Judge: Maurice A. Leiter, Case: 22STCV32477, Date: 2024-03-21 Tentative Ruling

Case Number: 22STCV32477    Hearing Date: March 21, 2024    Dept: 54

Hearing Date: March 21, 2024

Department 54, Judge Maurice Leiter

Motion to Set Aside Default and Default Judgment

Moving Party:            Defendants Prism Hospitality, Inc. and Maanbir Punia

Responding Party:   Plaintiff Sinanian Development, Inc.

T/R:     Defendants’ Motion to Set Aside Default and Default Judgment is DENIED. 

DEFENDANTS TO GIVE NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

            The Court considers the moving papers, opposition, and reply.

BACKGROUND

 On December 4, 2019, Plaintiff contracted with Defendant Prism Hospitality, Inc. for Prism to design, procure, and install the furniture, fixtures, and equipment (“FF&E”) for the hotel Plaintiff was building in Glendale, CA.  Plaintiff alleges Defendant Maanbir Punia was the owner of Prism.  Plaintiff alleges Prism breached the contract by failing to obtain the FF&E as promised.

Plaintiff sued on October 4, 2022, alleging breach of written contract and fraud.  On December 21, 2022, the Court entered default against Defendant Prism Hospitality, Inc.  On January 10, 2023, the Court entered default against Maanbir Punia.  On May 25, 2023, the Court entered default judgment against Prism Hospitality, Inc. and Maanbir Punia in the amount of $542,461.85. 

ANALYSIS

            “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.”  (CCP §473.5(a).)  “Section 473.5 provides relief from default or default judgment to those defendants who, despite proper service, never received ‘actual notice’ of the lawsuit in time to defend against it. (See § 473.5, subd. (a).) To get such relief, the defaulted defendant must submit an affidavit showing the lack of actual notice was not due to its avoidance of service or inexcusable neglect.”  (Luxury Asset Lending, LLC v. Philadelphia Television Network, Inc. (2020) 56 Cal.App.5th 894, 908.) 

            Defendants move for relief from the default and default judgment on the grounds that they never received actual notice of the Request for Entry of Default or Request for Entry of Default Judgment.  Defendants argue the first time they realized there was a default judgment against them was on September 12, 2023, when Punia was served with a notice to appear for a judgment debtor exam.

            Defendant Punia concedes he was served with the complaint on December 2, 2022.  Defendants argue they were communicating with Plaintiff thereafter regarding the case, production issues and delays due to the COVID pandemic. 

            Defendant Punia also argues the fraud claim against him is insufficient, as the specific fraudulent acts are not alleged, and the fraud claim is identical to the breach of contract claim.  Defendant Punia argues he has a meritorious defense to the fraud claim and he was lulled into believing that Plaintiff was not actively litigating the action, since the papers were served at the wrong address and Defendants never received copies of a Request for Entry of Default or Request for Entry of Default Judgment. 

            Plaintiff argues CCP §473.5 does not apply, because Defendants concede that they had actual notice of the lawsuit and were served with the summons and complaint in time to defend.  Prism was served with the summons and complaint on November 17, 2022; Punia was served on December 2, 2022.  Plaintiff argues that proper service is not contested. 

            Plaintiff also contends it served Defendants with the Requests for Entry of Default and Default Judgment at the Defendants’ last known address.

            CCP §473.5 does not apply here.  It allows for relief where service of the complaint and summons fails to give actual notice of the action to the defendant.  Defendants do not argue lack of actual notice. 

            A request for equitable relief based on extrinsic fraud or mistake may be brought at any time, so long as the party acted diligently in seeking relief.  (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982.)  “A party seeking relief under the court's equitable powers must satisfy the elements of a “stringent three-pronged test”: (1) a satisfactory excuse for not presenting a defense, (2) a meritorious defense, and (3) diligence in seeking to set aside the default.”  (Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 29.) 

            “The court's ability to grant relief under its inherent power is narrower than its ability to grant relief under section 473, subdivision (b).  This is especially true after a default judgment has been entered.  A party who seeks to set aside a default judgment pursuant to the court's equity power must make a substantially stronger showing of the excusable nature of his or her neglect than is necessary to obtain relief under section 473.”  (Id. (trial court erred in finding extrinsic mistake and diligence in seeking relief where defendants undisputedly had notice of the action, evidence established that defendants’ lack of notice was due to their own negligence and record established that plaintiff diligently attempted to contact and serve defendants with documents throughout the litigation).) 

            Defendants fail to demonstrate extrinsic mistake sufficient to justify equitable relief.  Defendants admit that they were properly served with the complaint and had actual notice of the lawsuit.  Defendant Punia’s testimony regarding the parties’ discussions after service do not support a finding that he reasonably believed Plaintiff was not litigating.  (Motion, Punia Dec., ¶2.)  Punia testifies the parties had “ongoing communications…about supply chain/product delays…”  (Id.)  Nothing in these discussions would reasonably lead Punia to believe Plaintiff was not pursuing the lawsuit. 

            Defendants also admit that they resided at 36 Blue Summit in Irvine, CA in 2022 through January 18, 2023.  Plaintiff served the request for entry of default at the Blue Summit address. Defendants were living at the Blue Summit address at that time. 

            Default was entered against Prism more than a year ago, on December 21, 2022, and against Punia on January 10, 2023.  Default judgment was entered on May 25, 2023.  The motion to set aside default and default judgment was not filed until February 15, 2024.  Even if the Court accepted Defendants’ claim of ignorance, Defendants admit receiving notice of the default judgment against them on September 12, 2023.  (Motion, 3:7-11; Punia Dec., ¶¶12-13.)  Defendants waited five months before filing this motion.  Defendants fail to demonstrate reasonable diligence in seeking to set aside the default and default judgment.