Filed 4/27/20 MW Properties v. Foundation for Affordable Housing CA6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

MW PROPERTIES, LLC,

Plaintiff and Appellant,

v.

FOUNDATION FOR AFFORDABLE HOUSING III, INC. et al,

Defendants and Respondents.

2d Civ. No. B291199

(Consolidated with No. B293819)

(Super. Ct. No. 56-2017-00496386-CU-CO-VTA)

(Ventura County)

MW Properties, LLC (MW) sued a dozen entities with which it had done business. The claims related to limited partnership agreements for the development of affordable housing units. MW was represented by Glenn Todd Rosen, who prepared and filed the complaint and served each defendant. Rosen’s failure to respond to demurrers and demands for arbitration resulted in the dismissal of all of MW’s claims and an award of $100,603.88 in attorney fees and costs. Rosen did not inform MW of the pending motions, dismissal or money judgment.

When Rosen ignored MW’s status inquiries, MW contacted another attorney, who discovered the case had been dismissed because Rosen failed (1) to appear at the scheduled arbitration and (2) to file an amended complaint following the sustaining of demurrers with leave to amend. The new attorney filed two successive motions to vacate the judgment of dismissal. The first motion invoked the discretionary clause of Code of Civil Procedure section 473, subdivision (b) (hereafter “section 473(b)”). MW was unable to obtain an affidavit of fault from Rosen, whom it claimed had abandoned the litigation and arbitration. The trial court denied that motion and MW appealed.

After initiating the appeal, MW filed the second motion, which invoked the mandatory clause of section 473(b). MW retained a malpractice attorney, who procured an affidavit of fault from Rosen, and argued it was entitled to mandatory relief based upon Rosen’s neglect. The trial court denied the motion, finding, among other things, that it lacked jurisdiction to consider the motion due to the pending appeal of the order denying the first motion. MW appealed the denial of the second motion and we consolidated the two appeals for purposes of briefing, oral argument and disposition.

MW contends both orders should be reversed, but focuses on the denial of the second motion. With respect to the first motion, MW has not shown the trial court’s denial of discretionary relief constituted an abuse of discretion. We affirm that order.

As for the second motion, we conclude MW was entitled to mandatory relief under section 473(b). Rosen’s affidavit of fault demonstrated his inexcusable and prejudicial neglect of his client throughout the litigation and arbitration. As we shall explain, the trial court had jurisdiction to consider the second motion notwithstanding the pending appeal from the order denying the first motion. (See Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 189-190 (Varian).) We therefore reverse the second order and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

In the late 1990’s, MW entered into three limited partnership agreements involving the development of affordable housing. In May 2017, MW filed a complaint against 12 defendants. It included causes of action for breach of contract, breach of fiduciary duties and promissory fraud. Rosen prepared and served the complaint.

Six defendants demurred to the complaint. Rosen filed no opposition to the demurrers, which were sustained with leave to amend. After Rosen failed to amend the complaint, the trial court granted the demurring defendants’ motion to dismiss the complaint with prejudice.

The other six defendants sought to enforce arbitration agreements in contracts with MW. They moved to compel arbitration and to dismiss the action, or in the alternative, for a stay pending arbitration. Rosen did not oppose the motion. The trial court granted the motion to compel and stayed the proceedings pending arbitration.

Rosen did not inform MW of the arbitration date. When neither MW nor Rosen appeared at the arbitration, the trial court granted the arbitration defendants’ motion to lift the stay and to dismiss MW’s claims without prejudice. On January 10, 2018, the court entered a judgment of dismissal as to all 12 defendants (collectively “respondents”) and awarded them $100,603.88 in attorney fees and costs. Aside from filing and serving the complaint, Rosen took no action on MW’s behalf.

The trial court denied the first section 473(b) motion, which was brought on discretionary grounds. It found that MW, as a suspended entity, lacked capacity to pursue the motion, had failed to submit the required amended pleading and had not shown any excusable neglect on its part. The court also determined that vacating the dismissals would prejudice respondents and awarded them $48,958 in attorney fees and costs.

Shortly after appealing that ruling, MW filed the second section 473(b) motion. MW stated its corporate status had been revived and submitted Rosen’s affidavit of fault, along with a proposed amended complaint. Rosen admitted he had continued to represent MW after filing the complaint, but had taken no action in response to the demurrers, the requests for attorney fees and costs, and the motions to compel arbitration, to dismiss the arbitration and complaint and to enter judgments against MW. Rosen declared his failure “to oppose any of the aforementioned litigation events” or to take any other action resulted in “the dismissal(s) and judgment(s) . . . entered against [MW],” “including a money judgment for over $100,000.”

The trial court denied the second motion, concluding it lacked jurisdiction to consider the motion given the pending appeal. Assuming it had jurisdiction, the court determined Rosen’s declaration was inadequate to support mandatory relief and should have been procured and included in the first motion. It also found that the motion was an improper motion for reconsideration of the first order. The court awarded respondents another $22,502 in attorney fees and costs.

DISCUSSION

Section 473(b) permits a court to grant relief from a default or dismissal in appropriate circumstances. The statute provides for both mandatory and discretionary relief. (Ibid.; State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 608 (Pietak).) MW challenges the trial court’s orders denying its first motion seeking discretionary relief and its second motion seeking mandatory relief.

A. Standard of Review
B.
Our review of an order denying relief under section 473(b)’s discretionary provision is highly deferential. (McClain v. Kissler (2019) 39 Cal.App.5th 399, 413 (McClain).) Section 473(b) “states that a court ‘may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise or excusable neglect.’ This part of section 473[(b)] is recognized as invoking the trial court’s discretion, and the judgment of the trial court ‘“shall not be disturbed on appeal absent a clear showing of abuse.” [Citation.]’” (Fasuyi v. Permatex, Inc. (2008) 167 Cal.App.4th 681, 694; McClain, at p. 413.)

An order denying mandatory relief under section 473(b) is scrutinized more carefully. (McClain, supra, 39 Cal.App.5th at p. 413.) If the prerequisites for relief are met, a trial court is without discretion to deny relief. (Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 612 (Leader); see Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2019) ¶ 5:294, p. 5-78 [“If the attorney is willing to take the blame – and pay the costs (¶5:306) – the court must set aside the default judgment”].) Our review is de novo, unless the applicability of the mandatory provision turns on disputed facts. (Leader, at p. 612.)

C. Order Denying Discretionary Relief
D.
Section 473(b) requires that a proposed pleading be attached to any motion for relief, “‘otherwise the application shall not be granted.’” (See Carmel, Ltd. v. Tavoussi (2009) 175 Cal.App.4th 393, 401 [“The purpose of the proposed pleading requirement . . . is to compel the delinquent party to demonstrate his or her good faith and readiness to proceed on the merits”].) MW did not attach a proposed amended complaint to the first motion and, as a suspended entity, it also lacked capacity to bring the motion. (Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1603-1604 [“Suspension of corporate powers results in a lack of capacity to sue”].) As MW’s counsel essentially conceded at oral argument, the trial court’s denial of the motion on those grounds was well within its discretion. (See McClain, supra, 39 Cal.App.5th at p. 413.)

E. Order Denying Mandatory Relief
F.
Before reaching the merits of the second motion, we must address the trial court’s determination that it lacked subject matter jurisdiction to consider the motion due to the pending appeal from the denial of the first motion. An order issued without such jurisdiction is void. (People v. American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 660.)

1. The Trial Court Had Jurisdiction to
2.
Consider the Second Motion

An appeal generally “stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order.” (§ 916, subd. (a).) “‘[W]hether a matter is “embraced” in or “affected” by a judgment [or order] within the meaning of [section 916, subd. (a)] depends on whether postjudgment [or postorder] proceedings on the matter would have any effect on the “effectiveness” of the appeal.’ [Citation.] ‘If so, the proceedings are stayed; if not, the proceedings are permitted.’ [Citation.]” (Varian, supra, 35 Cal.4th at p. 189.)

Successive postjudgment section 473(b) motions are permissible if they are filed within the six-month limitations period and are based on different grounds. In Standard Microsystems Corp. v. Winbond Electronics Corp. (2009) 179 Cal.App.4th 868 (Standard Microsystems), disapproved on other grounds in Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 844, the trial court entered default judgments after the defendants failed to respond to a summons. (Standard Microsystems, at p. 876.) Arguing they were improperly served, the defendants moved for discretionary relief under section 473(b). The court denied the motion. (Standard Microsystems, at pp. 877-879.) The defendants retained new counsel and filed a second section 473(b) motion based on former counsel’s neglect in failing to respond to the summons. (Standard Microsystems, at p. 880.) The Court of Appeal reversed the denial of the second motion, concluding the “defendants made the required prima facie showing for mandatory relief under section 473(b).” (Id. at pp. 894, 908.)

Respondents contend Standard Microsystems is inapplicable because MW’s second motion was based on the same theory as the first motion. They claim it was an improper motion for reconsideration under section 1008 rather than a permissible second section 473(b) motion. We disagree. Although the first motion did seek discretionary relief based on Rosen’s abandonment of MW, the trial court denied the motion, in part, because MW had “failed to submit an attorney affidavit of fault as required by [section 473(b)].” Respondents cite no authority suggesting MW was barred from continuing its efforts to obtain Rosen’s affidavit for purposes of bringing another section 473(b) motion within the limitations period.

It is true that if the trial court had granted the second motion, it would have mooted the appeal from the denial of the first motion. But “[t]he fact that the postjudgment or postorder proceeding may render the appeal moot is not, by itself, enough to establish that the proceeding affects the effectiveness of the appeal and should be stayed under section 916. Rather, something more is needed. For example, the trial court proceeding must directly or indirectly seek to ‘enforce, vacate or modify [the] appealed judgment or order.’ [Citation.] Or the proceeding must substantially interfere with the appellate court’s ability to conduct the appeal. [Citation.] [¶] A trial court proceeding also affects the effectiveness of an appeal if the possible outcomes on appeal and the actual or possible results of the proceeding are irreconcilable.” (Varian, supra, 35 Cal.4th at pp. 189-190, fn. omitted.)

Since the two section 473(b) motions were based on different provisions of the statute, the proceedings on the second motion did not “directly or indirectly seek to ‘enforce, vacate or modify [the] appealed judgment or order.’ [Citation.]” (Varian, supra, 35 Cal.4th at pp. 189, fn. omitted.) Had the trial court granted the second motion for mandatory relief, it would not have affected or modified its denial of the first motion for discretionary relief. Moreover, the actual or possible results of the proceedings and outcomes on appeal are not irreconcilable, as evidenced by our ability to affirm the first order and reverse the second without creating a conflict. (See Varian, at p. 190.) The same would be true if we affirmed or reversed both orders, or if we reversed the first order and affirmed the second.

Accordingly, we conclude the appeal from the denial of the first motion did not trigger an automatic stay of the proceedings on the second motion. In the absence of a stay, the trial court had jurisdiction to consider the second motion.

3. MW was Entitled to Mandatory Relief
4.
Relief under the attorney fault provision of section 473(b) “is mandatory when a complying affidavit is filed, even if the attorney’s neglect was inexcusable.” (Rodrigues v. Superior Court (2005) 127 Cal.App.4th 1027, 1033; Leader, supra, 89 Cal.App.4th at p. 612 [no discretion to deny mandatory relief if prerequisites are met].) The statute “‘promote[s] the determination of actions on their merits.’ [Citations.]’ More specifically, [section 473(b)’s] mandatory relief provision has three purposes: (1) ‘to relieve the innocent client of the consequences of the attorney’s fault [citations.];’ (2) ‘to place the burden on counsel [citation];’ and (3) ‘to discourage additional litigation in the form of malpractice actions by the defaulted client against the errant attorney’ [citation].” (Martin Potts & Associates, Inc. v. Corsair, LLC (2016) 244 Cal.App.4th 432, 439 (Martin Potts).) In other words, the statute “‘alleviate[s] the hardship on parties who lose their day in court due solely to an inexcusable failure to act on the part of their attorneys.’” (Generale Bank Nederland v. Eyes of the Beholder Ltd. (1998) 61 Cal.App.4th 1384, 1397 (Generale Bank), citation omitted.)

For a client to obtain mandatory relief, the attorney must submit a “straightforward admission of fault.” (Pietak, supra, 90 Cal.App.4th at p. 610; see Cowan v. Krayzman (2011) 196 Cal.App.4th 907, 916 [no entitlement to mandatory relief under section 473(b) where counsel’s declaration “did not unequivocally admit error”].) Rosen’s affidavit contains such an admission of fault. After noting that respondents had filed various demurrers and motions to compel arbitration, to dismiss the arbitration for failure to prosecute, to dismiss the complaint for failure to file an amended complaint and to recover attorney fees and costs, Rosen admitted he “took no action to oppose” the demurrers and motions and “as a result of [his] failure to take action, a dismissal or dismissals and a judgment or judgments were entered against plaintiff, including a money judgment for over $100,000.” He conceded his “failure to protect the interests of plaintiff was the sole reason that the dismissal(s) and judgment(s) were allowed to be entered.” (Italics added.)

The trial court found the affidavit “procedurally defective because [Rosen did] not provide any indication of the factual basis for any purported mistake, inadvertence, surprise, or neglect, or of the reasons therefore, as required by [section 473(b)].” This finding misstates the law. The attorney is not required to provide reasons for his or her mistake, inadvertence, surprise or neglect. (Weil & Brown, supra, ¶ 5:295, p. 5-79.) The “focus is on who is to blame, not why . . . .” (Ibid.; Martin Potts, supra, 244 Cal.App.4th at pp. 438, 440 [“[W]hat must be attested to is the mistake, inadvertence, surprise, or neglect — not the reasons for it”].)

Rosen’s affidavit of fault was modeled after the one upheld in Martin Potts. The Court of Appeal acknowledged that “an affidavit more directly spelling out an attorney’s actions might be more easily understood,” but concluded the attorney’s “declarations nevertheless unequivocally spell out that he was Corsair’s lawyer; he received plaintiff’s filings from Corsair; he did nothing with those papers; and his decision to do so was his and his alone.” (Martin Potts, supra, 244 Cal.App.4th at p. 443.) Although the affidavit did not specifically mention the word “neglect,” the court determined the attorney “sufficiently admitted his neglect.” (Ibid.) Noting that “‘[n]eglect’ includes an ‘omission,’ including the failure to give ‘“proper attention to a person or thing,”’” the court reasoned the attorney’s “acknowledgment that he received plaintiff’s lawsuit filings from Corsair and did nothing with them qualifies as not giving them proper attention, and thus as neglect.” (Ibid., citations omitted.)

Rosen’s affidavit similarly establishes his neglect of MW throughout the litigation and arbitration. Rosen admits he did nothing in response to respondents’ numerous filings and accepts full responsibility for the entry of the dismissal and fee award. Since a complying affidavit of fault was provided, the sole question for the trial court was whether the dismissal and fee award were in fact caused by Rosen’s neglect. (§ 473(b); Yeap v. Leake (1997) 60 Cal.App.4th 591, 601-602 (Yeap); Graham v. Beers (1994) 30 Cal.App.4th 1656, 1660.)

Although the trial court did not reach this issue, it is evident that Rosen’s failure to amend the complaint and to appear at the arbitration caused both the dismissal of the action and the award of $100,603.88 in attorney fees and costs. But for Rosen’s neglect, the arbitration and litigation would have proceeded to the next step. MW should not “lose [its] day in court [or arbitration] due solely to an inexcusable failure to act on the part of [its] attorney[].” (Generale Bank, supra, 61 Cal.App.4th at p. 1397, italics omitted.)

Finally, nothing in the record suggests that MW was in any way responsible for Rosen’s inaction throughout the litigation and arbitration or that Rosen’s inaction represented a deliberate strategic decision. (See Yeap, supra, 60 Cal.App.4th at p. 602.) Since Rosen’s neglect was the sole cause of the judgment of dismissal and fee award, MW was entitled to mandatory relief under section 473(b).

DISPOSITION

The trial court’s order dated April 27, 2018 denying MW’s first section 473(b) motion to vacate the judgment of dismissal is affirmed. The court’s order dated November 6, 2018 denying MW’s second section 473(b) motion to vacate the judgment of dismissal is reversed.

The matter is remanded to the trial court with instructions to grant the second section 473(b) motion, to set aside the judgment of dismissal dated January 10, 2018 and, in accordance with section 473(b), to direct Rosen to pay reasonable compensatory legal fees and costs to opposing counsel or parties. In the interests of justice, the parties shall bear their own costs on appeal.

The clerk of this court is directed to forward copies of this opinion to Rosen and the California State Bar.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

YEGAN, Acting P. J.

TANGEMAN, J.

Matthew P. Guasco, Judge

Superior Court County of Ventura

______________________________

Neufeld Marks, Paul S. Marks and Yuriko M. Shikai, for Plaintiff and Appellant.

OZ Law Group and Greg Ozhekim; Hogan Lovells US and Michael L. Turrill, for Defendants and Respondents.