Judge Daniel M. Crowley, Case Number: 22STCV09492, Date: 2024-06-04 Tentative Ruling

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Defendant Falls Lake National Insurance Company’s motion to set aside the entry of default and default judgment entered against it on March 23, 2023, is granted.

Defendant Falls Lake National Insurance Company (“Falls Lake”) (“Defendant”) moves for this Court to set aside the default judgment entered against it by Plaintiff Elat Properties LLC (“Elat”) (“Plaintiff”) on March 23, 2023, on the grounds Falls Lake did not receive actual notice of this action and that the default judgment is void on its face. (Notice of Motion, pg. 2; C.C.P. §§473(d), 473.5.) Defendant moves the Court to use its inherent equitable power to vacate the March 23, 2023, default judgment and requests relief from the default against Defendant on the grounds that Defendant did not receive actual notice, is not at fault for not receiving such notice, and has been diligent in seeking relief. (Notice of Motion, pg. 2.)

CRC Rule 3.1354(b) provides, in part: “All written objections to evidence must be served and filed separately from the other papers in support of or in opposition to the motion. . . . Each written objection must be numbered consecutively.” (CRC, Rule 3.1345(b), emphasis added.)

Defendant’s objections filed with its reply are in violation of CRC, Rule 3.1345(b) because they are not numbered consecutively. To avoid confusion, this Court numbers Defendant’s objections for them.

Defendant’s 5/28/24 evidentiary objections to the Declaration of Vince Batza (“Batza”) are sustained as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, and 9.

Defendant’s 5/28/24 evidentiary objections to the Declaration of Steven C. Shuman (“Shuman”) are sustained as to Nos. 10 and 11.

Defendant’s 5/28/24 evidentiary objection to the Declaration of Merlene Fletcher (“Fletcher”) are sustained as to Nos. 12, 13, 14, 15, 16, 17, and 18.

On March 17, 2022, Plaintiff filed its operative Complaint against Defendant alleging two causes of action: (1) breach of insurance contract; and (2) breach of the implied covenant of good faith and fair dealing. (See Complaint.)

On June 23, 2022, Entry of Default was entered against Defendant. On March 27, 2023, Default Judgment was entered against Defendant.

On February 5, 2024, Defendant filed the instant motion. Plaintiff filed its opposition on May 21, 2024. Defendant filed its reply on May 28, 2024.

The law favors judgments on the merits. Thus, on a motion for relief from default, “doubts must be resolved in favor of relief, with an order denying relief scrutinized [on appeal] more carefully than an order granting it.” (Lasalle v. Vogel (2019) 36 Cal.App.5th 127, 134.)

The trial court has broad discretion to vacate the judgment and/or the clerk’s entry of default that preceded it. However, that discretion can be exercised only if the moving party establishes a proper ground for relief, by the proper procedure, and within the proper time limits. (See Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 495.)

(a) When service of a summons has not resulted in actual notice to a party in time to defend the action and a default or default judgment has been entered against him or her in the action, he or she may serve and file a notice of motion to set aside the default or default judgment and for leave to defend the action. The notice of motion shall be served and filed within a reasonable time, but in no event exceeding the earlier of: (i) two years after entry of a default judgment against him or her; or (ii) 180 days after service on him or her of a written notice that the default or default judgment has been entered.

(b) A notice of motion to set aside a default or default judgment and for leave to defend the action shall designate as the time for making the motion a date prescribed by subdivision (b) of Section 1005, and it shall be accompanied by an affidavit showing under oath that the party’s lack of actual notice in time to defend the action was not caused by his or her avoidance of service or inexcusable neglect. The party shall serve and file with the notice a copy of the answer, motion, or other pleading proposed to be filed in the action.

(c) Upon a finding by the court that the motion was made within the period permitted by subdivision (a) and that his or her lack of actual notice in time to defend the action was not caused by his or her avoidance of service or inexcusable neglect, it may set aside the default or default judgment on whatever terms as may be just and allow the party to defend the action.

“It is also well established that it is the policy of the law to bring about a trial on the merits whenever possible, so that any doubts which may exist should be resolved in favor of the application, to the end of securing to a litigant his day in court and a trial upon the merits . . .. Even in a case where the showing under section 473 is not strong, or where there is any doubt as to setting aside of a default, such doubt should be resolved in favor of the application.” (Rosenthal v. Garner (1983) 142 Cal.App.3d 891, 898 [granting relief under C.C.P. §473.5 for lack of actual notice], internal quotations omitted.) Stated differently, “if any form of service of summons does not result in actual knowledge, fundamental fairness may require” the Court to set aside a default. (Olvera v. Olvera (1991) 232 Cal.App.3d 31, 40.)

Here, No one at Falls Lake received any notice of this action. (Decl. of Payne ¶5.) In particular, Karen Saturday (“Saturday”), whom Plaintiff says it served by substitute notice, never heard of this action, let alone received copies of the summons or complaint. (Decl. of Saturday ¶¶2-4.) Plaintiff concedes it did not even attempt to serve Defendant’s agent for service of process, i.e., the Insurance Commissioner. (Decl. of Schuman ¶7 [“we did not comply with the technical requirement of serving the insurance commissioner”].)

Assuming Saturday was a proper agent for serving Defendant, sending papers to a stale business address by mail or process service was not fair or proper service. To properly serve an entity by substitute service, one must leave papers in the physical office of the person to be served (if known) with someone apparently in charge. (C.C.P. § 415.20(a).) The Rancho Santa Margarita address was not Saturday’s or Defendant’s address when Plaintiff left or mailed papers there. (Decl. of Payne ¶5; Decl. of Saturday ¶¶2-4.) The Code provides a quick and simple solution to this: use the company’s mailing address. (C.C.P. §415.20(a).) In this case, that would have been Defendant’s address in Plaintiff’s complaint. (Complaint ¶2.) Moreover, Plaintiff could have skipped using a process server entirely and served Defendant by sending it copies of the summons and complaint by certified mail to the address Plaintiff already had. (C.C.P. §415.40.)

Defendant only learned of the case and the judgment when it received copies of a North Carolina enforcement proceeding against it. (See Motion Memo, pg. 4.) Nevertheless, Defendant moved to set aside the default judgment within 15 business days after it got actual notice. (Motion Memo, pgs. 2-4.) Under the circumstances, Defendant’s motion is timely. (See, e.g., Luxury Asset Lending, LLC v. Philadelphia Television Network, Inc. (2020) 56 Cal. App. 5th 894, 909 [defendant’s motion to set aside default was timely even though it was filed “almost one year after discovery of the judgment against it”].)

Accordingly, Defendant’s motion is granted on the basis Plaintiff’s method of service on Defendant did not result in Defendant’s actual knowledge of service. (Olvera, 232 Cal.App.3d at pg. 40.)

Defendant’s motion to set aside the entry of default and default judgment entered against it on March 23, 2023, is granted.

Hon. Daniel M. Crowley

Judge of the Superior Court