Judge: Robert S. Draper, Case: 21STCV17069, Date: 2022-10-21 Tentative Ruling

Case Number: 21STCV17069    Hearing Date: October 21, 2022    Dept: 78

Superior Court of California 

County of Los Angeles 

Department 78 

Defendant Ignacio Modesto Perez’s Motion to Set Aside Default and Default Judgment is GRANTED. Defendant has thirty days to file a responsive pleading.

FACTUAL BACKGROUND

This is an action for insurance subrogation. The Complaint alleges as follows.

Plaintiff Farmers Insurance Exchange (“Farmers”) insured non-parties Arman Markosyan (“Markosyan”) and Cathy and Siu Lee (the “Lees”). (Compl. ¶ 6.) On March 26, 2019, Defendant Ignacio Modesto Perez’s (“Perez”) vehicle struck Markosyan’s vehicle, then ran into the Lees’ home. (Compl. ¶ 13.) Farmer compensated Markosyan and the Lees in the amount of $123,247.25. (Compl. ¶ 13.)

PROCEDURAL HISTORY 

On May 6, 2021, Farmers filed the Complaint for property damage.

On May 25, 2021, Farmers filed a Proof of Service by Substituted Service as to Perez.

On June 29, 2021, Farmers filed a Request for Entry of Default. That Request was granted.

On September 8, 2021, Farmers filed a Request for Entry of Default Judgment.

On November 10, 2021, the Court entered the Default Judgment.

On July 18, 2022, Perez filed the instant Motion to Vacate Default and Default Judgment.

On October 10, 2022, Farmers filed an Opposition.

On October 14, 2022, Perez filed a Reply.

DISCUSSION 

I.                MOTION TO VACATE JUDGMENT

Defendants move the Court to vacate default pursuant to Code of Civil Procedure section 473.5 or the Court’s equitable power.  

A.   Section 473.5

CCP section 473.5 permits the court to vacate a default 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. (CCP § 473.5(a).) The phrase actual notice means genuine knowledge and does not include constructive or imputed notice to the client. (Tunis v. Barrow (1986) 184 Cal.App.3d 1069, 1077.)  “A defendant seeking vacation of a default judgment entered against him must further show that his lack of actual notice in time to defend the action was not caused by his inexcusable neglect or avoidance of service.”  (Id. at 1077-1078, citing CCP § 473.5(c).) 

Here, Perez notes that Farmers’ Proof of Service shows that Perez was served by substitute service at an address in Houston, Texas. (Fitzhugh Decl., ¶ 3.) Service was affected on a 73-year-old cohabitant living at that address. (Ibid.) In his Motion, Perez contends that he never received actual notice of the summons or complaint. (Motion at p. 5.) However, as Farmers notes in its Opposition, Perez did not file a declaration stating such. And, that Perez did not receive actual notice is relayed through multiple levels of hearsay.

Accordingly, Perez has not submitted any admissible evidence showing that he did not have actual notice of the action, and section 473.5 does not apply.

B.   Equitable Power

Next, Perez urges the Court to use its equitable power to vacate default and default judgment.

To qualify for equitable relief based on extrinsic mistake, which exists when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits, the defendant must demonstrate: (1) “a meritorious case”; (2) “a satisfactory excuse for not presenting a defense to the original action”; and (3) “diligence in seeking to set aside the default once the fraud [or mistake] had been discovered.” (Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241, 1245-1246 (citing In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1071).)  

Here, Attorney Matthew Nasser (“Nasser”), the initial attorney assigned by Perez’s insurer, GEICO, to represent Perez’s interests in this matter, states that GEICO assigned him the action on September 29, 2021. (Nasser Decl., ¶ 2.) At that time, neither GEICO nor Nasser knew that Default had been entered. (Ibid.) Nasser claims that GEICO repeatedly asked Farmers for information on the suit between May and September 2021 but received no response. (Nasser Decl., ¶ 3.)

Once Nasser was assigned the case, he reviewed the Los Angeles Superior Court website where he found that Perez had entered default. (Nasser Decl., ¶ 4.) Nasser called Farmers’ Counsel, informed her that Nasser would be representing Perez’s interests in this matter, and asked for a stipulation to set aside default. (Ibid.)

Nasser believed that Farmers’ Counsel would serve him with a copy of the Notice of Entry of Default Judgment as Perez’s counsel. (Nasser Decl., ¶ 6.) Nasser never received such notice. (Ibid.)

Perez argues he should be able to argue the merits of his case, as he could present evidence demonstrating Markosyan’s negligence in causing the collision.

In Opposition, Farmers argues it repeatedly informed a GEICO Claims Representative of its intent to file a lawsuit. (Sarrail Decl., ¶ 3.) Farmers states that they cooperated with GEICO’s request for information and sent GEICO a copy of the summons and complaint the same day it was requested. (Sarrail Decl., ¶ 7.) Finally, Farmers argues it had no obligation to send Nasser notice of the default judgment, as Perez was not a party to the action because he had not yet appeared.

Upon review of the evidence, the Court finds that it is proper to vacate default and default judgment on equitable grounds. Perez has demonstrated that he has a meritorious case, that there was a satisfactory excuse for his failure to respond, and that he has acted diligently to vacate judgment once he learned of its existence.

This, combined with the Court’s preference and obligation to consider all matters on their merits where possible, is sufficient to vacate default and default judgment.

Accordingly, Perez’s Motion to Vacate Default and Default Judgment is GRANTED. Perez has thirty days to file a responsive pleading.

Finally, Farmers requests reasonable costs and attorney fees pursuant to CCP § 473(c)(1)(A).

CCP § 473(c)(1)(A) states that “[w]henever the court grants relief from a default, default judgment, or dismissal based on any of the provisions of this section, the court may … [i]mpose a penalty of no greater than one thousand dollars ($1,000) upon an offending attorney or party.” 

As Notice of the Default Judgment was not sent to Perez’s Counsel, regardless of whether such notice was required under the California Rules of Court, and as Perez’s Counsel repeatedly requested a stipulation to set aside default, which would have rendered the instant motion practice unnecessary, Farmers’ request is DENIED.

DATED:  October 21, 2022   

_______________________ ____          

Hon. Robert S. Draper 

Judge of the Superior Court