Dollase v. Wanu Water Inc. ( 2023 )

Filed 7/28/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
STEVEN DOLLASE, B314900
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 19STCV19368)
v.
WANU WATER INC.,
Defendant and Appellant.
APPEAL from a postjudgment order of the Superior Court
of Los Angeles County. Barbara Ann Meiers, Judge. Reversed
and remanded with directions.
Abt & Associates and Gregory D. Abt for Defendant and
Appellant.
Norton Rose Fulbright US, James H. Turken and Neil P.
Thakor for Plaintiff and Respondent.
_________________________
SUMMARY
The trial court entered a default judgment against
defendant Wanu Water Inc. on June 16, 2020, and on
December 7, 2020, defendant filed a motion to set aside its
default and vacate the default judgment under the mandatory,
attorney-fault provision of Code of Civil Procedure section 473,
subdivision (b) (section 473(b)). The mandatory provision
requires the court to vacate the default judgment if the
application is filed “no more than six months after entry of
judgment,” is “in proper form,” and is accompanied by an
attorney’s affidavit of fault, unless the court finds the default
“was not in fact caused by” the attorney’s mistake, inadvertence,
surprise or neglect. (Ibid.)
Here, the trial court denied defendant’s motion and gave no
reason for its ruling. The record shows the filing was timely and
was accompanied by an attorney’s affidavit of fault. Thus, the
only bases for denying the motion to vacate the default judgment
were that the application was not “in proper form” or that the
default “was not in fact caused by” the attorney’s neglect.
(§ 473(b).) We have considered both possibilities and conclude
neither justifies denying the motion.
Accordingly, the default and the default judgment must be
vacated.
FACTS
1. The Court Filings: June 3, 2019, to August 4, 2020
On June 3, 2019, plaintiff Steven Dollase filed a complaint
against defendant alleging causes of action for breach of contract,
fraud and conversion. The proof of service of the summons and
complaint showed personal service by Tina Irizarry of First Legal
on Frances Hernandez, National Registered Agents, Inc.,
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Registered Agent for defendant, at an address in Dover,
Delaware.
On August 2, 2019, plaintiff’ filed a request for entry of
default, and default was entered as requested on that date.
On February 24, 2020, plaintiff filed for entry of default
judgment.
On June 16, 2020, judgment by default was entered in the
amount of $702,526.91.
On August 4, 2020, the trial court issued a writ of
execution, and plaintiff obtained $63,739.79 from defendant’s
Wells Fargo Bank account.
2. Defendant’s Motion To Vacate the Default Judgment
On December 7, 2020, defendant filed a motion to set aside
the default and vacate the default judgment. Defendant’s motion
also requested an order quashing service of process, an order
staying any further action to enforce the judgment, and an order
requiring plaintiff to return $63,739 already obtained by plaintiff.
Defendant based its motion on the mandatory provision of
section 473(b), contending the default and default judgment were
entered as a result of the neglect of defendant’s chief legal officer,
John Grbic, as detailed in his affidavit of fault. Defendant also
relied on subdivision (d) of section 473, which permits a court to
set aside a void judgment, and on the court’s “inherent authority
to vacate a default and default judgment on equitable grounds.”
And, defendant contended plaintiff submitted a false proof of
service.
a. Mr. Grbic’s affidavit of fault
The affidavit of fault of defendant’s chief legal officer,
Mr. Grbic, gives his description of what happened between the
time plaintiff filed his complaint (June 3, 2019) and the time
defendant moved to vacate the default judgment (December 7,
2020). That chronology is as follows.
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In mid-July 2019, Mr. Grbic learned from one of
defendant’s outside counsel that plaintiff had filed a summons
and complaint against defendant. He did not know if or how
service had been completed, and he did not inquire, or take any
action to safeguard defendant from having a default entered
against it. Mr. Grbic listed the actions he should have but did
not undertake. He stated he was solely responsible for the acts
and omissions that resulted in the default and the default
judgment.
On August 2, 2019 (the same day default was entered),
Mr. Grbic e-mailed plaintiff’s counsel saying defendant had
received word that a complaint was filed and was “looking to
retain local counsel” to handle the complaint; Mr. Grbic asked if
he could provide plaintiff’s counsel’s name as the point of contact
when counsel was retained.
On August 8, 2019, plaintiff’s counsel responded
affirmatively, also telling Mr. Grbic a default had already been
entered. Mr. Grbic responded that “we never received service”
and that counsel “will be in touch soon.” Plaintiff’s counsel
responded (August 9) that “we served your registered agents in
Delaware.”
In October 2019, Mr. Grbic and plaintiff’s counsel began
negotiations to settle the matter. E-mails attached to Mr. Grbic’s
affidavit reflect settlement communications beginning on
October 10, 2019, and continuing through January 27, 2020. The
record does not contain a response to a counteroffer plaintiff
made on January 27, 2020, or any further e-mail
communications.
On February 24, 2020, as already mentioned, plaintiff filed
for entry of default judgment.
Six months later, on August 28, 2020, Mr. Grbic learned, to
his “complete surprise,” that plaintiff’s counsel had filed a default
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package on February 24 and that plaintiff had obtained a default
judgment on June 16, 2020. He learned this when Wells Fargo
Bank informed him of the writ of execution plaintiff had obtained
and that $63,739.79 had been debited from defendant’s Wells
Fargo Bank account.
Plaintiff’s counsel did not give Mr. Grbic notice of his intent
to file the default package, and did not mail Mr. Grbic any of the
notices the court sent to plaintiff’s counsel relating to the hearing
on the default judgment or a copy of the judgment.
b. The Gregory Abt declaration
In addition to the Grbic affidavit of fault, defendant’s
motion to vacate the default judgment included a declaration
from Mr. Abt, outside counsel retained by defendant. Mr. Abt
declared that on November 8, 2020, as he was preparing to file
defendant’s motion to vacate the default judgment, he noticed
that the signature of the process server (Ms. Irizarry) on the
proof of service “did not in any way shape or form” resemble her
signature on the proof of service in another pending case in which
he also represented defendant. He then collected eight other
proofs of service signed by Ms. Irizarry from other states, and
attached these to his declaration, asserting the person who
signed the proof of service in this case was not the same person
who signed the others. Defendant requested judicial notice of all
these proofs of service.
The Abt declaration also states that “[a]ttached as
Exhibit 7 to this declaration is [defendant’s] motion to quash
service that will be provided under a separate declaration.” But
no separate declaration, and no motion to quash, appears in the
trial court record.
At the hearing on defendant’s motion to vacate the default,
on February 8, 2021, the proposed motion to quash was nowhere
to be found. The hearing was held remotely because of the
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pandemic protocols, so counsel could not provide a copy at the
hearing. (This court granted defendant’s motion to augment the
record on appeal to include the motion to quash, together with
documents showing defendant’s January 1, 2021 e-filing request
to attach the motion to the Abt declaration already on file, as well
as a February 8, 2021 request for courtesy copy delivery and
February 9, 2021 confirmation of delivery to “DEPT 12 Judge
Meiers.”)
3. Plaintiff’s Opposition
Plaintiff’s opposition, filed December 18, 2020, included
declarations from his counsel, Neil Thakor, and from the process
server, Ms. Irizarry.
Ms. Irizarry declared that, on June 12, 2019, she served
Frances Hernandez with National Registered Agents, Inc. at its
address in Delaware, and immediately signed the proof of service.
She stated the proof of service was “not in any way forged or
doctored”; the signature was hers; and she was willing to be
deposed and testify to those facts.
Mr. Thakor described the chronology of events and
appended much of the same e-mail correspondence with
Mr. Grbic as already recounted.
In the opposition, plaintiff contended, along with erroneous
legal arguments based on outdated precedent, that “default was
entered as a result of the neglect of both Wanu’s counsel, Wanu’s
Chief Executive Officer and its Board.” As evidence, plaintiff
pointed to the communications attached to Mr. Thakor’s
declaration, showing that defendant’s chief executive officer
(CEO) was copied on the e-mail in which plaintiff’s counsel
disclosed that a default had been entered against defendant
(August 8, 2019); on e-mails showing plaintiff’s counsel sent
Mr. Grbic and the CEO a copy of the complaint on October 3,
2019; and on an e-mail in which plaintiff’s counsel stated that “I
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don’t think we will be waiting for you to retain counsel much
longer” (October 3, 2019).
Most of the settlement communications do not show
defendant’s CEO as receiving a copy, including one from
plaintiff’s counsel in November 2019 saying plaintiff would
“proceed with the default judgment” if defendant refused its
demand to inspect financial records. Plaintiff also cited an e-mail
from Mr. Grbic to plaintiff’s counsel (January 27, 2020), stating
that “the board appears to be very interested in litigation to
obtain the data needed for the other cases against [other
persons].” That e-mail (which also states “we will get back to you
with a response” to plaintiff’s counteroffer) is the last e-mail in
the record about settlement.
From the evidence just described, plaintiff contended that
defendant “made the deliberate decision to not respond to the
Complaint and seek relief from default,” and “cannot now force
its attorney to fall on his sword, to cover up for its own mistakes.”
4. Defendant’s Reply
Defendant argued there was no evidence that any conduct
on its part in any way contributed to the entry of default on
August 2, 2019, which it says is the critical period for
determining the viability of an attorney’s affidavit of fault.
Moreover, defendant contended that, even assuming defendant
was in any way responsible, precedents state that mandatory
relief does not require the attorney to be solely responsible, citing
Benedict v. Danner Press (2001) 87 Cal.App.4th 923, 928–929
(Benedict) (observing that “[o]n its face, section 473,
subdivision (b), does not preclude relief under the mandatory
provision when default is entered as a result of a combination of
attorney and client fault. The statute merely requires that the
attorney’s conduct be a cause in fact of the entry of default (see
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§ 473, subd. (b)), but does not indicate that it must be
the only cause”).
Defendant also continued to argue that the judgment was
void because of a false proof of service.
5. Additional Briefing
On January 4, 2021, at a hearing on the motion to vacate
the default judgment, the court stayed all collection efforts and
enjoined plaintiff from disbursing any funds already collected,
and “set[] a hearing as to service.”
On February 2, 2021, two days before the then-scheduled
hearing date, plaintiff filed a supplemental brief in opposition to
defendant’s motion to vacate the judgment. In addition to other
points unnecessary to recite here, plaintiff argued for the first
time that defendant’s application did not include an answer or
other pleading proposed to be filed, as required by the statute,
and therefore it must be denied.
Defendant responded with a declaration from counsel
protesting the “11th-hour service” and, among other points,
stating that its motion to vacate the default was accompanied by
a motion to quash as its “other pleading proposed to be filed,” as
provided in the statute.
6. The Hearing
The court held the hearing on February 8, 2021. The
parties argued about the proposed motion to quash, whether it
qualified as a responsive pleading, and whether it had been filed,
since there was no copy in the court’s file. The hearing was
remote because of the pandemic, so counsel could not provide a
copy at the hearing. The parties also argued about the validity of
service of the summons and complaint, and particularly the
discrepancy in Ms. Irizarry’s signature on the proof of service
compared with other proofs of service. The trial court took the
matter under submission.
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On February 22, 2021, the court issued its ruling denying
defendant’s motion to set aside the default and vacate the default
judgment, and served the minute order on the parties. The court
did not state a reason for its decision.
Almost six months later, on August 13, 2021, defendant
served notice of entry of the court’s order, and filed a notice of
appeal on August 17, 2021.
During the briefing of this appeal, plaintiff requested
judicial notice of four documents.1 None of the documents was
judicially noticed by the trial court, and none of them has any
relevance to either of the two issues we decide in this case. We
therefore deny the request.
DISCUSSION
Section 473(b) provides in pertinent part:
“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.”
1 The documents are: a motion to set aside a default that
defendant filed in a different case in September 2020; an affidavit
supporting that motion; a notice of confirmation of an electronic
filing in this case dated August 1, 2019; and an e-mail from
plaintiff’s counsel to his assistant on August 2, 2019, asking her
to refile and re-serve the request for entry of default.
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“Unlike the discretionary ground for relief, a motion based
on attorney fault need not show diligence in seeking relief. The
motion is timely if filed within six months of the entry of the
default judgment or dismissal.” (Younessi v. Woolf (2016)
244 Cal.App.4th 1137, 1147; Milton v. Perceptual Development
Corp. (1997) 53 Cal.App.4th 861, 868.)
“The purpose of [the] mandatory relief provision is to
alleviate the hardship on parties who lose their day in court due
to an inexcusable failure to act by their attorneys. [Citation.]
More recently, the Court of Appeal has stated the purpose was to
relieve the innocent client of the burden of the attorney’s fault, to
impose the burden on the erring attorney, and to avoid
precipitating more litigation in the form of malpractice suits.”
(Rodriguez v. Brill (2015) 234 Cal.App.4th 715, 723 (Rodriguez).)
Here, plaintiff contends two grounds support the trial
court’s denial of the application for mandatory relief. We
disagree, and address plaintiff’s arguments in turn.
1. “In Proper Form”
Plaintiff asserts the application for relief was not “in proper
form” because it “did not contain a proposed answer or any other
responsive pleading,” and because defendant did not provide a
proposed answer before the February 8, 2021 hearing.
a. The legal principles
We apply the following principles.
First, there is precedent stating the Legislature “intended
the phrase ‘ “in proper form” ’ to encompass the mandate that the
application for relief . . . be accompanied by the pleading proposed
to be filed therein.” (Hernandez v. FCA US LLC (2020)
50 Cal.App.5th 329, 336–337 (Hernandez), citing Carmel, Ltd. v.
Tavoussi (2009) 175 Cal.App.4th 393, 401 (Carmel).)
Second, substantial compliance with that requirement is
sufficient. (Carmel, supra, 175 Cal.App.4th at p. 403.)
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Third, the statutory language plaintiff relies on requires
submission of “the answer or other pleading proposed to be filed”
– language that on its face does not exclude a motion to quash as
a proper response to a complaint.
b. This case
The substance of plaintiff’s argument is that a motion to
quash is not “a responsive pleading” because it does not
demonstrate readiness to proceed on the merits. Plaintiff relies
on language in cases where the defendant in default proposed to
file an answer together with the motion for relief from default.
The issue in those cases was whether the filing of a proposed
answer substantially complied with the statute if the answer was
not attached to the application and was instead filed later. For
example, in Carmel, the defendants executed a proposed answer,
but the record did not show they included it with their
application for relief. But the defendants “made it available at
the hearing on the motion,” and this “substantially complied with
the requirements of the mandatory relief provision of [section
473(b)].” (Carmel, supra, 175 Cal.App.4th at p. 403.)
In Carmel, the court stated that “we interpret the phrase
‘in the proper form’ to include the requirement that a proposed
answer accompany the application for mandatory relief.”
(Carmel, supra, 175 Cal.App.4th at p. 402.) Similarly, Job v.
Farrington (1989) 209 Cal.App.3d 338, relied on in Carmel,
stated that the object of the “proposed answer or other pleading”
requirement “was simply to require the delinquent party seeking
leave to contest on the merits, to show his good faith and readiness
to at once file his answer in the event that leave is granted.”
(Job, at pp. 340, 341, italics added.) Both cases involved a
proposed answer, not any other kind of pleading, and their
language is accordingly couched in terms of a proposed answer,
rather than any other kind of pleading. Neither case holds that a
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responsive pleading must address the merits of the case, and
neither court discusses what “on the merits” means. In short,
neither court considered whether a motion to quash service of
process constitutes an “other pleading proposed to be filed”
within the meaning of section 473(b).
Plaintiff cites the policies supporting the requirement that
a proposed pleading accompany the application for relief, as
described in Carmel: “ ‘ “policies [which] favor getting cases to
trial on time, avoiding unnecessary and prejudicial delay, and
preventing litigants from playing fast and loose with the
pertinent legal rules and procedures.” ’ ” (Carmel, supra,
175 Cal.App.4th at pp. 401–402.) While a motion to quash
service would involve a delay in reaching the merits, plaintiff
does not explain why it would create “ ‘ “unnecessary and
prejudicial delay,” ’ ” or how it would constitute “ ‘ “playing fast
and loose with the pertinent legal rules and procedures.’ ” ’
(Ibid.)
Plaintiff further claims a motion to quash is not a pleading
at all because it is not listed in Code of Civil Procedure
section 422.10 (“The pleadings allowed in civil actions are
complaints, demurrers, answers, and cross-complaints”) and
because section 420 defines “pleadings” as “the formal allegations
by the parties of their respective claims and defenses, for the
judgment of the court.” We do not construe the meaning of the
term “pleading” in section 473(b) so narrowly.
In a different context, Goddard v. Pollock (1974)
37 Cal.App.3d 137 states that a motion to quash service of
summons “clearly constitutes a ‘pleading’ which, if timely filed,
would have precluded the clerk from thereafter entering
defendants’ default.” (Id. at p. 141, citing Code Civ. Proc., § 585
[governing when judgment may be had if a defendant fails to
answer or file other specified motions, including a motion to
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quash].) Further, in many cases involving dismissals (as opposed
to default judgments) under the mandatory provision, the “other
pleading proposed to be filed” is a motion, or some other
document that is not a “pleading” as defined in section 422.10.
(See, e.g., Hernandez, supra, 50 Cal.App.5th at p. 337 [motion for
attorney fees, after a settlement and dismissal]; see also
Rodriguez, supra, 234 Cal.App.4th at pp. 719–720 [verified
discovery responses, after dismissal implementing a terminating
sanction for discovery abuse].) Consequently, the term “pleading”
is not limited as plaintiff suggests.
Next, plaintiff contends that even if a motion to quash
qualifies as an “other pleading,” in this case the proposed motion
to quash “was never submitted.” Plaintiff correctly states that at
the February 8, 2021 hearing, the trial court did not have a copy
of the proposed motion to quash. But the record reflects delivery
of a courtesy copy to the trial court the following day, as plaintiff
admits. The record also reflects defendant’s earlier, apparently
unsuccessful, efforts to file the proposed motion to quash,
beginning on January 1, 2021.
We conclude that defendant substantially complied with
the requirement that a proposed pleading accompany a motion to
vacate a default. We are aware that in other cases finding
substantial compliance, the “answer or other pleading” had been
lodged with the court by the day of the hearing. (Carmel, supra,
175 Cal.App.4th at p. 403 [“We do not know whether defendants’
counsel inadvertently failed to accompany the motion with their
proposed answer, or whether the proposed answer simply did not
find its way into the court’s file. But we perceive no reason why
the court could not have reviewed the proposed answer proffered
at the hearing and ordered it filed.”]; see also Rodriguez, supra,
234 Cal.App.4th at p. 733 [substantial compliance where “verified
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discovery responses were served the day before the hearing and
copies were lodged with the court the day of the hearing”].)
The circumstances here are different. The record shows
counsel tried to file the motion to quash before the hearing.
Moreover, the hearing was conducted remotely, while pandemic
protocols were in place, so counsel was not in a position to
present a copy of the motion to quash to the trial court at the
hearing. Further, the court did not decide the motion to vacate
the default until February 22, 2021, well after delivery to the
court of a copy of the motion to quash on February 9, 2021.
Plaintiff identifies no prejudice suffered from delivery to the court
one day after, rather than at, the hearing. The substantial
compliance standard was met.
2. The Causation Issue
Because defendant’s motion to vacate the default judgment
was timely and in proper form, the trial court was required to
vacate the default judgment “unless the court finds that the
default . . . was not in fact caused by the attorney’s mistake,
inadvertence, surprise, or neglect.” (§ 473(b).)
a. The law
There is a split of authority on whether the attorney must
be the sole cause of the default in order to rely on the mandatory
relief provision. Some cases say mandatory relief is available
only if the party against whom the judgment is taken is “totally
innocent of any wrongdoing and the attorney was the sole cause
of the default or dismissal.” (Lang v. Hochman (2000)
77 Cal.App.4th 1225, 1248; id. at p. 1252 [“When deciding
whether to grant relief, the court must resolve the issue whether
attorney actions, or the misconduct of the parties themselves,
actually caused the default or dismissal.”].)
Other cases say that mandatory relief is available unless
the party is guilty of intentional misconduct. (See, e.g.,
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SJP Limited Partnership v. City of Los Angeles (2006)
136 Cal.App.4th 511, 520 [“Because [the attorney’s] declaration
indicates that his mistake or neglect caused [the plaintiff’s]
dismissal and because the evidence does not support a finding of
intentional misconduct on [the plaintiff’s] part, we find that the
trial court erred in not granting [the plaintiff] mandatory relief
from dismissal.”]; Benedict, supra, 87 Cal.App.4th at pp. 930, 932
[“if the Lang court meant to hold that relief is precluded when a
default is caused in part by a mistake or error of judgment by the
client and in part by attorney oversight or neglect, we simply
disagree”; “Inasmuch as [the defendants’] counsel submitted
declarations indicating ways in which counsel’s mistake or
neglect caused the entry of default, the trial court properly
granted the requested [mandatory] relief, even though [a
defendant’s] mistakes were an additional cause in fact of the
entry of default.”].)
We need not enter the fray on this point, because there is
no substantial evidence to support plaintiff’s contention that
defendant caused the entry of default.
b. This case
We have described the record in detail in the Facts section,
including the evidence plaintiff relies on for his claim that the
attorney, Mr. Grbic, was not solely at fault (ante, at pp. 6–7). At
best, the record shows defendant’s executives may have had a
limited awareness of the lawsuit. That is not enough to show
defendant caused the default to be entered.
Plaintiff insists the record shows Mr. Grbic was “simply
covering up for his client.” But the only evidence plaintiff cites
are a few e-mails after the default was entered, showing a copy to
defendant’s CEO. As already described, these were e-mails
disclosing that a default had been entered; showing transmission
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of a copy of the complaint, including a statement by plaintiff’s
counsel that “I don’t think we will be waiting for you to retain
counsel much longer,” and a statement by Mr. Grbic that “[i]f we
have to litigate, we’re prepared to bring a full set of
counterclaims.” Plaintiff also cites e-mails (not showing a copy to
the CEO) from Mr. Grbic to counsel for plaintiff saying “we’re
also mindful of time to file and not going to put up with foot-
dragging” on a settlement offer, and “the board appears to be very
interested in litigation to obtain the data needed for the other
cases against [other persons].”
In sum, there is no evidence defendant caused the entry of
default, which occurred on August 2, 2019, before any of the e-
mail correspondence plaintiff cites. Nor can we reasonably infer,
from that correspondence, that (as plaintiff argues), defendant
“made the deliberate decision to not respond to the Complaint to
try to settle at a discount instead of seeking relief from default.”
Plaintiff contends the question whether the attorney
caused the default “is in part a credibility determination,” citing
Cowan v. Krayzman (2011) 196 Cal.App.4th 907, 915. But in that
case the trial court actually made a credibility determination,
and there was evidence to support it. (Ibid.) Here, the court did
not explain its reasoning and did not make any credibility
finding, and we find no reason to discredit Mr. Grbic’s
declaration.
On a final note, we do not describe in detail or consider the
parties’ contentions regarding the reliability of the proof of
service of the summons and complaint. That will be a matter for
the trial court to decide on remand. It is sufficient to say the
dispute does not appear to be manufactured for purposes of delay
because in November 2020, outside defense counsel expressed his
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belief that the proof of service was false and, whether or not
counsel was correct, he apparently had legitimate reasons to
think so.
DISPOSITION
The order denying defendant’s motion for relief under
section 473(b) is reversed. The cause is remanded to the trial
court with directions to vacate its order and to enter a new order
granting the motion for relief; vacating the entry of default and
vacating the default judgment; recalling and quashing the writ of
execution, vacating the levy, and ordering return of the
$63,739.79 to defendant. Defendant shall recover its costs on
appeal.
GRIMES, J.
WE CONCUR:
STRATTON, P. J.
VIRAMONTES, J.
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