Resolving what it said were “apparent conflicts in the Court of Appeal” regarding two issues, the Supreme Court today held in Siry Investment, L.P. v. Farkhondehpour that a party in default has standing to file a new trial motion asserting legal error relating to calculation of damages and that treble damages and attorney’s fees can be awarded under Penal Code section 496, subdivision (c), in a case involving, not trafficking of stolen goods, but instead, fraudulent diversion of a partnership’s cash distributions.
The court’s opinion by Chief Justice Tani Cantil-Sakauye says “the standing conclusion is supported by the statutory scheme as construed by well-reasoned prior appellate decisions and considerations of judicial economy.” The court didn’t address the damages issues in the new trial motion, but said they “substantially intersect with those that we may address in Los Angeles Unified School Dist. v. Superior Court (2021) 64 Cal.App.5th 549, review granted September 1, 2021, S269608.” (See here.)
The court also held that section 496 — covering the receipt of “any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained” — applies to the fraudulent diversion of partnership distributions because of “the statute’s unambiguous words and our obligation to honor them.” The court added that if the remedies it approves “are problematic as a matter of policy, the Legislature can be expected to amend the statute accordingly.”
Justice Joshua Groban signed the court’s opinion, but wrote separately for himself and Justice Leondra Kruger “to address the Court of Appeal’s concern that, if read too broadly, Penal Code section 496 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.” His concurrence states, “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.”
The court affirmed the Second District, Division Two, Court of Appeal’s published opinion as to the new trial issue and reversed as to the trafficking damages issue.