Judge: Edward B. Moreton, Jr, Case: 23SMCV04460, Date: 2024-12-04 Tentative Ruling

Case Number: 23SMCV04460    Hearing Date: December 4, 2024    Dept: 205

Superior Court of California

County of Los Angeles

Beverly Hills Courthouse | Department 205

Background

This case arises from two real estate loans. Plaintiff Adly Abdelmalak (Plaintiff) alleges that he was deceived by Defendants into investing 1.5 million dollars and 5 million dollars, respectively, into two development properties. (First Amended Complaint, ¶ 14) According to the complaint, the two properties were of lesser value than what was represented to Plaintiff. (Id. at ¶¶ 24, 34.)

On September 21, 2023, Plaintiff filed the instant action against Defendants Riverview Cottage Homes OC, LLC (Riverview); Elm Ave. Living LLC (Elm); Chris Staggs (Staggs); Sahana Sridhar (Sridhar); Kamyar K. Rezaie (Rezaie); and Wembley’s Inc. (Wembley), alleging causes of action for (1) Fraud – Intentional Misrepresentation; (2) Financial Elder Abuse; (3) Money Had and Received; (4) Money Lent; and (5) Breach of Personal Guarantee.

On March 13, 2024, Plaintiff filed the operative first amended complaint (FAC).

On August 7, 2024, this Court granted Plaintiff’s motion to strike Defendants Riverview and Elm’s answers and entered default against them.

On October 31, 2024, Defendants Riverview and Elm filed a joint motion to set aside and vacate the default found against them, as well as to reinstate their answer to the FAC.

No opposition was filed.

Legal Standard

Code of Civil Procedure Section 473.5 subdivision (a) provides in relevant part:¿¿ 

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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.¿ 

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Additionally, the motion “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.” (Code Civ Proc. § 473.5(b).)¿ 

Analysis

Defendants Riverview and Elm move for the Court to set aside and vacate the default judgment that was entered against them on August 7, 2024, and reinstating their answer to the FAC.

Here, managing member of Defendants Riverview and Elm, Chris Staggs, declares that in February of 2024, Riverview and Elm retained an attorney to represent them in the instant action, but that in May of 2024, this attorney and his firm withdrew from the case. (Staggs Decl., ¶¶ 2, 4.) Mr. Staggs states that Riverview and Elm did not have the sufficient funds to hire new counsel to replace their previous counsel. (Id. at ¶ 4.) Mr. Staggs then states that in August of 2024, he learned that this Court struck Riverview and Elm’s answer to the FAC and entered default against them because they did not have counsel to represent them. (Id. at ¶ 5.) Mr. Staggs then states that in October of 2024, Riverview and Elm raised sufficient funds to retain counsel for their representation in the instant action and retained attorney Clark McCutchen. (Id. at ¶ 9.)

“[W]hen relief under section 473 is available, there is a strong public policy in favor of granting relief and allowing the requesting party his or her day in court.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981–82.)

The Court finds that the circumstances support an order to vacate and set aside the default judgement rendered against Riverview and Elm, and reinstate their answer to the FAC. Here, the motion was timely filed within 180 days after notice that the default judgement has been entered against Riverview and Elm. Specifically, Riverview and Elm received notice that default judgment was entered against them in August of 2024 and promptly filed the instant motion less than three months later.

Further, Mr. Staggs declares that Riverview and Elm had insufficient funds to retain an attorney after their initial counsel withdrew from their case. (Staggs Decl., ¶ 4.) It is considered inexcusable neglect for individuals to contend that they did not have adequate funds to retain counsel when contesting a default judgment because individuals can “obtain[] a waiver of the fee by petition in forma pauperis . . . consult[] attorneys in legal aid officers or proceed[] in propria persona.” (Davis v. Thayer (1980) 113 Cal.App.3d 892, 906.) However, under California law, a corporation, as well as an LLC, can only appear in a civil matter through a licensed attorney. (Merco Construction Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724, 727; Paradise v. Nowlin (1948) 86 Cal.App.2d 897, 898; Clean Air Transport Systems v. San Mateo County Transit District (1988) 198 Cal.App.3d 576, 578- 579.) “[I]t is more appropriate and just to treat a corporation's failure to be represented by an attorney as a defect that may be corrected, on such terms as are just in the sound discretion of the court.” (CLD Constr., Inc. v. City of San Ramon, 120 Cal.App.4th 1141, 1149 (2004). Therefore, The Court finds that Riverview and Elm were diligent and took a reasonable time to secure replacement counsel.

The instant motion also is supported by a copy of the answer to the FAC that Riverview and Elm wish to reinstate. (Staggs Decl., Exhibit A.)

Lastly, Plaintiff does not oppose the instant motion.  

Conclusion

Based on the foregoing, Defendants Riverview and Elm’s motion to set aside and vacate default is GRANTED.

Dated: December 4, 2024

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Edward B. Moreton, Jr.

Judge of the Superior Court