Judge Cynthia A Freeland, Case 37-2022-00043218-CU-BC-NC 2024-03-22 Tentative Ruling

Judge: Cynthia A Freeland, Case: 37-2022-00043218-CU-BC-NC, Date: 2024-03-22 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - March 21, 2024

03/22/2024 01:30:00 PM N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited Breach of Contract/Warranty Motion to Dismiss 37-2022-00043218-CU-BC-NC OAKTREE INVESTMENT FUND VS. QUICHOCHO INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion to Vacate, 11/16/2023

Defendants Quichocho, Inc. ('Quichocho') and Carlos Quichocho ('Carlos' and, together with Quichocho, 'Defendants')'s motion for relief from default and default judgment is granted.

Defendants' request that the court take judicial notice of: (1) Plaintiff Oaktree Investment Fund, LLC ('Plaintiff')'s Complaint filed in this matter, and (2) Defendant Carlsky Quichocho ('Carlsky')'s Answer filed in this matter is granted. See Cal. Evid. Code § 452(d). However, the court does not take judicial notice of the truth of the statements contained within those documents. See People v. Woodell (1998) 17 Cal. 4th 448, 455.

California Code of Civil Procedure ('CCP') § 473(b) provides, in relevant part, that: 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 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.

Cal. Code Civ. P. § 473(b). 'Section 473 is often applied liberally where the party in default moves promptly to seek relief, and the party opposing the motion will not suffer prejudice if relief is granted.

[Citations.] In such situations 'very slight evidence will be required to justify a court in setting aside the default.' [Citations.]' Behm v. Clear View Tech. (2015) 241 Cal. App. 4th 1, 8. Any doubts concerning CCP § 473(b)'s application must be resolved in favor of the party seeking relief from default or default judgment in light of the policy favoring disposing of cases on the merits. See Rappleyea v. Campbell (1994) 8 Cal. 4th 975, 980; Shapiro v. Clark (2008) 164 Cal. App. 4th 1128, 1143-1144. The moving party bears the burden of establishing entitlement to relief under CCP § 473(b). See Hearn v. Howard (2009) 177 Cal. App. 4th 1193, 1205.

The court construes Plaintiff's lack of opposition as a concession of the motion's merits. See San Diego Rules of Court, Rule 2.1.19.B. In addition, the uncontroverted evidence establishes that on October 26, 2022, Plaintiff commenced this action by filing a Complaint against Quichocho, Carlsky, and Carlos for breach of lease and breach of guaranty. See ROA No. 1; Defendants' RJN, Ex. A. On December 8, 2022, Carlsky filed an Answer as 'Carlsky Quichocho dba Quichocho Inc'. See ROA No. 10; Defendants' RJN, Ex. B. The court notes that Carlsky's attempt to file an Answer on Quichocho's behalf was not well taken because, under California law, a corporation cannot represent itself either in propria Calendar No.: Event ID: TENTATIVE RULINGS

3053144 CASE NUMBER: CASE TITLE: OAKTREE INVESTMENT FUND VS. QUICHOCHO INC [IMAGED] 37-2022-00043218-CU-BC-NC persona or through an officer or agent who is not an attorney – a corporation must be represented by licensed counsel in proceedings before courts of record. See CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal. App. 4th 1141; Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals Bd.

(2002) 99 Cal. App. 4th 1094. On December 29, 2022, Plaintiff requested, and the court entered, Defendants' default (the 'Default'). See ROA No. 15. On April 27, 2023, Plaintiff requested, and the court entered, an order dismissing Carlsky without prejudice from this action. See ROA No. 24. On May 19, 2023, the court entered a $20,554.63 default judgment against Defendants (the 'Default Judgment').

See ROA No. 23. Defendants filed the pending motion to set aside or vacate the Default and Default Judgment under CCP § 473(b) on November 16, 2023. See ROA No. 30.

Initially, the court notes that the timing requirements of CCP § 473(b) are jurisdictional, i.e., the court generally lacks the power to grant relief under CCP § 473(b) once the six-month time period has lapsed.

See Austin v. Los Angeles Unified School Dist. (2016) 244 Cal. App. 4th 918, 928. As set forth above: (1) the Default was entered on December 29, 2022; (2) the Default Judgment was entered on May 19, 2023; and (3) Defendants did not seek relief from the Default and Default Judgment until November 16, 2023 – more than six months after entry of the Default. See Weiss v. Blumencranc (1976) 61 Cal. App. 3d 536, 541 (the six-month period runs from entry of default, not entry of judgment). Consequently, the motion is untimely as it was filed roughly 11 months after entry of the Default.

However, as Defendants correctly note, '[a]fter six months from entry of default, a trial court may still vacate a default on equitable grounds even if statutory relief is unavailable.' Rappleyea, 8 Cal. 4th at 981. Such equitable grounds include extrinsic fraud or mistake. See Manson, Iver & York v. Black (2009) 176 Cal. App. 4th 36, 47. 'Extrinsic fraud usually arises when a party is denied a fair adversary hearing because he has been 'deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting his claim or defense.'' Ibid. (quoting Kulchar v. Kulchar (1969) 1 Cal. 3d 467, 471). Extrinsic fraud 'occurs when 'the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from the court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff.'' Ibid. Extrinsic mistake, on the other hand, 'exists when the ground of 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. If that neglect results in an unjust judgment, without a fair adversary hearing, the basis for equitable relief on the ground of extrinsic mistake is present.' Ibid. However, once default judgment has been entered, relief should be granted only in exceptional circumstances given the strong public policy favoring the finality of judgments. See Rappleyea, 8 Cal. 4th at 981-982. 'To set aside a judgment based upon extrinsic mistake one must satisfy three elements. First, the defaulted party must demonstrate that it has a meritorious case. Second[ ], the party seeking to set aside the default must articulate a satisfactory excuse for not presenting a defense to the original action. Last [ ], the moving party must demonstrate diligence in seeking to set aside the default once ... discovered.' Stiles v. Wallis (1983) 147 Cal. App. 3d 1143, 1147-1148.

In the absence of opposition, the court finds that Defendants have demonstrated entitlement to the requested relief. Although the motion was untimely, the court exercises its equitable powers and will vacate the Default and Default Judgment on the ground of extrinsic mistake. Defendants have demonstrated that the Default and subsequent Default Judgment was entered as a result of their excusable neglect and resulted in an unjust judgment without a fair adversary hearing. The court accepts Defendants' (who were unrepresented until October 2023) explanation that Carlsky (Quichocho's Chief Executive Officer)'s Answer, which Answer was filed on Carlsky's and Quichocho's behalf and included a copy of the pertinent Estoppel Certificate, obviated Defendants' need to file and serve a separate Answer. See Carlos Decl., ¶¶ 5-6; Quichocho Decl., ¶¶ 5-6; Carlsky Decl., ¶¶ 5-6; Morton Decl., ¶¶ 3-4.

The court further finds that Defendants have established the requirements set forth in Stiles for relief from the Default Judgment. First, Defendants have raised a meritorious defense to the Complaint. The Complaint alleges that Quichocho breached the subject lease agreement by failing to pay rent and other Calendar No.: Event ID: TENTATIVE RULINGS

3053144 CASE NUMBER: CASE TITLE: OAKTREE INVESTMENT FUND VS. QUICHOCHO INC [IMAGED] 37-2022-00043218-CU-BC-NC charges due and owing beginning on June 1, 2022. See Complaint, ¶ 12. The Complaint further alleges that Carlsky and Carlos breached a separate guaranty by failing to perform Quichocho's obligations under the lease. Ibid., ¶¶ 17-18. However, Defendants have attached to their proposed Answer an August 16, 2022 Estoppel Certificate attesting, among other things, that Quichocho did not default under the terms of the lease. This, at a minimum, is a triable issue of material fact.

Second, Defendants have provided a satisfactory excuse for not presenting their defense to the Complaint sooner, namely that they erroneously believed (at a time when they were unrepresented) that Carlsky's Answer constituted a sufficient defense as to all Defendants.

Finally, Defendants have demonstrated that they were reasonably diligent in seeking to set aside the Default and Default Judgment once they were discovered. As set forth above, the Default Judgment was entered on May 19, 2023. Defendants represent that they became aware of the Default Judgment when Plaintiff began collection efforts in June 2023. See Carlos Decl., ¶ 7; Quichocho Decl., ¶ 7; Carlsky Decl., ¶ 7. Defendants contacted counsel on June 30, 2023; however, they were not able to retain him until October 2023 due, in part, to Plaintiff's collection efforts. See Morton Decl., ¶¶ 2-3. Defendants filed and served the pending motion on November 16, 2023.

In light of the foregoing, the court grants the motion and vacates entry of the Default (see ROA No. 15) and Default Judgment (see ROA No. 23). Defendants are directed to file and serve their proposed Answer in accordance with the pertinent sections of the California Code of Civil Procedure, the California Rules of Court, and the Local Rules.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, March 22, 2024. If no party appears at the hearing, this tentative ruling will become the order of the court as of March 22, 2024. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

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