Law Offices of Clemente Franco and Clemente Franco for Plaintiffs and Appellants. Law Offices of Tarik S. Adlai and Tarik S. Adlai for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC674013) APPEAL from an order of the Superior Court of Los Angeles County, Rafael A. Ongkeko, Judge. Affirmed. Law Offices of Clemente Franco and Clemente Franco for Plaintiffs and Appellants. Law Offices of Tarik S. Adlai and Tarik S. Adlai for Defendants and Respondents.
Plaintiffs Lester Mayorga, Ledis Medrano, and other tenants living on the property owned by Jose Zepeda, sued defendant Zepeda and his company Mountview Properties Limited Partnership for alleged uninhabitable conditions in their apartments. Months later, plaintiffs served Zepeda with the complaint. By that time, Zepeda, through counsel, had initiated eviction proceedings against tenant Medrano. Zepeda next paid tenant Mayorga relocation costs, and Mayorga moved out of the property. Defendants eventually resolved the rent dispute with Medrano who continued to live in his unit. Although the eviction proceedings were winding down, defendants did not file an answer or other pleading in response to plaintiffs' complaint for damages and other relief based on uninhabitable living conditions.
At plaintiffs' request, the clerk of the court entered defendants' default. Six months later, plaintiffs successfully sought entry of a default judgment, and the trial court awarded damages of nearly half a million dollars. Almost four months later, on the eve of the Christmas holidays, plaintiffs served on defendants notice of the entry of default judgment. By mid-January defendants had moved to set aside the judgment. Zepeda filed a declaration stating he did not respond to the complaint because he mistakenly believed his counsel had resolved those claims in conjunction with his representation of Zepeda in the unlawful detainer proceedings. The trial court found Zepeda credible and concluded his mistake was reasonable. Judgment was set aside. Plaintiffs now appeal. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Mayorga, Medrano, and their respective families were tenants in two apartments owned and managed by defendants. Mayorga's family lived in the downstairs unit; Medrano's family lived upstairs.
In May 2017, the City of Los Angeles (City) determined the units were unpermitted, and ordered Zepeda to demolish portions of the structure. Three months later, in August 2017, plaintiffs filed a complaint against Zepeda for breach of the warranty of habitability, breach of the covenant of quiet enjoyment, and related claims. Plaintiffs, however, would not immediately serve defendants with the complaint.
On September 25, 2017, defendants filed an unlawful detainer action against Medrano who had stopped paying rent. Defendants retained Dennis P. Block & Associates (the Block firm) to handle the eviction as well as to assist defendants with the City's building citations. A week later, on October 2, 2017, defendants served Mayorga with a 60-day notice to vacate and agreed to pay mandated relocation fees. On October 4, 2017, defendants paid the relocation fees, and eventually filed an unlawful detainer action against the Mayorgas. On January 6, 2018, the Mayorga family vacated the property.
On January 10, 2018, at a deposition attended by Zepeda and his lawyer, plaintiffs' counsel personally served on Zepeda plaintiffs' breach of habitability and quiet enjoyment complaint. He was served both in his individual capacity and on behalf of the other defendants. Plaintiffs' lawyer would later state in a declaration, that defendants' attorney (the Block firm) told him it would not represent defendants "in any civil action." Zepeda, in turn, would recall that his attorney told him he would handle the matter.
By "civil action," we understand plaintiffs' lawyers were referring to the suit for damages plaintiffs had filed, as distinguished from the unlawful detainer action.
Defendants subsequently dismissed the unlawful detainer action against Medrano, and his family continued to live in the unit. By then, the City had approved the apartment as a dwelling unit. Although the eviction action against Medrano had been dismissed, and the Mayorgas had moved out of their unit, plaintiffs' action against defendants remained pending. Defendants did not timely file an answer or otherwise respond to the complaint.
The next month, February 2018, plaintiffs requested entry of default against defendants, and served Zepeda with the related documents. No monetary amounts were listed on the form Request for Entry of Default - the space allotted for itemizing the damages sought by the complaint was left blank. The clerk entered default against defendants on February 22, 2018.
Approximately six months later, on August 26, 2018, plaintiffs' counsel completed an application for default judgment against defendants. The application sought nearly half a million dollars in damages and fees, some two-thirds of which consisted of damages for emotional distress, punitive damages, and attorney fees. Plaintiffs did not serve a copy of this document on defendants. On September 4, 2018, plaintiffs filed their request for judgment, and the trial court entered default judgment for $495,050 later that day.
Almost four months later, on December 21, 2018, plaintiffs mailed notice of the judgment to Zepeda. By mid-January 2019, Zepeda had filed a motion to set aside the default and judgment, as well as a proposed answer. The trial judge who had entered the judgment recused herself, and the case was reassigned to another judge.
Zepeda asked the court to exercise its inherent, equitable authority to set aside the default judgment due to "extrinsic mistake." Zepeda stated in a declaration that when plaintiffs served him with the complaint, the Block firm led him to believe that it "was going to handle [the lawsuit] and that it would 'go away' once the eviction was handled." Although the Block firm had produced a letter it purportedly sent after the deposition telling Zepeda he "must take action" on plaintiffs' case "separately from this unlawful detainer," Zepeda declared he never received the letter. According to Zepeda, when he received the request for entry of default in February 2018, "since there were no numbers on it, [he] still believed that [his] attorney at the Block firm had handled this matter," and "thought these papers were part of the process, because I was paying relocation costs."
At a March 2019 hearing, the trial court set aside the defaults and vacated the judgment. The court credited Zepeda's statements, and found "(1) a meritorious defense, (2) satisfactory excuse for not presenting a defense to the original action, and (3) diligence in seeking to set aside the default/default judgment once it was discovered," citing to Rappleyea v. Campbell (1994) 8 Cal.4th 975, 979 (Rappleyea).
As to the meritorious defense prong, the court found that defendants had asserted defenses in the "proposed answer and, by inference, the attached City of L.A. records. This minimal showing is sufficient."
As to the satisfactory excuse element, the court found that Zepeda had "shown reasonable reliance on legal representation . . . ." The court credited Zepeda's statements that he " 'believed' his lawyers would take care of this case" in addition to handling the unlawful detainer action. Because Zepeda had paid Mayorga's relocation costs and had retained the Block firm "to deal with Medrano," the court found it was "reasonable to infer that Zepeda was making productive attempts to clear up his various issues with his tenants who apparently had already filed their habitability complaint but had not yet served him." The court noted that not only did Zepeda deny receiving the Block firm's letter telling him to "take action" on plaintiffs' complaint separately from the unlawful detainer action, the letter "does not clearly tell Zepeda to get another attorney for this case."
Finally, the court found that Zepeda had "no knowledge of the judgment until late December 2018" and thereupon "acted diligently" by filing the motion less than a month later. The trial court also found that "plaintiffs have made no showing that they would be prejudiced by setting aside the default judgment" whereas defendants would "face a large judgment having lost the ability to defend on the merits."
We deny defendants' request for judicial notice filed February 2, 2021, for documents related to the City's "Statement of Registration of Rental Units."
Plaintiffs timely appealed.
1. Applicable Law of Setting Aside a Default Judgment
Under Code of Civil Procedure section 473 (section 473), "a court may relieve a party from a default or default judgment due to 'mistake, inadvertence, surprise, or excusable neglect' if the party files an application for relief within six months from the date of the default. [Citations.]" (Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13, 28 (Kramer).) "The six-month period runs from entry of default, not entry of judgment." (Manson, Iver & York v. Black (2009) 176 Cal.App.4th 36, 42.)
"Aside from section 473, subdivision (b), 'courts have the inherent authority to vacate a default and default judgment on equitable grounds such as extrinsic fraud or extrinsic mistake.' [Citation.] The court's ability to grant relief under its inherent power is narrower than its ability to grant relief under section 473, subdivision (b). [Citation.] This is especially true after a default judgment has been entered. 'A party who seeks to set aside a default judgment pursuant to the court's equity power must make a substantially stronger showing of the excusable nature of his or her neglect than is necessary to obtain relief under . . . section 473.' [Citation.]" (Kramer, supra, 56 Cal.App.5th at p. 29.)
"A party seeking relief under the court's equitable powers must satisfy the elements of a 'stringent three-pronged test': (1) a satisfactory excuse for not presenting a defense, (2) a meritorious defense, and (3) diligence in seeking to set aside the default. [Citation.]" (Kramer, supra, 56 Cal.App.5th p. 29.) "A defendant has a satisfactory excuse if it shows that an extrinsic fraud or extrinsic mistake occurred. [Citation.] [¶] . . . [¶] 'Extrinsic mistake occurs "when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits." [Citation.] In contrast with extrinsic fraud, extrinsic mistake exists when the ground of relief is not so much the fraud or other misconduct of one of the parties as it is the excusable neglect of the defaulting party to appear and present his claim or defense. If that neglect results in an unjust judgment, without a fair adversary hearing, the basis for equitable relief on the ground of extrinsic mistake is present. [Citation.]' " (Id. at pp. 29-30.)
We review an order granting a motion to set aside the default and default judgment for abuse of discretion. (Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241, 1246 [judgment set aside on equitable ground of extrinsic mistake] (Mechling).) "The law 'favor[s] a hearing on the merits whenever possible, and . . . appellate courts are much more disposed to affirm an order which compels a trial on the merits than to allow a default judgment to stand.' [Citation.]" (Ibid.; see also Weitz v. Yankosky (1966) 63 Cal.2d 849, 855 [judgment set aside on equitable grounds, the court stating "the policy of the law is to have every litigated case tried upon its merits, and it looks with disfavor upon a party, who, regardless of the merits of the case, attempts to take advantage of the mistake, surprise, inadvertence, or neglect of his adversary"].) 2. The Trial Court Did Not Abuse Its Discretion In Setting Aside the Default Judgment
We address each of the three elements a defaulted defendant must satisfy in order to have a default judgment set aside on nonstatutory, equitable grounds.
a. A meritorious case
The trial court found that defendants had satisfied the "meritorious case" element. "In this context, only a minimal showing is necessary. [Citation.] The moving party does not have to guarantee success, or 'demonstrate with certainty that a different result would obtain . . . . Rather, [it] must show facts indicating a sufficiently meritorious claim to entitle [it] to a fair adversary hearing.' [Citation.]" (Mechling, supra, 29 Cal.App.5th at p. 1246.)
Here, plaintiffs obtained a judgment of nearly half a million dollars based on an unchallenged showing of causation, damages and fees. The trial court could have reasonably found that plaintiffs' damages would have been reduced, or perhaps defeated, had defendants presented a defense. We provide one example. Even if a trier of fact would have found the unit uninhabitable, that "Zepeda was making productive attempts to clear up his various issues with his tenants," as the trial court found, might have been a successful defense to a claim of oppression, fraud, or malice necessary for punitive damages. (See Civ. Code, § 3294, subd. (a); cf. Garcia v. Myllyla (2019) 40 Cal.App.5th 990, 999 [landlord's fraudulent conduct supported punitive damages in tenants' action where landlord misrepresented to the city housing department that the building was not rented].)
Defendants lodged an answer asserting defenses to plaintiffs' claims; this, too, suffices to meet this prong. (See Rappleyea, supra, 8 Cal.4th at p. 983 [an unverified answer that denies, admits, or otherwise responds to the allegations plus counsel's declaration that the defendants had a "good defense" established a meritorious case].)
b. A satisfactory excuse
Defendants also articulated "a satisfactory excuse for not presenting a defense." (Kramer, supra, 56 Cal.App.5th at p. 29.) The trial court found Zepeda credible when he stated that he had discussed the complaint with his attorney and " 'believed' his lawyers would take care of this case" as they were doing with the related unlawful detainer action. At least implicitly, the court found Zepeda credible when he denied receiving his counsel's "purported letter" telling him to handle this case "separately from this unlawful detainer." Relying on Zepeda's payment to Mayorga of $16,000 in relocation costs and Zepeda's retention of the Block firm to "deal with Medrano," the court found that Zepeda was making "productive attempts to clear up his various issues with his tenants." One of these attempts was confirming that the Block firm would deal with plaintiffs' complaint as well. Even though the one retainer agreement Zepeda had signed with the Block firm only referred to the unlawful detainer proceeding, the trial court could have concluded that Zepeda reasonably, albeit mistakenly, later understood that his attorney would handle a related matter involving the same property.
Finally, defendants showed diligence in moving to set aside the default judgment within a month after it was served. Although plaintiffs argue that defendants did not "do anything" until "about 11 months after they received the request for defaults," plaintiffs were solely responsible for the 10-month delay between the entry of default and the notice of entry served on defendants.
Diligence alone does not satisfy this third element. When "evaluating a motion to set aside a default judgment on equitable grounds, the 'court must weigh the reasonableness of the conduct of the moving party in light of the extent of the prejudice to the responding party.' [Citation.]" (Mechling, supra, 29 Cal.App.5th at pp. 1248-1249; Rappleyea, supra, 8 Cal.4th at p. 984 [the lack of prejudice "correspondingly lower[s] the burden on defendants of showing diligence"].) Here, plaintiffs argue they were prejudiced by incurring attorney fees for the preparation of the default judgment package and subsequent "collection efforts." The trial court, in setting aside the judgment, addressed this point stating, "Should Plaintiffs so request, the court reserves" the issue of whether it should "authoriz[e] an award of attorney fees to the non-moving party as a condition to setting aside the default." Plaintiffs, thus, were offered the opportunity to seek this relief with the trial court. The trial court ultimately found, in balancing the comparative harms, that defendants faced "a large judgment having lost the ability to defend on the merits" while plaintiffs had "made no showing that they would be prejudiced by setting aside the default judgment, such as loss of witnesses or evidence."
Given that plaintiffs waited 10 months between the entry of default by the court and plaintiffs' service of judgment on defendants, it would be difficult for plaintiffs to argue an additional month's delay caused prejudice. Plaintiffs' delay in submitting a proposed default judgment apparently prompted the trial court to issue an order to show cause regarding dismissal. Plaintiffs filed the proposed judgment on the return date for the order to show to cause.
Respondents' counsel's opprobrium of appellants—referring to their "sloth and stealth" and their purported "extreme lack of hygiene" among other things—is unnecessary to the resolution of the issues on appeal, and violates the "civility oath" as well as civility guidelines. (See Cal. Rules of Court, rule 9.7 ["As an officer of the court, I will strive to conduct myself at all times with dignity, courtesy and integrity."]; see Cal. Attorney Guidelines of Civility and Professionalism, Introduction (2007), p. 3 <https:/www.saccourt.ca.gov/local-rules/docs/guidelines-civility-professionalism.pdf> as of April 1, 2021, archived at <https://perma.cc/X6XH-QVYE> [Attorneys' "obligation to be professional . . . includes civility, professional integrity, personal dignity, candor, diligence, respect, courtesy, and cooperation, all of which are essential to the fair administration of justice and conflict resolution."].) We see no need to take further action in light of counsel's apology at oral argument. --------
The order is affirmed. Respondents are entitled to their costs on appeal.
RUBIN, P. J. WE CONCUR: