Judge: Colin Leis, Case: 18STCV00180, Date: 2024-11-06 Tentative Ruling

Case Number: 18STCV00180    Hearing Date: November 6, 2024    Dept: 74

Join Fortune LTD v. Zhan Liu

Defendant Zhan Liu’s Motion to Set Aside Default.

BACKGROUND 

            Plaintiff Join Fortune LTD (Plaintiff) filed a Complaint in 2018 for failure to pay a promissory note against Defendant Zhan Liu (Defendant).

            On May 09, 2019, the Court entered default judgment against the Defendant.

            On August 13, 2024, Defendant filed the motion to set aside judgment.

            Defendant opposes and Plaintiff replied.

LEGAL STANDARD

Under Code of Civil Procedure, section 473, subdivision (b), an application for relief must be made no more than six months after entry of the order from which relief is sought and must be accompanied by an affidavit of fault attesting to the moving party’s mistake, inadvertence, surprise or neglect. (Code Civ. Proc., § 473, subd. (b); English v. IKON Business Solutions (2001) 94 Cal.App.4th 130, 143.) Application for this relief shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted, and shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.” (Code Civ. Proc., § 473, subd. (b).) 

In addition, courts have the authority to vacate a default and default judgement on equitable grounds such as extrinsic fraud or extrinsic mistake.  (Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 118.)  Parties seeking to set aside judgments on the grounds of extrinsic mistake or fraud must show (1) a meritorious case, (2) a satisfactory excuse for not presenting a defense in the earlier proceeding and (3) diligence in seeking to set aside the judgment after discovery.  (Rappleyea v. Campbell (1994) 8 Cal. 4th 975, 982.) 

DISCUSSION

            Defendant is seeking to set aside the judgement issued against her in 2018.  Since the six-month period has passed, Defendant must show extrinsic fraud or extrinsic mistake that led to the default being entered.

Extrinsic Fraud

Extrinsic fraud occurs when “a party is deprived of the opportunity to present his claim or defense to the court; where he was kept ignorant or, other than from his own negligence, fraudulently prevented from fully participating in the proceeding.”  (Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294, 1300.)

            Here, Defendant presents evidence that at the time the lawsuit was filed, she was living in China to complete a graduate degree.  (Liu Decl., ¶ 10, 11.)  Defendant’s husband at the time, Moses Wong, was the principal of plaintiff Join Fortune, LTD. While Defendant was living in China, Wong arranged to have Defendant served at their joint home in Pasadena.  (Liu Decl., ¶ 2, 4; Liu Decl., Ex. 2.)  Moses told Defendant’s mother who lived in the Pasadena home to give him any mail delivered to Defendant.  (Supp. Liu Decl., ¶ 8.)  Defendant’s Mother, who lacked English proficiency, did so when she was substitute served, giving the mail to Moses’s secretary without informing Defendant of the service.  (Liu Decl., ¶ 14.)  Defendant did not become aware of the suit or the default until June 2024.  (Liu Decl., ¶ 12.)

            Plaintiff contends that Defendant’s failure to receive service was an intrinsic mistake because it was Defendant’s mother who failed to deliver the summons and complaint to Defendant. Plaintiff’s contention does not persuade the Court because Plaintiff does not acknowledge the role Wong played in seeing the mail was routed to Wong.

            Given that Defendant has shown extrinsic fraud, to vacate the default Defendant must also show (1) a meritorious case, (2) a satisfactory excuse for not presenting a defense in the earlier proceeding and (3) diligence in seeking to set aside the judgment after discovery.

Meritorious Case

Defendant meets her burden of showing a meritorious defense.

The burden of showing a meritorious defense is low.  (Rappleyea, supra, 8Cal.4th 983 [“Ordinarily a verified answer to a complaint’s allegation suffices to show merit”].)  The complaint alleges that Defendant defaulted on a loan.  Defendant testifies that Moses had her “sign many documents without explaining what he was asking me to sign” and that she never knew of the loan, nor did she ever receive any of the money.  (Lui Decl., ¶ 8, 9.)  Plaintiff presents a copy of the Defendant’s bank account, showing a $3,691,000 wire transfer.  (Hin Yee Wong Decl., Ex. “A.”)  This is unpersuasive given Defendant’s testimony that Moses controlled the bank account and that the bank account was only used to purchase the Pasadena property.  (Supp. Liu Decl., ¶ 3,4.)  Defendant also testifies that the bank account has three entries in Moses’s handwriting that prove she did not control the account.  (Supp. Liu Decl., ¶ 12.)

Given the above evidence and testimony, Defendant has met her burden of showing a meritorious defense.

Satisfactory Excuse

            As discussed above, Defendant provides sufficient evidence that she did not learn about the lawsuit until June 2024.

Diligence

            Defendant testifies that she learned of this default when Plaintiff attempted to take her property in June 2024.  (Liu Decl., ¶ 12.)  Defendant promptly filed the motion to vacate in August 2024. 

CONCLUSION

The court grants Defendant’s motion to vacate the judgment and set aside the default.

Defendant shall give notice.