Judge: Armen Tamzarian, Case: 18STCV00178, Date: 2024-09-10 Tentative Ruling
Please notify Department 52 via email at smcdept52@lacourt.org and indicate that the parties are submitting on the tentative ruling. Please provide the attorney's name and represented party. Please notify the opposing side via email if submitting on the Court's tentative ruling.
Case Number: 18STCV00178 Hearing Date: September 10, 2024 Dept: 52
Defendant Zhan Liu’s Motion to Set Aside Judgment
Defendant Zhan Liu moves to vacate the default judgment
against her based on extrinsic fraud. “
‘[E]ven where relief is no longer available under statutory provisions, a trial
court generally retains the inherent power to vacate a default judgment or
order on equitable grounds where a party establishes that the judgment or order
... resulted from extrinsic fraud or mistake.’ ” (Pittman v. Beck Park Apartments Ltd.
(2018) 20 Cal.App.5th 1009, 1025.)
Extrinsic Fraud
Defendant meets her burden of showing the default
judgment against her resulted from extrinsic fraud by plaintiff Pacificorp
Investments, Ltd. “ ‘Extrinsic fraud occurs when a party is deprived of his opportunity to
present his claim or defense to the court, where he was kept in ignorance or in
some other manner fraudulently prevented from fully participating in the
proceeding.’ ” (Gibble v. Car-Lene
Research, Inc. (1998) 67 Cal.App.4th 295, 315.) Examples include “ ‘failure to give notice of
the action to the other party.’ ” (Ibid.) “ ‘The essence of extrinsic fraud is one
party’s preventing the other from having his day in court.’ ” (Sporn v. Home Depot USA, Inc. (2005)
126 Cal.App.4th 1294, 1300.)
Defendant presents evidence that plaintiff knowingly
served the summons and complaint in a way designed to deprive her of
notice. Plaintiff’s proof of service
indicates substituted service on defendant on October 31, 2018, at 1661
Lombardy Road, Pasadena, CA 91106 via a 70 year old woman. (F. Wong Decl., Ex. 1.)
Defendant testifies, “I am married (in divorce
proceedings) to Moses Wong, who owned Pacificorp Investments, Ltd.” (Liu Decl., ¶ 2.) “The corporate records from Hong Kong,
reflect ownership by Wong Lung Wab in 2002. Wong Lung Wab is my husband, Moses.” (Id., ¶ 4.) “Wong Hin Yee (The sister of Moses) is
identified as the sole director and 50% shareholder in November, 2014 (a month
after the purported loan [to defendant] was made).” (Id., ¶ 5.)
Defendant
testifies, “On September 10, 2018, I arrived in China to attend school.” (Liu Decl., ¶ 10.) She pursued a Ph.D. there. (Id., ¶ 11.) She presents documentary evidence supporting these
assertions. (Id., Exs. 9-10.) Defendant further testifies, “I was never
served with any lawsuit, and I did not know about it until after the judgment
when Moses tried to take my property.
The only 70 year old woman at my property would have been my mother and
she did not tell me anything about this.
Moses knew that I was in China and I would not receive notice of the
lawsuit.” (Id., ¶¶ 12-14.)
Defendant also presents the certified translation of
a declaration by her mother, Yin Long Zhao.
Zhao testifies she lives “at [her] daughter’s home in Lombardy” (Zhao
Decl., ¶ 1), referring to the property at 1661 Lombardy Road in Pasadena. She testifies, “Due
to my lack of English proficiency, my son-in-law, Moses Wong, instructed me to
hand over all received mails directly to him. If Moses is not in LA, his assistant, Victor
Ringor, comes monthly to collect all the mails … . His
assistant visits Lombardy every month to pick up the mail.” (Ibid.)
Regarding
service of the summons and complaint in this action, Zhao testifies: “In 2018,
I remember that a middle-aged man knocked on the door and delivered a document.
As usual, I handed it over to Moses’s
secretary, Victor. At that time, my
daughter, Zhan Liu, was pursuing further studies in China and was not in the
United States. Since this was our
standard procedure for handling mails and due to my inability to understand
English, I did not mention this to my daughter because I was unaware that the
received document was a legal notice concerning a lawsuit against her. Hereby, I attest that I did not inform or hand
over the lawsuit notice to my daughter, Zhan Liu. Instead, I gave it to my son-in-law Moses’s
secretary, Victor.” (Zhao Decl., ¶¶
2-3.)
Defendant
thus presents prima facie evidence that plaintiff, via its former principal or
owner Moses Wong (brother of its current owner, Hin Yee Wong), knew defendant
was in China when the summons was served.
Defendant’s testimony indicates Moses Wong knew that meant any papers
delivered to 1661 Lombardy Road would be forwarded to him. That constitutes extrinsic fraud by failing
to give notice of the action to defendant and preventing her from having her
day in court.
Plaintiff argues defendant has not shown she was
“kept in ignorance by any acts of Plaintiff or Plaintiff’s agents.” (Opp., p. 4.)
Plaintiff argues that defendant having her mail forwarded to her
husband’s secretary only “ ‘establishes a lack of sufficient internal
procedures to ensure that mail received at [defendant’s] offices is routed to
the intended recipients.’ ” (Kramer
v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 34, quoting Cruz
v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 504 (Cruz).)
Plaintiff’s reliance on Cruz is misplaced. There, defendant Fagor America, Inc. was a
corporation. It relied on “extrinsic
mistake” (Cruz, supra, 146 Cal.App.4th at pp. 502-503), not fraud. The record showed an employee “authorized to
accept mail on behalf of Fagor’s president at the time she signed the return
receipt for the summons and complaint.”
(Id. at p. 502.) The
evidence thus showed the corporation had at least “constructive knowledge of
the fact that the lawsuit had been filed.”
(Id. at p. 504.) “In light
of [that] evidence, Fagor was required to present evidence sufficient to
establish that through some error not attributable to its own handling of the
matter, Fagor did not receive actual notice of the lawsuit. It did not do so. [The corporation’s president] does not state
in his declaration that he was unaware of the lawsuit or that he had no
knowledge of the summons or complaint. Instead, he simply states that he ‘never
received’ the summons and complaint.” (Ibid.)
Here, defendant presents evidence plaintiff, via Moses
Wong, knew the manner of service used would result in the summons and complaint
being forwarded to himself instead of defendant. Unlike Fagor America, Inc., defendant
expressly states she had no knowledge of the lawsuit at all: “I was never
served with any lawsuit, and I did not know about it until after the judgment
when Moses tried to take my property.”
(Liu Decl., ¶ 12.)
Plaintiff presents no evidence rebutting defendant’s
testimony about Moses Wong and the process he and defendant used, in which
defendant’s mother gave the mail to plaintiff. These circumstances do not show defendant
simply failed to make sure her mail was properly routed. It shows Moses Wong, acting on plaintiff’s
behalf, intentionally took advantage of the mail receiving process he was
personally involved in. Plaintiff
presents no evidence that, after Moses or his secretary received the summons
and complaint from defendant’s mother, anyone tried to forward the papers to
defendant.
Additional Elements
Once the defendant shows the judgment resulted from
extrinsic fraud, she must also “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 default judgment once discovered.” (Rodriguez v. Cho (2015) 236
Cal.App.4th 742, 750.)
(1) Meritorious Defense
Defendant meets her burden of showing a meritorious
defense. The burden is low. (Rappleyea v. Campbell (1994) 8
Cal.4th 975, 983 [“Ordinarily a verified answer to a complaint’s allegations
suffices to show merit”].) Plaintiff’s
action alleges defendant defaulted on a $500,000 loan. Defendant testifies, “Over the course of the
marriage Moses [Wong] had me sign many documents without explaining what he was
asking me to sign.” (Liu Decl., ¶
8.) “I reviewed the purported loan that
is attached to the Complaint. I never
received the money from the alleged loan and never even knew there was a loan,
because there was not. This was a
fraudulent invention by my then-husband.”
(Id., ¶ 9.)
Plaintiff submits evidence showing it transferred
$500,000 to an account in defendant’s name.
(H. Y. Wong Decl., ¶ 5, Ex. B.)
Defendant, however, presents evidence that the bank statements showing
Liu received a $500,000 transfer are consistent with her story: that plaintiff
or Moses Wong orchestrated the loan in defendant’s name for his own purposes. Defendant testifies, “In 2014, Moses asked me
to sign a paper because it would make it easier for him to transfer money from
his Hong Kong company and to avoid taxes. I was unaware that what I signed was a
promissory note.” (Liu Reply Decl., ¶
2.)
Defendant further testifies, “The EastWest Bank
statement provided by Plaintiff in opposition to the Motion reflects three $10
entries that I recognize as Moses’s handwriting. I have never seen these statements and I did
not control this account. At no point
did I have any access to make deposits or withdraw money from this account.” (Id., ¶ 5.) She also testifies, “I never borrowed money
from Hin Yee Wong. … Everything she did was in accordance with
Moses Wong’s instructions as part of her secretarial duties. … The
last time we communicated was over a decade ago (in 2011, when we first applied
for divorce).” (Id., ¶ 8.)
Defendant also argues it is not plausible the
purported $500,000 loan was legitimate because it would have been financially
unsound for plaintiff. Defendant
testifies, “I am a housewife with no income, and all my financial support comes
from Moses, Hin Yee Wong's brother.”
(Liu Reply Decl., ¶ 7.)
Defendant is not required to fully prove her defense
on the merits now. This is not a motion
for summary judgment. The court cannot
and need not decide, based on these papers, which party will prevail in this
action. On this element, defendant makes
an adequate showing for relief from default.
“[T]he law favors disposing of cases on their merits.” (Rappleyea v. Campbell, supra, 8
Cal.4th at p. 980.)
(2) Satisfactory Excuse
Defendant
shows a satisfactory excuse for not defending the lawsuit. As discussed above, she presents evidence she
only learned about the lawsuit a few months ago. (Liu Decl., ¶ 12.) Plaintiff argues defendant periodically
returned to the United States from China over the past several years That may be so, but it does not mean she
received notice of the action.
(3) Diligence
Defendant
shows reasonable diligence in seeking to set aside the judgment since she
discovered it. Liu testifies, “I did not
know about [the lawsuit] until after the judgment when Moses tried to take my
property.” (Liu Decl., ¶ 12.) A writ of execution was issued on April 9,
2024. Defendant served and filed this motion
on August 13. She moved to set aside the
judgment within a reasonable amount of time.
Prejudice
Plaintiff
argues setting aside the default judgment would prejudice it. Plaintiff only argues it incurred costs and
fees in the action. If plaintiff prevails
on the merits, plaintiff may be able to recover those costs and fees. And, though the judgment was entered five
years ago, the delay is not likely to prevent plaintiff from presenting
evidence on the merits. Plaintiff does
not argue any evidence has been lost or any witnesses’ memories have
faded. The case is about a default on a
loan. Much of the evidence will be
documentary. Plaintiff already has at
least some of defendant’s bank statements from 2014. (H.Y. Wong Decl., Ex. B.) Moreover, the promissory note matured on June
30, 2015. (Comp., Ex. A, ¶ 1.b.) Plaintiff filed this action on October 10,
2018, over three years later. Plaintiff
gives no reason why further delay would cause any prejudice. The potential prejudice to defendant far
outweighs any prejudice to plaintiff.
Disposition
Defendant Zhan
Liu’s motion to set aside judgment is granted. The court hereby vacates the default and default
judgment entered against defendant Zhan Liu.
Defendant shall file her proposed answer (attached as Exhibit 13 to the
motion) forthwith.