Judge William A. Crowfoot, Case Number: 23AHCV02311, Date: 2024-03-14 Tentative Ruling

Judge: William A. Crowfoot, Case: 23AHCV02311, Date: 2024-03-14 Tentative Ruling

On October 5, 2023, plaintiff Sophia Cheung (“Plaintiff”) filed this action against defendant Potato Construction, Inc. (“Defendant”) asserting causes of action for: (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) fraud, and (4) violation of Business and Professions Code section 17200 et seq.

On January 10, 2024, Defendant filed this motion to set aside the entry of default on the grounds that it lacked actual knowledge of the complaint due to a clerical error.

Where a service of summons has not resulted in actual notice to a party in time to defend the action, the party may move the court to set aside default and default judgment. (Code Civ. Proc., § 473.5, subd. (a).) The motion must be made no later than two years after entry of default or 180 days after service of a written notice that default or default judgment has been entered. (Ibid.) The party must act with diligence upon learning of the judgment. (Trackman v. Kenney (2010) 187 Cal.App.4th 175, 180; Code Civ. Proc., §473.5, subd. (a).)

The party seeking to set aside must also submit a declaration that lack of actual notice was not caused by his or her avoidance of service or inexcusable neglect and a copy of the proposed answer, motion, or other pleading proposed to be filed in the action. (Code Civ. Proc., § 473.5, subd. (b).) Upon a finding by the court that the defendant’s lack of actual notice prevented him or her from defending the action, “it may set aside the default or default judgment on whatever terms as may be just and allow the party to defend the action.” (Code Civ. Proc. § 473.5, subd. (d); Goya v. P.E.R.U. Enterprises (1978) 87 Cal.App.3d 886, 893.)

Defendant states that the complaint was served on “Jessie S.” or Jing “Jessie” Sun (“Ms. Sun”) at its office located at 735 W. Duarte Road, Suite 301 in Arcadia, California. Ms. Sun is Defendant’s office manager and receptionist who is responsible for receiving and opening mail, filing, and general administrative and clerical tasks. Defendant states that the statement of information filed with the California Secretary of State identifies Boyu Zhang (“Mr. Zhang”) as its agent for service of process and that Mr. Zhang was not aware of the lawsuit until December 1, 2023, when Ms. Sun gave him a request for entry of default dated November 27, 2023. Ms. Sun then looked through Defendant’s files for Plaintiff and found a summons and 30 pages of other documents. Prior to this search, Ms. Sun did not have any recollection of seeing these documents or giving them to Mr. Zhang before December 1, 2023.

Defendant argues that serving Ms. Sun, its receptionist, did not result in actual notice to its officer and director, Mr. Zhang, therefore Defendant did not receive actual notice in time to defend the action. (Motion, pp. 6-7.) Defendant argues that Ms. Sun was not an officer or director and was not authorized to act on its behalf. Further, Defendant claims that the failure to respond was due to a clerical error and not due to any efforts to avoid service. Defendant also states that if the default is set aside, it intends to file an answer and a cross-complaint. A copy of the proposed answer is attached as an exhibit to defense counsel’s declaration.

A corporate defendant is deemed to have received actual notice for purposes of CCP § 473.5 if its board of directors, president, or designated agent for service of process was served with the summons and complaint on the defendant's behalf. (Pulte Homes Corp. v Williams Mechanical, Inc. (2016) 2 CA5th 267, 273–275.) In Ramos v Homeward Residential, Inc. (2014) 223 Cal.App.4th 1434, 1445, a corporate defendant was found not to have actual notice of the plaintiff's complaint against it merely because the plaintiff's attorney informed some of the defendant's employees of the litigation. Like the employees in Ramos, Ms. Sun was not a person who could be served on the corporation's behalf under Code of Civil Procedure section 416.10 and was not otherwise responsible for responding to litigation. Furthermore, the fact that Plaintiff served a demand letter on August 29, 2023, before this action was filed, does not impart actual notice of the lawsuit (which was nonexistent at the time of the letter). Therefore, Defendant’s motion is GRANTED and the default is set aside.

The Court separately notes that on November 20, 2023, Plaintiff filed a request for entry of default which was denied because the proof of service incorrectly stated that Mr. Zhang was “personally served.” The notice of rejection informed Plaintiff that Mr. Zhang was served by substituted service, not personal service, and that a corrected proof of service was needed. Subsequently, On November 21, 2023, Plaintiff filed another proof of service. While the title of the document states that it is a “proof of service by substituted service”, the document was still defective because it states that Mr. Zhang was “personally served.” Accordingly, the default was entered incorrectly.

Defendant’s motion to set aside the default is GRANTED. The Court sets a trial setting conference for __________ at 8:30 a.m. in Department 3 of the Alhambra Courthouse.

Defendant is ordered to file its proposed Answer within 10 days of the date of this order.

William A. Crowfoot

Judge of the Superior Court

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.