2010-00077267-CU-BC

Jairaj Dhillon vs. Jay Dhillon

Nature of Proceeding: Motion to Vacate Default and Default Judgment

Filed By: Varaich, Lori S.

Defendants Virk and Nagra’s motion to vacate pursuant to Code of Civil Procedure
§473(d), §473.5 and/or §585.5(b) the default and default judgment entered against
them is GRANTED, as follows.

Moving counsel is admonished because the notice of motion does not provide notice
of the Court’s tentative ruling system, as required by Local Rule 1.06. Moving counsel
is directed to contact opposing counsel and advise him/her of Local Rule 1.06 and the
Court’s tentative ruling procedure and the manner to request a hearing. If moving
counsel is unable to contact opposing counsel prior to hearing, moving counsel
is ordered to appear at the hearing in person or by telephone.

Moving counsel is also admonished for failing to comply with CRC Rule 3.1110(b)(3)-
(4).

Defendants moves to set aside the default and default judgment entered against them
on several grounds that the judgment is void. First, defendants contend the 3/22/2012
default judgment is void under Code of Civil Procedure §473.5 because plaintiff’s
purported service of the summons and complaint failed to provide “actual notice” of the
lawsuit to defendants, who did not learn of the lawsuit until February 2014 when their
bank accounts were levied but who have brought this motion within two years of the
entry of judgment. Second, defendants insist the judgment is also void under Code of
Civil Procedure §585.5(b) because plaintiff failed to comply with the venue
requirements found in Code of Civil Procedure §395 inasmuch as none of the
defendants reside in Sacramento County and the underlying contract was neither
entered nor to be performed in Sacramento County. Thus, defendants maintain that
under §585.5(b) they have timely moved within 60 days of “actual notice” to set aside
the default/default judgment and request leave to defend the action in the proper court.
Third, defendants argue the default judgment is void under Code of Civil Procedure
§473(d) since (1) the summons was invalid in that it fails to properly identify the
moving defendants with their full, complete names and listing only “common” Indian
names which did not provide notice of a lawsuit against them, (2) plaintiff’s substitute
service on the moving defendants was invalid in that it occurred at improper locations
and plaintiff failed to exercise reasonable diligence in attempting to effect personal
service, and (3) the proofs of service of the summons and complaint are “inadequate
and invalid” in that they are incomplete and not only fail to show reasonable diligence
in trying to personally serve defendants but also show substitute service at improper
location.

Plaintiff opposes, initially claiming that defendants are entitled to no relief under Code
of Civil Procedure §473.5 because this motion is untimely as a result of being filed on
3/24/2014, which is beyond §473.5’s limitation of two years from the entry of judgment.
The opposition next asserts that the substitute service on both defendants at their
respective franchise locations was permissible under Code of Civil Procedure §415.20,
which permits service at a defendant’s residence or usual place of business and which
does not require personal service first be attempted at his/her residence. Additionally,
the opposition insists that the alleged defects in the summons and/or proofs of service
are of no consequence since the moving defendants “knew…they were being sued by
Plaintiff because there was a partnership dispute among the parties,” especially since
they were also sent with a “demand letter” prior to the suit being filed. (Oppos., p.6:25-
28.) Plaintiff further contends that the substitute service was effective as to both
defendants, who have also failed to establish that the default judgment is void under
Code of Civil Procedure §473(d), §473.5 or §585.5(b). Finally, the opposition argues
that defendants did not act with reasonable diligence once they discovered the default
but this argument appears to be premised on an assumption that defendants were
aware of their default being entered in 2010, aware of the default judgment shortly
after it was entered in 2012 and/or actually received at any time the pre-litigation
“demand letter.”

At the outset, the Court rejects plaintiff’s initial argument that this motion is untimely.
Although plaintiff asserts that this motion was filed on 3/24/2014, the Court’s copy of
this motion plainly shows it was actually filed on 3/21/2014. Thus, defendants have
satisfied the two year limitation found in Code of Civil Procedure §473.5. The Court
also finds that the alternative limitation period for seeking relief under §473.5 (“180
days after service…a written notice that the default or default judgment has been
entered”) is not a bar here since there is no evidence in the record which indicates
either defendant actually received such notice, as it appears such notices were not
mailed to addresses where defendants customarily receive mail.

Turning to the merits of defendants’ motion, plaintiff’s filing of a proof of service of the
summons and complaint give rise to a “presumption” of valid service but Summers v.
McClanahan (2006) 140 Cal.App.4th 403 expressly places the ultimate burden of proof
on this critical issue on plaintiff when there is a challenge to the validity of service.
Relying on Dill v. Berquist Construction Co., Inc. (1994) 24 Cal.App.4th 1426, the
Summers Court stated:

“When a defendant challenges the court’s personal jurisdiction on the ground of
improper service of process, ‘the burden is on the plaintiff to prove the existence
of jurisdiction by proving, inter alia, the facts requisite to an effective service.’” (
Summers, at 413.)

Additionally, California law requires that plaintiff prove valid service and personal
jurisdiction by a preponderance of the evidence. (Floveyer Intl., Ltd. v. Superior Court
(Schick Tube-Veyor Corp. (1997) 59 Cal.App.4th 789, 793-794.) Plaintiff has not met its burden of showing it was more likely than not that defendants
were properly served via substitute service or otherwise had actual notice of the
subject lawsuit prior to their moving for relief in March 2014. In fact, plaintiff has
essentially offered no evidence of consequence but has instead argued that service
was valid and that defendants must have learned of the lawsuit. Plaintiff’s proof of
service and corresponding legal arguments is in the Court’s view only enough to show
that it is just as likely as it is unlikely that defendants were properly (sub-)served with
the summons and complaint in 2010 and/or were provided actual notice of the present
suit.

To be sure, while the opposition asserts the moving defendants “knew…they were
being sued by Plaintiff because there was a partnership dispute among the parties” by
virtue of being sent a “demand letter” prior to the suit being filed but there is now
before the Court no evidence which affirmatively demonstrates this “demand letter”
was actually received by either defendant. Indeed, Paragraph 4 of the Choudhary
Declaration avers that ‘no response was received’ to this demand letter.
Consequently, it cannot be reasonably inferred that this letter somehow put defendants
on notice of the present lawsuit.

Likewise, the substitutions of attorneys plaintiff mailed in July 2013 (which defendants
may well have received) are also not enough to establish that either of the moving
parties had actual notice they were defendants named in this lawsuit. Neither of these
documents contains a full caption which identifies all parties to this lawsuit and the
abbreviate case caption at the top does not include the names or even partial names
of either moving defendant. Thus, it would be impossible for these forms to provide
any meaningful notice to defendants. Although both substitution forms were
apparently mailed to both defendants at their residences, the mere inclusion of their
names on the proof of service and their subsequent receipt of the forms would not
necessarily put a reasonable person on inquiry notice.

Plaintiff may be correct that the Code of Civil Procedure does not require personal
service first be attempted at a defendant’s residence but §415.20 does require that
substitute service take place at either the defendant’s residence or usual place of
business. Thus, the critical question here is whether either of the franchise locations
at which defendants’ substitute service occurred constituted their usual place of
business within the meaning of §415.20. Plaintiff has submitted no evidence
whatsoever on this issue and thus, the Court can only consider the declarations filed
by the moving defendants.

The Virk Declaration indicates that Mr. Virk and his wife have resided in San Marcos,
California since 2002; there is a 7-Eleven Store located at 1501 Santa Fe Avenue in
Vista, California which is operated by R & Bea, Inc. since 2010; Mr. Virk and his wife
own 100% of the shares in R & Bea, Inc. and they are both officers of the corporation;
Mr. Virk has no office at this location but instead handles all his duties from an office in
his home; his personal mail is always sent to his home address along with al mail
relating to this business operation; and R & Bea, Inc.’s policy is to not accept any mail
or deliveries at the franchise location in Vista unless it is for R & Bea, Inc. itself.

Likewise, the Nagra Declaration asserts that Mr. Nagra, his wife and children have
resided in Temecula, California since 2005; there is a 7-Eleven Store located at 44260
Apis Road in Temecula which has for several years been operated by Pam & Jas, Inc. and this store is not the only one operated by the corporation; Mr. Nagra and his wife
own 100% of the shares in Pam & Jas, Inc. and they are both officers of the
corporation; Mr. Nagra has no office at the Apis Road store but instead has an office in
his home from which he manages his business interests; he has never used this
store’s address for his personal mail and typically receives all personal and business
mail at his home address; and Pam & Jas, Inc.’s policy is to not accept any document
or package delivered to the Apis Road address unless it is addressed to Pam & Jas,
Inc.

Based on this undisputed evidence, this Court cannot conclude that the two franchise
locations where defendants were served by substitute service were actually their usual
place of business within the meaning of §415.20 or that service at those locations were
reasonably calculated to provide defendants with actual notice of this lawsuit. More
importantly, given the present record and plaintiff’s own lack of evidence indicating
valid personal (substitute) service, this Court finds it is more likely than not that
defendants were not properly served and did not otherwise receive actual notice of this
lawsuit in time to respond. Since plaintiff has failed to meet its burden of proving by a
preponderance of the evidence that there was valid service of summons on
defendants, there is no legal basis for the 2010 default or the 2012 default judgment.

Finally, plaintiff’s suggestion that defendant did not act with reasonable diligence once
they discovered the default and default judgment is without evidentiary support. In
short, the opposition has failed to establish that either defendant was aware of this
lawsuit or their default at any time prior to 2014 since there is no evidence defendants
actually received at any time the pre-litigation “demand letter,” a copy of the summons
& complaint following the purported substitute service in 2010, the notice of entry of
default in 2010 and/or the notice of entry of default judgment in 2012.

For all these reasons and coupled with the well established policy favoring trial on the
merits, the Court finds good cause to set aside the default and default judgment
previously entered against defendants Virk and Nagra pursuant to Code of Civil
Procedure §473(d) and §473.5 and also to quash the purported service of summons
and complaint in 2010. Accordingly, the motion to vacate is hereby granted.

In the absence of valid service of the summons and complaint on defendants Virk and
Nagra, neither need file an answer to complaint unless and until proper service is
made. Similarly, since the Court finds there was no valid service of summons and no
valid entry of a judgment against the moving defendants, plaintiff is directed to
promptly return any and all funds already collected on account of the now
vacated default and default judgment against the moving defendants .

This minute order is effective immediately. No formal order or other notice is required.
(Code Civ. Proc. §1019.5; CRC Rule 3.1312.)