This thread should've been dead, but reviving it for an update.
Originally the final judgement was 50/50, both parties were at fault and the insurance company was willing to pay for half the amount for the damage. However, the other party didn't agree to it, so this case was taken to a small claim court.
To keep things short, the result was Car #1 was not at fault.
California Vehicle Code section 22500(e), which prohibits persons from stopping or parking a vehicle, attended or not, "in front of a public or private driveway" entrance.
Also, in accordance to Vehicle Code section 22106, no person shall move from a stopped or parked position until it is safe to do so.
Good luck to those that might have a similar accident to this.