Judge Lynne M. Hobbs, Case Number: BC478744, Date: 2024-10-11 Tentative Ruling

Judge: Lynne M. Hobbs, Case: BC478744, Date: 2024-10-11 Tentative Ruling

Case Number: BC478744 Hearing Date: October 11, 2024 Dept: 61

RAY W. EXLEY M.D., VS. BARRY HARLAN, ET AL

TENTATIVE

Michael Millward, Administrator of the Estate of Plaintiff and Cross-Defendant Ray W. Exley’s Motion to Set Aside Default is CONTINUED to permit Millward to file the appropriate motion to be substituted as Decedent’s personal representative, to be heard concurrently with the present continued motion.

The OSC re Default Judgment and Case Management Conference are continued to the same date.

Judicial Assistant to calendar.

Moving party to provide notice.

DISCUSSION

I. MOTION TO SET ASIDE DEFAULT

Plaintiff and Decedent Ray. W. Exley (Decedent) filed this action on February 10, 2012, which was subject to cross-complaint by Defendants Evan Schenkel and Lewitt Hackman Shapiro Marshall & Harlan (Defendants). After Decedent died in June 2020, his wife, Juliana Loza-Exley (Loza-Exley) filed two motions to be appointed successor in interest under Code of Civil Procedure § 377.31, which this court denied on August 11, 2021, and July 27, 2023, reasoning that Loza-Exley had not complied with Code of Civil Procedure § 377.32, as Decedent’s estate was being administered in California and Loza-Exley’s petitions to appoint a special administrator for Decedent’s claims had been denied. With the denial of the second petition, default was entered against Decedent. The California probate proceeding remains ongoing.

The present motion is brought by Michael Milward, a stranger to the action yet represented by Loza-Exley’s counsel (Kaplan, Kenegos & Kadin) and supported by a declaration from Loza-Exley. Milward argues that as of October 17, 2023, he was appointed the administrator of Decedent’s estate in the Nevada proceeding. (Motion Exhs. 2, 3.) At that time, this matter was stayed pursuant to Loza-Exley’s bankruptcy from September 5, 2023 through May 30, 2024.

More than six months has passed since the entrance of default against Decedent on July 27, 2023. As such, Millward can hope for no relief from default under Code of Civil Procedure § 473, subd. (b), which provides relief from defaults and other orders on the basis of “mistake, inadvertence, surprise, or excusable neglect.” (Code Civ. Proc. § 473, subd. (b).

However, Millward may still seek relief from default pursuant to this court’s inherent equitable powers. “After six months from entry of default, a trial court may still vacate a default on equitable grounds even if statutory relief is unavailable.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981.) These equitable grounds include extrinsic fraud and extrinsic mistake. Extrinsic mistake occurs “when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits.” (Id. at p. 981.) And “[f]raud is extrinsic where the defrauded party was deprived of the opportunity to present his or her claim or defense to the court, that is, where he or she was kept in ignorance or in some other manner, other than from his or her own conduct, fraudulently prevented from fully participating in the proceeding.” (Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 26–27.)

Millward here argues that the default entered against Decedent here was the product of extrinsic fraud or mistake, because prior efforts to appoint an administrator for the estate in the California probate proceedings were thwarted either by the intervention of Defendants, or else Loza-Exley’s financial insolvency. Loza-Exley presents a declaration in which she notes that she was approved for a fee-waiver in the California proceeding on May 10, 2021. (Loza-Exley Decl. ¶ 6.) Plaintiff and Defendants each objected to the others’ opposing petitions to administer the estate, until the court appointed a private professional fiduciary to administer the estate on August 17, 2022. (Opposition Exh. 1.) Loza-Exley contends that the fiduciary was forced to withdraw based on Defendants’ seeking (and the court granting) costly conditions on the appointment, such as the posting of a bond and the requirement of the appointment of counsel for the fiduciary, which Loza-Exley could not afford. (Loza-Exley Decl. ¶ 6.) But Defendants note that when the fiduciary submitted a “declination to act as administrator of the state,” she stated that the reason for the declination was the refusal of “the attorney who requested my appointment” to provide “documentation or any other information about the case,” (Opposition Exh. 2.) It was Loza-Exley who had nominated the fiduciary. (Garrotto Decl. Exh. 14.) Loza-Exley attempted to have Decedent’s brother appointed as a special administrator for Decedent’s case, but evidently served the petition without filing it, so it was never heard. (Loza-Exley Decl. ¶ 6; Garrotto Decl. ¶ 29.)

Relief on the ground of extrinsic fraud or mistake is not available to a party if that party has been given notice of an action yet fails to appear, without having been prevented from participating in the action. 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. (Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 503.)

Millward argues that he has satisfied the elements to seek relief based on extrinsic mistake here. He argues that he has proposed a verified answer denying the allegations in Defendants’ claims. (See Proposed Answers.) “It has long been established that merely attaching a verification to a proposed answer is sufficient to demonstrate meritoriousness.” (Stiles v. Wallis (1983) 147 Cal.App.3d 1143, 1148.) Millward also argues that sufficient excuse exists for not presenting a defense, because no administrator had been appointed to the estate until he was appointed in October 2023. (Motion at p. 16.) Finally, he argues Loza-Exley has been diligent in seeking the appointment of an administrator. (Ibid.)

Defendants in opposition argue that no relief is appropriate because Loza-Exley has negligently failed to obtain the appointment of an administrator for Decedent’s estate, as demonstrated by the above-discussed course of facts. (Opposition at pp. 6–7.) Defendants also argue that Millward lacks standing to bring the motion since he has not yet been substituted in as the personal representative of Decedent’s estate. (Opposition at p. 2.)

Extrinsic mistake is found when a party becomes incompetent but no guardian ad litem is appointed [citations]; when one party relies on another to defend [citations]; when there is reliance on an attorney who becomes incapacitated to act [citations]; when a mistake led a court to do what it never intended [citations]; when a mistaken belief of one party prevented proper notice of the action [citations]; or when the complaining party was disabled at the time the judgment was entered [citations]. Relief has also been extended to cases involving negligence of a party's attorney in not properly filing an answer [citations]; and mistaken belief as to immunity from suit.” (In re Marriage of Thorne & Raccina (2012) 203 Cal.App.4th 492, 505.)

There exists ample basis to find the existence of extrinsic mistake here. As noted in the above authority, extrinsic mistake is found where “a party becomes incompetent but no guardian ad litem is appointed.” (Thorne & Raccino, supra, 203 Cal.App.4th at p. 505.) The situation here is analogous, as the Plaintiff and Cross-Defendant Ray W. Exley has, by his death, ceased to be competent to bring this action, and no representative was appointed for him at the time his default was entered.

It is true that Loza-Exley has not demonstrated diligence or excuse on her part, given the long history of her failure to obtain representation through probate proceedings, as noted in this court’s prior orders denying her motions to be joined as a successor in interest. But Defendants do not explain why the negligence of Loza-Exley, who is not the representative of the estate, is chargeable to the estate or its personal representative. The personal representative, meanwhile, has moved with reasonable diligence to have the default overturned following the lifting of the stay in this case.

Defendants’ arguments with respect to the cases cited by Millward and how they are distinguishable are unpersuasive, as these cases are not cited for their analogous facts, but to set forth the rules governing equitable relief from default. And although Defendants argue that extra-statutory relief not governed by Code of Civil Procedure § 473 is “almost never” granted, this argument is offered without authority. It is true that relief from a default judgment will be granted “only in exceptional circumstances” — but this principle rests upon the policy favoring “the finality of judgments.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981.) No judgment has yet been entered here.

Indeed, any such judgment would likely be legally infirm. Upon Decedent’s death, this court’s jurisdiction to act upon his estate was suspended pending the joinder of his personal representative as a party. (Herring v. Peterson (1981) 116 Cal.App.3d 608, 611–612 [“Where a defendant dies and no personal representative is substituted, any judgment rendered is in excess of the court's jurisdiction to try the case.”].) In light of this authority, maintaining the default against Decedent would be of little effect, as Defendants could not seek judgment against him absent the joinder of his personal representative.

However, Defendants are correct that Millward is not yet party to the action. The right of a personal representative to substitute in as plaintiff, or be substituted as a defendant, is subject to motion. (See Code Civ. Proc. §§ 337.31 [substitution of plaintiff]; 337.41 [substitution of defendant].) The propriety to permitting such a substitution has not been briefed.

Accordingly, the motion to set aside default is CONTINUED to permit Millward to file the appropriate motion to be substituted as Decedent’s personal representative, to be heard concurrently with the present continued motion.