Case Number: KC069942 Hearing Date: November 21, 2018 Dept: J

Re: Jennifer Chan v. Great Eastern Company, et al. (KC069942)

MOTION TO SET ASIDE DEFAULT JUDGMENT

Moving Party: Defendant County Records Research Inc.

Respondent: Plaintiff Jennifer Chan

POS: OK (continued from 9/17/18)

This is a wrongful foreclosure lawsuit involving plaintiff’s residential property located at 2145 Wind River Lane in Rowland Heights. The complaint, filed 1/9/18, asserts causes of action against Defendants Ah Lay Tiow dba Great Eastern Company (erroneously sued as Great Eastern Company) (“Great Eastern”), County Records Research, Inc. (“CRRI”) and Does 1-25 for:

1. Violation of CA Homeowner Bill of Rights

2. Violations of CA Civil Code § 2923.5

3. Negligence

4. Constructive Fraud

5. Intentional Infliction of Emotional Distress

6. Slander of Title

7. Quiet Title

8. Declaratory Relief

9. Violation of CA B&P Code §§ 17200 et seq.

10. Fraud in the Concealment

11. Rescission

On 2/7/18, plaintiff filed a proof of service, which reflected that CRRI had been personally served with the summons and complaint on 1/23/18. On 2/26/18, Great Eastern filed its cross-complaint, asserting causes of action therein against plaintiff and Does 1-25 for:

1. Breach of Contract

2. Fraud

On 3/7/18, CRRI’s default was entered. A Case Management Conference is set for 11/2118.

Defendant County Records Research Inc. (“CRRI”) moves the court, per CCP § 473(b), for an order setting aside its 3/7/18 default. This motion was originally heard on 9/17/18; at that time, the motion was continued to 11/21/18. Counsel for defendant was instructed to serve and file a supplemental declaration within 30 days, and plaintiff was instructed to serve and file a supplemental opposition by 11/7/18.

On 10/16/18, attorney Victor S. Korechoff filed his supplemental declaration. Plaintiff has not filed a supplemental opposition as of 11/9/18.

“The 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. Application for this relief shall be accompanied by a copy of the answer or other pleading proposed to be filed therein, otherwise the application shall not be granted, and shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken… Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney’s sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney’s mistake, inadvertence, surprise, or neglect. The court shall, whenever relief is granted based on an attorney’s affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties.” CCP § 473(b).

Relief under CCP § 473(b) may be based either on an “attorney affidavit of fault,” in which event relief is mandatory or declarations or other evidence showing “mistake, inadvertence, surprise or excusable neglect,” in which even relief is discretionary.

“[S]ection 473, subdivision (b) makes relief mandatory only if the request for relief “is accompanied by an attorney’s sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect.” (§ 473, subd. (b).) As this text indicates, what must be attested to is the mistake, inadvertence, surprise, or neglect—not the reasons for it. (Accord, State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 609 [attorney affidavit must include ‘admission by counsel for the moving party that his error resulted in the entry of a default or dismissal’ or a ‘real concession of error’].).” Martin Potts and Associates, Inc. v. Corsair, LLC (2016) 244 Cal.App.4th 432, 438.

“[S]ection 473, subdivision (b)’s mandatory relief provision has three purposes: (1) ‘to relieve the innocent client of the consequences of the attorney’s fault’ (Solv–All v. Superior Court (2005) 131 Cal.App.4th 1003, 1009; Generale Bank Nederland v. Eyes of the Beholder Ltd. (1998) 61 Cal.App.4th 1384, 1397 [noting purpose is ‘”to alleviate the hardship on parties who lose their day in court due solely to an inexcusable failure to act on the part of their attorneys”’] ); (2) ‘to place the burden on counsel’ (Solv–All, at p. 1009, 32 Cal.Rptr.3d 202); and (3) ‘to discourage additional litigation in the form of malpractice actions by the defaulted client against the errant attorney’ (ibid.). These purposes are advanced as long as mandatory relief is confined to situations in which the attorney, rather than the client, is the cause of the default, default judgment, or dismissal.” Id. at 439 (emphasis added).

“[T]he purpose of the mandatory relief provision under section 473, subdivision (b) is achieved by focusing on who is to blame, not why. Indeed, in many cases, the reasons for the attorney’s mistake, inadvertence, surprise, or neglect will be irrelevant; that is because, as noted above, the mandatory relief provision entitles a party to relief even when his or her attorney’s error is inexcusable.” Id. at 439

(emphasis theirs).

Here, it was unclear whether CRRI is seeking to have its default set aside based on an attorney “affidavit of fault.” The motion states that “Defendant and Defendant’s Attorney, believed through mistake and negligence that they should not be included in the law suit as they were merely a substituted trustee with only a nonmonetary interest in performing their personal duty in accordance with the law and ethical rules of non-judicial foreclosures. In addition there was a mistake of who would be responsible for County Records Research Inc.’s legal representation on the one hand Mr. Korechoff thought he would be in conflict if he represented both clients CRR Inc., and Great Eastern Company (Ah Ley Tiow), while CRR Inc. believed that it was up to Great Eastern Company to provide representation to it.” (Motion, 2:15-24).

Attorney Victor Korechoff (“Korechoff”) initially attests that he “first heard about this case in late February of 2018 when [he] was hired by Ahlay Tiow, AKA Great Eastern Company, to represent him,” that “[i]n March [he] heard that County Records Research Inc., had also been served and a default had been entered against them,” that he “had a staff member call the number which [plaintiff] had left on a copy of her opposition to [his] ex parte,” that this staff member spoke to “John,” “who indicated, he was a Paralegal for [plaintiff],” that his “staff member requested that [plaintiff] release and relieve [his] client Defendant County Research Records Inc., from its Default,” that he “then learned that (Jen) a Foreclosure staff member of County Research Records Inc., indicated that she had expected Mr. Tiow to have his attorney (me), file a declaration of non monetary interest in the case for County Research Records Inc.,” that he “did not realize that [he] had been requested to [do] this and [had] not expected to do it on my behalf of [sic] this client,” and that he “now belief[s] [sic] that [he] do[es] not have a conflict of interest.” (Korechoff Decl., 8:11-9:5; emphasis added).

The aforesaid declaration does not appear to include an admission by Korechoff that his “error resulted in the entry of a default” or a “real concession of error.” The record reflects that Korechoff filed an answer on 2/26/18 on behalf of Defendant Ahlay Tiow aka Great Eastern Company (“Great Eastern”). On 3/7/18, CRRI’s default was entered. Korechoff does not identify who advised him in March that CRRI had been served and defaulted or when his staff member’s conversation with “John” occurred. He does not state when and how he learned that “Jen” at CRRI had expected him to provide a declaration of non monetary interest on behalf of CRRI or when he first learned from anyone that he was expected to represent CRRI’s interests; however, he appears to represent that he learned of “Jen’s” expectation after his staff member’s phone call with “John,” which again was after default has already been entered. It is unclear, however, why Korechoff would have had his staff member reach out to “John” to have CRRI’s default set aside if no one on or before that time had advised him that he was expected to represent CRRI.

On 9/17/18, the court continued the hearing on the motion to afford Korechoff the opportunity to provide clarification in a supplemental declaration as to when he first learned that he was expected to represent CRRI in this litigation. The court’s tentative ruling noted that if CRRI’s default had already been entered by the time Korechoff was first put on notice that CRRI expected him to represent its interests, then default could not be set aside on the basis of attorney affidavit of fault.

Korechoff’s supplemental declaration filed 10/16/18 provides this clarification. Korechoff attests that “[w]hen…Tiow…came to the Law Firm [he] had no idea that [he] would be representing County Records Research, Inc. also,” that he “assumed that to represent both could present a conflict and [he] hadn’t been asked to represent County Records Research, Inc.,” that he “[t]heir after [sic]…filed an answer on behalf of Great Eastern Company,” that “[i]n the meantime [he] heard that County Records Research, Inc. asked a staff member to file a “Notice of Non-monetary Interest’ on its behalf,” which he had never heard of, that he asked the staff member to obtain a sample of a “Notice of Non-monetary Interest,” that when he reviewed this sample, he believed that it did not appear to be an answer to a lawsuit, that he asked the staff member to “look into the matter further,” and that this individual “later informed [him] that…Great Eastern Company ‘had a duty to defend the foreclosure company in case of a dispute.’” (Korechoff Supp. Decl., ¶¶ 1-5).

CRRI’s default had not been entered at the time Korechoff was requested to file a “Notice of Non-monetary Interest” on its behalf. Mandatory relief is available under these circumstances.

The motion, then, is granted. CCP § 473(b) provides, in relevant part, that “[t]he court shall, whenever relief is granted based on an attorney’s affidavit of fault, direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or parties.” CCP § 473(b). Plaintiff’s counsel, however, has not provided a numerical figure for these fees and costs. The court directs plaintiff’s counsel to file a supplemental declaration providing this information at or before the time of the hearing or the request for fees and costs is denied.