SIRY INVESTMENT, L.P., Plaintiff and Appellant, v. SAEED FARKHONDEHPOUR et al., Defendants and Appellants.
S262081
IN THE SUPREME COURT OF CALIFORNIA
July 21, 2022
Second Appellate District, Division Two B277750, B279009 and B285904; Los Angeles County Superior Court BC372362
Chief Justice Cantil-Sakauye authored the opinion of the Court, in which Justices Corrigan, Liu, Kruger, Groban, Jenkins, and Guerrero concurred. Justice Groban filed a concurring opinion, in which Justice Kruger concurred.
We granted review to address apparent conflicts in the Courts of Appeal concerning (1) whether a party in default has standing to file a motion for a “new trial” asserting legal error relating to calculation of damages and (2) whether a trial court may award treble damages and attorney’s fees under
We answer yes to both questions — and hence affirm the appellate court’s judgment in the first respect, and reverse it in the second. As we will explain, the standing conclusion is supported by the statutory scheme as construed by well-reasoned prior appellate decisions and considerations of judicial economy. Likewise, the second conclusion — that treble damages and attorney’s fees are available under
I. FACTS AND PROCEDURE
We set forth the facts and procedural background, as recited in the Court of Appeal’s decision below (Siry v. Farkhondehpour (2020) 45 Cal.App.5th 1098, 1109–1113 (Siry)), with minor adjustments.
In 1998, Moe Siry, Saeed Farkhondehpour (Farkhondehpour), and Morad Neman (Neman) formed the “241 E. 5th Street Partnership” to renovate and lease space in a mixed-use building in downtown Los Angeles. The partnership agreement named one general partner — 416 South Wall Street, Inc. (of which Farkhondehpour was president) — and four limited partners — Siry Investment, L.P. (hereinafter plaintiff), the 1993 Farkhondehpour Family Trust (of which Farkhondehpour was trustee), the Neman Family Irrevocable Trust (of which Neman was trustee), and the Yedidia Investment Defined Benefit Plan Trust (of which Neman was also trustee). The agreement divided the partnership’s cash distributions as follows: Plaintiff was to receive 39.60 percent; the Farkhondehpour Family Trust, 29.70 percent; the Neman Family Irrevocable Trust, 19.80 percent; and the Yedidia Defined Benefit
In 2003, Farkhondehpour, 416 South Wall Street, and Neman (hereinafter defendants) created an entity named DTLA and required the building’s tenants to pay their rent to DTLA. Defendants then began to improperly divert rental income away from the limited partnership and into DTLA. Farkhondehpour and Neman also commenced charging personal and other non-partnership expenses to the partnership. The net effect of these actions was to direct Investment Consultants to underpay plaintiff its cash distributions. Farkhondehpour and Neman ensured that plaintiff remained unaware of the underpayments by misrepresenting to plaintiff the building’s rental income and the partnership’s expenses, effectively lying to plaintiff about what its cash distributions should have been.
A. Plaintiff’s Lawsuit, First Trial, and Reversal
In June 2007, plaintiff sued defendants and the entities over which they were trustees for underpaying plaintiff and improperly diverting the partnership’s rental income to their own coffers.2
The matter proceeded to a jury trial in October 2009. At that time, plaintiff’s operative second amended complaint sought (1) dissolution and winding up of the limited partnership; (2) an accounting; (3) damages for breach of the agreement; and (4) damages for breach of fiduciary duty. The jury found for plaintiff, awarding actual damages of $242,975 and punitive damages of $1.1 million against Farkhondehpour and $2 million against Neman. The trial court denied a subsequent motion for a new trial, but reduced the punitive damages awards to $728,925 against each Farkhondehpour and Neman.
In late 2012, the Court of Appeal reversed the judgment because the special verdict form submitted to the jury did not require the jury to specify whether Farkhondehpour and Neman were liable to plaintiff individually or as trustees of the various trusts. (Siry Investment, L.P. v. Farkhondehpour (Dec. 12, 2012, B223100, B234655) [nonpub. opn.].) The court explained that this defect rendered the verdict “hopelessly ambiguous” because “who is liable [was] key” — and hence remanded the matter for retrial. (Ibid.)
B. Issuance of Terminating Sanctions on Remand
On remand, plaintiff propounded two rounds of discovery on defendants — in late 2013, and again in early 2014. Defendants failed to adequately respond to the discovery or to the trial court’s subsequent orders directing them to do so without objection.
In 2015, plaintiff served defendants with notices that it was seeking $4 million in punitive damages against each of them. Plaintiff subsequently moved for terminating sanctions based on defendants’ steadfast refusal to respond to plaintiff’s discovery requests or to obey the trial court’s multiple orders compelling responses. At that time, plaintiff’s operative fifth amended complaint sought (1) compensatory damages for breach of the partnership agreement, breach of an oral contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and fraud;3 (2) punitive damages; (3) treble damages pursuant to
Defendants opposed the motion with extensive briefing and nearly 1,700 pages of exhibits. The court held two hearings and eventually issued a written order striking defendants’ answers and entering their default.
C. Default Prove-up and Entry of Judgment
Plaintiff filed more than 2,000 pages of documents in anticipation of the hearing at which it would prove its damages. In mid-2016, the trial court issued an order finding that plaintiff had “met its evidentiary burden as to all claims.” The court entered default judgment against defendants, awarding plaintiff (1) actual compensatory damages, with interest, of $956,487; (2) treble damages of $2,869,461 pursuant to
D. Motion for a New Trial and Ensuing Reduction of Damages
Defendants filed a motion for “new trial” (or, more precisely, in this setting, a new judgment hearing) premised on several grounds. Among other
The trial court partially denied and partially granted defendants’ motion. As a threshold matter, the court ruled that defendants had standing to move for a new trial despite the entry of default against them. On the merits, the court ruled that it had properly awarded treble damages and attorney’s fees under
Plaintiff filed a notice electing to collect treble damages, rather than punitive damages. Thereafter, the trial court entered an amended judgment against defendants, jointly and severally, awarding plaintiff (1) actual compensatory damages, with interest, of $956,487; (2) another $1,912,974, reflecting trebling pursuant to
E. The Court of Appeal’s Decision
Defendants appealed from the original default judgment and from the amended judgment, challenging the trial court’s award of treble damages and attorney’s fees under
A. Standing to Move for a New Trial To Contest the Amount of the Default Judgment
As the appellate court below recognized, a party who is in default is barred from further participation in the proceedings, and hence from “ ‘except[ing] to’ ” any error during the prove-up hearing itself. (Siry, supra, 45 Cal.App.5th at p. 1129, citing Christerson v. French (1919) 180 Cal. 523, 525; Devlin v. Kearny Mesa AMC/Jeep/Renault (1984) 155 Cal.App.3d 381, 385 (Devlin); and Forbes v. Cameron Petroleums, Inc. (1978) 83 Cal.App.3d 257, 262.) Yet, as the Court of Appeal also observed, a “plaintiff still bears the burden of proving its entitlement to damages to the court.” (Siry, supra, 45 Cal.App.5th at p. 1129, italics added, citing Barragan v. Banco BCH (1986) 188 Cal.App.3d 283, 302, and
The appellate court below also explained that entry of default “does not entirely render a defaulting defendant persona non grata.” (Siry, supra, 45 Cal.App.5th at p. 1129.) Even a defaulting defendant who has no right to participate at a prove-up hearing nevertheless may appeal the resulting default judgment on grounds that a damages award “(1) ‘is so disproportionate to the evidence as to suggest that the verdict was the result of passion, prejudice or corruption’ (Uva v. Evans (1978) 83 Cal.App.3d 356, 363), (2) ‘is so out of proportion to the evidence that it shocks the conscience of the appellate court’ ([id., at p. 364]), or (3) is ‘contrary to law’ (see Lasalle v. Vogel (2019) 36 Cal.App.5th 127, 139 [defaulting party may appeal refusal to set aside verdict on these grounds].” (Siry, supra, 45 Cal.App.5th at pp. 1129–1130.)
Although some of our older cases articulated a broad rule that a defaulting defendant is out of court and may not move for a new trial (see Howard Greer Custom Originals v. Capritti (1950) 35 Cal.2d 886, 888–889, and cases cited), in Carney v. Simons (1957) 49 Cal.2d 84, we declined to employ such preclusive language.5 Thereafter, in Schroeder v. Auto DrivewayCo. (1974) 11 Cal.3d 908, we foreshadowed the determination reached by the appellate court below. We held that a party may not “challenge [a] damage award on appeal[] without [first making] a motion for a new trial” — and that to conclude otherwise would “unnecessarily burden the appellate courts with issues which can and should be resolved at the trial level.” (Id., at p. 919.)
Efficiency and prudent allocation of judicial resources counsel us to apply the same reasoning in the circumstances of this case, and to agree with the Court of Appeal below that defendants’ challenges to the damages awarded in the original and amended default judgments are properly viewed as “[e]rror[s] in law” under
Plaintiff’s other challenges to this conclusion were properly addressed and rejected in the appellate court’s opinion below. (Siry, supra, 45 Cal.App.5th at pp. 1130–1131.) For present purposes, we find it useful to briefly address plaintiff’s observation that some Court of Appeal decisions, most notably Brooks v. Nelson (1928) 95 Cal.App. 144, 147–148 and Devlin, supra, 155 Cal.App.3d at pages 385–386, have asserted that a defaulting defendant may not file a motion for new trial under any circumstances. Yet both Brooks and Devlin are distinguishable: The former never squarely addressed the new trial motion issue; and the latter’s discussion amounts to problematic dictum. (See Misic, supra, 37 Cal.App.4th at p. 1154 [Devlin’s “dictum . . . ‘is unsupported by any recent authority, and is believed to be incorrect’ ”].) Moreover, and in any event, as the Court of Appeal below explained, those and other such decisions are distinguishable for another, fundamental reason: They “did not consider the rationale . . . that there is no reason to deprive the trial court of the power to consider challenges to the excessiveness or legal propriety of damages when those very same issues can undoubtedly be raised on appeal.” (Siry, supra, 45 Cal.App.5th at p. 1131.)
Ultimately, the Court of Appeal, applying
B. Propriety of the Default Judgment’s Treble Damages and Attorney’s Fees Awards
As explained below, three prior Court of Appeal decisions have addressed
1. Bell v. Feibush — Finding Section 496(c) Applies in the Context of a Loan Scam
In Bell v. Feibush (2013) 212 Cal.App.4th 1041, 1043–1044 (Bell), the defendant induced the plaintiff to loan him more than $200,000 “based on the false pretense he owned [a specific trademark] and he needed the money to settle a lawsuit over his interests in” a related enterprise. But these representations were lies, and the asserted enterprise “a scam.” (Id., at p. 1044.) When the plaintiff “asked for her money back, [the defendant] gave . . . a ‘litany of excuses’ and never repaid her.” (Ibid.)
Following the defendant’s abuse of discovery, the trial court entered a default judgment against him for breach of contract, fraud, and treble damages under
“ ‘
Penal Code section 496 was amended in relevant part in 1972. Prior to theamendment, the statute did not apply to those who sold stolen property; it applied only to those who purchased, received, withheld or concealed it. Nor did it include the language currently found in subdivision (c), which permits any party injured by a violation of subdivision (a) to bring a civil action for damages. This language was added by Statutes 1972, chapter 963, section 1, pages 1739–1740. It was the result of Senate Bill No. 1068 (1972 Reg. Sess.). The bill was introduced at the request of the California Trucking Association, with the goal of eliminating markets for stolen property, in order to substantially reduce the incentive to hijack cargo from common carriers. (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 1068 (1972 Reg. Sess.) as amended June 26, 1972.) Yet while an early version of the bill limited the plaintiffs who may bring civil actions to public carriers injured by the knowing purchase, receipt, concealment, or withholding of stolen property (Sen. Bill No. 1068 (1972 Reg. Sess.) as amended in Senate, May 30, 1972), the bill was subsequently amended to expand the class of potential plaintiffs to include “[a]ny person who has been injured by” the knowing purchase, receipt, concealment or withholding of stolen property. (Sen. Amend. to Sen. Bill No. 1068 (1972 Reg. Sess.) June 26, 1972.) Moreover, that same amendment included the sale of knowingly stolen property within its prohibitions, and allowed any person injured by the sale of knowingly stolen property to bring a civil action. In other words, it is apparent that the statute, as enacted, broadly allows anyone injured by the sale of knowingly stolen property to bring a civil action against the seller, in order to reduce thefts by eliminating the market for stolen goods.’ ” (Bell, supra, 212 Cal.App.4th at p. 1047, quoting Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, 17–18, disapproved on another ground in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337, fns. omitted in Bell.)
In connection with the 1972 amendment of
Various
Regarding California’s statute, the court in Bell summarized: “This history shows the Legislature believed the deterrent effect of criminal sanctions was not enough to reduce thefts. The means to reduce thefts, the Legislature concluded, was to dry up the market for stolen goods by permitting treble damage recovery by ‘any person’ injured by the knowing purchase, receipt, concealment, or withholding of property stolen or obtained by theft. Requiring a criminal conviction under
The appellate court in Bell next addressed whether
The court in Bell continued, observing that “[i]n 1927, the Legislature consolidated the separate common law crimes of larceny, embezzlement, and theft by false pretense in
i.e., theft committed by means of larceny, embezzlement, or false pretenses.” (People v. Allen (1999) 21 Cal.4th 846, 863 (Allen); see also People v. Vidana (2016) 1 Cal.5th 632, 648 [embezzlement is proscribed in both
Finally — and again, relevant to the issues in the current litigation — the Court of Appeal in Bell addressed the defendant‘s contention that permitting recovery of treble damages under
The appellate court acknowledged the defendant‘s “concerns about the potential consequences of our interpretation of
The next Court of Appeal decision concerning
After finding
The present case does not pose whether wage theft might give rise to a claim for treble damages under
3. Switzer v. Wood — Finding Section 496(c) Applies to Claims of Fraud and Breach of Contract in the Joint Venture / Limited Liability Corporation Context
In Switzer v. Wood (2019) 35 Cal.App.5th 116 (Switzer), the third and most recent Court of Appeal decision prior to the one under review, the appellate court found
In Switzer, the parties were business partners who sold medical devices. The plaintiff sued his partner and a related entity alleging, among other things, breach of contract, fraud, and breach of fiduciary duty concerning distribution of equity income funds. The plaintiff also sought the civil remedies afforded by
The Court of Appeal reversed. It observed, as had the Bell court, that the language of
The Switzer court also observed that “[a] violation of
The appellate court in Switzer determined that the same result was appropriate on the facts and claims before it. The court reasoned: “[I]t is undisputed that the jury specifically and unequivocally found all the factual elements necessary to establish that [the defendants] had engaged in conduct constituting a violation of
The court in Switzer next addressed the defendants’ argument “that
The Court of Appeal acknowledged a narrow exception to these standard principles of statutory construction exists when it can be determined that honoring statutory language “would frustrate the manifest purpose of the legislation as a whole or otherwise lead to absurd results.” (Switzer, supra, 35 Cal.App.5th at p. 129, citing California School Employees Assn. v. Governing Board (1994) 8 Cal.4th 333, 340.) And yet, the court observed, this limited exception “requires much more than showing that troubling consequences may potentially result if the statute‘s plain meaning were followed or that a different approach would have been wiser or better. (In re D.B. [(2014)] 58 Cal.4th [941,] 948 . . . .) Rather, ‘[t]o justify departing from a literal reading of a clearly worded statute, the results produced must be so unreasonable the Legislature could not have intended them.’ (In re D.B., supra, 58 Cal.4th at p. 948.) Moreover, our courts have wisely cautioned that the absurdity exception to the plain meaning rule ‘should be used most sparingly by the judiciary and only in extreme cases else we violate the separation of powers principle of government. [Citation.] We do not sit as a “super-legislature.” [Citation.]‘” (Switzer, supra, 35 Cal.App.5th at p. 129 The appellate court concluded that its understanding of section 496(c)‘s words was not “absurd at all, much less so absurd in its results that we would be permitted to disregard its literal wording.” ( Switzer, supra, 35 Cal.App.5th at p. 129Id., at pp. 129–130.) The court in Switzer surmised that in light of the language chosen, the Legislature “apparently believed that any violation of section 496(a),” if proved, “would warrant the availability of treble damages.” (Switzer, supra, 35 Cal.App.5th at p. 130 remedies at law have traditionally been limited (e.g., for fraud, conversion, or breach of contract) — while arguably a valid policy argument — manifestly falls short of establishing the absurdity exception. In the final analysis, we are unable to conclude that the results produced by a literal reading of the statute would be ‘so unreasonable the Legislature could not have intended them.’ (In re D.B., supra, 58 Cal.4th at p. 948 . . . .) In other words, the potential results of following the unambiguous literal wording of section 496(c) are not so absurd or unreasonable that we would be justified to override its plain meaning.” (Switzer, supra, 35 Cal.App.5th at p. 130 The Court of Appeal acknowledged the recurrent policy concerns that had first been voiced in Bell, and elaborated upon on in Lacagnina, regarding the potential consequences of its interpretation of section 496(c). (Switzer, supra, 35 Cal.App.5th at p. 130Ibid., quoting Bell, supra, 121 Cal.App.4th at p. 1049, italics in original.) The court added: “Of course, as always ‘[t]he Legislature . . . remains free to amend [the statute] if the language it has enacted is now understood to create unintended consequences.” (Switzer, supra, 35 Cal.App.5th at p. 130 The appellate court next confronted the defendants’ assertion that the legislative history (partially set out in Bell, supra, 121 Cal.App.4th 1041, and described ante, pt. II.B.1.) supported a contrary understanding of the statute. In rejecting that view, the court stressed the provision‘s amendment history and that it was designed, not solely to deter theft, but also to provide a new civil remedy to those who have been injured by a violation of the statute. (Switzer, supra, 35 Cal.App.5th at p. 131.)16 In the former respect, the court emphasized, the original 1972 bill was written broadly to authorize “‘any person‘” injured by a violation of the section to be awarded treble damages (and attorney‘s fees); it was later amended to limit those civil remedies to “for-hire carriers“; but that version was “short-lived” — within a few weeks the original broad version was restored, to read as it does now. (Switzer, supra, 35 Cal.App.5th at p. 131 The court summarized: “As the above outline of the legislative history makes clear, although [the 1972 bill] may have been briefly amended during the legislative committee process to have a narrower remedial focus (i.e., for-hire carriers), the Legislature ultimately restored the wording giving a treble damage remedy to ‘any person’ who was injured by a violation of section 496. Therefore, because the Legislature clearly approved and endorsed the broader scope of the civil remedy as provided in current section 496(c), we conclude the legislative history does not support [the defendants‘] contention that section 496(c) was intended to have a narrow focus that would apply only to common carriers or to situations involving theft in the cargo industry.” (Switzer, supra, 35 Cal.App.5th at p. 132 Accordingly, the Court of Appeal concluded that the plaintiff was entitled under section 496(c) to an award of treble damages. (Switzer, supra, 35 Cal.App.5th at p. 132 4. The Appellate Decision Below In this matter, the Court of Appeal framed the issue as whether section 496(c) authorizes treble damages when, as here, “the underlying conduct did not involve trafficking in stolen property, but rather the improper diversion of a limited partnership‘s cash distributions through fraud, misrepresentation, and breach of fiduciary duty.” (Siry, supra, 45 Cal.App.5th at p. 1133.) The court characterized the three appellate decisions described above as reflecting different “approaches to the issue” of section 496(c)‘s applicability. (Siry, supra, 45 Cal.App.5th at p. 1133.) It then explained: “We chart yet a different path in ruling that treble damages are not available under [section 496(c)] in cases where the plaintiff merely alleges and proves conduct involving fraud, misrepresentation, conversion, or some other type of theft that does not involve ‘stolen’ property.” (Siry, supra, 45 Cal.App.5th at p. 1134, italics added.) In other words, as the court later explicated, it determined that section 496(c) applies generally when there is evidence that “property” has been the subject of theft — but the statute does not apply in “theft-related tort cases” (Siry, supra, 45 Cal.5th at p. 1136) involving fraud, misrepresentation, or breach of fiduciary duty. Before commencing its statutory construction analysis, the appellate court below presented a general overview of statutory interpretation, during which it quoted various truisms from past decisions of this court. It began: “The ‘first task’ of any court ‘in construing a statute is to ascertain the intent of the Legislature so as to effectuate the purpose of the law.‘” (Siry, supra, 45 Cal.App.5th at p. 1134, quoting Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386 (Dyna-Med).) The appellate court acknowledged that a statute‘s language usually provides “’ “the most reliable indication of legislative intent.” ’ ” (Siry, supra, 45 Cal.App.5th at p. 1134.) Yet, the appellate court noted, the “’ “plain meaning” rule does not prohibit a court from determining whether the literal meaning of a statute comports with its purpose.’ ” (Id., at p. 1135, quoting Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735 (Lungren).) Next, the appellate court noted, in our own decisions we have “refused to ’ “presume that the Legislature intends, when it enacts a statute, to overthrow long-established principles of law unless such intention is clearly expressed or necessarily implied.” ’ ” (Siry, supra, 45 Cal.App.5th at p. 1135, quoting Brodie v. Workers’ Comp. Appeals Bd. (2007) 40 Cal.4th 1313, 1325 (Brodie), and citing Van Horn v. Watson (2008) 45 Cal.4th 322, 333 (Van Horn).) Moreover, as the Court of Appeal observed, we have remarked, “‘[i]t is doubtful that the Legislature would . . . institute[] . . . significant change through silence.’ ” (Siry, supra, 45 Cal.App.5th at p. 1135, quoting Riverside County Sheriff‘s Dept. v. Stiglitz (2014) 60 Cal.4th 624, 646–647 (Stiglitz), and citing In re Christian S. (1994) 7 Cal.4th 768, 782 (Christian S.).) Applying these principles, the appellate court reasoned that allowing section 496(c) “to authorize an award of treble damages whenever a plaintiff proves (or, in the case of a default, sufficiently alleges) any type of theft — whether it be fraud, misrepresentation, conversion, or breach of fiduciary duty — by which the defendant obtains money or property would institute [such] a ‘significant change’ [through silence].” (Siry, supra, 45 Cal.App.5th at p. 1135.) The Court of Appeal proceeded to elaborate on various grounds for its conclusion. First, it reasoned, a literal and broad reading of the statute “would transmogrify the law of remedies” for the torts of fraud, misrepresentation, conversion, and breach of fiduciary duty. (Siry, supra, 45 Cal.App.5th at p. 1135.) The court noted that the traditional damages remedy for these torts has been limited to the amount of actual damages caused by the perpetrators. (Ibid.) Affording treble damages in such settings, the appellate court asserted, “would all but eclipse these traditional damages remedies.” (Id., at p. 1136.) Second, the Court of Appeal reasoned, construing section 496(c) to apply in theft-related tort cases would impliedly and effectively “repeal the punitive damages statutes.” (Siry, supra, 45 Cal.App.5th at p. 1136.) The court observed that normally a plaintiff seeking greater than compensatory damages must meet strict standards applicable to punitive damages — i.e., prove, by clear and convincing evidence, the defendant “‘guilty of oppression, fraud, or malice.‘” (Ibid., quoting Civ. Code, § 3294, subd. (a).) Yet, the appellate court asserted, if section 496(c) applied to these torts, “a plaintiff could obtain treble damages merely by proving the tort itself by a preponderance of the evidence.” (Siry, supra, 45 Cal.App.5th at p. 1136.) Third, the appellate court asserted, because section 496(c) authorizes attorney‘s fees in addition to treble damages, recognizing its application in the present setting (as the court in Switzer did in closely analogous circumstances) would, in effect, authorize fee shifting “in nearly every tort case involving fraud, misrepresentation, or breach of fiduciary duty, thereby creating a gaping exception to the general rule against such fee shifting.” (Siry, supra, 45 Cal.App.5th at p. 1136, fn. 12.) Fourth, the appellate court turned to the same legislative history recounted earlier, analyzed by the Bell and Switzer courts — yet drew the opposite conclusion. The court focused on the history‘s recitation of “discussions about how best to achieve the ‘goal of eliminating markets for stolen property, in order to substantially reduce the incentive to hijack cargo from common carriers.‘” (Siry, supra, 45 Cal.App.5th at p. 1136id., at p. 1137), and thus, the court could not “infer any legislative intent” to effectuate the “significant change” that would result if the statute were construed to afford treble damages (ibid.). Indeed, the appellate court said, the “Legislature‘s silence” concerning such intent “is even more deafening when contrasted with other statutes that speak with a much clearer voice” when “creating the extraordinary remedy of treble damages.” (Ibid.) In view of all this, the appellate court determined, it could not “presume that our Legislature intended to so significantly alter the universe of tort remedies without saying anything about its desire to do so.” (Ibid.) Ultimately, the Court of Appeal concluded that section 496(c)‘s “language sweeps more broadly than its intent,” and hence must be understood, despite its unambiguous words, to withhold “the remedy of treble damages for torts not involving stolen property.” (Siry, supra, 45 Cal.App.5th at p. 1137.) The appellate court acknowledged that this conclusion conflicts with the decisions in Bell and especially Switzer, but explained that, in its view, the present case presents a situation in which perceived “legislative intent” (to maintain traditional remedies for torts involving fraud, misrepresentation, or breach of fiduciary duty) “trump[s] [the] statute‘s plain language.” (Ibid.) And so, the court explained, the “narrower intent” that it attributed to the Legislature “is controlling” and applies here. (Ibid.) The court further determined that in light of its reading of section 496(c), not only are treble damages unavailable in this setting, but correspondingly, the statute provides no basis for the trial court‘s award of attorney‘s fees. (Siry, supra, 45 Cal.App.5th at p. 1138.) 5. Our Understanding of Section 496(c) as Applied Here Viewing the issue independently as a matter of law, we endorse the analysis of Bell and Switzer — even though, at the same time, we acknowledge that some of the policy considerations highlighted in those cases, and elaborated upon by the appellate court below, give pause. Fundamentally, we agree with the conclusions of Bell and Switzer that section 496(c) is unambiguous, and that read together with sections 496(a) and 484, and in conformity with our standard approach to interpretation (e.g., Smith v. LoanMe, Inc. (2021) 11 Cal.5th 183, 190), section 496(c) must be understood as yielding the understanding attributed to it in those decisions: A plaintiff may recover treble damages and attorney‘s fees under section 496(c) when property has been obtained in any manner constituting theft. We also find that section 496(c) applies concerning the conduct at issue in the present case. The unambiguous relevant language covers fraudulent diversion of partnership funds. Defendants’ conduct falls within the ambit of section 496(a): They “receive[d]” “property” (the diverted partnership funds) belonging to plaintiff, having “obtained” the diverted funds “in [a] manner constituting theft.” (Ibid.) Defendants also conceal[ed]” or “withh[e]ld[]” those funds (and/or aided in concealing or withholding them) from plaintiff. (Ibid.) They did all of this “knowing” the diverted funds were “so . . . obtained.” (Ibid.) We pause to elaborate on these points, and, specifically, criminal intent under the statute. Because this litigation comes to us upon default judgment, defendants are deemed to have admitted all material allegations, including the allegation that defendants committed theft. Although we are not asked here to determine whether plaintiff would have been able to prove theft, we observe that not all commercial or consumer disputes alleging that a defendant obtained money or property through fraud, misrepresentation, or breach of a contractual promise will amount to a theft. To prove theft, a plaintiff must establish criminal intent on the part of the defendant beyond “mere proof of nonperformance or actual falsity.” (People v. Ashley (1954) 42 Cal.2d 246, 264.) This requirement prevents “‘[o]rdinary commercial defaults‘” from being transformed into a theft. (Id., at p. 265.) If misrepresentations or unfulfilled promises “are made innocently or inadvertently, they can no more form the basis for a prosecution for obtaining property by false pretenses than can an innocent breach of contract.” (Id., at p. 264.) In this case, the record appears consistent with a conclusion that defendants acted not innocently or inadvertently, but with careful planning and deliberation reflecting the requisite criminal intent. Defendants’ violation of section 496(a) caused plaintiff to suffer actual damage, loss, or harm. (See Switzer, supra, 35 Cal.App.5th at pp. 127–128.) In these circumstances, plaintiff qualifies under section 496(c) as “[a]ny person who has been injured by a violation of subdivision (a)” — and hence is entitled to “bring an action for three times the amount of actual damages, if any . . . and reasonable attorney‘s fees.” Finally, as the court in Switzer also observed, this construction and application of the statute cannot be avoided under the so-called “absurdity exception.”17 (Switzer, supra, 35 Cal.App.5th at p. 129.) As noted earlier, in reaching its contrary determination the appellate court quoted selected language from our decisions concerning statutory interpretation. (Siry, supra, 45 Cal.App.5th at pp. 1134–1135.) Yet, as we shall explain, these fundamental statutory construction truisms do not, in the present circumstances, support the Court of Appeal‘s ultimate conclusion. To begin with, Dyna-Med, supra, 43 Cal.3d at page 1386, quoted by the Court of Appeal concerning the need to ascertain the intent of the Legislature so as to effectuate the purpose of the law, concerned ambiguous statutory language — and hence is distinguishable from the present litigation. Similarly, and most significantly, although the appellate court below cited Lungren, supra, 45 Cal.3d at page 725, in support of the proposition that a court may properly inquire whether a literal meaning of a statute comports with its purpose, close review of that decision reveals that, in fact, we simply evaluated constitutional language that was subject to two alternate constructions, and endorsed the interpretation that avoided problematic internal inconsistencies within the overall scheme. In neither of these cases did we do anything similar to what the appellate court below proposes we do here — construe otherwise clear and unambiguous standalone language so as to withhold, rather than afford, that which its full and natural words provide. or unreasonable” legislative policy determination. (Ibid., italics added.) The parties cite no decision, and we are aware of none, finding the absurdity exception applicable on facts such as those at issue here. Likewise, although the appellate court below cited cases such as Brodie, supra, 40 Cal.4th at page 1325, in support of the proposition that courts should be very reluctant to infer legislative intent to overthrow long-standing principles of law (and thereby significantly alter traditional limits on remedies in the face of legislative silence on that issue, or absent clearly expressed legislative intent to do so), Brodie and related decisions are inapt in the current circumstances. In Brodie, contrasted with the present case, we faced statutory language that reflected a latent ambiguity. On one hand, the Legislature clearly intended to modify a discrete aspect of the workers’ compensation law. Yet the statute was silent regarding whether the Legislature intended also to effectuate a corresponding broader change that would overthrow long-established apportionment principles. In that setting, and in the face of ambiguity concerning the intended scope of the change to the statute, we invoked the traditional rule, declining to presume legislative intent to bring about such a major change in the face of silence — and we concluded, after reviewing the relevant legislative history, that only the limited, and not any monumental, change was intended. (Brodie, supra, 40 Cal.4th at pp. 1325–1332.) By contrast, the words of section 496(c) present no ambiguity, and the statutory construction issue before us today poses no interpretive challenge analogous to that in Brodie or related cases such as Stiglitz, supra, 60 Cal.4th 624, 646–647, Van Horn, supra, 45 Cal.4th 322, 333, and Christian S., supra, 7 Cal.4th 768, 782. As observed earlier, the Court of Appeal characterized the present circumstances as reflecting legislative “silence” concerning the scope of treble damages and attorney‘s fees remedies created by section 496(c), and it asserted that, in comparison, the Legislature has spoken with appreciably more clarity in the course of enacting seven other statutes in which it has afforded such remedies. (Siry, supra, 45 Cal.App.5th at p. 1137.) Ultimately it appears that the appellate court discerned authority to give the statute a narrow cast, divorced from its words — based largely on the assertion that the Legislature has not spoken with similar or requisite clarity here. And yet our review of the statutes does not reveal support for any such distinction.18 Although the appellate court below articulated policy concerns that affording remedies flowing from section 496(c)‘s language would generally and expansively allow remedies beyond those traditionally afforded at law for fraud, conversion, or breach of contract, these policy issues have not been hidden from the Legislature‘s attention, nor are they new. As observed ante, footnote 10, broadly applicable analogous “enhanced civil remedies” statutes akin to section 496(c), also allowing recovery of treble damages and attorney‘s fees upon a showing of criminal theft, have been enacted in other jurisdictions. Likewise, although some out-of-state decisions have, similarly to Lacagnina, supra, 25 Cal.App.5th 955, construed their own statutes as not applying in factual circumstances different from those in the present case,19 courts of those jurisdictions also have found their statutes do apply in factual circumstances like those we face here — in which funds were obtained or withheld in a manner constituting theft. Indeed, courts of other states have so construed their statutes even in the face of policy-based admonitions against unduly expanding such remedies. Cases construing Colorado Revised Statutes, section 18-4-405 (quoted ante, fn. 10) in circumstances like those we face here are particularly illuminating. An early decision expressed policy concerns about subjecting “every trustee, bailee, broker, or other fiduciary to treble damages and attorney fees,” thus “supplant[ing] common law conversion claims” — and saw this as a result the state legislature “could not have contemplated or intended.” (Itin v. Bertrand T. Ungar, P.C. (Colo.App. 1998) 978 P.2d 142, 145.) But on review the Colorado Supreme Court, in Itin v. Ungar (Colo. 2000) 17 P.3d 129, disagreed. It held that although the statute, like ours, had been triggered by trucking industry interests (id., at p. 134, fn. 8), under the provision‘s broad wording, the plaintiff was properly awarded such remedies stemming from the illegal diversion of funds. (Id., at p. 135; accord, e.g., Rhino Fund, LLLP v. Hutchins (Colo.App. 2008) 215 P.3d 1186, 1194 [rejecting assertion that the “economic loss rule” “‘abrogate[s] a legislatively created scheme designed to extend a civil remedy to those harmed by alleged criminal activity‘“]; see also Tisch v. Tisch (Colo.App. 2019) 439 P.3d 89, 103–105 [defendant‘s appropriation of company funds for personal use triggered treble damages for civil theft].) Most recently, the Colorado Supreme Court held that its statute applies even in the context of an employee‘s breach of contract — there, by improperly taking confidential proprietary information from his employer. (Bermel v. BlueRadios, Inc. (Colo. 2019) 440 P.3d 1150.) The court observed that “[t]he availability of treble damages and attorney fees for civil theft reflects the legislature‘s displeasure with the proscribed conduct and its desire to deter it” (id., at p. 1157), and stressed, “it is not this court‘s place to substitute the judiciary‘s policy judgments for those of the General Assembly” (id., at p. 1158). To the contrary, the state supreme court said: “Because the legislature‘s intent to provide a statutory remedy to victims of theft is plain from the face of the statute, no contrary statutory provision is before us, and there has been no allegation that the statute is unconstitutional, we are without any basis in law to limit the remedy it provides” (id., at p. 1159). The Colorado high court reached these determinations over dissenting objections that doing so violates the “economic loss rule” and “dramatically expands [the plaintiff‘s] contractual remedies and establishes a precedent that [may] inappropriately allow many future contract claims to be asserted as civil theft claims, in pursuit of otherwise unavailable treble damages and attorney fees awards.” (Id., at p. 1160 (dis. opn. of Gabriel, J.).)20 As noted ante, part II.B.1–3, the same policy issues addressed in Colorado over the course of more than two decades also have been highlighted in the published opinions in Bell, Lacagnina, and Switzer. Our Legislature is the appropriate body to address whether section 496(c) should be altered in light of our appellate courts’ repeated constructive focus on these and related policy issues. As alluded to earlier, and especially in light of the underlying legislative and case law history, any question we might harbor about how to properly balance such policy issues “manifestly falls short of establishing the absurdity exception” (Switzer, supra, 35 Cal.App.5th at p. 130) and leaves us with no room to decline to honor the words, as written, of section 496(c). Although defendants and the Court of Appeal below insist the Legislature was primarily concerned with the theft of cargo, as we have observed, “statutory prohibitions ‘often go beyond the principal evil to cover reasonably comparable evils, and it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.‘” (Smith v. LoanMe, supra, 11 Cal.5th at p. 199.) Moreover, as noted ante, part II.B.1., during the amendment process for the 1972 bill the Legislature expressly removed narrowing language (that would have limited coverage to “for-hire carriers“) and replaced it with the present broad language, “[a]ny person.” In analogous circumstances concerning this same scheme, we have observed, “[W]e cannot read [that limitation] back into the resulting statute.” (Allen, supra, 21 Cal.4th at p. 863.) For the reasons articulated above, we decline to agree with the Court of Appeal‘s statutory construction analysis or conclusion. We will not ” ’ “speculate that the Legislature meant something other than what it said,” ’ ” and ” ’ “rewrite [the] statute to posit an unexpressed intent.” ’ ” (Switzer, supra, 35 Cal.App.5th at p. 128; compare Kopp v. Fair Pol. Practices Com. (1995) 11 Cal.4th 607, 615 [describing the very limited circumstances in which a court has “authority to rewrite a statute in order to preserve its constitutionality“].) Perhaps the Legislature will see fit to consider the statute anew in light of the elaborated criticisms set forth in the Court of Appeal opinion below, and amend section 496(c) in line with the short-lived narrowed version that the Legislature briefly considered in 1972 before again broadening its scope to read as it does now. In this respect, the Court of Appeal‘s decision below may usefully assist and prompt the Legislature. In the meantime, however, although ” ‘[w]e are not unmindful of [the] policy concerns about the potential consequences of our interpretation,’ ” it is and remains ” ‘the task of the Legislature to address those policy concerns.’ ” (Switzer, supra, 35 Cal.App.5th at p. 130, italics omitted, quoting Bell, supra, 121 Cal.App.4th at p. 1049.) III. CONCLUSION AND DISPOSITION The Court of Appeal‘s judgment is affirmed to the extent it recognized and confirmed defendants’ standing to move for a new trial — more precisely, a new judgment hearing — on the ground that the trial court committed errors in law when awarding and calculating damages. The same judgment is reversed to the extent the appellate court declined to read section 496(c)‘s words in their full and natural manner, by construing that subdivision to withhold, rather than afford, treble damages and attorney‘s fees when, as here, property “has been obtained in any manner constituting theft.” (§ 496(a).) We remand to the Court of Appeal for proceedings consistent with our opinion. CANTIL-SAKAUYE, C. J. We Concur: CORRIGAN, J. LIU, J. KRUGER, J. GROBAN, J. JENKINS, J. GUERRERO, J. Case Information SIRY INVESTMENT, L.P. v. FARKHONDEHPOUR S262081 Concurring Opinion by Justice Groban I concur with the majority opinion‘s holdings. I write separately to address the Court of Appeal‘s concern that, if read too broadly, Penal Code section 4961 could “transmogrify the law of remedies” in a wide range of tort or breach of contract cases alleging that the defendant improperly obtained, diverted, received, or withheld the plaintiff‘s money. (Siry Investment, L.P. v. Farkhondehpour (2020) 45 Cal.App.5th 1098, 1135; accord, Lacagnina v. Comprehend Systems, Inc. (2018) 25 Cal.App.5th 955, 972 (Lacagnina) [noting the possibility of “significant adverse consequences” if parties could assert claims for treble damages under § 496 “in run-of-the-mill commercial disputes“].) I believe it important to note that the majority opinion‘s interpretation of section 496 will not allow for the recovery of treble damages in all, or even most, consumer or commercial disputes involving tort or breach of contract claims, for the reasons explained below. This matter comes to us upon a default judgment in the plaintiff‘s favor. Defendants were deemed to have admitted all material allegations in plaintiff‘s complaint and were not permitted to challenge whether plaintiff has adequately proved a violation of section 496, subdivision (a) on appeal. (See Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 823.) Given this procedural posture, the majority opinion rightly does not analyze in depth the elements required to establish a violation of section 496, subdivision (a) — a violation of which is required to obtain treble damages under section 496, subdivision (c). The majority opinion nevertheless recognizes important limitations on the scope of section 496. At a minimum, a plaintiff must prove that a “theft” has occurred to establish a violation of section 496, subdivision (a)ante, at p. 38; see id. at pp. 37–38 [“A plaintiff may recover treble damages and attorney‘s fees under section 496(c) when property has been obtained in any manner constituting theft” under section 496, subdivision (a)]; see also § 496, subd. (a) [prohibiting persons from “buy[ing] or receiv[ing] any property that has been stolen or that has been obtained in any manner constituting theft“].) Section 484 defines “theft,” in part, as “feloniously steal[ing]” or “knowingly and designedly, by any false or fraudulent representation or pretense, defraud[ing]” a person of money or property. (Italics added.) Thus, to establish a theft, a plaintiff must show an intent to steal. (People v. Ashley (1954) 42 Cal.2d 246, 263–264 (Ashley).) “The intent to steal or animus furandi is the intent, without a good faith claim of right, to permanently deprive the owner of possession.” (People v. Davis (1998) 19 Cal.4th 301, 305.) A defendant‘s good faith but erroneous belief in the truth of his or her misrepresentation or that the defendant has a right or claim to the property taken ” ‘negates the felonious intent necessary for conviction of theft.’ ” (People v. Kaufman (2017) 17 Cal.App.5th 370, 388, quoting People v. Tufunga (1999) 21 Cal.4th 935, 938; see also People v. Marsh (1962) 58 Cal.2d 732, 737 [trial court erred in refusing to admit reports from scientists and doctors to show the defendants’ good faith belief in their false representations that their machines cured medical ailments].) As the majority opinion rightly observes, a mere unfulfilled promise or misrepresentation of fact is insufficient to establish an intent to steal. (Maj. opn., ante, at p. 39.) “[T]he defendant‘s intent must be proved in both instances by something more than mere proof of nonperformance or actual falsity.” (Ashley, supra, 42 Cal.2d at p. 264.) “This requirement prevents ’ “[o]rdinary commercial defaults” ’ from being transformed into a theft.” (Maj. opn., ante, at p. 38 quoting Ashley, at p. 265.) “If misrepresentations or unfulfilled promises ‘are made innocently or inadvertently, they can no more form the basis for a prosecution for obtaining property by false pretenses than can an innocent breach of contract.’ ” (Maj. opn., ante, at p. 39, quoting Ashley, at p. 264.) Moreover, the testimony of a single witness that the defendant obtained the money or property through a false promise or representation must be corroborated. (Ashley, at p. 259; see also § 532, subd. (b).) In Ashley, we held that the evidence supported the jury‘s finding that the defendant had the requisite felonious intent to steal. (Ashley, supra, 42 Cal.2d at p. 267Ibid.) The fact that the “money acquired was needed and used for the running expenses of the corporation within a short time of its receipt” indicated that the defendant never intended to acquire or build the promised theater. (Ibid.) In contrast, the evidence in People v. Hartley (2016) 248 Cal.App.4th 620 did not support a finding that the defendant had the requisite felonious intent to steal, even though the defendant acknowledged that he made an implied promise to pay a fare upon entering a cab and did not do so. (Id. at p. 628.) As the court explained, the evidence did not show that the defendant entered the cab intending to renege on his promise to pay; instead, the defendant “decided not to pay because of his frustration with the driver and [his] suspicion that the driver was trying to inflate the fare.” (Id. at p. 629.) Thus, “his failure to pay the driver was akin to a transaction-gone-bad or, in the words of Ashley, ’ “[o]rdinary commercial default[].” ’ ” (Hartley, at pp. 630–631.) Consistent with these cases, several courts have recently concluded that a section 496 claim for treble damages in a civil action cannot be maintained where the defendant lacked the requisite felonious intent. In GEC US 1 LLC v. Frontier Renewables, LLC (N.D.Cal., Sept. 7, 2016, No. 16-CV-1276 YGR) 2016 WL 4677585, for example, the complaint alleged that the defendants improperly asserted control and ownership over a joint venture. (Id. at p. *1.) But, since the complaint also alleged that the defendants believed themselves to be the proper owners of the joint venture, the court concluded that they lacked the requisite felonious intent to steal. (Id. at p. *9.) The court explained that “allowing this claim to proceed on these allegations would sanction the use of the penal code to redress ordinary business disputes over ownership interests — an untenable result.” (Ibid.) The court in Lacagnina similarly explained that “an essential element of a section 496 violation is the defendant‘s knowledge that the property was stolen” and doubted that “a dispute over unpaid commissions and other compensation qualifies.” (Lacagnina, supra, 25 Cal.App.5th at p. 971; accord, Gillette v. Stater Bros. Markets, Inc. (C.D.Cal., Sept. 23, 2019, No. EDCV19-1292JVS (KKx) 2019 WL 8017735, p. *9 [allegation that the defendants ” ‘[k]ept [plaintiff‘s] pay for themselves’ ” was not sufficient to state a claim for theft since there was no indication that the defendants obtained the wages by false pretenses or knew them to be obtained by false pretenses].) There may be other relevant limitations on establishing a theft in a civil case seeking treble damages under section 496. Some federal courts have concluded that “[a] cause of action for civil theft cannot lie where a plaintiff receives legitimate services based on mutual agreement to pay for those services.” (Alvarez v. Adtalem Education Group, Inc. (N.D.Cal., Dec. 16, 2019, No. 19-cv-04079-JSW) 2019 WL 13065378, p. *5 [no section 496 claim where students received an education in exchange for their tuition payments, even though university misrepresented postgraduate employment rates].) Several out-of-state decisions have declined to award treble damages under their similar theft statutes because the defendant lacked an intent to permanently deprive the plaintiff of the use or benefit of the money or property at issue. (Maj. opn., ante, at p. 43, fn. 19.) Further, as noted in the majority, two federal decisions have held that a plaintiff must show additional conduct beyond the underlying theft to obtain treble damages under section 496 — though these decisions have been criticized on appeal and not followed by other federal courts. (Maj. opn., ante, at pp. 20–21, fn. 12; cf. People v. Allen (1999) 21 Cal.4th 846, 857 [noting that the first sentence of a 1992 amendment to § 496 “authorizes a conviction for receiving stolen property even though the defendant also stole the property,” which suggests that theft alone may enable § 496 liability in the civil context]; Bell v. Feibush (2013) 212 Cal.App.4th 1041, 1049 [raising the issue of whether the second sentence of the 1992 amendment, which bars dual convictions of the theft itself and the receipt of stolen property, operates to bar ” ‘double recovery’ ” in the civil context].) Again, we are not called upon in this matter to determine the precise elements necessary to establish a theft in a civil case seeking treble damages under section 496, or even whether plaintiff would have been able to prove these elements had he not obtained a default judgment. I nevertheless do not believe the majority opinion‘s holding will create a sea change in the law. If, as a result of the majority opinion‘s holding, most consumer or commercial transactions could now be transformed into a “theft” case seeking treble damages — including, for example, every conceivable type of claim premised upon wage and hour laws, false advertising laws such as the unfair competition law (Bus. & Prof. Code, § 17200 et seq.) or Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.), warranty laws such as the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.), or real estate or mortgage lending disputes — I might find such a result to be contrary to legislative intent. But I do not believe it is likely that section 496 will apply in most cases concerning consumer or commercial transactions, and I do not read the majority‘s opinion to suggest otherwise. And, as the majority notes, if the Legislature finds the treble damage remedy to be problematic where it does apply, the Legislature may amend the statute accordingly. (Maj. opn., ante, at pp. 1–2.) GROBAN, J. I Concur: KRUGER, J.
Notes
In a footnote appended to the above passage, the appellate court addressed what it viewed as a misstatement made by the trial court regarding the applicable subdivision of
As observed post, footnote 10, and in part II.B.5, other jurisdictions also have enacted statutory provisions substantially similar to
Relatedly, we have observed that “embezzlement,” which is defined as “the fraudulent appropriation of property by a person to whom it is intrusted” (