Opinion
NOT TO BE PUBLISHED
APPEALS from a judgment of the Superior Court of Los Angeles County, No. BC369306 Mark V. Mooney, Judge.
Feldsted & Scolney, Peter N. Scolney; and Harold C. Klaskin for Plaintiff and Appellant.
Lascher & Lascher, Wendy C. Lascher, and Eric R. Reed for Defendants and Appellants.
SUZUKAWA, J.
In this action in equity, plaintiff seeks to vacate a default judgment that was entered on defendants’ complaint in an underlying action. Plaintiff contends that the default judgment, although valid on its face, is void for lack of personal jurisdiction because of lack of notice and improper service of the summons and complaint.
At trial, the court excluded plaintiff’s evidence of lack of notice and improper service. Plaintiff had submitted similar evidence in his prior motion for relief under Code of Civil Procedure section 473, subdivision (d). The trial court concluded that, even though the section 473 motion was denied as untimely and did not result in a decision on the merits on the jurisdictional issues, the jurisdictional issues could not be relitigated and, therefore, the evidence was inadmissible.
All further undesignated statutory references are to the Code of Civil Procedure. Section 473, subdivision (d) provides in relevant part that “[t]he court may, upon motion of the injured party, or its own motion, ... set aside any void judgment or order.”
Notwithstanding plaintiff’s inability to litigate his jurisdictional challenge, he prevailed at trial based on evidence of other conduct that the trial court found was extrinsic fraud. Based on that finding, the trial court vacated the default judgment as void on the ground of extrinsic fraud. Both sides have appealed from the judgment.
In the main appeal, defendants contend that the judgment must be reversed because of insufficient evidence of extrinsic fraud. In the cross-appeal, plaintiff contends that, in the event of a reversal, the matter should be retried due to the erroneous exclusion of evidence of lack of notice and improper service.
We conclude that both appeals are well-taken. On defendants’ appeal, we reverse the judgment for insufficient evidence of extrinsic fraud. On plaintiff’s cross-appeal, we remand for a retrial of his jurisdictional challenge based on lack of notice and improper service.
FACTUAL AND PROCEDURAL BACKGROUND
The parties-defendants Frank Salvador, Mercario Marcelino, and Rolando Peralta (the employees), and their former supervisor, plaintiff Wajeeh Ersheid-were employed by the Los Angeles Unified School District (LAUSD or District). In August 1998, the District fired Ersheid for insubordination. Before he was fired, Ersheid had accused the employees of various misdeeds including “cheating on civil service exams, ” “exchanging exam results for sexual favors, ” “intimidating non-Filipino department heads, ” “threatening Ersheid’s life, ” “being unstable, liars, and troublemakers, ” “vandalizing Ersheid’s car, ” “exhibiting uncivilized and despicable behavior, ” and “being incompetent in the performance of their job.”
The District is not a party to this litigation. Upon the death of defendant Rolando Peralta, Maria Fernando was substituted in his place.
In October 1998, the employees filed an administrative complaint against the District under the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.; FEHA), alleging that Ersheid had harassed and discriminated against them because of their race and national origin. After the employees received a right to sue notice in February 1999, they entered into mediation with the District. The employees signed a settlement agreement with the District dated July 1, 1999 (settlement agreement). Ersheid was not a party to the mediation or the settlement agreement.
The settlement agreement contained a mutual release of each party’s claims against the other party and their respective agents, employees, and former employees (the release). Of relevance to this appeal, the release contained the following exception that preserved, to a limited extent, the employees’ claims against Ersheid for intentional misconduct or misconduct outside the scope of his employment, so long as the District was not compelled to defend or indemnify Ersheid. The exception stated: “The foregoing releases are not intended to encompass claims by Employees against Wajeeh Ersheid for intentional misconduct or misconduct outside the scope of his employment at LAUSD, so long as LAUSD is not compelled by statute or otherwise to provide Ersheid with a defense or indemnify him for any liability.”
The release stated that the parties “hereby release each other, including each of their respective agents, employees, former employees, [and] partners... from any and all claims, demands, causes of action, contracts, covenants, representations, warranties, promises, undertakings, actions, suits, obligations, controversies, debts, costs, expenses, accounts, damages, losses, judgments, liabilities, or demands of any nature whatsoever (‘Claims’), unanticipated, known or unknown, that either of the parties or any of their agents, representatives or successors may have or claim to have against the other or their above-mentioned agents, representatives or successors at this time or any prior time.”
On July 13, 1999, the employees filed the underlying action against Ersheid (underlying action or damages action). (Peralta v. Ersheid (Super. Ct. L.A. County, 2000, BC213421).) Their complaint alleged that Ersheid’s libelous and defamatory statements “were published to, among others, the Superintendent of Schools Dr. Ruben Zacarias, Los Angeles Unified School Board Members, LAUSD Chief Financial Officer Henry Jones, the Los Angeles Police Department, the Los Angeles School Police Department, and Plaintiffs’ co-workers within the Internal Audit Branch.”
In February 2000, the employees obtained an order allowing service by publication of the summons and complaint in the underlying action. The order was based on the process server’s declarations of due diligence regarding his attempts to effect personal service of the summons and complaint at Ersheid’s home. After the summons and complaint were served by publication, Ersheid’s default was entered in May 2000 and a $350,000 default judgment was entered in July 2000.
In 2007, Ersheid filed a motion to vacate the default and default judgment as void under section 473, subdivision (d). Ersheid raised two grounds for relief: (1) lack of notice and defective service of the summons and complaint; and (2) lack of evidence to sustain the judgment.
In his moving papers, Ersheid argued that by obtaining leave to serve the summons and complaint in the underlying action by publication, the employees “virtually made certain that [he] would have no notice of the action.” In support of their request for service by publication, the employees allegedly submitted a “purposefully vague and ambiguous” declaration that contained “‘hedging’ or less than forthright” descriptions of the process server’s attempts at personal service. The declaration was “purposefully vague and ambiguous with respect to whether he actually knocked on or rang [Ersheid’s] door. His testimony is that on the eight occasions he ‘either rang the doorbell or did not reach the front door due to the locked front gate.’ The declaration does not state upon which occasions he reached the front door and which occasions he did not. The declaration is either ‘hedging’ or less than forthright by saying that it was one or the other without specifying. As more particularly set forth in the Declaration of Wajeeh Ersh[e]id, one could easily step over the railing to reach the front door. There were no dangerous conditions on the other side which would have prevented... anyone from reaching the front door then or now.... It is quite conceivable from the totality and quality of service attempts that the process server may have knocked on Defendant’s door on only one occasion.”
The trial court denied the section 473 motion on April 10, 2007, and issued the following ruling: “Judgment Debtor’s Motion to Vacate and Set Aside Default and Default Judgment under CCP 473 is DENIED for the reasons set forth on the record, including but not limited to the fact that the Motion is untimely per CCP 473.5, and per the holding in Rogers v. Silverman (1989) 216 CA3d 1114.” (Italics added.) The record does not indicate that Ersheid appealed from the April 10 order of denial.
On April 12, 2007, Ersheid filed the present action in equity seeking relief from the default judgment on the ground of extrinsic fraud. Ersheid alleged that, as a result of the employees’ “fraud on the Court and fraud on [Ersheid], ” he lacked notice of the underlying action in which the default judgment was entered. He also alleged that the employees had misled the court to enter the default judgment by concealing and misrepresenting the terms of the settlement agreement with the District.
At trial, the court excluded Ersheid’s evidence of lack of notice and improper service. Referring to its earlier denial of the section 473 motion as untimely, the court stated, “I think that we are beyond the issues in terms of service.”
Notwithstanding Ersheid’s inability to produce evidence of lack of notice and improper service, the trial court found that the employees had committed extrinsic fraud by filing a sham complaint with claims that were identical to those they had released in their settlement with the District. The court stated that the fraud was compounded when, at the default prove-up hearing, the employees withheld the existence of the release and submitted declarations that falsely described the settlement agreement as a confidential agreement that could not be disclosed to the court. Based on this finding of extrinsic fraud, the trial court vacated the default judgment and allowed Ersheid to answer the complaint in the underlying action. Both sides appealed from the judgment.
DISCUSSION
Although a default judgment is supported by evidence of service of process, it may be challenged as void for lack of jurisdiction. When a court lacks jurisdiction in a fundamental sense, it has no power to hear or determine the case and has no authority over the subject matter or the parties, and any judgment that it issues is void and “‘thus vulnerable to direct or collateral attack at any time.’ (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 119.)” (People v. American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 660; Strathvale Holdings v. E.B.H. (2005) 126 Cal.App.4th 1241, 1249.)
Ersheid contends that even if the evidence at trial was insufficient to support the judgment, he is entitled to a retrial of his jurisdictional challenge based on his excluded evidence of lack of notice and improper service. He argues that notwithstanding the denial of his section 473 motion as untimely, the present action is not untimely because a judgment may be challenged as void for lack of personal jurisdiction at any time.
I. The Evidence Was Insufficient to Warrant Relief on the Ground of Extrinsic Fraud
The employees contend that their alleged conduct-filing a sham complaint and hiding or misrepresenting the terms of the settlement agreement-does not constitute extrinsic fraud because there is no evidence that they prevented Ersheid from knowing about or appearing in the underlying action. They argue that without such evidence, their conduct was insufficient to support a finding of extrinsic fraud. We agree.
In general, the existence of extrinsic fraud turns on whether the party seeking relief was prevented from having a fair adversary hearing. “Extrinsic fraud usually arises when a party is denied a fair adversary hearing because he has been ‘deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting his claim or defense.’ (3 Witkin, Cal. Procedure, p. 2124.) ‘Where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; or where the attorney regularly employed corruptly sells out his client’s interest to the other side-these, and similar cases which show that there has never been a real contest in the trial or hearing of the case, are reasons for which a new suit may be sustained to set aside and annul the former judgment or decree, and open the case for a new and a fair hearing.’ (United States v. Throckmorton (1878) 98 U.S. 61, 65-66.)” (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 471 (Kulchar).)
If a party seeking relief had notice of the action but failed to appear without having been prevented from doing so, there is no basis for relief on the ground of extrinsic fraud. “Relief on the ground of extrinsic fraud or mistake is not available to a party if that party has been given notice of an action yet fails to appear, without having been prevented from participating in the action. (Kulchar, supra, 1 Cal.3d at p. 472.)” (Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 503.)
In this case, the default judgment is valid on its face and is supported by evidence of service of process. In order to overcome the facial validity of the default judgment, Ersheid must produce evidence that he lacked notice or did not appear because he had been prevented from doing so. Without such evidence, the employees’ alleged conduct-filing a sham pleading and hiding or misrepresenting the terms of the settlement agreement-is insufficient to establish extrinsic fraud. (See Cruz, supra, 146 Cal.App.4th at p. 503 [if the party seeking relief was given notice and yet failed to appear without having been prevented from doing so, relief on the ground of extrinsic fraud is not available].)
The trial court stated that “these are the very claims for which [the employees] had already executed a full and complete release of all claims against LAUSD and its employees. This release was executed almost two weeks before the complaint was filed in Peralta et al v. Ersheid, Case No. BC 213421. [¶] Simply put, the Peralta complaint should have never been filed.”
II. Ersheid’s Evidence Was Erroneously Excluded
Ersheid contends that the trial court erroneously excluded evidence that he lacked notice and that his failure to appear was due to improper service of the summons and complaint (i.e., that perjured testimony was used to obtain the order allowing service by publication). Ersheid argues that the error was prejudicial because, in the absence of error, “there would have been substantial evidence of Defendants’ fraud relating to actual service on Mr. Ersheid had the Trial Court not erroneously precluded Mr. Ersheid from proffering such evidence.” We agree with both contentions.
At trial, Ersheid’s attorney provided an offer of proof that the excluded evidence would have shown that on the attempted service dates, “the gate was not locked, and the process server did not come to the door; did not ring the bell; and did not knock on the door. Mr. Ersheid was present at the times indicated in the declaration. Specifically, on September 28 at approximately 6 p.m., ... Mr. Ersheid was home waiting for a taxi to take him and his wife to the airport where they were flying to Australia. Mr. Ersheid would present to the court a copy of his passport showing when he arrived in Australia. With respect to the December dates, Mr. and Mrs. Ersheid had a Christmas display in the front window in the front yard, and the gate was unlocked so the people could come and see the display.” “Also, Mr. Ersheid had eye surgery in December and was home the entire time except when the surgery took place.”
“A trial court’s ruling on the admissibility of evidence is generally reviewed for abuse of discretion. [Citations.]” (Zhou v. Unisource Worldwide (2007) 157 Cal.App.4th 1471, 1476.)To the extent that a trial court’s ruling depends on the proper application of law to settled facts, the issue presents a question of law that we review de novo. (Ibid.)
The law is clear that Ersheid may present extrinsic evidence in this action in equity to vacate a default judgment, which is a direct attack. “A suit in equity instituted for the purpose of vacating a judgment is a direct attack. (Caldwell v. Taylor, 218 Cal. 471, 475; Bacon v. Bacon, 150 Cal. 477, 486; Campbell-Kawannanakoa v. Campbell, 152 Cal. 201, 209; Parsons v. Weis, 144 Cal. 410, 415; Turner v. Milstein, 103 Cal.App.2d 651, 655.)” (Bennett v. Hibernia Bank (1956) 47 Cal.2d 540, 558.) “‘[O]n direct attack, lack of jurisdiction may be shown by extrinsic evidence, i.e., evidence outside the judgment roll.’ (8 Witkin [Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court], § 5, p. 513.)” (Strathvale Holdings v. E.B.H., supra, 126 Cal.App.4th at p. 1249.)
The record is clear that the excluded evidence was relevant to the issue of extrinsic fraud. Extrinsic fraud exists “‘where the defendant never had knowledge of the suit’” and was “‘kept in ignorance by the acts of the plaintiff.’” (Kulchar, supra, 1 Cal.3d at p. 471.) According to the offer of proof below, the excluded evidence is relevant to show that Ersheid was “‘deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting his claim or defense.’” (Ibid.)
The denial of the section 473 motion does not support the exclusion of Ersheid’s evidence. The employees, who cite the section 473 ruling in their respondents’ brief, contend that the evidence was properly excluded because “[t]he same judge had already heard the same evidence in a post-trial hearing in this same case.... He denied the 2007 motion to vacate the judgment under Code of Civil Procedure section 473.5 for reasons ‘including but not limited to’ untimeliness [internal record reference omitted]. When Mr. Ersheid’s attorney asked to introduce evidence that allegedly proved appellants obtained permission to serve Mr. Ersheid through publication, the judge stated, ‘I think we are beyond that, ’ referring to the adequacy of service [internal record reference omitted]. And after Mr. Ersheid’s attorney made the offer of proof, the judge said, ‘I will take that as an offer of proof that the court at this point in time does consider’ [internal record reference omitted]. In other words, the court made his findings after weighing all the evidence, including the assertions raised in Mr. Ersheid’s offer of proof.”
Even assuming the trial court was aware of Ersheid’s contentions concerning improper service, it denied the jurisdictional challenge in the section 473 motion on the ground that it was untimely. The denial of the section 473 motion as untimely has no preclusive effect because the substantive issues were not actually litigated and there was no final decision on the merits.
“Collateral estoppel precludes the relitigation of an issue only if (1) the issue is identical to an issue decided in a prior proceeding; (2) the issue was actually litigated; (3) the issue was necessarily decided; (4) the decision in the prior proceeding is final and on the merits; and (5) the party against whom collateral estoppel is asserted was a party to the prior proceeding or in privity with a party to the prior proceeding. (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341.) Even if the minimal requirements for application of collateral estoppel are satisfied, courts will not apply the doctrine if considerations of policy or fairness outweigh the doctrine’s purposes as applied in a particular case (id. at pp. 342-343), or if the party to be estopped had no full and fair opportunity to litigate the issue in the prior proceeding. (Bostick v. Flex Equipment Co., Inc. (2007) 147 Cal.App.4th 80, 97; Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 148.)” (Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 82.)
Regardless of whether the section 473 motion was untimely, the present action is not untimely. As previously discussed, even though a default judgment is valid on its face and is supported by evidence of service of process, it may be challenged as void for lack of personal jurisdiction. Because a default judgment that is entered by a court that lacks jurisdiction is void, the judgment is “‘thus vulnerable to direct or collateral attack at any time.’ (Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 119.)” (People v. American Contractors Indemnity Co., supra, 33 Cal.4th at p. 660.)
We therefore conclude that the trial court abused its discretion by excluding the proffered evidence. We next address the issue of prejudice.
In order to establish that the erroneous exclusion of evidence constituted prejudicial error, the appellant must show there was “a ‘miscarriage of justice’-that is, that a different result would have been probable if the error had not occurred. ([Evid. Code, ] § 354 [‘[a] verdict or finding shall not be set aside, nor shall the judgment or decision based thereon be reversed, by reason of the erroneous exclusion of evidence unless the court which passes upon the effect of the error or errors is of the opinion that the error or errors complained of resulted in a miscarriage of justice’]; Code Civ. Proc., § 475 [‘[n]o judgment, decision, or decree shall be reversed or affected by reason of any error, ruling, instruction, or defect, unless it shall appear from the record that such error, ruling, instruction, or defect was prejudicial, and also by reason of such error, ruling, instruction, or defect, the said party complaining or appealing sustained and suffered substantial injury, and that a different result would have been probable if such error, ruling, instruction, or defect had not occurred or existed’] [fn. omitted]; Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1069; see City of Oakland v. Public Employees’ Retirement System (2002) 95 Cal.App.4th 29, 51-52 [prejudice will not be presumed; burden rests with party claiming error to demonstrate not only error, but also a resulting miscarriage of justice].)” (Zhou v. Unisource Worldwide, supra, 157 Cal.App.4th at p. 1480.)
In this case, there is ample evidence of prejudice. The statement of decision leaves little room for doubt that, if provided with additional evidence of lack of notice and improper service, the trial court could again return a finding of extrinsic fraud. The statement of decision clearly expresses the view that both the employees and their counsel perpetrated a fraud on the court and on Ersheid in order to obtain the default judgment. It is reasonable to infer that the additional evidence might reinforce that view.
Even though the evidence at trial was insufficient to establish extrinsic fraud, the trial court may exercise its discretion to admit any evidence that is relevant to Ersheid’s jurisdictional challenge on retrial.
For example, the trial court stated in the statement of decision that the “fraud perpetrated upon the Court was compounded” by Attorney Estuar’s misrepresentation, which was repeated in the employees’ declarations, that the settlement agreement was confidential and could not be disclosed. The trial court concluded that these “patently untrue” statements in the declarations had prevented the court at the default prove-up hearing from “fairly adjudicating the matter.” The trial court acknowledged that although a “judgment obtained by means of false or perjured testimony is ordinarily considered intrinsic fraud for which equitable relief will not be granted, ” the filing of a sham complaint constitutes “extrinsic fraud. The false statements and misrepresentations made in the declarations by [the employees] perpetuated that fraud.” “Thus, the parties themselves were fully complicit in the fraud perpetrated upon the Court in obtaining the judgment in Case No. BC 213421. A Court sitting in equity can not condone such conduct and can not permit a judgment to stand that was procured in such a perfidious manner.”
DISPOSITION
On defendants’ appeal, the judgment is reversed. On plaintiff’s appeal, the matter is remanded for a retrial of plaintiff’s jurisdictional challenge to the underlying default judgment. The parties are to bear their own costs.
We concur: EPSTEIN, P.J. MANELLA, J.