Case Number: BC626337 Hearing Date: March 07, 2018 Dept: 46

Case Number: BC626337
LARRY HANDY VS THE WILLIE AND MARGIE HOSKINS LIVING TRUST 19

Filing Date: 07/08/2016
Case Type: Contractual Fraud (General Jurisdiction)

03/07/2018
Motion to Vacate Default

TENTATIVE RULING

Larry Handy’s Motion to Set Aside Default is GRANTED based upon the facts and conclusions of law made herein in the Discussion section below. The default entered on 12/14/2016 is set aside; Handy may file an Answer to the Cross-Complaint. The Answer to the Cross-Complaint lodged on 1/23/2018 with the motion is deemed filed and served this date.

DISCUSSION

P/X-D Handy now moves this court, per CCP § 473.5, for an order setting aside the default entered against him on the grounds that he never had actual notice of the Cross-Complaint.

Recommendation

P/X-D Handy’s motion should be GRANTED.

CCP § 473.5 states:

“(a) When service of a summons has not resulted in actual notice to a party in time to defend the action and a default or default judgment has been entered against him or her in the action, he or she may serve and file a notice of motion to set aside the default or default judgment and for leave to defend the action. The notice of motion shall be served and filed within a reasonable time, but in no event exceeding the earlier of: (i) two years after entry of a default judgment against him or her; or (ii) 180 days after service on him or her of a written notice that the default or default judgment has been entered.

(b) A notice of motion to set aside a default or default judgment and for leave to defend the action shall designate as the time for making the motion a date prescribed by subdivision (b) of Section 1005, and it shall be accompanied by an affidavit showing under oath that the party’s lack of actual notice in time to defend the action was not caused by his or her avoidance of service or inexcusable neglect. The party shall serve and file with the notice a copy of the answer, motion, or other pleading proposed to be filed in the action.

(c) Upon a finding by the court that the motion was made within the period permitted by subdivision (a) and that his or her lack of actual notice in time to defend the action was not caused by his or her avoidance of service or inexcusable neglect, it may set aside the default or default judgment on whatever terms as may be just and allow the party to defend the action.”

Moreover, “[a]part from any statutory authority, a court has inherent, equitable power to set aside a judgment on the ground of extrinsic fraud or mistake. [Olivera v. Grace (1942) 19 C2d 570, 576-578, 122 P2d 564, 568; Sporn v. Home Depot USA, Inc. (2005) 126 CA4th 1294, 1300, 24 CR3d 780, 785 (citing text); Bae v. T.D. Service Co. (2016) 245 CA4th 89, 97, 199 CR3d 282, 287]. There are three essential requirements to obtain relief. The party in default must show:— a meritorious defense;— a satisfactory excuse for not presenting a defense to the original action; and — diligence in seeking to set aside the default once it was discovered. [Rappleyea v. Campbell (1994) 8 C4th 975, 982, 35 CR2d 669, 672-673—leaving open, however, whether the same test applies where a default but no judgment has been entered; Sporn v. Home Depot USA, Inc., supra, 126 CA4th at 1301, 24 CR3d at 785 (citing text)].” Weil & Brown, et al., Cal. Prac. Guide: Civ. Proc. Before Tr. (The Rutter Group 2017) ¶ 5:435.

“The statutory time limits on relief under CCP § 473(b) or § 473.5, supra, do not apply. The court may be asked to grant equitable relief from a default judgment whenever the “extrinsic fraud or mistake” is discovered. But once discovered, a party is expected to proceed diligently to seek relief (below). This requirement is “inextricably intertwined with prejudice” to the plaintiff. [Rappleyea v. Campbell, supra, 8 C4th at 983-984, 35 CR2d at 674; Lee v. An (2008) 168 CA4th 558, 566, 85 CR3d 620, 626—relief denied where defendant waited more than 2 years after discovering default judgment to seek relief].” Id. at ¶ 5:436.

“Prejudice to the plaintiff is less of a problem where defendant seeks equitable relief before a judgment has been entered, and correspondingly lowers the burden on defendants of showing diligence. [Rappleyea v. Campbell, supra, 8 C4th at 984, 35 CR2d at 674].” Id. at ¶ 5:437.1.

The situation here is as follows. X-D Handy’s original counsel was one Nathan J. Wagner (hereinafter “Wagner”). In September of 2016, shortly after filing the Complaint, Wagner vanished, without a trace. (Declaration of Larry Handy [hereinafter “Handy Dec.”] ¶ 1). He returned no calls, his listed address on the State Bar website turned out to be merely a mail drop, and his office space had been rented out to someone else. (Id. ¶¶ 1-2). After persistently attempting to hunt Wagner down for seven months, in April of 2017 Handy threw in the towel, reported Wagner to the State Bar, and started seeking new representation. (Id. ¶ 3). The State Bar has officially filed disciplinary charges against Wagner in connection with this case, and Wagner was ordered inactive as of 2/26/18.

In the meantime, D/X-C filed her Cross-Complaint in September of 2016, right when Wagner disappeared. In October of 2016, the complaint was mail-served on Wagner at his office address. Of course, Wagner was no longer there, so there was no one to receive it. Nor was there separate service on Handy. The case languished in the absence of opposing counsel, and on 12/14/16, X-D Handy’s default was taken. But the notice was again served on Wagner’s office address, with which neither Wagner nor Handy had any connection. Finally, in August of 2017, Handy was able to hire current counsel, who saved the case from impending dismissal and set about getting Handy’s backlogged discovery responses out and dealing with service issues on the Complaint. (Minute Orders of 8/31/17, 9/11/17, 10/11/17, and 12/13/17). On 1/15/18, Handy’s counsel noticed the default in the online docket for the first time. (Declaration of David M. Price [hereinafter “Price Dec.”] ¶ 1). Counsel immediately sought a stipulation to set the default aside, and when D/X-C refused, promptly filed this motion.

D/X-C makes several arguments. First, she argues that the motion is untimely, because Wagner was served with a notice of ruling in which this court ordered D/X-C to obtain Handy’s default. But this is not the same thing as a notice that the default has actually been entered, as required to trigger the 180-day limitation under Section 473.5(a)(ii). There is no evidence currently before this court that a formal notice of entry was ever served; only notices of intent to enter or requests to enter. Therefore, the 2-year limitation of Section 473.5(a)(i) is the operative limitation, and P/X-D Handy is well within that period.

Second, D/X-C argues that P/X-D Handy should be charged with the neglect of his attorney. Ordinarily, a party is only excused from the errors of his attorney where counsel has completely abandoned his client and thereby eviscerated the attorney-client relationship. Carroll v. Abbott Laboratories, Inc. (1982) 32 C.3d 892, 898-900. While it is possible to imagine a more glaring case of abandonment than that presented here, there can be no dispute that Wagner’s disappearance eliminated the attorney-client relationship.

Third, D/X-C argues that this motion was not filed within a reasonable time, and begins her analysis from the time that P/X-D Handy had notice that something had gone sideways with Wagner. But the computation of a reasonable time is based on the delay between P/X-D Handy’s actual notice of the default and the filing of the motion. P/X-D Handy obtained actual notice of the default when his counsel saw it online on 1/15/18. This motion was filed a mere eight days later. This timing shows adequate diligence.

Finally, even if Section 473.5 could afford no relief to P/X-D, the fact that Wagner abandoned him entitles Handy to equitable relief on the grounds of extrinsic mistake. People v. One Parcel of Land (1991) 235 C.A.3d 579 is on point and binding. In that case, an absentee landowner was contesting a forfeiture proceeding. Id. at 581. The state demurred to her claim and her attorney filed an amended claim but never served it, did not contest an ensuing default hearing, and did nothing more in the case. Id. at 581-582. The landowner heard nothing from her attorney for eight months (roughly the same length as Handy). Id. at 582. Eventually she retained another attorney who filed a motion to set aside the default judgment, which the trial court granted on equitable grounds. Id. at 582.

The Court of Appeal affirmed, holding as follows:

“For attorney misconduct to support equitable relief from a default judgment due to extrinsic mistake, there must have been “neglect of an extreme degree amounting to positive misconduct” by counsel, rather than mere inexcusable neglect, sufficient to obliterate the attorney-client relationship and thereby preclude any imputation of counsel’s neglect to the client. (Id. at pp. 738–739, 216 Cal.Rptr. 300; see also Lopez v. Superior Court (1986) 178 Cal.App.3d 925, 935, 223 Cal.Rptr. 798.) “Positive misconduct is found where there is a total failure on the part of counsel to represent his client.” (Aldrich v. San Fernando Valley Lumber Co., supra, 170 Cal.App.3d at pp. 738–739, 216 Cal.Rptr. 300.) Attorney Oliver’s untimely filing of the amended claim was mere inexcusable neglect, but his absolute failure to oppose the default judgment motion, as well as his apparent failure to return any of Wallace’s telephone calls, suggests positive misconduct through a total failure to represent his client. (Cf. id. [positive misconduct by counsel who had been suspended from practice of law and had failed to oppose motion to dismiss for failure to comply with order compelling answers to interrogatories].).” Id. at 584.

For the foregoing reasons, P/X-D Handy is entitled to the relief sought. D/X-C Dabbs makes the final argument that, if the court grants relief, she is entitled to attorney’s fees for appearing at the hearings held while Wagner was in the wind, and for opposing this motion. The court declines to make such an award. Handy was abandoned by his counsel; D/X-C’s expenses were not his fault. Wagner is the party at fault, but since he is no longer counsel of record, this court has no jurisdiction over him.

IT IS SO ORDERED:

Frederick C. Shaller, Judge