Judge: David S. Cunningham, Case: 23STCV22610, Date: 2024-05-09 Tentative Ruling
Case Number: 23STCV22610 Hearing Date: May 9, 2024 Dept: 11
Eshaghian (23STCV22610)
Tentative Ruling Re: Motion to Set Aside Default
Date: 5/9/24
Time: 11:00
am
Moving Party: George
Chouchanian dba G&N Motors, Inc. (“Chouchanian”)
Opposing Party: None
Department: 11
Judge: David
S. Cunningham III
________________________________________________________________________
TENTATIVE RULING
Chouchanian’s motion to set aside default is granted.
BACKGROUND
This is a putative class
action. The complaint alleges:
15. Plaintiff
insured the Vehicle through Defendant 21st Century Insurance Company. A true
copy of the contract is attached hereto and made a part hereof as Exhibit “A.”
16. Coverage to the
Vehicle included theft coverage and market value of the vehicle.
17. On or about
September 15, 2021, the vehicle was stolen from the Plaintiff.
18. Plaintiff timely
submitted to Defendant 21st Century a claim for the theft, which was assigned
the following claim number: 0003889906 (hereinafter referred to as the
“Claim”).
19. Defendant 21st
Century never produced a comp that complied with the terms of the insurance
agreement with Plaintiff. Some of their reports would have comps for different
cars, different models, and different years. Some of their reports only
contained quotes, no comps.
20. Plaintiff, at
her own expense, produced comps that showed the value of the car to be $26,000.
Defendant 21st Century ignored Plaintiff’s comp report.
21. Instead,
Defendant 21st Century took a more coercive approach: Defendant 21st Century
terminated Plaintiff’s rental car coverage. Under the terms of Plaintiff’s
insurance contract, Defendant 21st Century was required to cover Plaintiff’s
rental coverage until either (a) the day following the settlement offer or (b)
30 days of incurred rent. Defendant 21st Century’s offer did not comply with
the terms of their insurance agreement with Plaintiff. Therefore, Defendant
21st Century’s termination of Plaintiff’s rental coverage was in bad faith and
a breach of the insurance agreement.
22. Seeing that
Defendant 21st Century was going to ignore Plaintiff’s requests, Plaintiff
reported Defendant 21st Century to the California Department of Insurance. The
insurance agency agreed with Plaintiff that Defendant 21st Century acted in bad
faith and violated Plaintiff’s insurance policy, but ultimately said it did not
have jurisdiction to pursue an action against Defendant 21st Century. The
insurance agency advised Plaintiff, instead, to send the insurance company yet
another demand for a proper comp, this time with a new comp report that the
Plaintiff again generated at her own expense.
23. Plaintiff
followed the insurance agency’s recommendation: She provided a new comp report
to Defendant 21st Century, showing that the value of the car was actually
higher than her initial report—$31,800. Exhibit “B.” She then asked Defendant
21st Century to once and for all provide a legitimate comp report.
24. Instead of
providing Plaintiff with a legitimate comp report, Defendant 21st Century
retaliated against Plaintiff for taking the case to the insurance agency.
25. Not only did
Defendant 21st Century not provide a legitimate comp report, it reduced its
settlement offer to Plaintiff.
26. Defendant 21st
Century based its new comp report on misrepresentations it knew Plaintiff’s car
mechanic made.
27. Plaintiff’s car
was at the mechanic when it was stolen. On the day it was stolen, the Defendant
mechanic’s staff and lawyer called Plaintiff several times because they knew
they were responsible for the car’s theft. In fact, when Plaintiff reported the
theft to police, the police said that the first suspects should be the
Defendant car mechanic and/or his staff.
28. In order to
cover up his own liability, the Defendant car mechanic lied about the extent of
repairs the car needed, falsely reporting that the vehicle’s engine was blown.
29. The engine was
not in fact blown, however. The car was driven by Plaintiff’s brother to the
mechanic when the car signaled it may need repairs. Plaintiff’s brother could
not have driven the car to the Defendant mechanic if the car’s engine was
blown. When the Defendant mechanic diagnosed the problem, he said there were
some missing parts. The vehicle, a BMW 318is, is a rare car, so the Defendant
mechanic said it would take time to get the parts. But the Defendant mechanic
also was not diligent about getting the parts. After several months, the
Defendant mechanic still did not obtain the parts and never repaired the car.
During those many months, the Defendant mechanic did not keep the car in his
secure parking lot. Rather, the Defendant mechanic parked the car on the side
streets near his repair shop. Because the Defendant mechanic would park the car
on the side streets, it was prone to getting parking violation tickets. For
example, on August 31, 2021, Plaintiff received a parking violation ticket from
LA County. Exhibit “C.” In order to prevent the car from accumulating more such
tickets, the Defendant mechanic would frequently have to move the car. The
Defendant mechanic did so, as that parking violation ticket was the only one
Plaintiff received during the time the car was with the mechanic for this
repair. In fact, the reason that the Defendant mechanic discovered the car was
stolen was because he went to move it so that it would not get a ticket. Had
the engine been blown, the Defendant mechanic certainly would not have been
able to move the car so often and routinely to avoid a ticket. Nonetheless,
when the car was stolen, the Defendant mechanic lied and said the engine was
blown.
30. Defendant 21st
Century recognized when Plaintiff first filed her claim that the Defendant
mechanic’s allegation that the engine was blown was a lie. Defendant 21st
Century knew the Defendant mechanic would lie in order to limit his own
liability. For that reason, when the Defendant mechanic first told Defendant
21st Century that the engine was blown, Defendant 21st Century ignored him.
Defendant 21st Century did not lend any credibility to the Defendant mechanic’s
claim that the engine was blown when it compiled its first comp report.
31. But after
Plaintiff reported Defendants to the insurance agency and asked for a new comp
report, Defendant 21st Century retaliated against Plaintiff. Suddenly,
Defendant 21st Century said that it was going to rely on the Defendant
mechanic’s false statements about the blown engine to decrease the value of the
car.
32. Since Defendant
21st Century made this retaliatory shift, it has not backed down. It now
fervently stands by the Defendant mechanic’s false statement that the engine
was blown, and has offered a radically small amount for Plaintiff’s ultra-rare
BMW 318is: $4,377.02.
33. Even if
Plaintiff’s engine was blown (which it was not), her car would not be valued at
$4,377.02. Repair of a blown engine, by Defendant G&N Motors’ own
admission, would cost between $2,000-$3,000. If that amount were reduced by how
much the car was worth in good condition, then Defendant 21st Century’s offer
should have been $28,800.
34. Defendant 21st
Century’s offer was based on spurious and biased reasoning that has no basis in
reality.
(Complaint, ¶¶ 15-34.)
On December 18, 2023, the clerk entered default against
Chouchanian.
Here, Chouchanian moves to set aside the default.
DISCUSSION
The first issue is whether
Chouchanian’s motion is timely. A motion
for discretionary relief based on mistake, inadvertence, etc. must be filed
within six months after the default is entered.
(See Edmon & Karnow, Cal. Practice Guide: Civ. Procedure Before
Trial (The Rutter Group June 2023 Update) ¶ 5:279.) “[A] motion for mandatory relief . . . based
on an ‘attorney affidavit of fault’” must be filed within six months after
default judgment is entered. (Id. at ¶
5:279.1, emphasis deleted.) The clerk entered
default on December 18, 2023.
Chouchanian e-served the motion on March 19, 2023 and e-filed it on
March 21, 2023, so it is timely under both options.
Turning to the merits,
Chouchanian contends the default should be set aside on two grounds. One, the default is void because the case was
stayed when the clerk entered default.
Chouchanian asserts that he was not required to file an answer or
demurrer at that time. (See Motion, pp.
5-7.) Two, the default was caused by
defense counsel’s mistake, inadvertence, or excusable neglect. (See id. at pp. 7-8.)
The Court agrees and finds that
the motion should be granted because:
* the motion is unopposed;
* it is uncontested that the case
was stayed at the time of entry of default (see, e.g., 9/26/23 Minute Order,
pp. 1-2);
* Chouchanian filed a notice of
appearance in lieu of an answer or demurrer as required by the Court’s stay
order (see 1/10/24 Notice of Appearance);
* even assuming the notice of
appearance is late, defense counsel’s declaration indicates that the failure to
file sooner resulted from defense counsel’s mistake (see Reagan Decl.; see also
Motion, pp. 7-8.); and,
* since the case remains largely
stayed and is at an early stage, Plaintiff will not suffer prejudice.
Tentative Ruling Re: Motion to Compel Appraisal
Date: 5/9/24
Time: 11:00
am
Moving Party: 21st
Century Insurance Company (“Defendant” or “21st Century”)
Opposing Party: Mary
Eshaghian (“Plaintiff”)
Department: 11
Judge: David
S. Cunningham III
________________________________________________________________________
TENTATIVE RULING
Request for Judicial Notice (“RJN”)
Defendant’s RJN is granted as to exhibits 1 through 5.
Defendant’s RJN is denied as to exhibit 6.
Motion to Compel Appraisal
Defendant’s motion to compel appraisal is granted.
The rest of the case is stayed until the parties complete the appraisal
process.
BACKGROUND
This is a putative class
action. The complaint alleges:
15. Plaintiff
insured the Vehicle through Defendant 21st Century Insurance Company. A true
copy of the contract is attached hereto and made a part hereof as Exhibit “A.”
16. Coverage to the
Vehicle included theft coverage and market value of the vehicle.
17. On or about
September 15, 2021, the vehicle was stolen from the Plaintiff.
18. Plaintiff timely
submitted to Defendant 21st Century a claim for the theft, which was assigned
the following claim number: 0003889906 (hereinafter referred to as the
“Claim”).
19. Defendant 21st
Century never produced a comp that complied with the terms of the insurance
agreement with Plaintiff. Some of their reports would have comps for different
cars, different models, and different years. Some of their reports only
contained quotes, no comps.
20. Plaintiff, at
her own expense, produced comps that showed the value of the car to be $26,000.
Defendant 21st Century ignored Plaintiff’s comp report.
21. Instead,
Defendant 21st Century took a more coercive approach: Defendant 21st Century
terminated Plaintiff’s rental car coverage. Under the terms of Plaintiff’s
insurance contract, Defendant 21st Century was required to cover Plaintiff’s
rental coverage until either (a) the day following the settlement offer or (b)
30 days of incurred rent. Defendant 21st Century’s offer did not comply with
the terms of their insurance agreement with Plaintiff. Therefore, Defendant
21st Century’s termination of Plaintiff’s rental coverage was in bad faith and
a breach of the insurance agreement.
22. Seeing that
Defendant 21st Century was going to ignore Plaintiff’s requests, Plaintiff
reported Defendant 21st Century to the California Department of Insurance. The
insurance agency agreed with Plaintiff that Defendant 21st Century acted in bad
faith and violated Plaintiff’s insurance policy, but ultimately said it did not
have jurisdiction to pursue an action against Defendant 21st Century. The
insurance agency advised Plaintiff, instead, to send the insurance company yet
another demand for a proper comp, this time with a new comp report that the
Plaintiff again generated at her own expense.
23. Plaintiff
followed the insurance agency’s recommendation: She provided a new comp report
to Defendant 21st Century, showing that the value of the car was actually
higher than her initial report—$31,800. Exhibit “B.” She then asked Defendant
21st Century to once and for all provide a legitimate comp report.
24. Instead of
providing Plaintiff with a legitimate comp report, Defendant 21st Century
retaliated against Plaintiff for taking the case to the insurance agency.
25. Not only did
Defendant 21st Century not provide a legitimate comp report, it reduced its
settlement offer to Plaintiff.
26. Defendant 21st
Century based its new comp report on misrepresentations it knew Plaintiff’s car
mechanic made.
27. Plaintiff’s car
was at the mechanic when it was stolen. On the day it was stolen, the Defendant
mechanic’s staff and lawyer called Plaintiff several times because they knew
they were responsible for the car’s theft. In fact, when Plaintiff reported the
theft to police, the police said that the first suspects should be the
Defendant car mechanic and/or his staff.
28. In order to
cover up his own liability, the Defendant car mechanic lied about the extent of
repairs the car needed, falsely reporting that the vehicle’s engine was blown.
29. The engine was
not in fact blown, however. The car was driven by Plaintiff’s brother to the
mechanic when the car signaled it may need repairs. Plaintiff’s brother could
not have driven the car to the Defendant mechanic if the car’s engine was
blown. When the Defendant mechanic diagnosed the problem, he said there were
some missing parts. The vehicle, a BMW 318is, is a rare car, so the Defendant
mechanic said it would take time to get the parts. But the Defendant mechanic
also was not diligent about getting the parts. After several months, the
Defendant mechanic still did not obtain the parts and never repaired the car.
During those many months, the Defendant mechanic did not keep the car in his
secure parking lot. Rather, the Defendant mechanic parked the car on the side
streets near his repair shop. Because the Defendant mechanic would park the car
on the side streets, it was prone to getting parking violation tickets. For
example, on August 31, 2021, Plaintiff received a parking violation ticket from
LA County. Exhibit “C.” In order to prevent the car from accumulating more such
tickets, the Defendant mechanic would frequently have to move the car. The
Defendant mechanic did so, as that parking violation ticket was the only one
Plaintiff received during the time the car was with the mechanic for this
repair. In fact, the reason that the Defendant mechanic discovered the car was
stolen was because he went to move it so that it would not get a ticket. Had
the engine been blown, the Defendant mechanic certainly would not have been
able to move the car so often and routinely to avoid a ticket. Nonetheless,
when the car was stolen, the Defendant mechanic lied and said the engine was
blown.
30. Defendant 21st
Century recognized when Plaintiff first filed her claim that the Defendant
mechanic’s allegation that the engine was blown was a lie. Defendant 21st
Century knew the Defendant mechanic would lie in order to limit his own
liability. For that reason, when the Defendant mechanic first told Defendant
21st Century that the engine was blown, Defendant 21st Century ignored him.
Defendant 21st Century did not lend any credibility to the Defendant mechanic’s
claim that the engine was blown when it compiled its first comp report.
31. But after
Plaintiff reported Defendants to the insurance agency and asked for a new comp
report, Defendant 21st Century retaliated against Plaintiff. Suddenly,
Defendant 21st Century said that it was going to rely on the Defendant
mechanic’s false statements about the blown engine to decrease the value of the
car.
32. Since Defendant
21st Century made this retaliatory shift, it has not backed down. It now
fervently stands by the Defendant mechanic’s false statement that the engine
was blown, and has offered a radically small amount for Plaintiff’s ultra-rare
BMW 318is: $4,377.02.
33. Even if
Plaintiff’s engine was blown (which it was not), her car would not be valued at
$4,377.02. Repair of a blown engine, by Defendant G&N Motors’ own
admission, would cost between $2,000-$3,000. If that amount were reduced by how
much the car was worth in good condition, then Defendant 21st Century’s offer
should have been $28,800.
34. Defendant 21st
Century’s offer was based on spurious and biased reasoning that has no basis in
reality.
(Complaint, ¶¶ 15-34.)
Here, 21st Century
moves to compel an appraisal under the insurance policy to determine the value
of the purported loss.
DISCUSSION
RJN
Defendant seeks judicial notice
of Plaintiff’s complaint (exhibit 1), exhibit A to the complaint, which is an
alleged copy of Plaintiff’s insurance policy (exhibit 2), exhibit D to the
complaint, which is an alleged copy of correspondence between Plaintiff and
Defendant (exhibit 3), the parties’ joint statement for the initial status
conference (exhibit 4), the parties’ joint statement for the pre-pleading
conference (exhibit 5), and a copy of a website page from the California
Department of Insurance’s website (exhibit 6).
The RJN is unopposed.
The Court finds that the RJN
should be granted as to exhibits 1 through 5.
The documents are court records, so judicial notice is appropriate.
The Court denies the RJN as to
exhibit 6. The website page is
unauthenticated and unverified.
Motion to Compel Appraisal
Plaintiff’s insurance policy
contains an appraisal provision. The
provision states:
RIGHT TO
APPRAISAL
If we and the person
insured do not agree on the amount of loss, either may demand an
appraisal of the loss. In
this event, each party will select an appraiser. The appraisers will state separately the
actual cash value and the amount of loss. If they fail to agree, they will submit their
differences to an umpire chosen by them.
A decision agreed upon any two of these three persons will be binding. Each party will:
(a) pay its chosen
appraiser; and
(b) bear the
expenses of the appraisal and umpire equally.
We do
not waive any of our rights under this policy by agreeing to an
appraisal.
(Defendant’s RJN, Ex. 2, p.
RJN-042, emphasis in original.)
“Under California law, agreements
providing for ‘valuations, appraisals and similar proceedings’
are treated as agreements to arbitrate.”
(Knight, et al., Cal. Practice Guide: Alternative Dispute Resolution
(The Rutter Group December 2023 Update) ¶ 5:29, emphasis in original; see also Louise
Gardens of Encino Homeowners’ Assn., Inc. v. Truck Ins. Exchange, Inc.
(2000) 82 Cal.App.4th 648, 658 [noting that “[a]n agreement to
conduct an appraisal contained in a policy of insurance . . . is considered to
be an arbitration agreement subject to the statutory contractual arbitration
law”]; Croskey, et. al., Cal. Practice Guide: Ins. Litigation (The Rutter Group
August 2023 Update) ¶ 15:356 [stating that “[a]ppraisal proceedings are a form
of informal arbitration and generally are subject to the rules governing
arbitration”].)
“The same is true under the
[Federal Arbitration Act (‘FAA’)].”
(Knight, supra, at ¶ 5:29.)
“However, while the agreement
providing for arbitration often gives the arbitrator broad powers, appraisers
generally have more limited powers.”
(Croskey, supra, at ¶ 15:356, emphasis in original.) “The function of appraisers is to determine
the amount of damage to items submitted for their consideration.” (Id. at ¶ 15:359.) In other words, their jurisdiction is limited
to assessing the “value or amount of loss[.]” (Ibid., emphasis in original.) They cannot “determine questions of coverage
or interpret policy provisions or governing statutes.” (Ibid.)
Nor can they “determine[e] [the] proper method for calculation[.]” (Id. at ¶ 15:356.)
If an appraisal request gets
granted, each side must “select a ‘competent and disinterested’ appraiser and
notify the of the appraiser selected within 20 days of the request.” (Id. at ¶ 15:362.) “These appraisers must then select an
‘umpire’ within 15 days. If they fail to
do so, a court will make the selection[.]”
(Id. at ¶ 15:363; see also Knight, supra, at ¶ 5:487.3 [noting that each
appraiser “is required to be ‘disinterested[]’” and that the “umpire . . . must
[also] be ‘disinterested[]’”].)
Valid Agreement
The Court agrees with Defendant
that the appraisal provision constitutes a valid agreement to arbitrate. (See Motion, pp. 9-11.) The provision is part of Plaintiff’s
insurance policy. It is undisputed that
she purchased it and assented to its terms and provisions. If nothing else, she fails to cite evidence
showing an absence of assent. (See
Eshaghian Decl., ¶¶ 1-4.)
Plaintiff’s argument – that the
appraisal provision is invalid because the condition of the car, specifically,
whether it had a blown engine, is a contested issue, and the umpire lacks
jurisdiction to decide it (see Opposition, p. 5) – does not change the
result. The argument goes to the scope
of the umpire’s authority, not whether the appraisal provision is valid. (See Reply, pp. 7-9.)
Waiver, Forfeiture, and
Timeliness
Plaintiff claims Defendant waived
and forfeited the right to compel an appraisal by failing to invoke the right
prior to the lawsuit. (See Opposition,
pp. 4-5.)
The Court disagrees. Plaintiff bears the burden to prove waiver
and forfeiture “by clear and convincing evidence.” (Chase v. Blue Cross of California
(1996) 42 Cal.App.4th 1142, 1157.)
The only evidence in support of her opposition is her declaration. The four paragraphs say nothing about waiver
or forfeiture. (See Exhaghian Decl., ¶¶
1-4.) The attached Department of
Insurance letter is equally silent. (See
id. at Ex. A.) Moreover, waiver and
forfeiture were found inapplicable in several cases where the insurers sought
arbitration or appraisals after the insureds commenced litigation. (See, e.g., Wolschlager v. Fidelity
National Title Ins. Co. (2003) 11 Cal.App.4th 784, 793 [denying
waiver argument despite the fact that the insurer did not demand arbitration
until the plaintiff served discovery]; see also, e.g., Fuchs v. State Farm
General Ins. Co. (C.D. Cal. Nov. 14, 2016, no. CV16-01844-BRO-GJS) 2016 WL
11504212, at *9 [denying waiver argument even though the insurer waited seven
months, post-removal, to request an appraisal].) As Defendant points out, the motion is
timely, and Plaintiff’s showing is inadequate.
(See Motion, pp. 13-18; see also Reply, pp. 4-7.)
Optional or Mandatory
The next issue is whether the
appraisal provision is optional or mandatory.
“[S]ome courts have concluded that appraisal is mandatory if
demanded.” (Croskey, supra, at ¶ 15:358
[citing cases], emphasis in original.)
Their conclusion appears consistent with the plain language of
Plaintiff’s insurance policy. The
appraisal provision allows either side to demand an appraisal. (See RJN, Ex. 2, p. RJN-042 [stating: “If we
and the person insured do not agree on the amount of loss, either
may demand an appraisal of the loss”], emphasis in
original.) Once a demand is made, the
provision states that “each party will select an appraiser.” (Ibid., emphasis added.) Read in context, the meaning of “will” is
closer to “shall” than “may,” especially since there is no clause or sentence
that says the demand can be rejected.
Bottom line, the Court agrees with Defendant’s interpretation; the
provision is mandatory. (See Motion, pp.
11-12; see also Reply, pp. 3-4.)
Code of Civil Procedure
Section 1281.2
Section 1281.2 provides:
On petition of a party to an arbitration agreement alleging the
existence of a written agreement to arbitrate a controversy and that a party to
the agreement refuses to arbitrate that controversy, the court shall order the
petitioner and the respondent to arbitrate the controversy if it determines
that an agreement to arbitrate the controversy exists, unless it determines
that:
(a) The right
to compel arbitration has been waived by the petitioner; or
* * *
(c) A party to
the arbitration agreement is also a party to a pending court action or special
proceeding with a third party, arising out of the same transaction or series of
related transactions and there is a possibility of conflicting rulings on a
common issue of law or fact. For purposes of this section, a pending court
action or special proceeding includes an action or proceeding initiated by the
party refusing to arbitrate after the petition to compel arbitration has been
filed, but on or before the date of the hearing on the petition. This
subdivision shall not be applicable to an agreement to arbitrate disputes as to
the professional negligence of a health care provider made pursuant to
Section 1295.
(Code Civ.
Proc. § 1281.2, subds. (a), (c).)
Plaintiff contends the motion
should be denied pursuant to section 1281.2 because:
* Defendant waived its right to
an appraisal (see Opposition, pp. 5-6); and,
* in addition to the causes of
action asserted against Defendant, Plaintiff asserts causes of action against a
third party – George Chouchanian dba G&N Motors – that arise out of the
same transaction. (See ibid.)
The first point is
unavailing. The Court reiterates that
Plaintiff’s showing is inadequate to demonstrate waiver.
The second point also fails. When subsection (c) applies, four options
become available, and they are all discretionary:
If the court determines that a party
to the arbitration is also a party to litigation in a pending court action or
special proceeding with a third party as set forth under subdivision (c), the
court (1) may refuse to enforce the arbitration agreement and may order
intervention or joinder of all parties in a single action or special
proceeding; (2) may order intervention or joinder as to all or only
certain issues; (3) may order arbitration among the parties who have
agreed to arbitration and stay the pending court action or special proceeding
pending the outcome of the arbitration proceeding; or (4) may stay
arbitration pending the outcome of the court action or special proceeding.
(Code Civ. Proc. § 1281.2, emphasis added.) Denial is not required and is not fitting
under the circumstances. The Court
believes options (3) and (4) fit better here.
Ultimately, option (3) fits best. To be sure, “[a] court has discretion
to defer appraisal proceedings pending its determination of legal issues that
lie outside the appraiser’s authority, including the parties’ rights under
insurance policies and statutes.”
(Croskey, supra, at ¶ 15:359.5, emphasis in original; see also, e.g., Kirkwood
v. California State Auto. Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th
49, 60 [affirming denial, without prejudice, of the insurer’s motion to compel
appraisal until the court resolved the declaratory claim regarding the
insurer’s depreciation formula].) But
Plaintiff is the putative class representative.
The efficient approach is to conduct the appraisal first given that the
outcome could impact her standing to sue as well as her ability to satisfy the
typicality and adequacy prongs. (See,
e.g., Motion, p. 18.) Resolving the
appraisal before certification will help to determine, at an earlier stage,
whether a different putative class representative needs to be added to the
case.
Conclusion
The motion to compel is granted,
and the Court stays the rest of the case until the appraisal is finished.