Judge: Ashfaq G. Chowdhury, Case: 23GDCV00584, Date: 2025-01-16 Tentative Ruling
Case Number: 23GDCV00584 Hearing Date: January 16, 2025 Dept: E
Hearing Date: 01/09/2025 – 8:30am
Case No. 23GDCV00584
Trial Date: UNSET
Case Name: MONEYTUN, LLC., a California limited liability company; v. VIRTUAL
COMPLIANCE MANAGEMENT SERVICES, LLC., a California limited liability company;
DANA MOSLEY, an individual; JAMES DEFRANZ, an individual; DOES 1-30 inclusive
[TENTATIVE
RULING– MOTION TO SET ASIDE/VACATE DEFAULT AND DEFAULT JUDGMENT]
RELIEF REQUESTED¿
“Defendants
VIRTUAL COMPLIANCE MANAGEMENT SERVICES, LLC., DANA MOSLEY, and JAMES DEFRANTZ
(“Defendants”) will and hereby do petition the Court for an order granting it
relief from entry of default and the default judgment.
This
Motion is made on the grounds that Defendant acted with excusable negligence in
failing to file a pleading responsive to the Complaint filed by Plaintiff
MONEYTUN, LLC. This Motion is also made pursuant to California Code of Civil
Procedure § 473(b), which allows the Court to grant relief from entry of
default at its discretion. This Motion is based upon this Notice of Motion, the
Memorandum of Points and Authorities and the Declaration of James DeFrantz in
support thereof.”
(Def.
Mot. p. i.)
Procedural
Moving Party: Defendants, Virtual Compliance
Services, LLC.; Dana Mosley; and James Defrantz (Defendants)
Responding Party: Plaintiff, Moneytun, LLC.
(Plaintiff)
Moving Papers: Notice/Motion; Proposed Order;
Farinpour Declaration
Opposition Papers: Opposition; Proposed Order
Reply Papers: Reply; Farinpour Declaration
ANALYSIS
As
an initial matter, it appears as if moving Defendants appear to be confused as
to what legal basis they are bringing the instant motion to vacate the default
and default judgment. Defendants go back and forth between using the standard
of CCP § 473(b) and the Court’s inherent authority to vacate a default and
default judgement on equitable grounds.
CCP § 473(b) in relevant part provides:
The court may, upon any terms as may be
just, relieve a party or his or her legal representative from a judgment,
dismissal, order, or other proceeding taken against him or her through his or
her mistake, inadvertence, surprise, or excusable neglect. Application for this
relief ... shall be made within a reasonable time, in no case exceeding six
months, after the judgment, dismissal, order, or proceeding was taken.
(CCP § 473(b).)
However, as pointed out
by Plaintiff, this statute does not provide Defendants a means for relief
because relief under 473(b) must be made within six months.
At first glance this
motion appears timely under 473(b) because the default judgment was entered on
9/23/2024, and this motion was made on 12/9/2024.
However, as pointed out
in Opposition, the default in this case was entered on 7/28/2023, and this
motion was not made within six months of 7/28/2023.
As stated in Pulte
Homes Corp. v. Williams Mechanical, Inc.
Williams's motion was filed less than six months
after entry of the default judgment, but more than six months after entry of
its default. The trial court therefore could not set aside the default
under Code of Civil Procedure section 473. And because it could not set
aside the default, it also could not set aside the default judgment
under Code of Civil Procedure section 473, because that would be “an idle
act.” (Howard Greer Custom Originals v. Capritti (1950) 35 Cal.2d
886, 888, 221 P.2d 937.) “ ‘... If the judgment were vacated, it would be the
duty of the court immediately to render another judgment of like effect, and
the defendants, still being in default, could not be heard in opposition
thereto. ...’ ” (Id. at pp. 888–889, 221 P.2d 937; accord, Weiss
v. Blumencranc (1976) 61 Cal.App.3d 536, 541, 131 Cal.Rptr. 298; Koski
v. U–Haul Co. (1963) 212 Cal.App.2d 640, 643, 28 Cal.Rptr. 398.)
We therefore conclude that Williams was
not entitled to relief under Code of Civil Procedure section 473.
(Pulte Homes Corp. v.
Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267, 273.)
Here, CCP § 473(b) does
not appear to afford Defendants an avenue of relief.
Equitable Authority
Defendants
also move for relief on equitable grounds.
“Apart from any statute, courts have the inherent
authority to vacate a default and default judgment on equitable grounds
such as extrinsic fraud or extrinsic mistake.” (Pulte Homes Corp. v.
Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267, 275 quoting Bae v.
T.D. Service Company (2016) 245 Cal.App.4th 89, 97.)
Part 2 – Satisfactory Excuse
As
stated in Pulte Homes Corp. v. Williams Mechanical Inc.:
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. [Citation omitted.] Relief on the ground of
extrinsic fraud or mistake is not available to a party if that party has been
given notice of an action yet fails to appear, without having been prevented
from participating in the action. [Citation omitted.]
(Pulte Homes Corp. v.
Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267, 276.)
As to the entry of default, Defendants appear to have
no excusable neglect.
Plaintiff, Moneytun LLC, filed a Complaint on
3/22/2023 alleging seven causes of action against three Defendants – Virtual
Compliance Management Services, LLC., Dana Mosley, and James Defranz.
The record shows based on the evidence submitted by
both parties that Defendants were aware of the filing of this case as
Defendants admit to settlement negotiations between March 2023 and July 2023.
Not only did Defendants not hire counsel, but they were under the mistaken
assumption that they did not have to submit an Answer to the action based on an
August 1, 2023 email.
This email would not lead any reasonable person to
believe that Plaintiff’s counsel misled Defendants to the idea that an Answer
was not required.
Further, this email on August 1, 2023 informs
Defendants that the default was entered on 7/28/2023. Defendants clearly
received this August 1, 2023 email about notice of entry of default because
Defendants responded to the August 1, 2023 email on August 8, 2023 stating they
were still in the process of retaining counsel.
Despite this, Defendants did not retain counsel.
Although the aforementioned discussion would lead one
to believe that Defendants cannot demonstrate excusable neglect, there is a
slight wrinkle in this case.
Despite entry of default on 7/28/2023, and despite
Defendants being aware of the entry of default and doing nothing about it, on
11/27/2023 this Court dismissed Plaintiff’s Complaint.
Therefore, Defendants argue that there is excusable
neglect by the defaulting party to appear and present his claim or defense.
The Court finds this argument availing.
Although there was an entry of default on 7/28/2023,
the Court dismissed Plaintiff’s Complaint on 11/27/2023.
Defendants argue that on 8/27/2024 the Court set aside
the dismissal of 11/27/2023 and that Defendants never received notice of the
case being reinstated.
Defendants state that once they received the request
for entry of default judgment on or about September 23, 2024, they retained
counsel.
As stated in Pulte Homes Corp. v. Williams
Mechanical Inc.:
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. [Citation omitted.] Relief on the ground of
extrinsic fraud or mistake is not available to a party if that party has been
given notice of an action yet fails to appear, without having been prevented
from participating in the action. [Citation omitted.]
(Pulte Homes Corp. v. Williams Mechanical, Inc. (2016)
2 Cal.App.5th 267, 276.)
Here, there is excusable neglect of the defaulting
party because even though an entry of default was entered against Defendants
and Defendants did not initially act diligently, once Plaintiff’s case was
dismissed, Defendants were under the impression that there was nothing to do
since the case was dismissed. This appears to be excusable neglect because
Plaintiff’s case was in fact dismissed. Further, Defendants state they did not get
notice of the case being reinstated; therefore, once they received request for
entry of default judgment on or about September 23, 2024 they promptly retained
counsel and this motion was filed on 12/9/2024.
Therefore, Defendants met the second factor of the
three part test by articulating a satisfactory excuse for not presenting a
defense to the action.
Part 1 – Meritorious Case
“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.’ [Citation.] But for a party to qualify for such equitable
relief on this basis, courts have developed a three-part test: first, the
defaulted party must demonstrate it has a meritorious case; second, it must
articulate a satisfactory excuse for not presenting a defense to the original
action; and third, the moving party must demonstrate diligence in seeking to
set aside the default once it was discovered.” (Pulte Homes Corp. v.
Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267, 275 quoting Lee v.
An (2008) 168 Cal.App.4th 558, 566.)
As to the first part of the test – the defaulted party
must demonstrate it has a meritorious case – the Court will hear argument.
Plaintiff’s Complaint alleged seven causes of action,
and in no clear manner do Defendants address each cause of action and how they
have a meritorious defense. Further, Defendants did not cite California state
law; they cited federal cases.
The only California state case that Defendants cited
was Stiles v. Wallis (1983) 147 Cal.App.3d 1143.
“The respondent provided evidence of a meritorious
case by filing with his motion to set aside the default a proposed verified
answer denying the material allegations of the first amended complaint.” (Stiles
v. Wallis (1983) 147 Cal.App.3d 1143, 1148.)
To the extent that all that was required to show a
meritorious case was filing with the motion a proposed verified answer, the
problem here is that Defendants filed a proposed answer but the proposed answer
was not verified.
In Opposition, Plaintiffs argue that Defendants did
not file a proposed answer with their filing, but this is incorrect. Defendants
did in fact file a proposed answer with their filing, the issue is that it was
not verified.
Neither parties address this lack of verification.
The Court notes that upon its own perusal of case law,
it appears as if this lack of verification can be excused.
As stated in Rappleyea v. Campbell:
We next examine whether the defense has
merit. Ordinarily a verified answer to a complaint's allegations suffices to
show merit. (Stiles v. Wallis, supra, 147 Cal.App.3d at
p. 1148, 195 Cal.Rptr. 377.) The answer here was not verified, but
neither was the complaint. Moreover, the answer did deny, admit, or otherwise
respond to the allegations. And the Arizona lawyer who informally aided
defendants declared under oath that he believed “these Defendants have a very
good (and certainly a justiciable) defense to the Plaintiff's claim.” On the
combined strength of these facts, we believe defendants have sufficiently shown
merit.
(Rappleyea v. Campbell
(1994) 8 Cal.4th 975, 983.)
Here, the Complaint was
also not verified; therefore, it appears as if the lack of verification on the
proposed answer can be excused. The Defendants are encouraged to file a
verified proposed answer before the hearing.
Part 3 - Diligence
“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.’ [Citation.] But for a party to qualify for such equitable
relief on this basis, courts have developed a three-part test: first, the
defaulted party must demonstrate it has a meritorious case; second, it must
articulate a satisfactory excuse for not presenting a defense to the original
action; and third, the moving party must demonstrate diligence in seeking to
set aside the default once it was discovered.” (Pulte Homes Corp. v.
Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267, 275 quoting Lee v.
An (2008) 168 Cal.App.4th 558, 566.)
Here, Defendants demonstrated diligence. While Plaintiff
argues that Defendants did not show diligence because of the fact that
Defendants did not act upon the entry of default, as explained previously, this
issue appears to be mooted because of the fact that Plaintiff’s Complaint was
dismissed after the entry of default.
Therefore, Defendants were under the impression that
the case was dismissed and Defendants state they had no notice the case was
reinstated.
The default judgment here was entered on 9/23/2024,
and Defendants state that after receipt of request for entry of default
judgment on or about September 23, 2024, Defendants retained counsel. This
motion was then brought by 12/9/2024. Therefore, this Court finds that
Defendants acted diligently.
TENTATIVE RULING
The
Court will hear argument, particularly as to the factor of “meritorious
defense;” however, the Court is likely to grant Defendants’ motion to vacate both
the default judgment and entry of default.