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Pulte Homes Corp. v. Williams Mechanical, Inc.

California Court of Appeals, Fourth District, Second Division

August 9, 2016

PULTE HOMES CORPORATION, Plaintiff and Appellant,
v.
WILLIAMS MECHANICAL, INC., Defendant and Respondent.

         CERTIFIED FOR PARTIAL PUBLICATION[*]

         APPEAL from the Superior Court of Riverside County. No. PSC1300561, David M. Chapman, Judge.

          Graham & Associates and Bruce N. Graham for Plaintiff and Appellant.

          Morrow & White, William D. Morrow; Geoffrey A. Kraemer and Jesse S. Abrams for Defendant and Respondent.

          OPINION

          RAMIREZ P.J.

         Pulte Homes Corporation (Pulte) filed this action against Williams Mechanical, Inc. (Williams) for defective performance of a plumbing subcontract. Even before the action was filed, however, Williams was defunct; first, it was suspended by the Secretary of State, and thereafter, it dissolved voluntarily.

         Pulte served Williams by effecting service on an attorney whom Williams had designated as its agent for service of process. The attorney, however, did not notify Williams of the action; he also did not identify or notify Williams’s liability insurer. Williams, of course, failed to respond to the complaint, and Pulte obtained a default judgment.

         Pulte then notified Williams’s liability insurer of the default judgment. About four and a half months later, the insurer retained counsel to represent Williams, and Williams’s counsel filed a motion to set aside the default judgment. The trial court granted the motion.

         Pulte appeals, contending:

         1. Williams lacks the capacity to defend this action because it has been suspended.

         2. Williams failed to establish that it was entitled to relief from the default and default judgment.

         We will hold that the trial court abused its discretion by ruling that Williams was entitled to relief. Accordingly, we need not decide whether Williams had the capacity to defend.

         I

         FACTUAL BACKGROUND

         The following facts are taken from the evidence submitted in connection with the motion to set aside.[1]

         On February 16, 2011, Williams was suspended by the Secretary of State. On June 29, 2012, while Williams was still suspended, [2] its sole director filed a certificate of dissolution.

         According to the records of the Secretary of State, Williams’s agent for service of process was Matt H. Morris. Morris was an attorney. On November 25, 2013, Pulte served a summons and complaint on Morris by substituted service. Morris admitted that he received the summons and complaint, but he did not take any action in response because Williams was dissolved and because he had no information about Williams’s liability insurance carrier(s).

         Actually, Williams’s liability insurer was First Specialty Insurance Corp. (First). On April 2, 2015, Pulte’s attorney contacted First and notified it of the litigation. He provided a copy of the default judgment and a “cursory case summary.” First’s adjuster asked him for “copies of all relevant documents including but not limited to contracts, payment records, pleadings, defect list, and evidence of damages.” On April 3, 2015, and on “several” subsequent occasions, First’s adjuster again requested documents “pertinent to [First]’s coverage investigation.” On July 20, 2015, Pulte’s attorney provided some, though not all, of the requested documents.

         According to First’s adjuster, between April 2 and July 20, 2015, she was “led to believe” that the underlying litigation involved only one home; on July 20, 2015, she realized for the first time that it involved “up to 26 homes.”

         On August 17, 2015, First retained counsel to represent Williams. On August 21, 2015, Williams’s counsel filed the motion to set aside.

         II

         PROCEDURAL BACKGROUND

         In 2013, Pulte filed this action against Williams. In it, Pulte seeks $69, 576 based on Williams’s allegedly negligent performance of a subcontract for the installation of plumbing in two residential construction projects.

         Williams failed to file a timely response to the complaint. On January 7, 2014, the trial court entered Williams’s default.[3] On March 10, 2015, it entered a default judgment against Williams.

         On August 21, 2015, Williams filed a motion to set aside the default and the default judgment. The motion was brought under Code of Civil Procedure section 473, subdivision (b), on the ground that Williams’s failure to respond to the complaint was due to its own mistake, inadvertence, surprise, or excusable neglect. Alternatively, the motion was also brought under Code of Civil Procedure section 473.5, on the ground that Williams had not received actual notice of the proceedings. Finally, the motion was also brought on the nonstatutory equitable ground of extrinsic mistake.

         In its opposition, Pulte argued, among other things, that Williams was a suspended corporation and therefore lacked the capacity to file the motion.

         In reply, Williams argued that it was actually a dissolved corporation, and therefore it had the capacity to file the motion under Corporations Code section 2010, subdivision (a), which, as relevant here, provides that a dissolved corporation “continues to exist for the purpose of winding up its affairs, [including] prosecuting and defending actions by or against it....”

         The trial court granted the motion. In its minute order, it stated: “Court finds current status is: [d]issolved [c]orporation.” Thus, it ...


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