Judge: Shirley K. Watkins, Case: 23VECV00702, Date: 2023-05-25 Tentative Ruling

Case Number: 23VECV00702    Hearing Date: May 25, 2023    Dept: T

23VECV00702 CREDITORS ADJUSTMENT BUREAU... vs THE PLANET STONE GLOBAL

Defendant’s Motion to vacate default and default judgment: Grant.  Defendant shall separately efile and serve its demurrer within 10 days.

This is a collection matter in which a default judgment was entered for $690,644.85.  The following is a timetable of events:

The complaint was filed on 2/14/2023.

The summons and complaint were served on 3/3/2023.

On 4/3/2023, defense counsel sent a letter of representation to plaintiff's counsel.

On 4/4/2023 at 10:27 a.m., plaintiff's counsel sent an email letter of representation to both defense counsel.

On 4/4/2023 at 12:05 p.m., default was entered.

On 4/5/2023 at 9:57 a.m., plaintiff's counsel emailed both defense counsel and stated that he noticed that a default was filed 4/4/2023 and reminded that he had advised them of his representation before default was entered, then asked plaintiff to stipulate to set aside the default.

On 4/5/2023 at 10:46 am from plaintiff’s counsel stating that the default was filed prior to "processing" the email.  He indicated the plaintiff would stipulate to set aside the default only if defendant agreed to answer only and prepare a stipulation and order by the close of business on 4/7/2023.

On 4/5/2023 at 11:30 a.m., judgment was entered despite ongoing discussions about resolution and knowing there was counsel on the other side.

On 4/5/2023 at 12:30 p.m., defendant asked for two additional weeks so he could demur.

On 4/5/2023 at 12:37 p.m., Mr. Freed responded by email that he would agree to answer only, no demurrer.  He did not mention that judgment has already been entered.

There is no Notice of Entry of Default Judgment in the file.

On 4/17/2023, defendant sought ex parte relief to vacate the default and default judgment.  The court set the matter for hearing on 5/25/2023. 

The law in California, and the trend nationwide, is that if an attorney is known to be representing a defendant before default is entered, the policy is to give "fair notice" before default is entered.  Fair notice is generally to be to designate a reasonable period of time to respond or else default will be entered.  Here, notice was given before default of the representation but because the process was already in the works, the letter of representation and the default bypassed each other.  Moreover, plaintiff’s counsel knew there was counsel on the other side when judgment was entered, also without “fair notice.” Mr. Freed has already agreed that he would agree to an answer only which means he is generally not opposed to the concept of stipulating to set aside the default. 

Monetary sanctions are not warranted here, and the request is denied.  Under usual circumstances, the request for entry of default should have been withdrawn once the notice of representation was made and judgment should not have been entered without “fair notice."

Finally, there is a strong policy in California favoring a decision on the merits.  Here, contact was made between counsel before default was entered and again before judgment was entered, defendant moved promptly for relief, and there is no prejudice to plaintiff.