Chao v. A. Salem, D.D.S., Inc. CA6

Filed 11/6/15 Chao v. A. Salem, D.D.S., Inc. CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
JINNIE CHAO, H041261
(Santa Clara County
Plaintiff and Respondent, Super. Ct. No. 1-12-CV217465)
v.
A. SALEM, D.D.S., INC.,
Defendant and Appellant.
A. Salem, D.D.S., Inc. (Salem or the corporation) appeals from a default
judgment, seeking review of three superior court decisions: an order striking its answer
to the complaint filed by respondent Jinnie Chao, an order denying its motion to set aside
the resulting default, and a post-judgment order directing a third party to turn over funds
in which Salem had an interest. Salem contends that the superior court should have given
its principal, defendant Ardeshir Salem, more time to secure legal counsel for the
corporation after the law firm representing both defendants withdrew from representing
them. Salem further contends that the court abused its discretion by striking its answer
without giving it additional time to secure replacement counsel. Finally, Salem
complains that the court violated Code of Civil Procedure section 708.1201 by directing
the third party to turn over the funds he held for Salem, in order to enforce Chao’s default
1
All further statutory references are to the Code of Civil Procedure.
judgment against the corporation. We find no error in the rulings that are properly before
us and will therefore affirm the judgment.
Background
Respondent Chao initiated this action in January 2012, naming both Ardeshir
Salem and the corporation as defendants. In her first amended complaint, filed in
July 2012, she alleged that she had been both a dental patient and an employee of
defendants. Ardeshir Salem had “abused [her] trust and confidence” by overcharging her
for unnecessary dental treatment and by inducing her to loan him money through verbal
abuse and “exploit[ing] [her] sense of charity.”2 Defendants answered the complaint and
filed a cross-complaint against Chao, her son, and various companies alleged to be
associated with Chao. Defendants eventually amended their pleading twice, eventually
filing their second amended cross-complaint on December 28, 2012.
In July 2013 defendants’ attorneys, members of the Hopkins & Carley law firm,
asked the court to relieve them as counsel. According to Chao, the motion was granted
September 24, 2013, but the order was filed October 1, 2013. On September 30, 2013,
Chao and the other cross-defendants moved to strike Salem’s answer and to strike or
dismiss its cross-complaint on the ground that a corporation may not represent itself. No
written opposition was submitted. At the October 29, 2013 hearing, however, counsel for
the corporation in a separate matter specially appeared “to see if [he could] at least seek a
[sic] additional amount of time for [Salem] to get new counsel.” The attorney also
contested the motion to strike, arguing that the cross-defendants had exceeded the
permissible time for the motion under section 435,3 that service of the motion was
2
A filed copy of this pleading is not in the appellate record. The copy that is in the
record is incomplete, containing only the first four pages.
3
Section 435, subdivision (a), permits a party to move to strike a pleading, including a
cross-complaint, “within the time allowed to respond to a pleading.”
2
“technically” ineffective because the motion to withdraw had not yet been granted by
final written order, and that the statutory grounds for striking or dismissing the pleadings
under sections 436 and 581 did not exist.4
Chao’s attorney responded that Ardeshir Salem had exhibited a pattern of ignoring
tasks and then asking the court to “help him out” at the last minute. On this occasion,
Chao’s attorney pointed out, it had been exactly 16 weeks since Hopkins & Carley had
filed the motion to withdraw as counsel; Ardeshir Salem had thus shown no diligence
despite ample time to find a new attorney for the corporation.
The court granted Chao’s motion. In its December 12, 2013 order it declared that
Salem’s answer was “stricken and defendant is defaulted.” The court also dismissed the
cross-complaint without prejudice as to most of the cross-defendants, including Chao.
On January 24, 2014, Salem, now represented by counsel, moved to set aside the
default under section 473, subdivision (b),5 on the ground of “surprise, inadvertence,
and/or excusable neglect.” Salem listed five different attorneys defendants had attempted
to engage between August 1 and October 23, 2013. The last three attorneys, all contacted
in October 2013, apparently were available, but in each case the retainer fee was
4
Section 436 permits the court, “upon a motion made pursuant to Section 435, or at
any time in its discretion, and upon terms it deems proper,” to “(a) Strike out any
irrelevant, false, or improper matter inserted in any pleading. [¶] (b) Strike out all or any
part of any pleading not drawn or filed in conformity with the laws of this state, a court
rule, or an order of the court.” Section 581 sets forth the circumstances and conditions
under which an action or complaint may be dismissed.
5
This provision states, in pertinent part, “(b) 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.”
3
“prohibitively high.” The superior court, however, evidently agreed with Chao that
Salem’s inability to secure counsel did not constitute “mistake, inadvertence, surprise, or
excusable neglect” within the meaning of section 473, subdivision (b). Accordingly, on
March 10, 2014, the court denied Salem’s motion.
On May 16, 2014, after a prove-up hearing, the court entered a default judgment
against the corporation for $1.4 million plus costs, for a total award to Chao of
$1,403,242.09. Salem filed its notice of appeal from this judgment on July 18, 2014.6
On December 3, 2014, the superior court granted Chao’s application for a turnover
order, which required Ronald P. Goldman, who held money in a trust account for Salem’s
benefit, to convey that money to Chao’s attorney in partial satisfaction of Chao’s default
judgment.
Discussion
Salem raises three issues for resolution on appeal: (1) whether the superior court
abused its discretion in denying Salem’s motion to set aside the default; (2) whether the
court abused its discretion by striking Salem’s answer without giving it an “opportunity
to cure the problem with the pleadings” by allowing it more time to find new counsel;
and (3) whether, contrary to section 708.180, the court improperly ordered the funds held
by Goldman to be released to Chao’s attorney in partial satisfaction of Chao’s default
judgment.
It is immediately apparent that we lack jurisdiction to address Salem’s third
argument, because it did not appeal from the turnover order. This was a post-judgment
order made appealable by section 904.1, subdivision (a)(2), not an interlocutory order
6
On May 22, 2014, Chao’s counsel executed a declaration stating that he had served
the “Notice of Entry of Judgment” on that date. The Notice itself, however, was not filed
until June 5, 2014. We presume that counsel misspoke, particularly since his declaration
also was not filed until June 5, 2014.
4
requiring a party to immediately pay money, as Salem suggests in its reply brief.7 Filing
a timely notice of appeal is a jurisdictional prerequisite to appellate review. Without that
timely notice, a reviewing court has no jurisdiction. (Van Beurden Ins. Services, Inc. v.
Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal. 4th 51, 56.) Salem’s
challenge to the turnover order will therefore not be considered in this appeal.
1. Motion to Set Aside Default
Section 473, subdivision (b), permits the court to “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.”
Relief must be sought “within a reasonable time, in no case exceeding six months, after
the judgment, dismissal, order, or proceeding was taken.” (Ibid.)
Salem contends that the superior court abused its discretion by declining to apply
section 473 to set aside its default, because it had established that its efforts to secure
counsel constituted excusable neglect, and after obtaining counsel, it sought relief
“promptly.”8 In Salem’s view, the court unreasonably denied the motion because
Ardeshir Salem had been “proactive” in trying to find counsel to replace Hopkins &
Carley. His efforts were, in Salem’s view, “the acts of a diligent and prudent person”
faced with the difficulty of finding an attorney after two years of litigation. Thus,
“Salem’s actions fall within the category of excusable neglect and the trial court abused
its discretion by not granting the motion to set aside the default.”
Salem acknowledges that a motion for relief from default “lies within the sound
discretion of the trial court, and the trial court’s decision will not be overturned absent an
7
Salem’s attorney acknowledged at the hearing on the turnover application that if
granted, the turnover order would be an appealable order.
8
On appeal, Salem does not rely specifically on any of the alternative statutory
grounds of mistake, inadvertence, and surprise to justify its request for relief.
5
abuse of discretion.” (Elston v. City of Turlock (1985) 38 Cal. 3d 227, 233 (Elston); see
also Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal. 4th 249, 257 [ruling on
motion for discretionary relief under section 473 may not be disturbed on appeal absent a
clear showing of abuse].) On the other hand, “[s]ection 473 is often applied liberally
where the party in default moves promptly to seek relief, and [where] the party opposing
the motion will not suffer prejudice if relief is granted. [Citations.] In such situations
‘very slight evidence will be required to justify a court in setting aside the default.’
[Citations.] [¶] Moreover, because the law strongly favors trial and disposition on the
merits, any doubts in applying section 473 must be resolved in favor of the party seeking
relief from default.” (Elston, supra, at p. 233; accord, Maynard v. Brandon (2005) 36
Cal. 4th 364, 372.)
Salem’s initial burden, however, was to show by a preponderance of the evidence
that default was taken against it through its inadvertence, surprise or excusable neglect.
(Etchepare v. Ehmke (1955) 137 Cal. App. 2d 508, 511.) If it had met that burden, the
court would have had discretion to grant relief under section 473. “But if a party fails to
show that a judgment has been taken against him through his mistake, inadvertence,
surprise or excusable neglect the court may not grant relief. It has no discretion.” (Iott v.
Franklin (1988) 206 Cal. App. 3d 521, 528 (Iott); accord, Parage v. Couedel (1997) 60
Cal. App. 4th 1037, 1042.) “In other words, the court’s ‘discretion may be exercised only
after the party seeking relief has shown that there is a proper ground for relief, and that
the party has raised that ground in a procedurally proper manner, within any applicable
time limits.’ [Citation.]” (Huh v. Wang (2007) 158 Cal. App. 4th 1406, 1419; but see
Hearn v. Howard (2009) 177 Cal. App. 4th 1193, 1206-1207 (Hearn) [finding proper
exercise of discretion in lower court’s reasonable conclusion that default judgment did
not result from mistake, inadvertence, surprise or excusable neglect]; Cole v. City of Los
Angeles (1986) 187 Cal. App. 3d 1369, 1377 [same].)
6
Whether the court’s finding of no excusable neglect is viewed as an exercise of
discretion in itself or as a finding preceding its exercise of discretion, we cannot find
error in its determination that Salem failed to show excusable neglect. “ ‘To warrant
relief under section 473 a litigant’s neglect must have been such as might have been the
act of a reasonably prudent person under the same circumstances. . . . It is the duty of
every party desiring to resist an action or to participate in a judicial proceeding to take
timely and adequate steps to retain counsel or to act in his own person to avoid an
undesirable judgment. . . . Courts neither act as guardians for incompetent parties nor for
those who are grossly careless of their own affairs. . . . The only occasion for the
application of section 473 is where a party is unexpectedly placed in a situation to his
injury without fault or negligence of his own and against which ordinary prudence could
not have guarded.’ [Citation.]” (Hearn, supra, 177 Cal.App.4th at p. 1206.)
Here the court rejected as insufficient to show excusable neglect Ardeshir Salem’s
declaration, in which he stated that he had made five attempts to secure representation for
the corporation between Hopkins & Carley’s July 9, 2013 motion to withdraw and the
October 29, 2013 hearing on Chao’s motion to strike.9 The court had before it the
transcript of that hearing, at which the prior judge10 noted the lengthy history of the case
and expressed the opinion that 16 weeks was “more than sufficient time” to find
replacement counsel. The court was also aware that Salem had not obtained an attorney
9
Chao’s attorney submitted a declaration stating that he was notified on June 11, 2013
that Hopkins & Carley intended to file its motion to withdraw as Salem’s counsel. Chao
urged the superior court to infer that Salem also knew as early as this date that it would
soon be left without an attorney.
10
The various rulings in this case were made by different judges. The Honorable Peter
H. Kirwan entered the order striking Salem’s answer and dismissing the cross-complaint
without prejudice. Salem’s subsequent motion to vacate that order was denied by the
Honorable James L. Stoelker. The Honorable Socrates P. Manoukian entered the default
judgment, and the Honorable Patricia M. Lucas issued the turnover order.
7
to replace Hopkins & Carley until December 16, 2013, more than five months after
knowing that the firm was going to withdraw as counsel. Its determination that Salem
had not met its burden to show excusable neglect by failing to secure legal representation
supported its denial of Salem’s motion for relief from default.
“ ‘Trial judges are presumed to be intelligent, honest, and fair-minded individuals.
They have a grave responsibility in cases of this character. The statute has reposed in
them an exceptionally broad power. The power to grant relief from default. The statute
has fixed the limit of that power. Within that limit it must be exercised wisely,
reasonably and fairly, with the view of advancing the administration of justice. All this a
trial judge is presumed to have done when he exercises his discretion in ruling on an
application for relief from default under section 473 of the Code of Civil Procedure. The
ruling comes before an appellate court fortified with this presumption. The duty of the
appellate court is to give full effect to this presumption. The question to be determined
by the appellate court is not what it would have done had it been sitting in the place of the
trial judge, but whether from the record it can be said that the trial judge failed to act
wisely, reasonably and fairly in view of what was presented to him in support of the
application. If such failure does not clearly and unmistakably appear, it cannot be said
that the trial judge abused his discretion, and his decision should be affirmed.’ ”
(Iott, supra, 206 Cal.App.3d at p. 527, quoting Benjamin v. Dalmo Mfg. Co. (1948) 31
Cal. 2d 523, 533-534, [dis. opn. of Carter, J.].) No error in denying the motion for relief
is apparent on this record.
2. Leave to Amend Answer
Salem next contends that the default judgment should be set aside because the
superior court had struck its answer without giving it a reasonable opportunity to “cure
the problem” by obtaining new counsel. Although Salem phrases its argument in terms
of leave to amend its answer, the essence of Salem’s argument on appeal is directed at the
court’s refusal to allow it more time to find an attorney. In other words, Salem explains
8
in its reply brief, leave to amend would have given Salem at least 10 extra days to “cure
the defect.”
Salem acknowledges that a corporation may not appear in court without being
represented by a licensed attorney. (Merco Constr. Engineers, Inc. v. Municipal Court
(1978) 21 Cal. 3d 724, 730; Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals
Bd. (2002) 99 Cal. App. 4th 1094, 1101-1102; Paradise v. Nowlin (1948) 86 Cal. App. 2d
897, 898-899.) Salem suggests, however, that the superior court should not have
“applied this rule rigidly,” because “California is moving in the direction of a more
flexible application of this rule.” It cites CLD Construction, Inc. v. City of San Ramon
(2004) 120 Cal. App. 4th 1141 (CLD), where the appellate court reversed an order striking
a corporation’s complaint under section 436. The corporation had filed the complaint in
propria persona, but it had obtained counsel by the time the defendant city moved to
strike the complaint. The Court of Appeal, First Appellate District, Division Five, held
that it was “more appropriate and just to treat a corporation’s failure to be represented by
an attorney as a defect that may be corrected, on such terms as are just in the sound
discretion of the court.” (CLD, supra, at p. 1149.) Because the parties were at the
threshold of the lawsuit, no prejudice to the city could have occurred. Most notably,
because CLD had retained counsel before the city appeared, its initial self-representation
was “minimal, and essentially inconsequential. For all practical purposes CLD was
represented by counsel before the City became a player in the action, so neither the City
nor the trial court was ever in the position of having to deal with a nonattorney corporate
representative.” (Id. at p. 1150.) Indeed, the record indicated to the appellate court that
the substitution might have taken place even before the city was served. Thus, the court
held, just as courts arrange for counsel when minors have attempted to represent
themselves in court, a corporation “should not be foreclosed from going forward with its
legal right to sue because of a defective complaint that can be readily and easily cured
without prejudice to either its opponent or the court.” (Id. at p. 1152.)
9
CLD Construction does not help Salem. The defect before the superior court in
this case was not so easily corrected by amendment because, unlike CLD, Salem had no
attorney when the motion to strike was brought and when it was heard by the court.
At the hearing on the motion to strike Salem never asked the court for an opportunity to
amend the answer; the attorney specially appearing for Salem at the hearing asked only
for more time to find counsel. Nor was amendment strictly necessary, since the answer
had been properly filed while Salem was represented by Hopkins & Carley. Salem’s
only objective was to be afforded more time to obtain substitute counsel so that it could
proceed with its defense and its cross-complaint. This was a decision to be made by the
court in its sound discretion. As discussed above, no abuse of that discretion occurred
when the court struck Salem’s answer without first giving the corporation more time to
find legal representation by an attorney.
Disposition
The judgment is affirmed.
10
_________________________________
ELIA, J.
WE CONCUR:
_______________________________
RUSHING, P. J.
_______________________________
MÁRQUEZ, J.
Chao v. A. Salem, D.D.S., Inc.
H041261