Judge: Steven A. Ellis, Case: BC701350, Date: 2024-01-31 Tentative Ruling
Case Number: BC701350 Hearing Date: February 6, 2024 Dept: 29
Motion for Enforcement of Settlement or in alternative, Motion
to Set Aside Default Judgment filed by Andrews
International, Inc. and Allied Universal Risk Advisory and Consulting Services,
Inc.
Motion to Amend Judgment filed by Plaintiff
Tentative
The Court DENIES the motion to enforce the settlement
agreement.
The Court GRANTS the motion to set aside the entry of
default and default judgment.
The Court SETS ASIDE the default entered on November 5,
2019, and the default judgment entered on November 30, 2022.
The Court DENIES as moot the motion to amend the
judgment.
Background
On April 9, 2018, Willy Mathurin
(“Plaintiff”) filed the Complaint in this action against Curtis Jelks (“Jelks”),
G. Harris, A. Jones, Andrews International, Inc. (“Andrews”), and Does 1 through
10. On October 2, 2018, Plaintiff amended
the complaint to substitute the true name of Defendant Antoine Jones (“Jones”) for
the incorrect name “A. Jones” and to substitute the true name of Defendant
Gerry Harris (“Harris”) for the incorrect name “G. Harris.”
On November 5, 2019, the Court ordered that
clerk to enter the default of Andrews.
Subsequently, the defaults of Jelks and Jones were also entered (on
November 7, 2019, and January 21, 2020).
On February 5, 2020, the Court, at the request of Plaintiff, dismissed
all claims against Harris and Does 1 through 10.
On November 30, 2022, the Court entered
judgment in favor of Plaintiff, and against Welks, Jones, and Andrews in the
amount of $74,910.91.
On June 1, 2023, the Court denied Plaintiff’s
ex parte application for leave to amend the judgment (or, alternatively, to
shorten time on a motion for leave to amend judgment). On June 16, 2023, the Court denied a second
ex parte application by Plaintiff for an order shortening time on a motion for
leave to amend judgment.
On June 6, 2023, Plaintiff filed a motion for
leave to amend the judgment. The basis
of the motion is that Andrews had merged with, into, or otherwise been renamed
Allied Universal Risk Advisory and Consulting Services, Inc. (“Allied”). The motion was scheduled for hearing on
January 8, 2024. Allied filed its opposition
December 22, 2023. Plaintiff filed his reply on December 29, 2023. After hearing argument, the Court continued
the hearing to January 31, 2024.
Meanwhile, on December 15, 2023, Allied filed
a motion to enforce a settlement agreement, or, in the alternative, set aside
the default and default judgment entered against Andrews. That motion was scheduled for hearing on January
31, 2024. Allied filed an amended notice
of motion and motion on December 18 and an amended memorandum of points and
authorities on January 2. Plaintiff
filed his opposition on January 18, and Allied filed its reply on January 24.
Subsequently, the Court, on its own motion,
continued both hearings to February 7, 2024.
Legal Standard
Motion to Enforce Settlement Agreement
Code of Civil Procedure section 664.6 provides:
(a) If
parties to pending litigation stipulate, in a writing signed by the parties
outside the presence of the court or orally before the court, for settlement of
the case, or part thereof, the court, upon motion, may enter judgment pursuant
to the terms of the settlement. If requested by the parties, the court may
retain jurisdiction over the parties to enforce the settlement until
performance in full of the terms of the settlement.
(b) For purposes of this section, a writing is signed
by a party if it is signed by any of the following:
(1) The party.
(2) An attorney who represents the party.
(3) If the party is an insurer, an agent who is
authorized in writing by the insurer to sign on the insurer's behalf.
Because of the summary nature of a proceeding to enforce a
settlement agreement under section 664.6, and because settlement of a lawsuit
implicates a substantial right of a litigant, strict compliance with the
statutory requirements is required. (J.B.B.
Investment Partners, Ltd. v. Fair (2014)
232 Cal.App.4th 974, 985; Sully-Miller Contracting Co. v.
Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37.)
Before the Legislature amended the statute effective as of January 1, 2021, “parties” under section 664.6 meant the litigants
themselves, not their attorneys. (See Levy v. Superior Court
(1995) 10 Cal.4th 578, 586.) In any event, however, for a settlement
agreement to be enforceable under section 664.6, all “parties” (as that term is
defined in the statute) must sign, including the party seeking to enforce the
agreement and the party against whom enforcement is sought. (J.B.B.
Investment Partners, supra, 232 Cal.App.4th at p. 985.)
If the settlement leaves material terms wanting, or confusing, the
settlement cannot be enforced through the section 664.6 summary
proceeding. (Compare Terry v. Conlan (2005) 131 Cal.App.4th 1445
[finding parties never agreed to the means that were material to the
settlement, including what role an independent manager was to play regarding
management of a trust property, and whether the trust should be qualified as a QTIP,
thereby indicating that there was no meeting of the minds as to the material
terms] with Osumi v. Sutton (2007) 151 Cal.App.4th 1355 [holding trial
court’s decision to extend closing date for vendor’s agreement to repurchase
house did not create a material term and was within court’s power because the
closing date had passed by the time the motions came on for hearing and a new
closing date was necessary to grant the relief sought by both parties].) Nonetheless, when the “parties intend that an agreement be
binding, the fact that a more formal agreement must be prepared and executed
does not alter the validity of the agreement.” (Blix St.
Records, Inc. v. Cassidy (2010)
191 CA4th 39, 48.)
It is possible for parties to have an
enforceable settlement agreement that is not subject to the summary enforcement
proceedings of section 664.6 (including, for example, an
enforceable oral agreement to settle or an agreement that is signed by an
authorized representative who has the power to bind the party but is not listed
in subdivision (b) of the statute). In
those circumstances, a party seeking to enforce the agreement must proceed
through other means, such as a separate civil action, an amendment to the
answer to add a new affirmative defense, and/or a motion for summary judgment,
rather than through the summary procedures of section 664.6. (See generally Weddington Productions v.
Flick (1998) 60 Cal.App.4th 793, 809 [“Section 664.6 was enacted to provide
a summary procedure for specifically enforcing a settlement contract without
the need for a new lawsuit.”])
Motion to Set Aside Default and
Default Judgment
The motion before the Court invokes both a
statutory power to set aside a default and default judgment and the Court’s
inherent authority to do so.
Beginning with the statutory authority, Code
of Civil Procedure section 473.5 states:
(a) 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.
(b) A notice of motion to set aside a default
or default judgment and for leave to defend the action shall designate as the
time for making the motion a date prescribed by subdivision (b) of Section
1005, and it shall be accompanied by an affidavit showing under oath that the
party’s lack of actual notice in time to defend the action was not caused by
his or her avoidance of service or inexcusable neglect. The party shall serve
and file with the notice a copy of the answer, motion, or other pleading proposed
to be filed in the action.
(c) Upon a finding by the court that the
motion was made within the period permitted by subdivision (a) and that his or
her lack of actual notice in time to defend the action was not caused by his or
her avoidance of service or inexcusable neglect, it may set aside the default
or default judgment on whatever terms as may be just and allow the party to
defend the action.”
In addition, and separately, even when there
is no statutory basis to set aside a default or default judgment, courts have “the
inherent authority to vacate a default and default judgment on equitable
grounds such as extrinsic fraud or extrinsic mistake.” (Bae v. T.D. Service Co. (2016) 245
Cal.App.4th 89, 97; see also, e.g., Rappleyea v. Campbell (1994) 8
Cal.4th 975, 981-982.)
“Extrinsic fraud” generally involves some act
that kept the party seeking relief “in ignorance of the action or proceeding”
or “fraudulently prevented” the party “from presenting his claim or defense.” (Kulchar v. Kulchar (1969) 1 Cal.3d
467, 471; see also, e.g., Bae, supra, 245 Cal.App.4th at p. 97.)
“Extrinsic mistake” is defined broadly and encompasses “almost any set of extrinsic circumstances
which deprive a party of a fair adversary hearing.” (In re Marriage of Park (1980) 27
Cal.3d 337, 342; see also, e.g., Rappleyea,
supra, 8 Cal.4th at p, 981.) There need not
necessarily be a mistake “in the strict sense.”
(Park, supra, 27 Cal.3d at p. 342.) But a mistake
is intrinsic, and not extrinsic, when “a party’s own negligence allows the … mistake
to occur.” (Kramer v. Traditional
Escrow (2020) 56 Cal.App.5th 13, 29.)
Intrinsic mistakes relate to the merits of the case, such that granting
relief would improperly allow a party to relitigate the case. (Kulchar, supra, 1 Cal. 3d at pp.
472-73.) Examples of intrinsic mistakes,
or intrinsic fraud, are perjury, failing to complete discovery, or failing to
prepare adequately for trial. (Ibid.)
Courts apply a stringent, three-part
test for equitable relief pursuant to the inherent authority of the court. A party seeking relief on equitable grounds
must show (1) “a satisfactory excuse”; (2) “a meritorious case”; and (3)
"diligence in seeking” relief. (Rappleyea,
supra, 8 Cal.4th at p. 982; see also, e.g., Kramer, supra, 56
Cal.App.5th at p. 29; 1 Weil & Brown, California Practice Guide: Civil
Procedure Before Trial (The Rutter Group 2023), ¶ 5:435.)
Motion to Amend Judgment
“When jurisdiction is, by the Constitution or
this Code, or by any other statute, conferred on a Court or judicial officer,
all the means necessary to carry it into effect are also given; and in the
exercise of this jurisdiction, if the course of proceeding be not specifically
pointed out by this Code or the statute, any suitable process or mode of
proceeding may be adopted which may appear most conformable to the spirit of
this Code.” (Code Civ. Proc, § 187.)
Under Code of Civil Procedure section 187,
the court has authority (among other things) to amend a judgment to add, as a
judgment debtor, a corporation that is an alter ego of a named defendant or a
successor to a named defendant. (Misik
v. D'Arco (2011) 197 Cal.App.4th 1065, 1074–75; McClellan v. Northridge
Park Townhome Owners Ass'n, Inc. (2001) 89 Cal.App.4th 746, 752.) “The general rule is “where one corporation
sells or transfers all of its assets to another corporation, the latter is not
liable for the debts and liabilities of the former unless (1) the purchaser
expressly or impliedly agrees to such assumption, (2) the transaction amounts
to a consolidation or merger of the two corporations, (3) the purchasing
corporation is merely a continuation of the selling corporation, or (4) the
transaction is entered into fraudulently to escape liability for debts.
[Citations.]” (Id., at 753; see also, e.g., Ray v. Alad Corp.
(1977) 19 Cal.3d 22, 28.)
Discussion
Motion to
Enforce Settlement
Allied contends
that the parties entered into a settlement agreement that may be enforced under
Code of Civil Procedure section 664.6.
According to Allied’s counsel:
·
The parties reached an oral agreement
“to settle Plaintiff’s claims” and agreed “to several material terms” during a phone
call on July 14, 2023. (Lewis Decl., ¶
17.)
·
Allied’s counsel sent a draft of the
agreement to Plaintiff’s counsel on July 20, 2023. (Id., ¶ 17 & Exh. Z.) The next day, on July 21, Plaintiff’s counsel
proposed revisions. (Id., ¶¶ 18-19
& Exh. AA-BB.) Later that same day
(July 21), Allied’s counsel agreed to most but not all of Plaintiff’s proposed
revisions. (Id., ¶ 20 & Exh.
CC.)
·
A month passed. After further discussions, on August 21,
2023, Allied’s counsel sent a revised draft of the agreement to Plaintiff’s
counsel. (Id., ¶ 21 & Exh. DD.)
·
On August 23, 2023, Plaintiff’s
former counsel raised an issue of an attorney fee lien. (Id., ¶ 22 &
Exh. EE.)
·
More than two months passed. Allied’s counsel contacted Plaintiff’s
counsel on November 7, 2023, to discuss further revisions to the settlement
agreement, but Plaintiff’s counsel stated that Plaintiff was no longer
interested in resolving the claims on the terms that had been discussed. (Id., ¶ 24.)
On these facts,
the Court finds that the parties did not enter into a written settlement
agreement that can be enforced under the summary procedures of Code of Civil
Procedure section 664.6. As noted above,
there must be strict compliance with the statutory requirements of section
664.6. (J.B.B.
Investment Partners, supra, 232
Cal.App.4th at p. 985; Sully-Miller Contracting, supra, 103
Cal.App.4th at p. 37.) Here, however, although it does appear that the parties agreed on a number of
material terms, they never reached agreement on other terms, and they never
signed a settlement agreement.
Accordingly,
Allied’s request to enforce a settlement agreement under Code of Civil
Procedure section 664.6 is DENIED.
Motion to Set
Aside Default and Default Judgment
Allied, acting
as the successor to Andrews (Mem. at p. 10), seeks in the alternative to set
aside the default and default judgment entered against Andrews.
Allied first seeks
this relief under Code of Civil Procedure section 473.5. That request is GRANTED.
A request for
relief under section 473.5 must be brought within two years of entry of the
default judgment. (Code Civ. Proc., §
473.5, subd. (a).) Here, the judgment was
entered on November 20, 2022, and the motion was filed on December 15,
2023. Accordingly, the motion is timely.
Allied has
adequately shown that the service of the summons, although proper, did not
result in “actual notice to a party in time to defend the action.” (Code Civ. Proc., § 473.5, subd. (a); Blatz
Decl., ¶ 10.)
And Allied has adequately
shown that the lack of actual notice was not the result of “avoidance of
service” or “inexcusable neglect.” (Code
Civ. Proc., § 473.5, subd. (c); Blatz Decl., ¶ 11.) Rather, the lack of notice was the result of
a series of corporate transactions that led to what the Court can classify as neglect,
but excusable neglect, by Allied in failing to monitor the addresses previously
used by the companies it acquired, including Andrews.
In light of the
above, the Court need not reach, and does not reach, the issues of equitable
relief and amending the judgment.
Conclusion
The Court DENIES the motion to enforce the settlement
agreement.
The Court GRANTS the motion to set aside the entry of
default and default judgment.
The Court SETS ASIDE the default entered on November 5,
2019, and the default judgment entered on November 30, 2022.
The Court DENIES as moot the motion to amend the
judgment.
Allied is ordered to give notice.