IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT San Joaquin
March 15, 2011
JOSEPH REYES, PLAINTIFF AND APPELLANT,
DANIEL JOHNSON ET AL., DEFENDANTS AND RESPONDENTS.
(Super. Ct. No. CV035179)
The opinion of the court was delivered by: Robie ,j.
Reyes v. Johnson CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
In this assault and battery case, plaintiff Joseph Reyes appeals from orders granting motions by defendants Daniel Johnson and Ghassan Sharmoug to set aside their defaults and the resulting default judgment against them.
With respect to Sharmoug, Reyes contends the attorney's affidavit of fault offered in support of Sharmoug's set-aside motion did not justify relief under the mandatory relief provision in subdivision (b) of Code of Civil Procedure section 473 (section 473(b)) because the affidavit did not support a finding that the attorney caused Sharmoug's default. Reyes also contends that if the trial court properly granted Sharmoug's set-aside motion, the court nonetheless erred in failing to order Sharmoug's attorney to pay Reyes's reasonable compensatory fees and costs.
With respect to Johnson, Reyes contends Johnson's set-aside motion was untimely under the discretionary relief provision in section 473(b) and, in any event, Johnson failed to demonstrate any valid ground for relief under that provision.
We conclude the affidavit of fault offered in support of Sharmoug's motion was sufficient to require the trial court to set aside the default and default judgment as to Sharmoug under the mandatory relief provision in section 473(b). We also conclude that while Johnson's set-aside motion was untimely under the discretionary relief provision in that statute, the trial court did not abuse its discretion in granting Johnson relief from his default under the court's equitable powers based on extrinsic mistake. Accordingly, we will affirm both set-aside orders.
FACTUAL AND PROCEDURAL BACKGROUND
A The Complaint And The Default Judgment
On April 4, 2008, Reyes filed a complaint for damages against Johnson and Sharmoug, alleging they had attacked him at a party in August 2007.
On October 2, 2008, Reyes took the defaults of both defendants. On June 24, 2009, he obtained a default judgment against them for nearly $500,000 in damages, most of which consisted of punitive damages.*fn1
B Sharmoug's Set-Aside Motion
On December 17, 2009, Sharmoug moved to set aside the default and the default judgment, asserting that his attorney, Brennan Newsom, had failed to timely file a responsive pleading because Newsom believed Reyes's attorney, Vladimir Kozina, "had given him an open extension of time to respond."
In support of the motion, Newsom submitted a declaration stating that before December 2008 he had represented Sharmoug in the criminal prosecution arising out of the same incident as this civil action and had also "agreed to provide legal representation in connection with the Civil Case by way of tendering the matter to [Sharmoug]'s insurance carrier." Around the beginning of July 2008, he obtained an extension of time from Kozina to answer the complaint, confirming that extension in a letter to Kozina dated July 1, 2008. In that letter, Newsom stated that he would have a responsive pleading on file no later than July 11.
Later in July 2008, Newsom told Kozina he had tendered the defense of the action to the insurer. In a letter to Kozina dated July 22, Newsom confirmed the tender with Kozina and told Kozina he had been advised that the insurer would "be getting back to [him] shortly to tell [him] whether or not [the insurer would] pick up the defense." Newsom continued as follows: "Of course, if they do, I will be dropping out of this case. However, in the mean time, I will assume that I have your continued indulgence in not filing a responsive pleading pending a determination of [the insurer] to pick up the defense."
Shortly after this, Newsom was diagnosed with skin cancer, and through the end of 2008 he underwent treatment for cancer and also for a heart condition. These medical issues prevented Newsom from tending to his law practice, and by December 2008 he filed a motion to be relieved as Sharmoug's attorney in the criminal case based on his medical condition. He did not make a similar motion in this action because he had not made an appearance in the case.
Newsom stated that Kozina never asked him to file a responsive pleading on behalf of Sharmoug, never denied that Newsom had an open extension of time to file such a pleading, and never advised Newsom that he intended to take Sharmoug's default. Newsom also said that he never received a copy of the request for entry of default or any notice of the default prove-up hearing. Newsom asserted if Kozina had asked him to file a responsive pleading or advised him Reyes was going to take Sharmoug's default, Newsom would have "made arrangements to file a responsive pleading, refer the matter to a colleague or otherwise take[n] action sufficient to protect . . . Sharmoug's interests."
C Johnson's Set-Aside Motion
On December 23, 2009, Johnson moved to set aside the default and the default judgment, claiming he failed to file an answer because he mistakenly believed the attorney representing him in the criminal prosecution arising out of the same incident was also representing him in this case.*fn2
In support of the motion, Johnson stated that he had hired an attorney, Russell Marne, to represent him in the criminal prosecution. Sometime in early May 2008, he was in court on the criminal matter when someone handed him an envelope and told him it contained "legal papers pertaining to this same action." Before he could open the envelope, Marne took it from him and said the documents were for him (Marne). At that time, Johnson believed the documents were related to the criminal prosecution.*fn3
Johnson further attested that a similar event occurred at a hearing in the criminal case in August 2008.*fn4 Again, before he had a chance to open the envelope, Marne took it from him and said the documents were for Marne. Johnson asserted that he "had no reason to suspect the contents of either envelope were related to anything but the criminal matter."
Johnson claimed he never heard anything further about Reyes's civil action against him until late September or October 2009, when he learned of the judgment against him. He tried to contact Marne, but could only leave a message, and Marne never got back to him. Johnson claimed he "had no idea there was a difference between civil and criminal law," and he was "further mistaken in the fact that Mr. Marne only represented [him] in the criminal action."
D Reyes's Opposition
Reyes opposed both set-aside motions. He argued that both motions were untimely and that neither defendant was entitled to relief in any event. He also argued that if the court granted Sharmoug's motion, the court should order Newsom to pay $4,475 for Reyes's fees and costs in filing the default, the default judgment, and the opposition to the set-aside motion.
E The Rulings And The Appeal
On February 19, 2010, the trial court (Judge Saiers) granted Sharmoug's set-aside motion, but refused to award any "sanctions" against Newsom. Reyes filed a timely notice of appeal on March 4, 2010.
On April 30, 2010, the trial court (Judge Humphreys) entered a formal order granting Johnson's set-aside motion. Reyes filed a timely notice of appeal on June 21, 2010.
I Sharmoug's Set-Aside Motion
"Section 473, subdivision (b) provides for two distinct types of relief--commonly differentiated as 'discretionary' and 'mandatory'--from certain prior actions or proceedings in the trial court. 'Under the discretionary relief provision, on a showing of "mistake, inadvertence, surprise, or excusable neglect," the court has discretion to allow relief from a "judgment, dismissal, order, or other proceeding taken against" a party or his or her attorney. Under the mandatory relief provision, on the other hand, upon a showing by attorney declaration of "mistake, inadvertence, surprise, or neglect," the court shall vacate any "resulting default judgment or dismissal entered."'" (Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1124.)
Under the discretionary relief provision of section 473(b), the application for relief "shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken." "The general rule is that the six-month period within which to bring a motion to vacate under [the discretionary relief provision of] section 473 runs from the date of the default and not from the judgment taken thereafter." (Rutan v. Summit Sports, Inc. (1985) 173 Cal.App.3d 965, 970.) In contrast, under the mandatory relief provision of the statute the application for relief need only be "made no more than six months after entry of judgment." (§ 473(b).)
Because Sharmoug filed his set-aside motion more than six months after entry of the default (but within six months of entry of the default judgment), Reyes contends that "[w]ith regard to the discretionary provision of Section 473(b)," Sharmoug's motion was untimely. He also contends that Sharmoug failed to demonstrate any basis for relief under the discretionary relief provision. Because we do not rely on that provision in affirming the trial court's ruling, but instead rely on the mandatory relief provision, we need not address these arguments.
With respect to the mandatory relief provision, Reyes argues that Sharmoug was not entitled to relief because his default was not the result of an error by Newsom "in failing to file a responsive pleading. In fact, Mr. Newsom fully complied with his stated obligations to . . . Sharmoug; he tendered the civil defense to . . . Sharmoug's insurance carrier." In Reyes's view, "Newsom's sole responsibility was to tender the defense to the . . . insurance carrier." Because Newsom "fully complied with his limited obligations" to Sharmoug, Reyes contends the default could not have been the result of any error by Newsom in his representation of Sharmoug.
We disagree. The mandatory relief provision in section 473(b) provides as follows: "Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney's sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney's mistake, inadvertence, surprise, or neglect."
"The clause in section 473, subdivision (b) which mandates the court to grant relief unless it finds that the default was not in fact caused by lawyer error is not only a credibility testing device. It is also 'a causation testing device.' . . . A trial court's finding on the causation issue will be affirmed so long as it is supported by substantial evidence. [Citation.] If the evidence gives rise to conflicting inferences, one of which supports the trial court's findings, we must affirm." (Milton v. Perceptual Development Corp. (1997) 53 Cal.App.4th 861, 867.)
In his reply brief, Reyes argues that because the trial court made no express findings of fact here, the standard of review should be de novo, but Reyes fails to support that argument with any law, and in fact California law is to the contrary. "Generally, in the absence of express findings, we will presume the court found in favor of the prevailing party on all disputed factual issues. [Citation.] Our task in such cases is to determine if the presumed findings are supported by substantial evidence." (Responsible Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1734.)
Here, because the trial court made no express findings in granting the set-aside motion, we must presume the court found that the default was caused by Newsom's mistake, inadvertence, surprise, or neglect in representing Sharmoug, and the only question for us to answer is whether there was substantial evidence to support such a finding. There was.
Newsom did assert in his declaration that he "agreed to provide legal representation [to Sharmoug] in connection with the Civil Case by way of tendering the matter to [Sharmoug]'s insurance carrier." But there was further evidence from which the trial court could have found that Newsom's representation of Sharmoug in the civil case was not limited to simply making that tender. Specifically, in his letter to Kozina on July 22 -- after Newsom had tendered the matter to the insurer -- Newsom specifically informed Kozina that he would "be dropping out of this case" if the insurer picked up Sharmoug's defense. This statement evidenced that Newsom was going to continue representing Sharmoug in the civil action in the meanwhile. This was confirmed by the next sentence in the letter, in which Newsom stated his assumption that he had Kozina's "continued indulgence in not filing a responsive pleading pending a determination of [the insurer] to pick up the defense." These statements provided substantial evidence for the trial court to conclude that Newsom continued to represent Sharmoug in Reyes's civil action even after he tendered Sharmoug's defense to the insurer.
As for whether some mistake, inadvertence, surprise, or neglect by Newsome in representing Sharmoug after the tender was the cause of Sharmoug's default, there was substantial evidence to support a finding in favor of Sharmoug on that point also. In opposition to Sharmoug's set-aside motion, Kozina submitted a declaration in which he stated that after the extension of time to answer to July 11, confirmed by Newsom in his letter of July 1, "[n]o further extensions were discussed, agreed to, or granted." This comports with Newsom's statement in his letter of July 22 that he would "assume" he had Kozina's "continued indulgence in not filing a responsive pleading." In effect, the evidence supported a finding that Newsom did not secure an extension of time beyond July 11 to file Sharmoug's responsive pleading in the action, but instead merely assumed Kozina would give him an open-ended extension of time beyond that date. As it turned out, that assumption was incorrect; Kozina did not intend to allow Newsom any further extension of time, and he acted accordingly when he took Sharmoug's default.
Under these circumstances, Newsom's incorrect assumption that he had an open-ended period to respond to Reyes's complaint on Sharmoug's behalf -- whether characterized as mistake, inadvertence, surprise, or neglect -- entitled Sharmoug to relief from the default under the mandatory relief provision of section 473(b), and the trial court did not err in granting that relief.
Reyes argues that if we affirm the trial court's ruling on Sharmoug's set-aside motion based on Newsom's affidavit of fault, we "must order the lower . . . court to award [Reyes] reasonable compensatory legal fees and costs." Again, we disagree.
Section 473(b) does provide that "[t]he court shall, whenever relief is granted based on an attorney's affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties." The key element of that provision here is the word "reasonable." While the trial court has an obligation to make an award of reasonable compensatory legal fees and costs, it has no obligation to award fees and costs it determines are unreasonable.
On the evidence before the trial court here, we conclude the court reasonably could have determined that no portion of the legal fees and costs Reyes incurred in taking Sharmoug's default and obtaining a default judgment against him was "reasonable." The evidence showed that in late July 2008, Newsom communicated to Kozina that Newsom was assuming he had an essentially open-ended extension of time to respond to Reyes's complaint on Sharmoug's behalf. The evidence further showed that between July 22, when Newsom communicated that assumption to Kozina, and October 2, when he took Sharmoug's default, Kozina did nothing to disabuse Newsom of this notion, and instead Kozina took Sharmoug's default without any warning to Newsom. While Kozina may not have been under any legal obligation to notify Newsom of the impending entry of default (see Smith v. Los Angeles Bookbinders Union (1955) 133 Cal.App.2d 486, 500, disapproved on other grounds in MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536, 551), the trial court nonetheless could have found it was unreasonable for Kozina not to do so, especially when Kozina had reason to know that Newsom was operating under the mistaken assumption that Kozina was giving Newsom an open-ended extension of time to respond to the complaint.
Because the evidence was sufficient to support a finding that Kozina acted unreasonably in taking Sharmoug's default without warning Newsom, it also was sufficient to support a finding that none of the $4,475 in fees and costs Reyes incurred in taking Sharmoug's default, obtaining the default judgment against him, and opposing his set-aside motion were reasonable. If none of those fees and costs were reasonable, then the trial court had no obligation to make a fee and cost award to Reyes under the mandatory relief provisions of section 473(b). Accordingly, Reyes has failed to show any error or abuse of discretion in the trial court's refusal to make such an award in connection with granting Sharmoug mandatory relief under the statute.
II Johnson's Set-Aside Motion
Reyes contends Johnson's set-aside motion was untimely under the discretionary relief provision in section 473(b) because an application for discretionary relief must be made within six months from the date the default was entered. (See Rutan v. Summit Sports, Inc., supra, 173 Cal.App.3d at p. 970.) Johnson acknowledges the motion was not timely for purposes of obtaining discretionary relief from the default under section 473(b), but he contends the trial court did not rely on section 473(b) in granting the set-aside motion. Instead, he contends the trial court employed its "inherent equitable power to set aside a default or default judgment [sic] on the ground of extrinsic fraud or mistake."
"Once the six months have run under section 473, . . . a court of equity has power to set aside a judgment on . . . grounds" of "extrinsic fraud or mistake or inadvertence that may have deprived one party of a fair adversary hearing." (Bloniarz v. Roloson (1969) 70 Cal.2d 143, 148.) While Johnson did not expressly seek relief on equitable grounds in his set-aside motion, it appears the trial court did rely on its equitable powers in granting his motion. It was readily apparent that Johnson's set-aside motion was untimely under section 473(b) as to the entry of default, because the default was taken more than a year before Johnson filed his motion, and Reyes pointed out this untimeliness in his opposing papers in the trial court. Nevertheless, the trial court expressly found in granting the set-aside motion that "Johnson's motion was filed timely." This finding makes sense only if the trial court was exercising its equitable power to set aside the default, rather than acting under the discretionary relief provision of section 473(b).
"It is well recognized that it is within the trial court's sound discretion to utilize its equitable powers to provide relief from default and that on review the burden rests heavily on the appellant to show an abuse of discretion or error." (Janetsky v. Avis (1986) 176 Cal.App.3d 799, 811.) Reyes has not met that burden here.
"There are four grounds which a court, utilizing its equity capacity may rely upon to provide relief from a default. Those areas are (1) void judgment, (2) extrinsic fraud, (3) constructive service, and (4) extrinsic mistake." (Stiles v. Wallis (1983) 147 Cal.App.3d 1143, 1147.) "To set aside a judgment based upon extrinsic mistake one must satisfy three elements. First, the defaulted party must demonstrate that it has a meritorious case. Secondly, the party seeking to set aside the default must articulate a satisfactory excuse for not presenting a defense to the original action. Lastly, the moving party must demonstrate diligence in seeking to set aside the default once it had been discovered." (Id. at pp. 1147-1148.)
To show a meritorious case, the party seeking relief must allege facts that "would warrant the court in determining that if the facts so alleged be proven a different result would ensue." (Huron College v. Yetter (1947) 78 Cal.App.2d 145, 150.) Here, Johnson attested in support of his set-aside motion that the altercation out of which this case arose was instigated by Reyes himself, who "ma[de] several racial comments towards others and eventually resorted to deadly force" and that "[a]ny injuries sustained were the result of his [own] conduct."*fn5 If proven, these facts would likely lead to a far better result for Johnson than a judgment against him for nearly $500,000, including punitive damages. Accordingly, the first element of the test for extrinsic mistake was satisfied.
As for whether Johnson had a satisfactory excuse for not presenting a defense to the action, it has often been held that "[r]eliance on on a third person to protect the rights of the aggrieved party may . . . make out a case of extrinsic mistake." (8 Witkin, Cal. Procedure (5th ed. 2008) Attack on Judgment in Trial Court, § 232, at p. 843.) "Where a default is entered because defendant has relied upon a co-defendant or other interested party to defend, the question is whether the defendant was reasonably justified under the circumstances in his reliance or whether his neglect to attend to the matter was inexcusable." (Weitz v. Yankosky (1966) 63 Cal.2d 849, 855.) Here, the evidence showed that immediately after Johnson was served with the summons and complaint, and later the statement of damages, in this action, the attorney representing him against the criminal charges took the envelopes from him before he could open them and told Johnson they were for him (the attorney). At that time, Johnson had no idea about the distinction between civil and criminal proceedings, and he trusted his criminal attorney to handle whatever he had been given. This evidence was sufficient for the trial court to find that Johnson had a satisfactory excuse for not presenting a defense to the action, because he reasonably relied on his criminal attorney to take care of whatever was in the envelopes.
Reyes asserts that the trial court "should not have accepted this as sufficient evidence that . . . Johnson was unaware of the civil suit pending against him and his obligations thereunder," and "the court did not need to take . . . Johnson's . . . sworn statement as true." It is true that "a trial judge is not required to accept as true the sworn testimony of a witness, even in the absence of evidence directly contradicting it, and this rule applies to an affidavit." (Lohman v. Lohman (1946) 29 Cal.2d 144, 149.) On appellate review, however, where a "matter is before us with no findings of facts and conclusions of law," we "will presume that the trial court found every fact essential to support the judgment, and such findings will be implied by us." (Estate of Buzza (1961) 194 Cal.App.2d 598, 601.) Thus, we must presume the trial court credited Johnson's claim about why he did not answer the complaint in this case, and because Johnson's excuse was satisfactory under the case law, this element of the test for extrinsic mistake was satisfied.
Finally, on the issue of diligence, "Lack of prejudice is one of the factors the trial court may properly consider in determining whether defendant acted diligently. [¶] The other factor to be considered is whether defendant in the light of the circumstances known to him acted unreasonably in not filing the motion to set aside the default judgment earlier." (Weitz v. Yankosky, supra, 63 Cal.2d at p. 857.)
In support of his set-aside motion, Johnson attested that he did not learn of the default judgment against him "until late September or October 2009." The attorney who filed the set-aside motion for him attested that Johnson contacted him "sometime in October 2009." Why it took two months (or slightly more) for the attorney to file the set-aside motion for Johnson is not apparent from the record. Although, given this unexplained delay, the showing of diligence is not a strong one, we cannot say it was "unreasonable for the trial court to have resolved any doubt it may have had in favor of permitting an adjudication on the merits" (Weitz v. Yankosky, supra, 63 Cal.2d at p. 858), especially given the lack of prejudice to Reyes.
"'The greater the prejudice to the responding party, the more likely it is that the court will determine that equitable defenses such as laches or estoppel apply to the request to vacate a valid judgment.' [Citation.] Of the three items a defendant must show to win equitable relief from default, diligence is the most inextricably intertwined with prejudice. If heightened prejudice strengthens the burden of proving diligence, so must reduced prejudice weaken it." (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 983-984.)
Here, Reyes did not offer any evidence of prejudice in opposing Johnson's set-aside motion. Instead, he simply argued that given the lapse of time since the incident, "there is a high probability that much of th[e] evidence has been misplaced or destroyed, and many of the witnesses' memories lost." He repeats that assertion on appeal. In assessing this factor, however, the relevant point is not whether Reyes will be prejudiced by the lapse of time since the underlying incident (now over three and one-half years), but whether he will suffer "prejudice resulting from [Johnson]'s claimed lack of diligence." (Weitz v. Yankosky, supra, 63 Cal.2d at p. 857.) Here, any lack of diligence on Johnson's part in bringing his set-aside motion covered, at most, the period from late September or October 2009, when he first learned of the judgment against him, to late December 2009, when he filed his set-aside motion. Any loss of evidence -- which, on this record, is pure speculation anyway -- cannot reasonably be attributed to this period of delay, as opposed to the remainder of the time that has passed since the incident. Indeed, any loss of evidence would be far more attributable to Reyes's own delay of nearly nine months between the time he took Johnson's default to the time he obtained a judgment against Johnson based on that default than to Johnson's much shorter two-month delay in moving to set aside the default after he learned of the judgment.
In short, on this record we cannot conclude that the trial court abused its discretion in using its equitable powers to relieve Johnson from the default and default judgment Reyes took against him.
The orders granting Johnson's and Sharmoug's set-aside motions are affirmed. Johnson and Sharmoug shall recover their costs on appeal. (Cal. Rules of Court, rule 278(a).)
We concur: RAYE , P.J. BUTZ ,J.