Judge Alison Mackenzie, Case Number: BC565176, Date: 2025-01-08 Tentative Ruling

Judge: Alison Mackenzie, Case: BC565176, Date: 2025-01-08 Tentative Ruling

Case Number: BC565176 Hearing Date: January 8, 2025 Dept: 55

NATURE OF PROCEEDINGS: Hearing on Defendant’s Motion to Set Aside/Vacate Default and Default Judgment

BACKGROUND

Plaintiffs Gagik Knyzyan and David Knyzyan filed this action against Armen Kazanchian (Defendant), alleging they loaned him $250,000.00 in 2006 to be paid back with interest by December 31, 2012. The Complaint further alleges that in September 2014, Defendant wrote Plaintiffs two checks, one for $100,000 in interest and the second for the $250,000 principal, but neither of these checks cleared.

The causes of action are: (1) Breach of Oral Contract; and (2) Common Counts: Money Due & Owed.

On January 29, 2016, Plaintiffs obtained a default judgment against Defendant.

On February 7, 2024, Plaintiffs executed an Acknowledgment of Assignment of Judgment assigning their interest in the money judgment to David Elliot (Assignee). On February 22, 2024, Assignee replaced Plaintiffs as a party in this case.

Defendant filed a Motion to Set Aside/Vacate Default and Default Judgment and a Motion to Quash Service of Summons. Assignee filed an opposition.

REQUEST FOR JUDICIAL NOTICE

Assignee requests that the Court take judicial notice of certain records of the following four cases of the Superior Court of California, County of Los Angeles: Case Nos. BC565176 (the instant case); BC435554; BC573544, and 19STCV19275. Assignee’s request for judicial notice is granted.

LEGAL STANDARD

Code of Civil Procedure section 473, subdivision (d) provides in relevant part that a court “may … on motion of either party after notice to the other party, set aside any void judgment or order.” “A judgment is ‘void’ only when the court entering that judgment ‘lack[ed] jurisdiction in a fundamental sense’ due to the ‘entire absence of power to hear or determine the case’ resulting from the ‘absence of authority over the subject matter or the parties.’” People v. The North River Ins. Co. (2020) 48 Cal.App.5th 226, 233 (quoting People v. American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 660) (citations omitted) (internal quotation marks omitted). “Service of process, under longstanding tradition in our system of justice, is fundamental to any procedural imposition on a named defendant.” AO Alfa-Bank v. Yakovlev (2018) 21 Cal.App.5th 189, (citation omitted) (internal quotation marks omitted). “[C]ompliance with the statutory procedures for service of process is essential to establish personal jurisdiction.... Thus, a default judgment entered against a defendant who was not served with a summons in the manner prescribed by statute is void.” American Express Centurion Bank v. Zara (2011) 199 Cal.App.4th 383, 387 (quoting, Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444) (internal quotations omitted).

Code of Civil Procedure section 473.5 allows a motion to set aside a judgment based on lack of actual notice but limits the period to bring such a motion to no later than two years after entry of judgment. “A person moving for relief under section 473(d) seeks to invalidate a judgment void for improper service, whereas a defendant moving for relief under section 473.5 seeks to set aside a valid judgment rendered without actual notice.” California Capital Ins. Co. v. Hoehn (2024) 17 Cal.5th 207, 223 (Hoehn). Hoehn overturned a prior line of cases that applied the two-year limitation period in section 473.5 to motions filed under section 473, subdivision (d). Id. at p. 225 (“a section 473(d) motion to vacate a judgment that is void for lack of proper service is not subject to the judicially imposed two-year limitation. [fn. omitted]).

Additionally, even where relief is not authorized by statute, “a trial court generally retains its inherent power to vacate orders on equitable grounds where a party establishes that the judgment or order was void for lack of due process or resulted from extrinsic fraud or mistake.” County of San Diego v. Gorham (2010) 186 Cal.App.4th 1215, 1228-1229 (citations omitted). “While the grounds for an equitable action to set aside a default judgment are commonly stated as being those of extrinsic fraud or mistake, the terms are given a very broad meaning which tends to encompass all circumstances that deprive an adversary of fair notice of hearing whether or not those circumstances would qualify as fraudulent or mistaken in the strict sense. Thus, a false recital of service although not deliberate is treated as extrinsic fraud or mistake in the context of an equitable action to set aside a default judgment.” Munoz v. Lopez (1969) 275 Cal.App.2d 178, 181 (citation omitted).

In addition to showing extrinsic fraud, a party seeking equitable relief “must show three elements: (1) a meritorious defense; (2) a satisfactory excuse for not presenting a defense in the first place; and (3) diligence in seeking to set aside the [order] once discovered.” Pittman v. Beck Park Apartments Ltd. (2018) 20 Cal.App.5th 1009, 1025 (alteration in original) (quoting Rodriguez v. Cho (2015) 236 Cal.App.4th 742, 750) (internal quotation marks omitted). In contrast, a judgment void for improper service must be set aside regardless of the merits of the underlying case or the defendant’s delay in rectifying it. See Peralta v. Heights Med. Ctr., Inc. (1988) 485 US 80, 86-87 (“Where a person has been deprived of property in a manner contrary to the most basic tenets of due process, it is no answer to say that in his particular case due process of law would have led to the same result because he had no adequate defense upon the merits.” [citation omitted] [internal quotation marks omitted]); Los Angeles v. Morgan (1951) 105 Cal.App.2d 726, 731 (“[I]n the absence of service of process upon such a party there is no duty on his part even though he has actual knowledge to take any affirmative action at any time thereafter to preserve his right to challenge the judgment. What is initially void is ever void and life may not be breathed into it by lapse of time.”).

ANALYSIS

Defendant moves to set aside and vacate default and default judgment, arguing that the judgment is void because he was never properly served.

I. Request to Strike Opposition

As an initial matter, the Court denies Defendant’s request to strike Assignee’s opposition and accompanying documents filed prior to the December 31, 2024, Notice of Association of Counsel. Defendant provides no authority requiring the Court to take such action. Moreover, there is no evidence of prejudice to Defendant from the five-day delay between filing the responsive documents and the notice of association.

II. Grounds for Relief

Because more than two years have passed since the entry of default judgment, Defendant may not seek relief under Code of Civil Procedure section 473.5. However, Defendant may seek relief under Code of Civil Procedure section 473, subdivision (d), or the Court’s equitable power.

Improper service of summons is a basis to establish either that the judgment is void, or extrinsic fraud or mistake permitting equitable relief. County of San Diego v. Gorham (2010) 186 Cal.App.4th 1215, 1229 (“In addition to providing proof that a judgment or order is void, a false return of summons may constitute both extrinsic fraud and mistake.”). However, if service was proper, Defendant’s motion fails regardless of any underlying merit of the defense. Likewise, if service was improper, Defendant’s motion succeeds regardless of underlying merit or delay. Therefore, the Court only needs to address the issue of improper service to determine if the judgment is void.

III. Improper Service of Summons

The burden of proof is on the party seeking relief from default to show that service was improper. See Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 495 (“Although a trial court has discretion to vacate the entry of a default or subsequent judgment, this discretion may be exercised only after the party seeking relief has shown that there is a proper ground for relief….”).

Plaintiffs filed proof of substituted service on March 12, 2015. RJN Ex.3 at p 11. The proof of service reflects it was performed by Gerardo Ponce on January 23, 2015, by substituted service at Defendant’s place of business on “Hasmik (last name unknown) - Office Manager, person in charge.” Ibid. The proof of service describes “Hasmik” as a “30-40 years old, 5’5” in height, 140 pounds in weight, with black hair, brown eyes, and caucasian.” Ibid.

Defendant argues that no such substituted service ever occurred and accuses Plaintiffs of engaging in so-called “sewer service. Mot. at p. 4; see Hoehn, supra,17 Cal.5th 207, 217 (noting, “The filing of false affidavits to conceal a lack of lawful service has reportedly become a common practice among debt collectors and has been given its own name— ‘sewer service’—so denominated because ‘the server throws the documents “down the sewer” and then falsifies its affidavit of service.’” [quoting Fed. Trade Com., Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration (July 2010) p. 8, fn. 22.]).

Defendant testified that the only Hasmik working in his office in 2015 was his wife, Hasmik Alexanyan. Defendant provides a declaration of Hasmik testifying that she did not receive it. Mot. at p. 21, Hasmik Decl. ¶8. Defendant argues that the following errors make service improper. At the time of the alleged service, Hasmik was 45 years old, her hair has “always been very light brown,” she is 5’1 and has never been 5’5,” her weight in 2015 was between 110-115 pounds. Mot. at p. 10, Kazanchian Decl. at ¶ f. Even accepting that the process server misstated Hasmik’s age, height, weight, and hair color, these errors alone are not sufficient to invalidate the evidentiary value of the proof of service. See Bein v. Brechtel-Jochim Group, Inc. (1992) 6 Cal.App.4th 1387, 1394 (“minor, harmless deficiencies will not be allowed to defeat service.”)

Additionally, Defendant argues that the Declaration of Diligence attached to the proof of service states that the process server “received the within process on January 22, 2015,” but also states that he attempted service of process on January 20, 2015. However, Assignee provides the declaration of Terry Gilbert, General Manager of USA Express Legal & Investigative Services, explaining that this was simply a clerical error. As custodian of records, Gilbert attests that the company’s records contain Work Order #PS160565, which USA Express received on January 19, 2015, and which was dispatched to server Gerardo Ponce, with accompanying documents….” The work order identifies Defendant Armen Kazanchian, his business address, that it was received on January 19, 2015, and that it was assigned to Gerardo Ponce. Considering this evidence, the inconsistent dates on the Declaration of Diligence is another minor harmless deficiency that will not be allowed to defeat service. Gilbert Decl., Ex. A

Additionally, the process server, Gerardo Ponce, was not required to register as a process server because he was an employee of a licensed private investigator. Gilbert Decl. ¶ 7; Bus. & Prof. Code, § 22350, subd. (b)(2) (“[This chapter shall not apply to] [a]n attorney or his or her employees, when serving process related to cases for which the attorney is providing legal services.”). Because he is not a registered process server, the return is not entitled to a presumption of truth. See Evid. Code § 647 (“The return of a process server registered pursuant … upon process or notice establishes a presumption, affecting the burden of producing evidence, of the facts stated in the return.”). However, the return is signed under the pains and penalties of perjury and may properly be considered by the Court. RJN, Ex. 3 at p. 12; see Hoehn, supra, 17 Cal.5th at p. 225 (“Given the limited nature of the inquiry—was the defendant properly served—there will be some cases, and perhaps many, that may be tried on affidavits or declarations alone.”)

In ruling on this motion, the Court must determine the relative credibility of Hasmik Alexanyan and the process server. To aid the Court in reaching that determination, the Court will hear testimony from Hasmik, either at the January 9, 2024, hearing or at a continued date. See Hoehn, supra, (2024) 17 Cal.5th at p. 225 (noting “there are some motions brought beyond the two-year limit as to which trial courts will exercise their discretion to hold hearings and allow oral testimony.” While Assignee likely cannot produce Gerardo Ponce, if he wishes to submit oral testimony evidencing the service of process, the Court will consider hearing such testimony.

CONCLUSION

The Court declines to rule on Defendant’s motion to set aside default and default judgment pending an opportunity to hear oral testimony regarding the service of process.