Judge: Monica Bachner, Case: 21STCV34807, Date: 2023-01-25 Tentative Ruling

Case Number: 21STCV34807    Hearing Date: January 25, 2023    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendants Stephen Perl’s and Peter Perl’s motion to set aside default judgment is granted.  Defendants are granted leave to file their Answer. Defendants are ordered to file their Answer within two court days.

Defendants Stephen Perl (“Stephen”) and Peter Perl (“Peter”) (collectively, “Defendants”) move for an order to set aside the default entered against them in this action brought by Plaintiff Ka Sum Garlise Cheung (“Cheung”) (“Plaintiff”) pursuant to C.C.P. §§473.5 and 473(b).  Defendants move to set aside the judgment on the grounds (1) the default was improperly entered against the Defendants since the purported service of the Summons did not result in actual notice to them in time to defend; (2) default judgment was entered against the Defendants by reason of their own surprise and excusable neglect; (3) Defendants did not receive and did not otherwise have notice of the Summons, Complaint or other related papers in this action; (4) Defendants have valid and meritorious defenses to Plaintiff’s Complaint, which bar in whole or in part any recovery against them, especially where the Defendants are not parties to the contract at issue, where the Defendants cannot have and did not make promises as to the loan between Plaintiff and now-dismissed defendant PMF Investment Corp. giving rise to a purported claim for promissory fraud, and where PMF Investment Corp. repaid a substantial portion of the loan over a consistent period of several years; (5) equitable considerations mitigate in favor of setting aside and vacating the default and default judgment; (6) Plaintiff has unreasonably refused to stipulate for relief from the default and default judgment despite Defendants’ request, necessitating the filing of this Motion; and (7) the Motion was filed within 6 months of entry of the default judgment in accordance with C.C.P §§473(b) and 473.5.  (Notice of Motion, pgs. 2-3.)

Background

On September 21, 2021, Plaintiff filed her complaint against Defendants Stephen and Peter and against non-moving Defendant PMF Investments, Corp.  (“PMF”) alleging four causes of action: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) promissory fraud; and (4) common counts and unjust enrichment. (See Complaint.)  Plaintiff filed a proof of personal service on Peter and proof of substituted service on Stephen on December 8, 2021.  On February 8, 2022, the Clerk entered Default against Peter, and on February 10, 2022, the Clerk entered Default against Stephen.  On April 12, 2022, Plaintiff dismissed Defendant PMF Investments, Corp. and Does 1-10. This Court entered Default Judgment on August 18, 2022, in the amount of $109,003.36.

On October 18, 2022, Defendants filed the instant motion. On January 11, 2023, Plaintiff filed an opposition to the instant motion. Defendants filed their reply on January 23, 2023.

          C.C.P. §473.5

C.C.P. §473.5 provides, in part:

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.

(C.C.P. §473.5(a).)  Courts have interpreted “actual notice” under §473.5 to mean that the party possessed genuine knowledge of the action.  (Tunis v. Barrow (1986) 184 Cal.App.3d 1069, 1077; Rosenthal v. Garner (1983) 142 Cal.App.3d 891, 895.)  Courts have set aside defaults where substituted service did not result in actual notice to a party in time to defend an action.  (Kodiak Films. Inc. v. Jensen (1991) 230 Cal.App.3d 1260, 1264-1265 [affirming an order to set aside a default and default judgment where substitute service on defendant’s girlfriend at a residence at which defendant had not lived for several months did not provide defendant with actual notice in time to defend action].)  Further, unless lack of actual notice has clearly resulted from avoidance of service or inexcusable neglect, applications to set aside defaults should normally be granted. (Tunis, 184 Cal.App.3d at 1078-1079.)

As a preliminary matter, Defendants’ motion is timely, as it was filed less than six months after entry of default judgment on August 18, 2022.  Additionally, Defendants filed and submitted a proposed Answer with this motion, as required by C.C.P. §473.5(b).  (Decl. of Salvato, Exh. A.)

          Here, Defendants Peter and Stephen declare that they did not receive actual notice of the summons in time to defend this action.  Peter and Stephen declare that at the time the lawsuit was filed, PMF had closed its offices and filed for bankruptcy.  (Decl. of Peter ¶2; Decl. of Stephen ¶6.)  Stephen declares that any mail that was sent to PMF at the time when the office was closed has been either lost or misplaced, and Stephen never received the summons.  (Decl. of Stephen ¶4.)  Stephen declares that his father, Peter, 80, has a serious medical condition that has made him unable to be fully cognizant of his circumstances, and has been diagnosed with dementia by a medical doctor.  (Decl. of Stephen ¶8, Exh. 1.) 

          Plaintiff argues in opposition that Defendants’ declarations are insufficient to support their motion to set aside or vacate the default, and should deny Defendants’ motion, or in the alternative require Defendants to submit supplemental declarations.  (Opposition, pg. 3.)  Plaintiff argues Defendants’ declarations contradict the registered process server’s declaration of diligence filed with the proof of service of summons on Stephen.  (Opposition, pg. 2; see 2/10/2022 Declaration of Diligence.)

          Defendants’ declarations are sufficient to demonstrate lack of actual notice of service.  Defendants have declared that they have not attempted to avoid service or disregard legal notices in this case and have acted promptly to retain counsel and obtain an order vacating the default judgment in order to adjudicate this case on the merits.

Based on the foregoing, Defendants’ motion to set aside default judgment is granted.  Defendants are granted leave to file their Answer. Defendants are ordered to file their Answer within two court days.

Dated:  January _____, 2023

Hon. Monica Bachner

Judge of the Superior Court