Case Number: BC506489 Hearing Date: June 02, 2014 Dept: 34

Moving Party: Defendants J.J.J. Diners, Inc.; Marvin Hur; and Connie Hur (“defendants”)

Resp. Party: Plaintiff Wilshire State Bank (“plaintiff”)

Defendants’ motion to vacate judgment and set aside default is DENIED.

The Court takes judicial notice of the items requested by plaintiff. (See Evid. Code, § 452(d), (h); Ascherman v. General Reinsurance Corp. (1986) 183 Cal.App.3d 307, 310 [recognizing that a court may take judicial notice of a contract when it relates to the complaint].)

BACKGROUND:

Plaintiff commenced this action on 4/19/13 against defendants for: (1) breach of contract; (2) breach of guaranty; (3) breach of guaranty; and (4) enforcement of security. Plaintiff alleges that it made a loan to JJJ Diners Inc. for $297,000.00 and that JJJ executed a promissory note for this sum. Chul Hur and Shunji Hur each guaranteed payment on the note. JJJ defaulted on the note by not paying the balance due under the note. There remains due and owing $130,298.47.

Default was entered against all defendants on 6/12/13.

Defendants previously moved to set aside the default. The motion was denied on 1/27/14. The Court found that defendants had failed attach a proposed responsive pleading, failed to explain their delay in seeking relief, failed to show that they lacked actual notice of the action under Code of Civil Procedure section 473.5, and did not sufficiently show that service of the summons and complaint was improper.

On 3/6/14, the Court entered default judgment against defendants in the amount of $179,080.62.
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ANALYSIS:

Defendants argue that the Court should set aside the orders pursuant to its equitable powers because the orders were the result of extrinsic fraud or mistake. Equitable relief may be granted in exceptional circumstances after six months even if statutory relief is unavailable for reasons such as the time limits have expired. (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981. See also Code Civ. Proc., § 473(b).) This motion is not barred by collateral estoppel because defendants did not request, and the Court did not consider, equitable relief during the 1/27/14 ruling.

Equitable relief from judgments or dismissals is available only upon a showing of extrinsic factors like extrinsic fraud or mistake. (Advanced Bldg. Maint. v. State Comp. Ins. Fund (1996) 49 Cal.App.4th 1388, 1395.) Extrinsic mistake broadly applies “when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits.” (Rappleyea, 8 Cal.4th at p. 981.) Parties seeking to set aside judgments on the grounds of extrinsic mistake or fraud one must show (1) a meritorious case, (2) a satisfactory excuse for not presenting a claim in the earlier proceeding and (3) diligence in seeking to set aside the judgment after discovery. (Id. at p. 982.)

“Where a client is unknowingly deprived of effective representation by counsel the client will not be charged with responsibility for misconduct if the client acts with due diligence in moving for relief after discovering the attorney’s neglect and if the other side will not be prejudiced by the delay.” (Aldrich v. San Fernando Valley Lumber Co. (1985) 170 Cal.App.3d 725, 739.) “Positive misconduct is found where there is a total failure on the part of counsel to represent his client.” (Ibid.)

Defendants provide declarations, which if credited, appear to evidence positive misconduct on the part of their previous attorneys. However, the Court finds it difficult to take these declarations at face value, since they are contradicted by previous declarations submitted by defendants.

Connie Hur declares that, immediately after being sued, she contacted the law firm of Badkoubehi & Dadmehr LLP to represent defendants in this action as well as another action with plaintiff. (C. Hur Decl., ¶ 4.) In the previous motion that the court denied on January 27, 2014, defendants stated under penalty of perjury that they were not served with the summons and complaint and that they were not aware of the action. Clearly, both assertions can not be true.

Connie declares that, after hiring Badkoubehi & Dadmehr, she was unable to speak with any of the attorneys and began looking for another lawyer. (Id., ¶ 5.) In June 2013, Soo Young Biun suggested the Nassie Law firm and acted as a go between in communicating with Nassie. (Id., ¶ 6.) Connie thereafter fired Badkoubehi & Dadmehr and hired Nassie Law. (Id., ¶ 7.) Connie communicated with Nassie almost exclusively through Biun. (Ibid.) Defendants were billed by Nassie and Biun for these communications and services. (Id., ¶¶ 7-11, Exhs. A-C.) Biun has been sending threatening communications to Connie demanding more money. (Id., ¶ 12.) Connie thereafter contacted the Muhan Law Group to assist with a loan modification and this action. (Id., ¶ 13.) Muhan informed Connie that Nassie had done nothing on defendants’ behalf and had never substituted in as defendants’ counsel of record. (Id., ¶¶ 13-14.) Connie then hired Muhan to represent defendants in this action. (Id., ¶ 13.) Muhan filed the previous motion to set aside default, but indicated that the motion was filed in pro per and failed to make an appearance at the hearing. (Id., ¶ 17.) Defendants’ current counsel declares that no documents were filed and no appearances were made by Badkoubehi & Dadmehr or Nassie. (See Madrosen Decl., ¶¶ 4-5.)

For the diligence prong, it appears that defendants became aware in August 2013 of their previous attorneys’ failure to respond to the action. (See C. Hur Decl., ¶ 13.) Defendants hired Muhan in August 2013, and Muhan filed a motion to set aside default three months later, in November 2013. (See id., ¶¶ 13, 17.) Default judgment was entered on 3/6/14 and the instant motion was filed on 4/22/14, purportedly one week after defendants retained their current counsel. (See id., ¶ 18.)

Finally, it must be determined whether defendants have a meritorious case. Defendants fail to make this showing. The instant action concerns a loan made by plaintiff to defendants. Defendants declare that they do not read or write English. (C. Hur. Decl., ¶ 2; M. Hur Decl., ¶ 2.) They declare that when they obtained the loan in March 2006, the promissory note was in English and was not translated into Korean. (Ibid.) They state that “[t]he official at the Bank spoke to us in Korean and read to us the terms he deemed to be important. He stated to us that this was a five year loan and that the loan amount would be paid off at the end of five years.” (Ibid.) Defendants declare that they made the monthly payments for five years and believed that they had paid off the loan in full. (C. Hur. Decl., ¶ 3; M. Hur Decl., ¶ 3.) In March 2011, an officer from the bank contacted them and stated that they still owed $100,000.00 on the loan and that they missed a payment. (Ibid.) Defendants declare that the officer “mentioned something about a ‘write-off” which defendants understood to mean that plaintiff would write off whatever balance remained. (Ibid.) Defendants did not hear from the bank until they received the summons and complaint in this action. (Ibid.)

At most, the evidence establishes that defendants failed to read or obtain an independent translation of the loan agreement before it was signed. “Ordinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to consent to all its terms, and cannot escape liability on the ground that he or she has not read it. If the person cannot read, he or she should have it read or explained.” (1 Witkin, Summary (10th ed. 2005) Contracts , § 118, p. 157. See also Bolanos v. Khalatian (1991) 231 Cal.App.3d 1586, 1590 [a party’s limited ability to read the language of the contract was not enough by itself to invalidate the agreement]; Randas v. YMCA of Metroplitan Los Angeles (1993) 17 Cal.App.4th 158, 160, 163 [an agreement written in English was valid even though a party who signed contract was only literate in Greek].) “Fraud, or a confidential relationship giving rise to an affirmative duty of disclosure, are obvious exceptions to this rule.” (1 Witkin, Summary (10th ed. 2005) Contracts , § 118, p. 157.)

Defendants’ evidence does not establish any fraud or a confidential relationship with plaintiff. The evidence at most shows that plaintiff’s agent read certain terms to defendants and stated that the loan would be paid off in five years. This does not conflict with the express terms of the promissory note, which provide that the borrower “will pay this loan in 59 regular payments of $4,799.47 each and one irregular last payment estimated at $109,683.57.” (Pl. RJN, Exh. 8.) The note has an express term from April 21, 2006 to March 21, 2011. (Ibid.) There is no evidence that the bank official represented that all payments would be for $4,799.47. Moreover, there is evidence that the parties entered into a change in terms agreement in June 2010 which reiterated that the final payment on March 21, 2011, would be a lump sum payment of all principal and accrued interest not yet paid. (See Pl. RJN, Exh. 7.) There is no evidence as to any misrepresentations regarding this agreement.

There is also no clear evidence that plaintiff ever agreed to or represented that it would “write off” the remainder of the loan. Instead, defendants’ vaguely declare that the officer “mentioned something about a ‘write-off.’” (See C. Hur Decl., ¶ 3; M. Hur Decl., ¶ 3.) The fact that the officer “mentioned something” does not establish that defendants were reasonable in their understanding that the balance would be written off. It is unclear exactly what the officer said, and therefore cannot be determined that defendants were reasonable in their failure to pay the loan.

Even if the Court were to believe defendants’ declarations, they have not established that they have a meritorious case. At best, we have defense counsel who now says that three previous defense attorneys all committed malpractice; and we have defendants who have submitted two motions for relief from default that contradict each other.

Because defendants fail to establish that they have a meritorious case, they are not entitled to relief from the default judgment on equitable grounds.

Defendants’ motion is DENIED.