App.4th at p. 328.) We concluded that Allen’s other challenges to the validity of the assignment were outside the scope of the appeal. (Id. at p. 326.) We held that the homestead exemption from enforcement of judgment was inapplicable because the property was not owned by a natural person, and because Allen had not resided continuously on the property. (Id. at pp. 329-331.) We also concluded Allen had not presented evidence to support his claim that the amounts listed on the writ of execution were incorrect because they failed to take into account the effect of his discharge in bankruptcy. That decision is now final.
Statutory references are to the Code of Civil Procedure unless otherwise indicated.
Allen claimed the assignment exceeded the Commission’s powers, violated the Public Contract Code and open meeting laws, and illegally bestowed powers on the Radoseviches which are reserved to the Attorney General. We did not address the merits of these arguments.
While the appeal in Allen II was pending, the Radoseviches filed another order for sale of the property in March 2008. Allen again asserted the homestead exemption. The trial court rejected the claim and granted the order for sale. Allen appealed and Division 7 of this District affirmed the order in a nonpublished opinion. (Radosevich v. Allen (Apr. 19, 2010, B212592) (Allen III).) The court found that principles of collateral estoppel precluded Allen from relitigating the issues raised and resolved against him in Allen II. The court also concluded that even if collateral estoppel did not apply, Allen was not entitled to relief.
In February 2009, the Radoseviches filed and served an application for renewal of the judgment, which otherwise would have expired on April 19, 2009. This was recorded with the Los Angeles County Recorder on March 10, 2009. Allen moved for an order vacating the renewal of judgment. The motion was denied, and Allen filed this timely appeal.
DISCUSSION
I
Allen argues that the assignment to the Radoseviches is invalid because they cannot lawfully represent the Commission, the Attorney General, or the California Legislature. This is essentially a repeat of the challenge to the assignment raised and rejected in our decision in Allen II. In that case, we held that the Enforcement of Judgments Law (§§ 680.010-724.260), which governed that proceeding, required the Radoseviches to become assignees of record by filing an acknowledgment of assignment of judgment in accordance with sections 681.020 and 673 in order to obtain standing to enforce the judgment as judgment creditors. (Allen II, supra, 167 Cal.App.4th at pp. 326-327.) We concluded that the Radoseviches complied with that requirement, and thus had standing as assignees to enforce the judgment. (Id. at p. 328.)
We also rejected Allen’s right to raise objections to the validity of the underlying assignment beyond the question of compliance with the requirements in the Enforcement of Judgments Law. “These statutes, read together, specify requirements for an assignee to obtain standing as a judgment creditor to enforce a judgment under the Enforcement of Judgments Law. No provision is made for a debtor to attack the judgment creditor’s authority to make the assignment; the scope of the provision is limited to the process for an assignee to obtain standing to proceed as a creditor. For this reason, we conclude the Legislature did not intend a proceeding under the Enforcement of Judgments Law to become a forum for litigating the validity of the underlying assignment agreement. Allen’s challenges to the method and content of the Coastal Commission’s assignment of judgment to the Radoseviches are subject to being raised in a separate proceeding.” (Allen II, supra, 167 Cal.App.4th at p. 327.) Respondents inform us that Allen has since filed a separate action on this issue (Allen v. Radosevich (Super. Ct. L.A. County, 2010, No. BC430131)).
This case, like Allen II, arises under the Enforcement of Judgments Law. And as in Allen II, the only question before us with respect to the assignment is whether the Radoseviches complied with the requirements for becoming assignees of record in accordance with sections 681.020 and 673. Whether we review the matter freshly, or apply principles of issue preclusion or law of the case, the conclusion is the same: the acknowledgment of assignment which we found adequate to give the Radoseviches standing in Allen II also is adequate to give them standing in this case.
II
Allen argues the judgment is “wrongful and void.” He relies on section 683.170, which states in subdivision (a): “The renewal of a judgment pursuant to this article may be vacated on any ground that would be a defense to an action on the judgment....” This statute is derived from section 1710.40, which provides for vacation of sister state judgments “on any ground which would be a defense to an action in this state on the sister state judgment....” The Law Revision Commission Comment to section 1710.40 lists several common defenses to enforcement of a sister state judgment, including: “the judgment is not final and unconditional...; the judgment was obtained by extrinsic fraud; the judgment was rendered in excess of jurisdiction; the judgment is not enforceable in the state of rendition; the plaintiff is guilty of misconduct; the judgment has already been paid; suit on the judgment is barred by the statute of limitations in the state where enforcement is sought.” (Cal. Law Revision Com. com., 20 West’s Ann. Code Civ. Proc. (2007 ed.) foll. § 1710.40, p. 385.)
Allen cannot and does not argue that the default judgment in the underlying action should have been set aside for lack of actual notice of the action under section 473.5. That issue was decided adversely to him when the trial court denied his motion to set aside the judgment, an order affirmed by this court in Allen I. It is not subject to relitigation.
But denial of the procedural remedy of section 473.5 does not preclude a judgment debtor from opposing the renewal of a judgment by establishing a defense to an action on the judgment. (See Fidelity Creditor Service, Inc. v. Browne (2001) 89 Cal.App.4th 195, 203.) Allen attempts to do so by arguing that the underlying default judgment “was obtained without jurisdiction over the allegations in the complaint, jurisdiction having been retained by a different court pursuant to stipulation, and the complaint, especially under the facts of this matter as described below....” A careful reading of the complaint underlying the default judgment refutes this claim.
The complaint begins with the factual history of the dispute between the Commission and Allen, which included two earlier lawsuits. According to the complaint, in 1989, the Commission granted permit 5-89-612 to Allen to construct a single family dwelling with a garage, septic system, and grading. In July 1991, the Commission brought an action to enjoin development activities on the property which were beyond the scope of that permit. Allen and then co-owner Mary Beth Allen entered into a settlement agreement with the Commission in November 1992, agreeing to pay $7,000 in lieu of civil penalties and to restore the drainage course on the property to its natural condition.
These activities allegedly included “clearing of vegetation, grading, excavating, placing solid material as fill, and installing a pipe in the drainage course on the subject property.”
The agreement also provided: “Failure by the Allens to complete the restoration project in full compliance with the terms and conditions of the coastal development permit and/or to pay any portion of the penalty when due shall entitle the Coastal Commission to proceed to court to obtain enforcement against the Allens of this agreement. The Allens agree that in such an event this agreement may be deemed the same as a stipulated judgment under section 664.6 of the Code of Civil Procedure that may be enforced by the court pursuant to section 128 of the Code of Civil Procedure.”
The Allens failed to comply with the settlement agreement, and in March 1993 the Commission filed a new action against them to enforce the settlement agreement. In October 1993, the Commission obtained a default judgment ordering the Allens to pay in excess of $9,000 plus simple interest at 15 percent per annum on the unpaid balance of $6,900 and to restore the drainage course on the property to its natural condition. The Commission recorded an abstract of judgment in November 1993. It mailed a certified copy of the recorded abstract to the Allens, which was returned marked “unclaimed.” The Commission then mailed a copy of the abstract by first class mail in January 1994. That judgment remains unsatisfied.
After laying out this background, the complaint sets out the factual allegations supporting its claim for relief. In June 1996, the Commission confirmed that development activities had been performed which were outside the scope of activities approved in permit 5-89-612, including grading, vegetation removal, filling, construction of retaining walls, installation of a pipe/culvert in a drainage course, creation of a pad with horse corrals and fences, and installation of a concrete holding tank. The Commission sent several certified letters to Allen informing him that he was in violation of the Coastal Act, that he could be subjected to fines and penalties, and requesting that he submit a permit application to restore the property or to obtain after-the-fact approval of the development activities. These letters were returned marked “unclaimed” or “refused.”
The Commission notified Allen of its intent to commence cease and desist order proceedings. Allen requested a postponement of the initial hearing. He was present at the rescheduled hearing in November 1997 and had actual notice of the Commission’s unanimous decision to issue the cease and desist order. The cease and desist order provided in part that Allen was to refrain from engaging in development activity without first obtaining a coastal development permit authorizing the activity; submit a permit application either for removal of unpermitted development or for after-the-fact authorization allowing retention of the development; and complete the approved development or the removal of unauthorized development within specified time periods. Allen did not challenge the cease and desist order within the applicable statute of limitations under Public Resources Code section 30801, nor did he comply with its terms.
The Commission then filed the action which underlies this proceeding. Based on Allen’s ongoing unpermitted development, and on his failure to comply with the cease and desist order, the Commission sought declaratory and injunctive relief, and civil fines under Public Resources Code section 30820, subdivision (a) [$30,000 for each act of unpermitted development]; section 30820, subdivision (b) [$15,000 per day for each day of unabated violations]; and section 30821.6, subdivision (a) [$6,000 for each day of continuing violation of the cease and desist order].
The complaint was premised on Allen’s additional unpermitted development, and also on his failure to comply with the terms of the cease and desist order with respect to prior unpermitted development. At no point prior to this appeal did Allen assert that the 1992 settlement agreement precluded any other enforcement action, nor does that agreement so provide. His assertion here that the court lacked jurisdiction over the complaint based on that settlement comes too late, since the cease and desist order and the resulting default judgment are both long since final.
There also is no merit to Allen’s claim that the complaint “was grossly insufficient to provide notice that the defendant faced a possible judgment of $1,469,000.” The complaint sets out the potential civil penalties in detail, providing adequate notice that Allen faced the potential for constantly increasing civil penalties under Public Resources Code sections 30820 and 30821.6 for every day he remained in violation of the coastal permitting requirements and the cease and desist order.
III
Allen next claims the judgment was discharged in bankruptcy, and is thus void and not subject to renewal. Under title 11 United States Code section 523(a)(7), an individual debtor is not discharged from any debt “to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss....” “[T]hree requirements must be met before a debt is excepted from discharge: (1) there must be a debt for a fine, penalty, or forfeiture; (2) that debt must be payable to and for the benefit of a governmental unit; and (3) that debt cannot constitute compensation for actual pecuniary loss.” (Commonwealth of Kentucky v. Seals (W.D. Va. 1993) 161 B.R. 615, 618, fn. omitted.)
Allen first argues the nondischargeability provision does not apply to civil liability or costs. The judgment being renewed consisted of fines payable to the Commission pursuant to Public Resources Code sections 30820, subdivisions (a) and (b), and 30821.6, subdivision (a). “Although Bankruptcy Code § 523(a)(7) applies both to civil and criminal penalties, [citations], in order to qualify for a dischargeability exception under subsection 523(a)(7), normally the particular penalty must serve some ‘punitive’ or ‘rehabilitative’ governmental aim, rather than a purely compensatory purpose.” (Whitehouse v. LaRoche (1st Cir. 2002) 277 F.3d 568, 573; see In re Jones (M.D. Ga. 2004) 311 B.R. 647, 651-652 [civil penalties for violation of Clean Water Act nondischargeable under 11 U.S.C. § 523(a)(7)]; see also Commonwealth of Kentucky v. Seals, supra, 161 B.R. at pages 620-621 [civil penalties for violation of surface mining reclamation laws nondischargeable under 11 U.S.C. § 523(a)(7)]; In re Findley (9th Cir. 2010) 593 F.3d 1048, 1054 [attorney disciplinary costs imposed by California State Bar excepted from discharge in bankruptcy under 11 U.S.C. § 523(a)(7)].)
Allen argues that the penalties imposed against him were compensatory in nature, and thus dischargeable. He points to Public Resources Code section 30820, subdivision (c), which lists the factors to be considered in determining the amount of civil liability to be imposed for violation of the California Coastal Act, including “(4) The cost to the state of bringing the action.” He also notes that section 30821.6 requires that “Any actual penalty imposed shall be reasonably proportionate to the damage suffered as a consequence of the violation” and that section 30823 requires that funds collected “shall be expended for carrying out the provisions of this division, when appropriated by the Legislature.” The fact that a sanction is calculated by reference to the actual loss does not transform the penalty into compensation for pecuniary loss. (Richmond v. New Hampshire Supreme Court (1st Cir. 2008) 542 F.3d 913, 920-921.) Where, as in this case, the purpose of the penalties is to deter continuing violation of environmental laws, the penalties are not compensatory. (Ibid.; In re Jones, supra, 311 B.R. at pp. 651-652.) The only portion of the judgment in this case which can be characterized as compensatory is the $684 in costs; the remainder of the judgment consists of fines payable to the Commission for violations of the Public Resources Code. These fall within the exception to dischargeability under title 11 United States Code section 523(a)(7).
Allen argues that the assignment of the claim to the Radoseviches rendered these fines dischargeable because they were not payable to and for the benefit of a governmental unit, but instead were to be paid to the Radoseviches. A similar argument was raised and rejected in Stevens v. Commercial Collection Service, Inc. (W.D. Wash. 1995) 184 B.R. 584, a case in which a county assigned an unpaid claim to a collection service. The bankruptcy court held: “When there has been an assignment for collection purposes, the assignor remains the real party in interest.” (Id. at p. 586.) The judgment being renewed was for fines payable to the Commission, a governmental agency. The Radoseviches stand in the shoes of the Commission in seeking to collect the debt owed to the Commission. The assignment did not undermine the nondischargeability of the debt under title 11 United States Code section 523(a)(7) in Stevens, nor does it do so in this case.
The exception to dischargeability is automatic; the Commission did not have to appear in the bankruptcy action in order to protect its judgment from discharge. (Kelly v. Robinson (1986) 479 U.S. 36 [107 S.Ct. 353, 357].) The Commission notified the bankruptcy trustee of the nondischargeability of its debt, and Allen did not seek a determination in the bankruptcy proceeding on that question. If, as in this case, the debtor does not file an adversary proceeding to determine the dischargeability of debt under title 11 United States Code section 523(a)(7), “the creditor is free to pursue its claim in another forum, such as a state court, which has concurrent jurisdiction. A debtor, faced with the pursuit of such a claim, may raise the discharge as an affirmative defense and the state tribunal may make its determination.” (In re Taibbi (E.D. N.Y. 1997) 213 B.R. 261, 273.) Allen did so, and the trial court rejected this defense. The record supports this conclusion that the judgment was not discharged in Allen’s bankruptcy, and renewal of the judgment was not precluded under bankruptcy law.
IV
Allen asserts the Radoseviches had no authority to renew the judgment because pursuant to section 30823 of the Public Resources Code, the funds they are seeking should be deposited in the Violation Remediation Account of the Coastal Conservancy Fund until appropriated by the Legislature. This is yet another attack on the assignment. As we have explained, it is beyond the scope of this appeal.
DISPOSITION
The order denying the motion to vacate the renewal of judgment is modified to exclude $684 in costs from the renewed judgment. In all other respects, the order is affirmed. Respondents are to have their costs on appeal.
We concur: MANELLA, J.SUZUKAWA, J.