Judge: Christian R. Gullon, Case: 24PSCV01069, Date: 2025-03-13 Tentative Ruling

Case Number: 24PSCV01069    Hearing Date: March 13, 2025    Dept: O

Tentative Ruling

MOTION TO SET ASIDE ENTRY OF DEFAULT AND DEFAULT JUDGMENT OF DEFENDANTS is DENIED; namely as the motion is untimely and Defendant Torres’ declaration strains credulity as he was informed on multiple occasions his insurance would not cover the matter; thus, his failure to defend the action does not amount to excusable neglect. 

Background

This is a collections case.

On April 4, 2024, Plaintiff CREDITORS ADJUSTMENT BUREAU, INC. filed suit against Defendants DAVID TORRES AKA DAVID C TORRES DBA BETTY'S PASTA HOUSE and BETTYS PASTA HOUSE, LLC DBA BETTY'S PASTA HOUSE (collectively “Defendants”) for:

1. OPEN BOOK ACCOUNT

2. ACCOUNT STATED

3. REASONABLE VALUE

4. BREACH OF CONTRACT

5. PERSONAL GUARANTY

On June 20, 2024, default was entered as to Defendants. The POS indicates that Defendants were served on 5/16/24 at 10:51 by serving David Torres, the registered agent, at 23625 MAPLE SPRINGS DR Diamond Bar, CA 91765.

On August 29, 2024, default judgment was entered as to Defendants in the total amount of $47,139.19 ($36,080.11 in damages, $8,966.16 in prejudgment interest; $1,472.40 in attorney fees, and $620.52 in costs).

On January 7, 2025, Defendants filed a motion to set aside default and default judgment, but it was withdrawn on 1/8/25 by Defendants.

On February 7, 2025, Defendants filed the instant motion.

On February 28, 2025, Plaintiff filed its opposition.

On March 6, 2025, Defendants filed their reply.

Discussion

Defendants bring forth the motion pursuant to Code Civ. Proc. section 473(b) which provides that “the court may, on 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.” (Motion p. 4:12-15.) Specifically, Defendant David Torres explains the following in his declaration:

-        He was personally served with the Summons and Complaint in April 2024;

-        On June 5, 2024 8:20:54 AM, he reached out to his insurance broker Jarry Kulakjian at Tagrisk Insurance Services 818.419.7070 as Defendant was under the impression that insurance would be handling the lawsuit;^[1]

-        On June 20, 2024, at 1:49 PM, Defendant Torres again reached out again to his insurance broker and the insurance carrier provider to report the lawsuit and seek coverage–on this date, he did not receive any follow-up communication from them at that time indicating that they were denying his request for coverage;

-        On June 25, 2024 at 11:46:57, he reached out to his Insurance broker Harry Kulakjian again to follow up on the case. Defendant sent him a copy of the file CIV-100. (Torres Decl., ¶5.)

-        On August 5, 2024, Defendant received a Request for Court Judgment by mail. So, he again contacted his insurance provider and forwarded the notice to them.

-        On August 21, 2024, he received a letter from his insurance provider formally denying coverage for the lawsuit. “Unfortunately, by that time, [Defendant] was unaware of the procedural consequences of this denial and did not take immediate legal action to address the matter.”

-        On December 20, 2024, I received a letter from Chase Bank informing him that a default judgment had been entered against him. “This was the first time [Defendant] realized that the case had not been handled by [his] insurance provider and that a judgment had already been entered against me. I immediately sought legal counsel and took action to rectify the situation.” (Torres Decl., ¶8, emphasis added.)

-        Defendant claims that “Plaintiff also failed to provide me with a reasonable opportunity to address the alleged debt before seeking a default judgment. Despite knowing that [Defendant] had contacted [his] insurance provider, Plaintiff did not make any good-faith efforts to notify [Defendant] before proceeding with default.” (Torres Decl., ¶12, emphasis added.)

Here, though mindful of the liberal policy in hearing cases on their merits, the court agrees with Plaintiff on many points, including that Defendant’s declaration strains credulity and his inactions amount to inexcusable neglect/something beyond mere mistake or inadvertence. (See Opp. p. 6, citing Elms v. Elms (1946) 72 Cal.App.2d 508,513 ["Courts neither act as guardians for incompetent parties nor for those who are grossly careless of their own affairs ... The only occasion for the application of section 473 is where a party is unexpectedly placed in a situation to his injury without fault or negligence of his own and against which ordinary prudence could not have guarded."].)

First, as noted by Plaintiff, Defendant Torres’ declaration is questionable in light of the fact that Mr. Torres was advised by his insurance provider as early as June 20, 2024 that his carrier that this lawsuit is not something they would provide coverage for. Specifically, he was told the following:

Please be advised, I have been assigned to this claim. On first review of the complaint, this does not seem like anything we would have coverage for, this is some sort of breach of contract complaint. I’m going to confirm same and let the insured know he will need to obtain counsel to answer this complaint. (Motion, Ex. C, p. 61 of 81 of PDF, emphasis added.)

Then again on June 25, 2024, the claims specialist noted that “AGAIN, there is no coverage for this claim (pending a full investigation) and the insured needs to assign their own counsel to answer the complaint.” (Motion, p.58 of 81 of PDF, capitalization and emphasis added.) Then, again on August 21, 2024, Defendant received a letter from his insurance provider formally denying coverage for the lawsuit.^[2] (See Motion, Ex. C, p. 63 of 81 of PDF [“....Associated hereby disclaims coverage of this matter and will not defend or indemnify David Torres MBR with respect to this matter….”].) Accordingly, Defendant Torres’ declaration becomes more questionable as he states that December 20, 2024 is the “first time” he realized his case was not being handled by insurance but his insurance on a FEW occasions told him otherwise. What is more, it is unclear why Defendant would state he was served in April when the POS indicates he was served with the summons and complaint in May. Thus, when in its totality, the declaration draws into question the credibility and veracity of Defendant Torres’ declaration. (See Hodge Sheet Metal Products v. Palm Springs Riviera Hotel (1961) 189 Cal.App.2d 653, 658 [“The weighing of the veracity of the affidavit was in the province of the trial court.”]; see also Opp. p. 5, citing to McClaim v. Kissler (2019) 39 Cal.App.5th 399 [regarding trial court’s province to determine credibility of the declarant; see also Opp. p. 4, citing Solv-All v. Sup. Ct. (2005) 131 Cal.App.4th I 003, 1008 [same].)

Second, as noted by Plaintiff, he bold-faced print on the very first/top page contained in the summons stating "YOU ARE BEING SUED BY PLAINTIFF" and "NOTICE" etc. This form informs a defendant that they have 30 days to file an answer. (See also Opp. p. 4, citing  Gilio v. Campbell (1952) 114 Cal.App.2.d 853,856 [“We are unable to discover any basis for believing that the defendant was laboring under any mistake of fact. A mere reading of the summons served on the defendant would have informed him that if he did not appear and answer the complaint within 10 days, a judgment could be taken against him. It is to be noted that the defendant does not claim that he was unaware of the contents of the summons and complaint. In any event, a failure to read the summons would furnish defendant no excuse.”].)

Third, to the extent that Defendants argue that the arbitration clause in the agreement precluded entry of default judgment, not so. As noted by Plaintiff, "A party may waive the right to compel arbitration by failing to demand arbitration within a time limit specified for that purpose in a statute. A party may also waive the right to compel by failing to comply with a time limit for demanding arbitration specified in the contract. (Opp. p. 10, citing Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal. 4th 19, 30.) Here, Defendants through their past action waived this clause. Plus, Defendants have offered no authority that a default judgment can be set aside merely by the existence of an arbitration clause in an agreement between the defaulting and non-defaulting party.

Fourth, to the extent that Defendants dispute service, not so. For one, Defendants do not dispute proper service. (See also Motion p. 8:19-20 [“Even though Defendants were properly served….”].) Plus, the motion is largely if not solely dedicated to the existence of excusable neglect/inadvertence. Defendants make one mention to CCP section 473.5 (when service of a summons has not resulted in actual notice.) In any event, a reading of Defendant Torres’ declaration does not indicate that he disputes service. (See also Opp. pp. 3-4.) Thus, to the extent that Reply argues improper service (Reply p. 4), that further strains Torres’ declaration of the series of events; any request for relief under C.C.P. §473.5 is denied.

Fifth, even assuming there was excusable neglect, the motion is UNTIMELY. The application for discretionary relief under C.C.P. § 473(b) must be made "within a reasonable time" and "in no case exceeding six months" after entry of the default. This limit is jurisdictional in the sense that the court has no power to grant relief after this time regardless of how reasonable the excuse for the delay. (Opp. p. 3 citing Austin v. Los Angeles Unified School Dist. (2016) 244 Cal.App.4th 918.) The 6-month limit for discretionary relief under C.C.P. § 473(b) runs from the date the clerk entered the original default and not the date default judgment is entered. Here, the court entered the default on June 20, 2024, but Defendants did not bring their motion until February 6, 2025, more than seven months after the court entered the default. To the extent Defendants rely upon their first filed motion, that is inapposite. For one, the motion was improperly noticed. Second, as noted by Plaintiffs, it was late by 18 days. (Opp. p. 3, fn. 1.)^[3]

Lastly, to the extent that Defendants argue “Plaintiff failed to follow up with Defendants in good faith before obtaining a default judgment,” (Opp. p. 8:20-21), not necessarily. Plaintiff’s opposition appears to indicate that Defense Counsel Fang Chen had reached out to Plaintiff in July 2023 indicating representation of Defendants and requesting a breakdown of debt owed. In fact, on 1/15/24, Defense Counsel rejected an offer and stated that Defendants “will be happy to litigate this in court.” (Opp. p. 23 of 26 of PDF.) Accordingly, this conduct does not amount to extrinsic fraud. (See Opp. p. 10, citing Marriage of Park (1980) 27 Cal.3d 337,342; Estate of Sanders v. Sutton (1985) 40 Cal.3d 607, 614 [extrinsic fraud almost always include instances where the opposing attorney fraudulently or through deception deprived a party of the fair adversary hearing.].)

To the extent a reply was filed, it largely repeats what was stated in the motion without squarely addressing Plaintiff’s arguments and authorities.

All in all, the evidence here indicates that Defendants were given notice of the action and were not precluded from appearing, yet chose not to timely defend themselves. With that, relief is not available, including equitable relief.

Conclusion

Based on the foregoing, the motion is DENIED.