Case Number: EC062294 Hearing Date: February 13, 2015 Dept: NCD
MOTION FOR RELIEF
“Mistake, Inadvertence, Surprise, or Neglect”
(CCP §473)

TENTATIVE RULING (2/13/15)
#4
EC 062294
MCW FUELS, INC. v. WESTCO PETROLEUM DISTRIBUTORS, INC.

Joint Motion to Vacate and Set Aside Entry of Default
Tentative:
Motion is GRANTED pursuant to CCP § 473(b). Defaults entered against defendants Westco Petroleum Inc. and Westco Petroleum Distributors, Inc. on December 1, 2014 are set aside, based on excusable neglect or surprise.

The proposed Answer and Cross-Complaints have not been lodged separately. Defendants are ordered to file with the court this date the proposed pleadings, and the pleadings will be deemed filed and served on the current parties this date.

BACKGROUND:
MP: Defendants Westco Petroleum Inc. and Westco Petroleum Distributors, Inc.
RP: Plaintiff MCW Fuels, Inc.

RELIEF REQUESTED:
Set aside defaults (entered December 1, 2014)

FACTUAL AND PROCEDURAL BACKGROUND:
Plaintiff MCW Fuels alleges that it is a master branded reseller of fuel for Conoco Phillips under a Master Branded Reseller Fuel Distribution Agreement (“BRFD”), and that defendant Westco Petroleum Distributors was also a master branded reseller of fuel under a Master BRFD with Conoco Phillips. Antone Nino represented in 2012 that he was the sole shareholder and director of Westco, and that he owned Conoco Phillips branded gasoline stations in Los Angeles County. (Nino is now deceased, and the named defendant is Jasmine Nino, his personal representative).

Plaintiff alleges that in June of 2012, plaintiff MCW entered into a written Master Agreement (the “Agreement”) with Westco and Nino, which involved the assignment of eight BRFDs from Westco to MCW (the “Assigned BRFD Agreements”) and eight BRFDs between Nino and MCW (the “Nino BRFD Agreements), under which MCW contracted to sell Conoco Phillips fuel to the subject eight gas stations owned exclusively by Nino. During negotiations for the Agreement, Westco and Nino were represented by defendant attorney Kamal Bilal.

Plaintiff alleges that the Agreement contained material representations and warranties which were not true, including that Nino was the sole shareholder of Westco and its sole owner with the authority to sign the contract, that Nino was the sole current owner and operator of the eight subject gasoline stations, that the gasoline stations were solvent and profitable, and that no actions, suits, judgments or liens were pending against the gasoline stations. Defendants also represented that the combined sale of monthly gasoline to the stations subject to the Nino BRFD Agreements, and the eight stations constituting the Assigned BRFD Agreements, amounted to 2,100,000 gallons.

The BRFD Agreements themselves also included some of these representations.

The Agreement required a two phase closing. The first phase required MCW to pay $1 million for two Assigned BRFD Agreements, and for five Nino BRFD Agreements, which phase was completed on June 12, 2012, when the sum was paid to Westco. The Agreement was modified in September of 2012, with the second phase to be completed on December 1, 2012. On November 30, 2012, one of the gasoline stations subject to the Assignment BRFD Agreement was debranded and a lawsuit filed against Westco, and the parties agreed to modify the Agreement so that Westco would not sell the last six Assignment BRFD Agreements. In May of 2013 new negotiations for phase two were commenced, but in June of 2013, Bilal for the first time revealed that Nino was not the sole owner of Westco, but that Bilal was a shareholder of Westco, entitled to 24% of any sum to be paid to Westco, and had a lien for legal services on the Assignment BRFD Agreements. Shortly thereafter, Westco had transactions returned for insufficient funds, including a check to Conoco Phillips, and Westco’s supply of fuel was terminated by Conoco Phillips. MCW agreed to take over fuel deliveries on a temporary basis to service five Westco customers.

It has since been revealed that at the time the Agreement was signed the gasoline stations were actually owned by Westco Petroleum, Inc. (“WP”, not Westco Petroleum Distributors, Inc.,) which was an entity half owned by Bilal. The stations were managed and operated by defendant AAA Gas, Inc., not Nino. Plaintiff alleges that defendants’ plan was to cause MCW to believe that Nino was the sole owner, but since he was not, Bilal could later claim that the Agreement was not valid, and that defendants thereby sold MCW eight worthless, non-enforceable and invalid BRFD Agreements. It is also alleged that Bilal has engaged in activity to withhold payments from several gasoline stations owed to MCW, threatened to debrand several stations, filed a lawsuit against plaintiff and the other defendants, seized control of Westco and WP and is attempting to force MCW to pay for the gasoline stations to which MCW agreed to deliver gas on a temporary basis. The complaint alleges causes of action for fraud, negligent misrepresentation, breach of contract, indebitatus assumpsit, account stated and civil conspiracy.

The file shows that a First Amended Complaint was filed on August 6, 2014.

Defendants’ defaults were entered on December 1, 2014.

ANALYSIS:
Relief is sought under the discretionary provision of CCP § 473(b), which provides:
“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.”

The trial court’s granting or denial of relief under this provision is reviewed for abuse of discretion. State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610. It is noted that appellate courts are traditionally “favorably disposed toward such action on the part of the trial courts as will permit, rather than prevent, the adjudication of legal controversies on their merits.” Mercantile Collection Bureau v. Pinheiro (1948) 84 Cal.App.2d 606, 608, citing Benjamin v. Dalmo Mfg. Co. (1947) 31 Cal.2d 523.

Here, the motion argues that the parties had entered into a stipulation to stay this action, and that responsive pleadings would be filed by defendants, and would be “due on or before November 17, 2014.” [Ex. 1]. This stipulation evidently was never filed with the court and no court order was entered thereon, as nothing could be located in the file, and neither side has produced a conformed copy.

The parties appear to agree that the stipulation was entered, and that defendants had until November 17, 2014 to respond to the FAC. However, defendants argue that at a Case Management Conference on November 17, 2014, defendants requested and the court granted defendants’ request for additional time to file their responses to the FAC and their cross-complaints, to December 10, 2014. [Bilal Decl., para. 16]. The declaration of Bilal, an attorney representing himself in this matter, who is not a moving party, indicates that plaintiff’s attorneys were present at the CMC and did not voice any opposition to the request for an extension to December 10, 2014. [Para. 16]. Defendants also submit a declaration of the contract attorney personally appearing for the Westco defendants at the hearing, who had the same understanding of the proceedings, and communicated that to counsel Nabaldian. [Vesagas Decl., paras. 3, 4].

The opposition argues that the court did not grant an extension of time at the hearing, and that it was made clear that plaintiff expected responsive pleadings to be filed that date, November 17, 2014, pursuant to the stipulation. [Gareeb Decl., paras. 6-10]. The argument is that the court commented that the extension appeared reasonable and fair, but that this was not included in the minute order, or otherwise become an instruction of the court. [Gareeb Decl., para. 10]. There is no indication that between the time of the CMC and the date defaults were requested, counsel for plaintiff attempted to clarify this with defendants. The argument is accordingly that the conduct of counsel in delaying in filing responsive pleadings was deliberate and inexcusable, not excusable neglect, and that there was no court order issued somehow rendering the default void. The argument is in essence that the court cannot grant relief here in the absence of an attorney affidavit of fault attesting to counsel’s inexcusable neglect.

This appears to be a case where even if the court was not authorized to enlarge the time to answer, and did not intend to do so, this does not establish that the attorneys’ belief that the due date had been extended was not reasonable under the circumstances. Weighing the competing views of what happened at the hearing, there appears to have been some misunderstanding. Overall, there is no prejudice to plaintiff if relief is granted, and the matter should be resolved on its merits. The motion is granted.