Judge Alison Mackenzie, Case Number: 20STCV39275, Date: 2024-01-17 Tentative Ruling

Judge: Alison Mackenzie, Case: 20STCV39275, Date: 2024-01-17 Tentative Ruling

Case Number: 20STCV39275 Hearing Date: January 17, 2024 Dept: 55

NATURE OF PROCEEDINGS: Motion of Defendant to Set Aside the Entry of Default and Default Judgment Against Defendant Silvestre Cosio.

The motion is granted.

The Court vacates and sets aside the (1) 3/1/2023 order granting the motion for terminating sanctions and entering default against Defendant, and (2) 8/9/2023 Default Judgment, and instead enters an order denying the motion for terminating sanctions.

Plaintiff’s request for monetary sanctions is denied, the Court finding the motion to set aside has merit.

Background

Plaintiff JOSE ANTONIO OLIVARES LIRA’s (“Plaintiff”) Complaint alleges that Defendant SILVESTRE COSIO (“Defendant”) agreed to produce textile materials in exchange for money tendered by Plaintiff, but Defendant never delivered the materials. On 8/3/2022, the Court granted Plaintiff’s motion to compel responses to Plaintiff’s Interrogatories (Set 1), Requests for Production of Documents (Set 1), and Requests for Admission (Set 2), plus monetary sanctions. On 11/18/2022, the Court granted Plaintiff’s motion to compel Defendant’s deposition. On 3/1/2023, the Court granted Plaintiff’s motion for terminating sanctions, striking Defendant’s answer, and entering default against Defendant. The basis of the termination sanctions motion was Defendant’s failure to comply with the 8/3/2022 and 11/18/2022 discovery orders. The Court set an OSC re Entry of Default Judgment, which it ultimately heard on 8/8/23. Defendant appeared at the hearing, and, as reflected in the minute order, represented that he had hired an attorney and requested a continuance of the hearing. The Court instructed Plaintiff to submit a default judgment and on 8/9/23, the Court entered a Default Judgment in the sum of $64,706.77, against Defendant.

Defendant now moves to vacate and to set aside the Default Judgment. Plaintiff opposes the motion and requests $50,000 in sanctions against Defendant.

Legal Standard

A court may relieve a party from a default or default judgment due to “mistake, inadvertence, surprise, or excusable neglect” if the party seeking relief files a motion within six months from the date default is entered. CCP § 473(b); Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 28. A court must set aside default caused by attorney error, as set forth in an affidavit from the attorney who committed the error. CCP § 473(b). A set aside motion based on an attorney’s affidavit documenting error must be filed within six months of entry of the default judgment. Id.

In addition to the statutory grounds set forth in CCP § 473, at any time “courts have the inherent authority to vacate a default and default judgment on equitable grounds such as extrinsic fraud or extrinsic mistake.” Kramer, 56 Cal.App.5th at 29 (internal quotes omitted). “One ground for equitable relief is extrinsic mistake—a term broadly applied when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits.” Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981. “Extrinsic mistake exists when the ground for relief is not so much the fraud or other misconduct of one of the parties as it is the excusable neglect of the defaulting party to appear and present his claim or defense. Cruz v. Fagor Am., Inc. (2007) 146 Cal.App.4th 488, 503.

A party seeking relief under the court’s inherent authority must demonstrate a “satisfactory excuse for not presenting a defense to the action,” a meritorious defense to the action, and diligence in seeking relief once the defendant discovered the entry of a default judgment. Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241, 1246.

Analysis

The Court entered default against Defendant on 3/1/23, more than six months before Defendant filed this motion on 10/16/23. Defendant’s motion therefore is untimely under the discretionary grounds set forth in CCP § 473(b). Defendant does not base his motion on an affidavit from the attorney who failed to respond to the discovery or the motion for terminating sanctions, and thus mandatory relief under CCP § 473(b) is also unavailable.

Defendant alternatively seeks relief under the Court’s inherent authority. (Mot at 2:19-20; 8:16-9:12, 11:9-24.) As noted above, the Court granted the terminating sanctions motion and entered default against Defendant as a sanction for not complying with the Court’s prior discovery orders. Defendant contends that his failure to oppose the terminating sanctions motion is excusable and not willful because he believed that an attorney he had hired was representing him at that hearing and in the case in general. While an attorney’s negligent handling of a case is imputed to his client for purposes of discovery sanctions, that is not the case if evidence exists that the attorney engaged in “positive misconduct” such as abandoning the client. Sauer v. Sup. Ct. (1987) 195 Cal.App.3d 213, 231. See also generally, e.g., Seacall Dev. v. Santa Monica Rent Control Bd. (1999) 73 Cal.App.4th 201, 205.

Here, Defendant explains that he paid a retainer to an attorney named Saunders in or around March 2023 to represent him in this case. (Cosio Decl., ¶ 4.) Defendant, who lives in Mexico, believed that Saunders was working on the case and did not know that Saunders never filed a substitution of counsel form and never appeared in the case. (Id.) Defendant forwarded Saunders the motion for terminating sanctions, believing that Saunders was dealing with the litigation. (Id., ¶ 6, Ex. B.) Defendant did not oppose the terminating sanctions motion and indeed, did not appear at the hearing. In June 2023, Saunders returned Defendant’s retainer in exchange for Defendant agreeing not to sue him. (Id., ¶ 5, Ex. A.)

Plaintiff contends that Defendant’s default came at the end of many years of discovery misconduct, including failing to respond to discovery and appear for his deposition. But this overlooks Saunders’s abandonment of Defendant at the critical time of a hearing on a pending motion for terminating sanctions. Defendant filed no opposition, and this meant the Court had no information from Defendant that could have changed the result as to the discretionary discovery sanctions sought in that motion. Plaintiff also contends that Defendant cannot use Saunders’ alleged misconduct to get out of the default judgment because Saunders returned the retainer before default judgment was entered, and thus no attorney-client relationship existed at that point in time. But Saunders’ abandonment of Defendant had already occurred when he failed to oppose or appear at the terminating sanctions hearing in March 2023, at which time the Court entered default against Defendant.

The Court thus concludes that Defendant has adequately shown that his attorney Saunders engaged in positive misconduct by abandoning Defendant at the time of the terminating sanctions motion that led to Defendant’s default. Defendant’s failure to oppose the motion and/or address the discovery failures that eventually led to his default thus are excusable and not willful and constitute extrinsic mistake.

The Court finds that Defendant has adequately established that he has a meritorious case, attaching both responses to the RFAs that Defendant previously failed to provide as well as an opposition to the motion for terminating sanctions. (Kamyab Decl., Exs. D & E.) Defendant has also stated he will sit for his deposition within 10 days of the Court’s order setting aside the default and default judgment and answer the outstanding discovery. (Cosio Decl., ¶ 5.) Defendant also contends that no facts exist to support Plaintiff’s claims. (Mot. at 11:9-24.) These facts are sufficient to show Defendant has a meritorious defense to the case. Mechling, 29 Cal.App.5th at 1246 (“only a minimal showing is necessary” to establish a meritorious defense as basis for equitable relief).

Finally, Defendant demonstrated diligence in seeking relief once he discovered the default judgment. Once Saunders abandoned Defendant, Defendant appeared at the OSC re entry of default judgment hearing on 8/8/23 and told the Court he had hired an attorney. His current attorney confirms Cosio retained him to file this motion on 8/8/23. (Kamyab Decl., ¶ 2.)

The Court therefore exercises its inherent authority to grant the motion and set aside the default judgment and default against Defendant. The Court does not, therefore, reach Defendant’s arguments about the validity of the default judgment though it notes that a contractual or statutory basis must exist for attorney’s fees sought in a default judgment, and no such basis appears in the default judgment papers submitted here.

The Court will confer with the parties on a date for a status conference regarding Defendant’s discovery responses, to be held within the next 30 days. The purpose of the status conference is to ensure that Defendant serves verified written responses to the outstanding interrogatories and document requests and pays the monetary sanctions from the 8/3/2022 order and sits for his deposition within 10 days of this order.

Because the Court has granted the motion to set aside, finding that such relief is warranted, the Court denies Plaintiff’s request for sanctions under CCP § 128.7.