Judge Ashfaq G. Chowdhury, Case Number: 23GDCP00239, Date: 2024-04-26 Tentative Ruling

Judge: Ashfaq G. Chowdhury, Case: 23GDCP00239, Date: 2024-04-26 Tentative Ruling

Case Number: 23GDCP00239 Hearing Date: April 26, 2024 Dept: E

Hearing Date: 04/26/2024-8:30am
Case No. 23GDCP00239
Trial Date: UNSET
Case Name: CREST FOODS, INC. v. OHANYAN LLC; and MICHAEL OGANYAN

TENTATIVE RULING– MOTION TO VACATE JUDGMENT ON SISTER_STATE JUDGMENT

RELIEF REQUESTED¿

Defendant, Mkrtych Oganyan (erroneously sued as Michael Oganyan) moves this Court for an order vacating and setting aside Judgment on Sister-State Judgment entered on December 14, 2023, and recalling and quashing any Writs of Execution or Abstracts of Judgment issued thereunder.

Defendant brings this motion under Code of Civil Procedure section 1710.40(a)-(b) on the grounds that Defendant Mkrtych was never served with the summons and complaint for the underlying action, thus the Texas Court never acquired personal jurisdiction over Defendant Mkrtych; Code of Civil Procedure §473(d); Peralta v. Heights Med. Ctr., (1988) 485 US 80, on the grounds that Plaintiff filed a false Proof of Service of Summons in the sister action; and on Munoz v. Lopez (1969) 275 Cal.App.2d 178, on the grounds that a judgment based on extrinsic fraud can be set aside at any time.

Procedural

Moving Party: Defendant, Mkrtych Oganyan (erroneously sued as Michael Oganyan)

Responding Party: Plaintiff, Crest Foods, Inc.

Moving Papers: Notice/Motion; Sarkisyan Declaration; Proposed Order; Oganyan Declaration

Opposition Papers: Opposition; Mackie Declaration; Vaughan Declaration; Request for Judicial Notice

Reply: Reply

16/21 Day Lapse (CCP § 12c and § 1005(b): Ok
Proof of Service Timely Filed (CRC, Rule 3.1300): Ok
Correct Address (CCP § 1013, § 1013a): Ok

BACKGROUND
In the underlying action (Texas Suit), Plaintiff Crest Foods, Inc. filed suit against Defendants Ohanyan LLC and Mkrtych in the action Crest Foods as Trustee for the Starlight Crest Foods, Inc. v. Ohanyan LLC and Michael Oganyan, Cause No. DC-23-05332, in the 192nd Judicial District Court of Dallas County, Texas on April 24, 2023.

On August 14, 2023, the Texas Court granted Plaintiff’s motion for default judgment based on Defendants failing to file a timely answer.

Based on the default judgment entered in the Texas Court (sister state), Plaintiff filed an Application for Entry of Judgment on Sister-State Judgment in this Court against Defendants on 12/14/2023. Judgment was entered in this Court on 12/14/2023. The Notice of Entry of Judgment on Sister-State Judgment indicates that title of the case and case number in the sister-state is Ohanyan LLC; and Michael Oganyan, Case No. DC-23-05332.

Defendant Mkrtych (erroneously sued as Michael Oganyan) now brings this motion under CCP §1710.40(a)-(b) on the grounds that Mkrtych was never served with the summons and complaint in the sister-state action of Texas, thus the Texas Court never acquired personal jurisdiction over Defendant Mkrtych.

ANALYSIS
Timeliness
As a preliminary matter, Plaintiff’s Opposition does not oppose the timeliness of this motion.

“Not later than 30 days after service of notice of entry of judgment pursuant to Section 1710.30, proof of which has been made in the manner provided by Article 5 (commencing with Section 417.10) of Chapter 4 of Title 5 of Part 2, the judgment debtor, on written notice to the judgment creditor, may make a motion to vacate the judgment under this section.” (CCP §1710.40(b).)

The Court will not analyze Defendant’s argument as to why the instant motion is timely under the reasoning set forth in Defendant’s motion. Analyzing Defendant’s argument as to the timeliness issue would be far more complicated than it needs to be. Defendant’s argument seems to miss the mark and overcomplicates the issue.

Plaintiff filed a proof of service on 1/26/2024 that indicated that Mkrtych was served with the notice of entry of judgment on sister-state judgment on 1/6/2024. The instant motion was made on 1/25/2024; therefore, this motion is timely.

To the extent that Defendant argued he was served the notice of entry of judgment on sister-state judgment in this case on or about December 27, 2023, this appears to be contrary to the proofs of service filed by Plaintiff. “[T]he statute explicitly states that the 30-day period for bringing the motion commences with service of the notice of the sister state judgment. Contrary to Tsako’s contention, section 1710.40 did not require Juniper to file its motion to vacate within 30 days of learning of the judgment.” (Tsakos Shipping & Trading, S.A. v. Juniper Garden Town Homes, Ltd. (1993) 12 Cal.App.4th 74, 84.)

CCP § 1710.40(a)
“A judgment entered pursuant to this chapter may be vacated on any ground which would be a defense to an action in this state on the sister state judgment, including the ground that the amount of interest accrued on the sister state judgment and included in the judgment entered pursuant to this chapter is incorrect.” (CCP § 1710.40(a).)

“The party moving under section 1710.40 to set aside the sister state judgment has the burden to show by a preponderance of the evidence why it was entitled to relief.” (Conseco Marketing, LLC v. IFA & Ins. Services, Inc. (2013) 221 Cal.App.4th 831, 841.)

Casey helps further explain the defenses that may be asserted under § 1710.40:

The defenses that may be asserted in a motion to vacate under section 1710.40 are not well defined. The Act itself does not specify the available defenses. However, the Law Revision Commission's comment to section 1710.40 lists certain “[c]ommon” defenses. It states: “Common defenses to enforcement of a sister state judgment include the following: the judgment is not final and unconditional (where finality means that no further action by the court rendering the judgment is necessary to resolve the matter litigated); the judgment was obtained by extrinsic fraud; the judgment was rendered in excess of jurisdiction; the judgment is not enforceable in the state of rendition; the plaintiff is guilty of misconduct; the judgment has already been paid; suit on the judgment is barred by the statute of limitations in the state where enforcement is sought.” (Cal. Law Revision Com. com., 20 West's Ann. Code Civ. Proc. (2007 ed.) foll. § 1710.40, p. 385; see Traci & Marx Co. v. Legal Options, Inc. (2005) 126 Cal.App.4th 155, 158–159, 23 Cal.Rptr.3d 685 (Traci & Marx).)

(Casey v. Hill (2022) 79 Cal.App.5th 937, 976.)

Judgment Rendered in Excess of Jurisdiction
Defendant moves to vacate the judgment by arguing the judgment was rendered in excess of jurisdiction.

Defendant argues that the Texas Court did not have personal jurisdiction over him because he did not receive service of process in the Texas Court for the underlying sister-state action.

“[I]f the movant proves service of process in the sister state action was not made or was defective, this burden has been met. Under these circumstances, the sister state judgment is void for lack of fundamental jurisdiction and therefore unenforceable in California.” (Conseco Marketing, LLC v. IFA & Ins. Services, Inc. (2013) 221 Cal.App.4th 831, 841.

Specifically, Defendant argues:

Here, on the date of the alleged substitute service in the First Suit, Defendant Mkrtych was not residing at the 1243 Vista Court service address. Defendant Mkrtych does not have a brother named "Adam" that resided at the address. Also, Defendant Mkrtych did not receive the actual notice of entry of judgment on sister-state judgment until December 27, 2023 in the present case-while he was in Nevada.

Defendant Mkrtych then, has grounds to move to vacate the Judgment on Sister-State Judgment because he never received service of process in the First Suit as a result of extrinsic fraud upon the Texas Court. He has been sued as Michael Oganyan-not as Mkrtych Oganyan. The green card evidencing receipt of the certified mail for effectuating substituted service was never provided to the Texas Court. The process server did not state the date he received the process, nor did he provide proof in the Affidavit that he posted the process on the door, as required by the Order Granting Motion for Substitute Service. The Affidavit does not indicate that process was left with anyone over the age of 18 as required by the Order Granting Motion for Substitute Service. Defendant Mkrtych's non-appearance in the First Suit was not intentional or the result of conscious indifference, in that he did not know about the lawsuit and never received service of process. Furthermore, he has a meritorious defense in that Crest Foods, through its own misconduct, breached the franchisee agreement at issue.

As such, the Texas Affidavit of service is invalid, and the California judgment and judgment on sister-state judgment, therefore, are void.

(Def. Mot. p. 7.)

Defendant’s argument is unavailing and does not help the Court evaluate whether or not service was proper in the Texas Court.

As stated in Bank of America:

A review of the cases under the full faith and credit clause and California's Sister State Money Judgments Act suggests that personal jurisdiction over a nonresident defendant depends upon the satisfaction of three criteria: First, a statute of the forum state must allow for the assertion of jurisdiction over the defendant under the circumstances presented (Indiana Insurance Co. v. Pettigrew, supra, 115 Cal.App.3d at pp. 864-865; McGuire v. Brightman, supra, 79 Cal.App.3d at p. 784); second, the assertion of personal jurisdiction must be constitutionally permissible (ibid.); and third, jurisdiction must be acquired by service of process in strict compliance with the requirements of that state's service statutes. (Donel, Inc. v. Badalian (1978) 87 Cal.App.3d 327, 332-333 [150 Cal.Rptr. 855]; see Ziller Electronics Lab GmbH v. Superior Court (1988) 206 Cal.App.3d 1222, 1229 [254 Cal.Rptr. 410].) All three of these criteria are satisfied here.

(Bank of America v. Jennett (1999) 77 Cal.App.4th 104, 115.)

Here, in the Texas Court, the Texas Court allowed substitute service to be effected on the non-resident Defendants in California. In Defendant’s motion, Defendant argues when the substitute service was effected in the Texas Court, he was living in Nevada.

Defendant asserts various arguments as to why service was improper in the Texas Court on pages 3-5 of its motion and on page 7.

Defendant fails to tie his arguments to legal authority. Instead, Defendant simply concludes he wasn’t served properly.

Further, Defendant does not explain how he meets the requirements set forth in Bank of America v. Jennett.

The Opposition also misses the mark by explaining why substitute service was compliant with California law. However, that is not the standard set forth in Bank of America v. Jennett. The relevant issue would be if service was compliant under Texas law.

The parties fail to address what the legal standard is for proper service under Texas law in the instant scenario and whether the standard was met in the underlying sister-state action. (See Bank of America v. Jennett (1999) 77 Cal.App.4th 104, 115-17 [when discussing the third criteria, the California Court addressed service requirements in Hawaii].)

Extrinsic Fraud
The Defendant also argues that the Texas judgment should be vacated because of extrinsic fraud.

As stated in Casey v. Hill:

Extrinsic fraud—which, according to the Law Revision Commission comment to section 1710.40, is the species of fraud that can be asserted as a defense to enforcement of a judgment—occurs when “the defrauded party was deprived of the opportunity to present his or her claim or defense to the court, that is, where he or she was kept in ignorance or in some other manner, other than from his or her own conduct, fraudulently prevented from fully participating in the proceeding.” (Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 26–27, 116 Cal.Rptr.2d 583.) Examples of extrinsic fraud include “ ‘concealment of the existence of a community property asset, failure to give notice of the action to the other party, and convincing the other party not to obtain counsel because the matter will not proceed (and then it does proceed).’ ” (Navarro v. IHOP Properties, Inc. (2005) 134 Cal.App.4th 834, 844, 36 Cal.Rptr.3d 385.)

(Casey v. Hill (2022) 79 Cal.App.5th 937, 980.)

Further, Casey notes that “a claim of extrinsic fraud is not available unless the defense the party was prevented from asserting is a meritorious one.” (Id. at 981 [citing New York Higher Education Assistance Corp. v. Siegel (1979) 91 Cal.App.3d 684, 688].)

Here, Defendant sets forth the same exact reasons for extrinsic fraud being a basis to vacate the judgment based Texas Court not having personal jurisdiction over Defendant.

Defendant’s argument is unavailing for the same reasons set above.

Argument in Reply
In Reply, Defendant states that Crest Foods’ sister state judgment is now null and void because on April 19, 2024, the Honorable Rachel Craig of the 192nd judicial district Court of Dallas County, Texas, in Case No. DC-24-00942, granted Mkrtych Oganyan’s Petition for Bill of Review and set aside Crest Foods’ default judgment in Texas.

Defendant states that the Texas judgment that Crest Foods relied upon in applying for entry of the sister state judgment in this California Court has now been set aside.

Defendant does not cite any authority establishing this is a proper defense under CCP § 1710.40(a). The Court notes that it was not able to find case law as to whether

this is a proper basis to vacate the judgment.

However, to this Court it appears as if this could potentially fall under the Law Revision Commission’s common defense of “the judgment is not enforceable in the state of rendition.”

The Court would likely set aside the judgment in this case if the underlying judgment in the sister-state has been set aside.

The Court will hear argument from counsel. The Notice of Entry of Judgment on Sister State Judgment indicates that the case number in the sister-state was DC-23-05332; whereas, Defendant’s Reply indicates that the Texas Court set aside the default judgment in the underlying case in DC-24-00942.

The Court notes that the burden is on the movant. (Conseco, supra, 221 Cal.App.4th at 841.)

It would be helpful if Defendant submitted the order granted in the Texas Court on April 19, 2024 that allegedly vacated the default judgment in the underlying Texas judgment.

It would be most helpful if Defendant submitted the Texas Court ruling online before the hearing, but, in any event, Defendant should consider bringing the Texas Court ruling to the instant hearing.

TENTATIVE RULING
The Court will hear argument.

The Court notes that there are two Defendants in this action. Putting aside whether moving Defendant comes forth with the proper order that setting aside the default judgment in the Texas Court, the Court will want to determine whether the order vacates the default judgment as to both Defendants or just as to one Defendant. This is important because the moving papers suggest that, if the motion is granted, this Court should recall and quash any writ that it previously issued and order that any funds obtained under the judgment be returned to the payor. The Court would be hesitant to recall any writ if a write is still proper as to one of the Defendants.

The parties should also address whether any writs were issued or if any funds were obtained under the judgment.

Plaintiff’s request for judicial notice is granted.