Judge: Stephen I. Goorvitch, Case: 19STCV28189, Date: 2023-09-29 Tentative Ruling

Case Number: 19STCV28189    Hearing Date: March 26, 2024    Dept: 39

SoCal Lien Solutions, LLC v. BDB Properties, Inc.

Case No. 19STCV28189

Motion to Set Aside Default

Motion for a Turnover Order

Plaintiff SoCal Lien Solutions, LLC (“Plaintiff”) filed this breach of contract action against BDB Properties (“Defendant”), based upon having been assigned the claim, per Civil Code section 954.  The Court incorporates its minute orders of March 23, 2021, and September 29, 2023, by reference and includes the relevant details in this order. 

Plaintiff filed this action on August 8, 2019.  The summons and original complaint were served on  “Vanik Vergovian of Shalili & Shalili—Agent for Service” at “1200 S. Hope Street, Ste. 1000, Los Angeles, CA 90015.”  Plaintiff obtained a default judgment, following which Defendant filed an ex parte application to set aside that default judgment.  The Court gave Defendant the benefit of the doubt and granted the ex parte application on March 23, 2021.   

Following that hearing, on March 29, 2021, Plaintiff filed a first amended complaint.  Plaintiff filed a proof of service on August 23, 2021, which states that “BDB Properties, Inc.” was served personally on April 21, 2021, at 3:14 p.m. by serving “Daniel Khalili-agent of Service” at the following address: “925 N Croft Ave Los Angeles CA 90069.”  Plaintiff filed a request for entry of default, which the Clerk’s Office rejected because: (1) The proof of service stated that the first amended complaint was served, but not the summons; (2) The request for entry of default stated that the plaintiff’s name was “SoCal Lien Solutions, LLC” but the first amended complaint listed the plaintiff as “SoCal Lien Solutions;” and (3) The request for entry of default stated that the defendant’s name was “BDB Properties,” but the first amended complaint listed the defendant’s name as “BDB Properties, Inc.”    

Plaintiff corrected these issues and made two attempts to serve Defendant at its address-of-record.  Plaintiff filed an application to serve through the Secretary of State which has a declaration stating that the process server attempted service on December 1, 2021, but could not locate Defendant at its address-of-record.  Plaintiff filed a second application to serve through the Secretary of State which has a declaration stating that the process server attempted service at Defendant’s address-of-record on March 11, 2022.  The declaration states: “I walked every floor and found no body or entity with that name.”  The declaration also states that he made efforts to locate Defendant at the property through the property manager, to no avail.  The Court granted the application, following which Plaintiff served the summons and operative complaint through the Secretary of State.

Since that time, Plaintiff’s counsel mailed requests for entry of default to Defendant’s address of record: “1200 S Hope St Los Angeles CA 90015.”  These requests for entry of default were mailed on August 2, 2022; August 4, 2022; August 18, 2022; and August 23, 2022.  The Court entered a default judgment in the amount of $44,153.36 on September 2, 2022. 

Now, Defendant (again) seeks to set aside default judgment, per Code of Civil Procedure section 473.  As an initial matter, Defendant’s counsel argues that Plaintiff should have served Defendant through counsel.  In fact, at the hearing on March 23, 2021, the Court asked Defendant’s counsel whether he would accept service, and he indicated that he had no authority to do so.  Defendant’s counsel also argues that Plaintiff was not eligible to serve Defendant through the Secretary of State.  Per California Corporations Code section 1702, a plaintiff may serve a corporate defendant through the Secretary of State if, among other things, the agent for service cannot be found.  Plaintiff appears to have satisfied this requirement, as two different process servers went to Defendant’s purported address and could not locate Defendant’s office at that address.    

            In support of Defendant’s ex parte application, Daniel Khalili submitted a declaration stating that he is the sole owner of BDB Properties.  (See Declaration of Daniel Khalili, dated September 28, 2023.)  Mr. Khalili states that he is the agent for service of process and that his address is: “1200 S. Hope Street, Los Angeles, CA 90012.”  (Ibid.)  He claims never to have been served with the summons or complaint, either personally or through his address.  (Ibid.)  He also states: “I carefully receive and review all mail addressed to BDB Properties at 1200 S. Hope Street in Los Angeles, CA 90012, however I never received the Summons, the Complaint or any other papers filed in this action.”  (Ibid.)     

            The Court disbelieves Mr. Khalili’s representations.  As an initial matter, Mr. Khalili provides the wrong zip code in his declaration.  According to Defendant’s corporate records on file with the California Secretary of State, the zip code is “90015,” not “90012.”  (See Plaintiff’s Request for Judicial Notice, Exh. A.)  Moreover, the record does not support Mr. Khalili’s representations.  Plaintiff’s counsel declared under penalty of perjury that he mailed four different requests for entry of default to Defendant’s address-of-record (with the correct zip code).  The summons and original complaint were purportedly served at Defendant’s address-of-record by Mr. Pradip Kissoondyal, a registered process server.  Two different process servers—Mr. Babak Ghorbanian and Mr. Brian Weller, a registered process server—attempted to serve the summons and the first amended complaint to Defendant at its address-of-record and could not locate Defendant at its purported business address.  A fourth process server—Mr. Eric Gamble, a registered process server—personally served “Daniel Khalili.”  Plaintiff’s counsel served the “Notice of Entry of Judgment” at Defendant’s address-of-record.  (See Notice of Entry of Judgment, dated September 6, 2022.)  The Secretary of State served the summons and operative complaint at Defendant’s address-of-record.  (See Notice of Lodging, dated December 28, 2023.)  It strains credulity for Mr. Khalili to maintain that his business address is correct and that he was never served with any pleading concerning this case. 

            Defendant moves to set aside the default judgment on two grounds.  First, Plaintiff argues that the default judgment is void under Code of Civil Procedure section 473(d).  The default judgment is not void.  The record supports Plaintiff’s counsel’s application to serve Defendant through the Secretary of State.  The proof of service was filed on August 17, 2022, and states that the documents were served on the Secretary of State on June 20, 2022.  The summons and operative complaint were deemed to have been served “on the 10th day after delivery of the process to the Secretary of State.”  (Corp. Code, § 1702(a).)  Service was effective as of June 30, 2022.  The default judgment was issued on September 2, 2022.  Therefore, the default judgment is not void.  Plaintiff’s counsel argues for a different interpretation of section 1702(a), namely that service is not effective until the 10th day after the summons and complaint are mailed by the Secretary of State.  Section 1702(a) is clear on its face, so the default judgment is not void.

            In the alternative, Defendant argues that the Court should set aside the default and default judgment under Code of Civil Procedure section 473.5 because “service of a summons [did] not result[] in actual notice to [Defendant] in time to defend the action . . . .”  Section 473.5 is a better means of addressing the Secretary of State’s delay in mailing the summons and complaint to Defendant, because the late delivery prevented Defendant from filing an answer or responsive pleading before default and default judgment were entered.  Accordingly, Defendant would have had a strong argument had the motion been filed in a timely manner.  But it was not. 

Per section 273.5, Defendant was required to serve its notice of motion two years after entry of default judgment or 180 days after service of a written notice that default/default judgment was entered, whichever is earlier.  (Code Civ. Proc., § 273.5(a).)  The Court entered the default judgment on September 2, 2022.  Plaintiff served a “Notice of Entry of Judgment or Order” on September 6, 2022.  The notice was served on: “BDB Properties, Inc.” at 1200 South Hope Street, Los Angeles, California 90015 by mail.  Plaintiff’s counsel served the notice by mail, which adds five days to the deadline.  Therefore, Defendant was required to seek relief within 185 days of September 6, 2022, which was Friday, March 10, 2023.  Defendant failed to do so.  Defendant’s counsel filed an ex parte application to set aside default/default judgment on September 28, 2023; and Defendant’s counsel filed and served the instant motion on December 18, 2023.  Defendant argues that the Secretary of State did not actually serve the documents on Defendant until October 24, 2022.  (See Notice of Lodging, filed on December 28, 2023.)  Defendant still waited almost one year from that date to seek relief, so this motion is untimely.

            Moreover, Defendant does not qualify for relief under Code of Civil Procedure section 473.5 because he cannot show “a lack of actual notice not caused by avoidance of service or inexcusable neglect.”  (Trackman v. Kenney (2010) 187 Cal.App.4th 175, 180.  To the contrary, this record reflects an extraordinary amount of gamesmanship and deceit by Defendant and its owner, Daniel Khalili, to avoid the consequences of this case.  The Court previously gave Defendant the benefit of the doubt and set aside the first default judgment on March 23, 2021, at which point Mr. Khalili became aware of this litigation.  Yet, Defendant continued to ignore this case resulting in entry of another default judgment, and it has taken years to resolve the issues.  Mr. Khalili has unclean hands and his misconduct “relate[s] directly to the cause at issue.”  (Jay Bharat Developers, Inc. v. Minidis (2008) 167 Cal.App.4th 437, 445.)  Therefore, Defendant is not entitled to relief because any lack of actual notice was caused by his own misconduct.    

Based upon the foregoing, the Court orders as follows:

            1.         The Court denies Defendant’s motion to set aside the default judgment.

2.         The Court grants Plaintiff’s motion for a turnover order.

3.         Plaintiff’s counsel shall provide notice and file proof of such with the Court.