Judge: William A. Crowfoot, Case: 22AHCP00163, Date: 2023-03-14 Tentative Ruling

Case Number: 22AHCP00163    Hearing Date: March 14, 2023    Dept: 3

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - NORTHEAST DISTRICT

On May 5, 2022, Petitioner Rosa Jaime (“Jaime”) filed a petition for supervision of voluntary dissolution and winding up of limited liability company pursuant to Corporations Code section 17701.01(b).  Jaime alleged that they, along with respondent Thomas Smock (“Smock”), formed Tequisquiapan, LLC (“LLC”) on June 16, 2004, with each having 50% membership interest.  The LLC operated a business known as the Four Seasons Tea Room located at 75 North Baldwin Avenue in Sierra Madre, California (the “Real Property”).  The Real Property is a multi-use building with commercial space for the business on the ground floor and a single residential dwelling on its upper floor (the “Apartment”).  Smock is living in the Apartment without paying rent to the LLC. 

Jaime alleges that around the time the LLC was formed, she purchased the Real Property in her name and took out a loan to fund the purchase.  The loan is secured by a first priority deed of trust on the Real Property.  After purchasing the Real Property, Jaime, at Smock’s request, deeded ownership of the Real Property to the LLC, which triggered the “due on sale” clause of the Deed of Trust.  Jaime determined that since the LLC did not have sufficient cash to pay the loan, the LLC should be dissolved and the Real Property sold.  On March 11, 2021, Jaime signed and delivered to Smock a document entitled “Member Action” as well as a certificate of dissolution requesting his signature.  Smock failed to sign the certificate.  Jaime alleges that Smock is not cooperating in the winding-up of the LLC and thereby requests judicial supervision of the process, including her appointment as the sole winding-up manager for the LLC. 

On July 5, 2022, Jaime filed a proof of service of summons reflecting personal service of the summons and petition on Smock on June 29, 2022, at 9:30 p.m.  Smock did not make an appearance and the clerk, at Jaime’s request, entered default against Smock on August 3, 2022. 

On September 27, 2022, Jaime filed a motion for court supervision of the voluntary dissolution and winding up of the LLC, asserting that she has the absolute right to dissolve the LLC and should be designated as the person to wind up the LLC’s affairs due to Smock’s failure to cooperate. 

The motion was heard by the Honorable Colin P. Leis on October 19, 2022, and granted.  On October 28, 2022, Judge Leis signed an order (the “Order”) designating Jaime as the person to wind up the affairs of the LLC and granting Jaime the sole power and authority to take action on behalf of the LLC, including closing or selling the tea room, and signing all documents on behalf of the entity, including the certificate of dissolution and all contracts related to the sale of the Real Property.  Smock was ordered to cooperate with the process including, but not limited to, allowing the property to be shown.  The Court retained jurisdiction to supervise the winding up, including the determination of any claims by and against the LLC and between the members.  Jaime served the order on Smock by mail on November 3, 2022. 

On January 26, 2023, Smock filed this motion to set aside the default and the Order.  The motion is brought under Code of Civil Procedure sections 473(b) and 473.5.  Smock argues that the entry of default was a result of his excusable neglect because he was never served with the summons.  Smock also argues that he lacked actual notice of the summons in time to defend the action.   

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.  (CCP 473.5, subd. (a).)  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.  (Ibid.)  A motion under this section “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.”  (Id., subd. (b).)  “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.”  (Id., subd. (c).) 

Smock declares that he and Jaime engaged in settlement discussions to purchase Jaime’s interest in the LLC in May 2021.  (Smock Decl., ¶ 7.)  He claims he was unaware that Jaime was “claiming voluntary dissolution of the [LLC] in violation of the [LLC]’s operating agreement.”  (Smock Decl., ¶ 7.)  He states that he did not receive personal service of the petition or summons and it was not until an unspecified number of months later when he discovered Jaime’s claim that he had been served on June 29, 2022.  (Smock Decl., ¶¶ 8-9.)  He also states he was not served with notice of the hearing on Jaime’s motion.  (Smock Decl., ¶ 11.) 

Smock fails to show that: (1) he lacked actual knowledge of the action in time to defend it or that (2) the lack of notice was not caused by his avoidance of service or inexcusable neglect.  First, Smock fails to declare when he finally became aware of the action; notably, Smock merely states he was unaware that the proof of service of summons represented that he was personally served.  (Smock Decl., ¶¶ 7, 9.)  Also, Jaime’s attorney, Justene M. Adamec, declares that Smock’s attorney was informed of the summons and petition as early as May 9, 2022, and requested to accept service of process on June 21, 2022.  (Opp., Adamec Decl., ¶ 2, Ex. 1.)  Notably, Smock only claims that he was informed at some unspecified time that he would not need to defend any action until he was served.  Second, Smock fails to submit any evidence in his moving or reply papers to show he was not avoiding service.  In contract, Jaime’s attorney attaches emails showing that a registered process server attempted to serve Smock at his residence on June 23, 2022, and June 24, 2022.  (Adamec Decl., ¶ 4, Ex. 3.) 

As for the claim that he was not personally served with the petition or summons, Smock’s factually devoid declaration is not credible, especially in light of the multiple declarations submitted with Jaime’s opposition brief.  The individual who purportedly effected service and signed the proof of service, William A. Morrison, declares that he is an employee of the Four Seasons Tea Room and recognized Smock, who often congregated with others at the local Starbucks near the Four Seasons Tea Room.  (Opp., Morrison Decl., ¶ 4.)  Morrison states he was requested to serve Smock because he could identify him and lived nearby.  (Morrison Decl., ¶ 5.)  He stated that on the evening of June 29, 2022, he was with his son (who also submitted a substantively identical declaration) when he observed Smock on the street near his apartment.  (Morrison Decl., ¶ 6.)  Morrison inquired, “Mr. Smock” and he replied, “Yes.”  (Morrison Decl., ¶ 6.)  Morrison delivered the papers and said, “These are for you.”  Smock then said, “I’m not Tom.”  However, Morrison and his son waited out of sight across the street and observed Smock “take a short walk up Baldwin Avenue and go into the penthouse above the Four Seasons Tea Room.”  (Morrison, ¶ 7.)  Smock makes no effort to dispel this testimony beyond questioning Morrison’s credibility.  (Reply, 3:6-9.)  For example, Smock does not explain his whereabouts on June 29, 2022, nor does he offer any explanation for why another man who responded to “Mr. Smock” might have entered his dwelling. 

Based on the foregoing, Smock’s motion to set aside the default and Order is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org.  Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter.  Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue.  If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.

Dated this 14th day of March, 2023