Judge Salvatore Sirna, Case Number: 23PSCV02030, Date: 2024-06-20 Tentative Ruling

Judge: Salvatore Sirna, Case: 23PSCV02030, Date: 2024-06-20 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on a tentative ruling by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 23PSCV02030 Hearing Date: June 20, 2024 Dept: G

Defendant Kenbald International, Inc.’s Motion to Set Aside Plaintiff’s Entry of Default

Respondent: Plaintiff Guangzhou Hong You Trading Co., Ltd.

TENTATIVE RULING

Defendant Kenbald International, Inc.’s Motion to Set Aside Plaintiff’s Entry of Default is GRANTED. Defendant Kenbald International, Inc.’s Answer that was previously received by the Court on April 9, 2024 is deemed filed and operative as of this date.

BACKGROUND

This is an action for breach of contract and fraud. Plaintiff Guangzhou Hong You Trading Co., Ltd. (Guangzhou Hong You Trading) is a Chinese manufacturer and vendor of denim jeans. One of its buyers was Defendant Eddie Lin who purchased goods from Guangzhou Hong You Trading through S.H.E. Global, Inc., a California corporation owned by Lin. In October 2021, Lin allegedly told Guangzhou Hong You Trading that Lin wanted to use one of Lin’s other corporations, Defendant Kenbald International, Inc. (Kenbald), to place orders with Guangzhou Hong You Trading so Lin could purportedly increase Kenbald’s credit lines.

From December 2022 to January 2023, Lin and Kenbald’s CEO, Defendant Zhimin Dai, placed sixteen different orders with Guangzhou Hong You Trading. Subsequently, Lin, Dai, and Kenbald allegedly failed to pay for the goods and services they received. Guangzhou Hong You Trading alleges that Dai was hired by Lin to be a fake CEO and that Lin intentionally made Kenbald financially insolvent so as to defraud Guangzhou Hong You Trading.

On July 7, 2023, Guangzhou Hong You Trading filed a complaint against Lin, Dai, Kenbald, and Does 1-20, alleging the following causes of action: (1) breach of contract, (2) breach of the implied duty of good faith and fair dealing, (3) fraud, and (4) civil conspiracy. On February 9, 2024, Guangzhou Hong You Trading’s process server served Kenbald and Dai with substitute service in Temple City. On February 25, 2024, Guangzhou Hong You Trading’s process server served Lin with substitute service in Walnut.

On March 26, 2024, the Court entered default against Kenbald and Dai after they failed to timely file an answer. On April 8, 2024, the Court entered default against Lin after Lin also failed to timely file an answer.

On April 9, 2024, Lin and Kenbald filed answers and a cross-complaint against Guangzhou Hong You Trading and Does 1-10, alleging the following causes of action: (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) fraud, (4) civil conspiracy, (5) common counts, and (6) intentional interference with prospective economic relations.

On May 13, 2024, Guangzhou Hong You Trading filed a motion to strike portions of Lin and Kenbald’s Cross-Complaint. On the same day, Guangzhou Hong You Trading also filed a motion to strike Kenbald’s answer to Guangzhou Hong You Trading’s Complaint.

On May 28, 2024, Kenbald filed the present motion.

On June 10, 2024, Guangzhou Hong You Trading stipulated to setting aside the entry of default against Lin.

A hearing on the present motion and a case management conference are set for June 20, 2024. A hearing on Guangzhou Hong You Trading’s motions to strike are set for August 21, 2024, and August 22, 2024.

ANALYSIS

Kenbald seeks to set aside the entry of default on the grounds of improper service, mistake, inadvertence, surprise, or neglect. For the following reasons, the Court GRANTS Kenbald’s motion.

Legal Standard

Whenever an application for relief from default judgment is made no more than six months after entry of judgment, is in proper form, and is accompanied by the moving party’s sworn affidavit attesting to his or her mistake, inadvertence, surprise, or excusable neglect, the court may vacate any (1) resulting default entered by the clerk against the moving party or (2) resulting default judgment or dismissal entered against the moving party, unless the court finds that the default or dismissal was not in fact caused by the moving party’s mistake, inadvertence, surprise, or excusable neglect. (Code Civ. Proc., §473, subd. (b).) “The six-month time limit for granting statutory relief is jurisdictional and the court may not consider a motion for relief made after that period has elapsed.” (Manson, Iver & York v. Black (2009) 176 Cal.App.4th 36, 42 (Manson).) That “six-month period runs from entry of default, not entry of judgment.” (Id.)

Courts liberally grant motions to vacate default judgments when relief is promptly sought and the opposing party is not prejudiced as the law strongly favors resolution on the merits. (Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 28.) Courts only require “slight evidence” to support vacating a default and resolve all doubts in favor of the party seeking relief. (Ibid.) However, “[t]he only occasion for the application of section 473 is where a party is unexpectedly placed in a situation to his injury without fault or negligence of his own and against which ordinary prudence could not have guarded.” (Hearn v. Howard (2009) 177 Cal.App.4th 1193, 1206, quoting Elms v. Elms (1946) 72 Cal.App.2d 508, 513.)

Discussion

In this case, Kenbald first argues Guangzhou Hong You Trading’s substitute service of Kenbald was improper because it was not completed at Kenbald’s registered mailing address in Walnut. (Motion, p. 7:1-6.)

Pursuant to Code of Civil Procedure section 473, subdivision (d), “The court may . . . on motion of either party after notice to the other party, set aside any void judgment or order.” “[A] default judgment entered against a defendant who was not served with a summons in the manner prescribed by statute is void.” (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444.) Thus, pursuant to Code of Civil Procedure section 473, subdivision (d), “the court may set aside a default judgment which is valid on its face, but void, as a matter of law, due to improper service.” (Ellard v. Conway (2001) 94 Cal.App.4th 540, 544.)

A corporation may be served by “delivering a copy of the summons and the complaint . . . [t]o the person designated as agent for service of process.” (Code Civ. Proc., § 416.10, subd. (a).) In addition to personal delivery, summons may also be served on a corporation’s agent “by leaving a copy of the summons and complaint during usual office hours in his or her office or, if no physical address is known, at his or her usual mailing address, other than a United States Postal Service post office box, with the person who is apparently in charge thereof, and by thereafter mailing a copy of the summons and complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left.” (Code Civ. Proc., § 415.20, subd. (a).)

In this case, Lin provided a declaration stating the address of 20317 Lake Erie Drive in Walnut, California is the principal and regular mailing address for Kenbald. (Lin Decl., ¶ 10.) In support of this claim, Lin provided a copy of what appears to be the California Secretary of State’s website which displays the Walnut address as Kenbald’s mailing address. (Lin Decl., Ex. 2.) The same website lists Dai as Kenbald’s agent and provides the Walnut address as Dai’s address. (Lin Decl., Ex. 2.) Kenbald’s 2023 and 2022 Statements of Information also provide the same addresses and list Dai as Kenbald’s agent. (Agopoglu Decl., Ex. A.) Based on this evidence, it appears the Walnut address is the usual mailing address for Dai as Kenbald’s agent.

However, instead of serving Dai at the Walnut address, Guangzhou Hong You Trading attempted to serve Dai at an address in Temple City as reflected in their proof of service filed with the Court. When service of summons is challenged as improper, the serving party generally bears the initial burden of proving the service was proper. (See American Express Centurion Bank v. Zara (2011) 199 Cal.App.4th 383, 387.) Guangzhou Hong You Trading’s counsel states they did not serve Dai at the Walnut address because they determined it was a bad address. (Agopoglu Decl., ¶ 7.) In support of this claim, Guangzhou Hong You Trading’s counsel provided a copy of a “proof of diligence” that purports to show the service attempts made at the Walnut address. (Agopoglu Decl., ¶ 5, Ex. B.) But counsel failed to establish how they have personal knowledge of these purported service attempts and failed to authenticate the exhibit. (See Evid. Code, §§ 702, 1400, 1401.) Further, the “proof of diligence” is not in the proper form of a signed and sworn affidavit. Thus, the court finds it has no evidentiary value.

Moreover, even if the court considered this exhibit, it still fails to establish service was proper. It states a “Danny Wu” claimed “defendant” is unknown at the address. (Agopoglu Decl., ¶ 5, Ex. B.) But it does not clarify which “defendant” Wu was referring to and the fact that one occupant of the Walnut address is unaware of Dai does not mean it cannot have served as a mailing address. In fact, the process server could have and probably should have effected substitute service right then and there. Instead, the process server apparently took the word of an individual who could be motivated to avoid service with misleading information over Kenbald’s official filings with the California Secretary of State. Last, even if the Court accepts the dubious premise that it was reasonable to abandon service at the Walnut address, Guangzhou Hong You Trading failed to provide any evidence that establishes the Temple City address was the proper address for Dai. Thus, the Court does not find the substitute service of Kenbald was proper but in doing so, the Court issues no opinion as to the propriety or effectiveness of the substitute service on Dai individually.

Accordingly, the Court GRANTS Kenbald’s motion.

CONCLUSION

Based on the foregoing, Kenbald’s motion to set aside default is GRANTED and Kenbald’s answer that was previously received by the Court on April 9, 2024 is deemed filed and operative as of this date.