Case Number: GC050848    Hearing Date: November 07, 2014    Dept: A

Dugar v Bjornbak

MOTION TO SET ASIDE DEFAULT
MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

Calendar: 22 (and 27, EC062406)
Case No: GC050848 (consolidated with EC062406)
Date: 11/7/14

MP: Cross-Defendants, Manuel Esparza and Esparza Construction, Inc.
RP: Cross-Complainants, David Bjornbak and Quang Bjornbak

RELIEF REQUESTED:
1. Order setting aside default entered on October 11, 2013.
2. Order granting leave to file Cross-Complaint

DISCUSSION:
This case, GC050848, is consolidated with EC062406. GC050848 is the lead case.

This hearing concerns the Cross-Defendants’ motion to set aside a default and for leave to file a Cross-Complaint in GC050848.

1. Motion to Set Aside Default
The Cross-Defendants request that the Court set aside the defaults entered against them on October 11, 2013. A review of the Court file reveals that a default was entered against Manuel Esparza dba Esparza Construction on October 11, 2013. This is a default against Manuel Esparza alone. It is not a default entered against Esparza Construction, Inc., which is a separate business entity.
Further, Esparza Construction, Inc. is not a party to the Cross-Complaint of David Bjornbak and Qiang Bjornbak. The pleadings do not identify it as a business entity; instead, the Cross-Complainants allege in paragraph 5 that it is the dba of Manual Esparza.

In the notice of motion, Manuel Esparza sought relief under CCP section 473(d). Under CCP section 1010, a notice of motion must state the grounds upon which the motion is made. CRC rule 3.1110(a) requires the notice of motion to state in its opening paragraph the nature of the order sought and the grounds for issuance of the order. Only the grounds specified in the notice of motion may be considered by the trial court. Taliaferro v. Riddle(1959) 167 Cal.App.2d 567, 570. Since the Plaintiff sought relief under CCP section 473(d), he is limited to this ground.

Under section 473(d) the Court may, upon motion of the injured party, or its own motion, correct clerical mistakes in its judgment or orders as entered, so as to conform to the judgment or order directed, and may, on motion of either party after notice to the other party, set aside any void judgment or order. This section authorizes the trial court to “set aside any void judgment or order” upon a noticed motion. Schwab v. Southern California Gas Co. (2004) 114 Cal. App. 4th 1308, 1320.
The Defendant argues that he is entitled to relief based on extrinsic fraud or mistake. However, extrinsic fraud or mistake are not grounds for relief under CCP section 473(d) because they do not demonstrate that the default is void. Instead, the Defendant’s arguments are based on the Court’s equitable grounds for setting aside a judgment. Since the Defendant identifies no basis to set aside the default under CCP section 473(d), the Court will deny his motion.

It appears that the Defendant was attempting to seek relief under the Court’s equitable power and not CCP section 473(d). When statutory authority is lacking, a Court possesses jurisdiction in equity to relieve a defendant from a judgments taken under circumstances of unfairness and injustice. Olivera v. Grace (1942) 19 Cal. 2d 570, 575. When a judgment was entered through fraud, mistake, or because the defendant was prevented from maintaining a legally valid defense by fraud, mistake, or accident, a Court may set aside the judgment. Id. However, the defendant must show that the defendant did not act with negligence, laches, or other fault. Id.
This is the Court’s inherent equity power to grant relief from a default or default judgment procured by extrinsic fraud or mistake. Gibble v. Car-Lene Research, Inc. (1998) 67 Cal. App. 4th 295, 315. However, equitable relief may be given only in exceptional circumstances. Rappleyea v. Campbell (1994) 8 Cal. 4th 975, 981. After the period for granting relief under CCP section 473 has run, there is a strong public policy in favor of the finality of judgments and only in exceptional circumstances should relief be granted. Id. at 982.
Extrinsic mistake is shown by circumstances extrinsic to the litigation that have cost a party a hearing on the merits, e.g., the entry of default judgment as a result of clerical error. Rappleyea v. Campbell (1994) 8 Cal. 4th 975, 981-982. Extrinsic fraud is shown by evidence that the successful party has by inequitable conduct, either direct or insidious in nature, lulled the other party into a state of false security, thus causing the latter to refrain from appearing in court or asserting legal rights. Gibble, 67 Cal.App.4th 295, 314.

The Cross-Defendant, Manual Esparza, states in his declaration that he was served with the Cross-Complaint filed by Lanny Dugar. In addition, the Defendant admits in paragraph 6 of his declaration that he was served with another Cross-Complaint, which is the Cross-Complaint of David Bjornbak and Quang Bjornbak.
Mr. Esparza states in paragraph 6 that he believed that he did not need to take any further action because he had not heard anything further from Lanny Dugar. This does not identify any extrinsic mistake because the circumstances that caused the default are not extrinsic to the litigation. Instead, the default was caused by an intrinsic mistake, i.e., the mistaken belief of Manual Esparza that he need do nothing in response to the Cross-Complaint of David Bjornbak and Quang Bjornbak.
Further, there is no evidence of extrinsic fraud. Mr. Esparza offers no facts demonstrating that the successful parties, i.e., Cross-Complainants, David Bjornbak and Quang Bjornbak, engaged in inequitable conduct to lull Mr. Esparza into a state of false security such that he did not assert his legal rights.

Therefore, there are no grounds to find that Manual Esparza is entitled to equitable relief because he does not demonstrate that the default was caused by extrinsic fraud or mistake.

Finally, the Cross-Defendant argues that he could seek relief under CCP section 473(b) because, even though it has been more than six months since the entry of default, no default judgment has been entered. However, the general rule is that the six-month period of CCP section 473(b) runs from the date of default and not from the date of the default judgment. Nemeth v. Trumbull (1963) 220 Cal. App. 2d 788, 791-792. The reason for this rule is that setting aside the default judgment alone would be an idle act. Id. An exception to the rule exists when the objective of the motion to set aside is to vacate a portion of the judgment in excess of that demanded by the complaint, e.g., two default judgments were entered in a case to award damages on the same claim in the Complaint. Id.
Further, California law holds that setting aside and vacating a default judgment alone is an idle act because the default would stand undisturbed. Howard Greer Custom Originals v. Capritti (1950) 35 Cal. 2d 886, 888-889. The default cut offs a defendant from making any further opposition or objection to the relief which plaintiff’s complaint shows the plaintiff is entitled to demand. Id. A defendant against whom a default has been entered is out of Court and is not entitled to take any further steps in the cause affecting plaintiff’s right of action. Id. The defendant cannot, until the default is set aside in a proper proceeding, file pleadings or move for a new trial, or demand notice of subsequent proceedings. Id. If the default judgment were vacated it would be the duty of the Court immediately to render another judgment of like effect, and the defendants, still being in default, could not be heard in opposition thereto. Id.
In Howard Greer, the defendant sought to set aside the default judgment. The trial court denied the motion and the Court of Appeal affirmed the order based on the reasoning that it sought an idle act.
Accordingly, relief cannot be granted under CCP section 473 if the proceeding invoking relief is instituted or the motion made more than six months after the date of entry of the default. Thompson v. Vallembois (1963) 216 Cal. App. 2d 21, 24 (finding that the Court lacked jurisdiction to grant relief under CCP section 473 after the six month period).

Therefore, the Court will deny the Cross-Defendant’s motion for relief from the entry of default because he has not identified any grounds under CCP section 473(d), under the Court’s equitable powers, or under CCP section 473(b) for relief.

2. Motion for Leave to File Cross-Complaint
Cross-Defendants, Manual Esparza and Manual Esparza Construction, Inc., were named in the Cross-Complaint filed by Lanny Dugar dba American Top Remodeling on May 28, 2013. The Cross-Defendants seek leave to file a Cross-Complaint because they did not file one at the time they filed their answer to Lanny Dugar’s Cross-Complaint.
Under CCP section 428.50, the Court may grant leave to file a Cross-Complaint in the interest of justice at any time during the course of the action. A policy of liberal construction of section 426.50 to avoid forfeiture of causes of action is imposed on the trial court. Silver Orgs. v. Frank (1990) 217 Cal. App. 3d 94, 98-99.
A motion to file a cross-complaint at any time during the course of the action must be granted unless substantial evidence of bad faith is demonstrated. Id. Bad faith involves conduct, not prompted by an honest mistake, but by some sinister motive, not simply bad judgment or negligence, but rather the conscious doing of a wrong because of dishonest purpose or moral obliquity. Id. Bad faith contemplates a state of mind affirmatively operating with furtive design or ill will. Id.

Here, Cross-Defendants, Manual Esparza and Manual Esparza Construction, Inc., seek leave to file a Cross-Complaint for indemnity against David Bjornbak and Qiang Bjornbak. It is in the interests of justice to grant leave to file a Cross-Complaint for indemnity to ensure that all the claims arising from the construction matter at issue can be resolved in one action. Further, no party filed any substantial evidence that Cross-Defendants, Manual Esparza and Manual Esparza Construction, Inc., are engaged in bad faith.
Finally, there is no trial date. Granting leave to file a Cross-Complaint for indemnity will not prejudice any party’s ability to prepare for trial.

Therefore, the Court will grant the motion for leave to file a Cross-Complaint.

RULING:
1. DENY motion to set aside default.
2. GRANT leave to file Cross-Complaint

DEMURRER & MOTION TO STRIKE

Calendar: 22 (also 27, which is EC062406)
Case No: GC050848 (consolidated with EC062406)
Date: 11/7/14

MP: Defendants, Hector Medina, Geomax Engineering, Keith Farrell, and Carlos Morales
RP: Plaintiffs, David Bjornbak and Qiang Bjornbak

ALLEGATIONS IN FIRST AMENDED COMPLAINT (in EC062406):
The Plaintiffs entered into an agreement for the Defendants to produce a soil engineering report. The Defendants produced a report that indicated that the site was suitable for construction. The Defendants breached the agreement by failing to discover conditions that made construction unsuitable. Further, the Defendants acted negligently by failing to provide services to the standard of care. In addition, the Defendants acted fraudulently by failing to disclose material facts about the property.

CAUSES OF ACTION IN FIRST AMENDED COMPLAINT (in EC062406):
1) Breach of Contract
2) Breach of Warranty
3) Professional Negligence
4) Negligence
5) Fraudulent Concealment

RELIEF REQUESTED:
Demurrer to sixth cause of action.
Strike claim for punitive damages.

DISCUSSION:
This hearing concerns the Defendants’ demurrer and motion to strike directed at the First Amended Complaint in EC062406.

1. Demurrer to Sixth Cause of Action for Fraudulent Concealment
The Defendants argue that this cause of action lacks the particularity needed to plead a fraud claim. The sixth cause of action for fraudulent concealment must include the following elements:

1) the defendant must have concealed or suppressed a material fact,
2) the defendant must have been under a duty to disclose the fact to the plaintiff,
3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,
4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and
5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.
Lovejoy v. AT&T Corp. (2004) 119 Cal. App. 4th 151, 157-158.

This cause of action attempts to plead a tort of deceit and the facts constituting each element must be alleged with particularity; the claims cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.

The Plaintiffs directed this cause of action at all of the six Defendants. In paragraph 68, the Plaintiffs allege that all of the Defendants failed to disclose important facts known to the Defendants regarding the property, including that the construction was on a landslide zone, the slope was graded improperly, that additional soil sampling was needed, that a two foot deep foundation repair was an error, and that the grading problems could not be solved by sinking caissons to a greater depth. There are no particular facts regarding each, separate Defendant to plead that each Defendant knew these material facts and concealed them from the Plaintiff. This is insufficient to plead the concealment of a material fact element.
Further, there are no particular facts demonstrating that each, separate Defendant had a duty to disclose these material facts to the Plaintiffs. This is insufficient to plead the element of a duty to disclose the material facts identified by the Plaintiffs.
In paragraph 70, the Plaintiffs allege that the Defendants intended to deceive the Plaintiffs by concealing the facts. There are no particular facts to demonstrate that each, separate Defendant intentionally concealed the facts with the intent to defraud the Plaintiffs. This is insufficient to plead the element of intentional concealment with intent to defraud.

Accordingly, the Court will sustain the demurrer to the sixth cause of action.

Under California law, the Plaintiffs must show in what manner the Plaintiffs can amend their Complaint and how that amendment will change the legal effect of the pleading. Goodman v. Kennedy (1976) 18 Cal.3d 335, 349. The Plaintiffs did not request leave to amend and did not offer any basis for finding that they can correct the identified defects by amendment.
Therefore, the Court will not grant leave to amend.

2. Motion to Strike
The Defendants request that the Court strike the claim for punitive damages in the sixth cause of action. In light of the recommendation to sustain the demurrer to the sixth cause of action, the motion to strike is moot because the claim for punitive damages will be removed. Accordingly, the Court will take the motion to strike off calendar.

RULING:
SUSTAIN demurrer to sixth cause of action without leave to amend.
TAKE OFF CALENDAR motion to strike.