Banc of >America> Practice
Solutions v. D’Angelo

 

 

 

 

 

 

 

 

Filed 5/29/13  Banc of America Practice Solutions v. D’Angelo CA2/1

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>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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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  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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

 

SECOND
APPELLATE DISTRICT

 

DIVISION
ONE

 

 
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BANC OF AMERICA PRACTICE SOLUTIONS, INC.,               Plaintiff and Respondent,               v.   PHILLIP D’ANGELO et al.,               Defendants and Appellants.

B241891         (Los Angeles County       Super. Ct. No. LC092619)

 

            APPEAL from
a judgment of the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County.  Michael Latin and Huey P. Cotton,
Judges.  Reversed.

            Neary and
O’Brien and Christopher J. Neary for Defendants and Appellants.

            Law Offices
of Marlene Leiva and Marlene Leiva for Plaintiff and Respondent.

 

 

 

__________________________________

>

            Defendants
appeal from a default judgment entered after the trial court denied defendants’
motion to set aside default.  We reverse.

BACKGROUND

            On February
4, 2011, plaintiff Banc of America Practice Solutions, Inc. (plaintiff) filed
this breach of contract action
against defendants Phillip D’Angelo, D.D.S. and Phillip J. D’Angelo D.D.S.,
Inc. (collectively, defendants), alleging defendants owed plaintiff $95,271.21
plus pre-judgment interest under a Finance Agreement (agreement).  Phillip D’Angelo borrowed $202,110.15 from
plaintiff under the agreement.  The
corporate defendant (Phillip J. D’Angelo, D.D.S., Inc.) is not listed as a
borrower in the agreement.  Nor is the
corporate defendant a signatory to the agreement.

Plaintiff personally served
defendants with the summons and complaint on February 8, 2011 and filed proofs of service on February 15, 2011.  Defendants did not file an answer to the
complaint.  On March 16, 2011, plaintiff served defendants by
mail with a request for entry of default. 
Defendants filed the request for entry of default on March 17, 2011, and the trial court
entered default that same day.  On May 13, 2011, defendants filed the
motion to set aside default which is at issue on appeal.

            Dr.
D’Angelo submitted a declaration in support of defendants’ motion to set aside
default.  He stated, immediately upon
receiving plaintiff’s complaint, he contacted plaintiff to negotiate a loan
modification to resolve the matter.  From
mid-February to mid-March 2011, he was in discussions with plaintiff’s
representatives, Jeff Schneider and Bob Gibson. 
During this period he “made the December 2010 payment on the loan and
the January 2011 payment on the loan.” 
He believed plaintiff “did not require or expect [him] to respond to the
Complaint as all parties expected a loan modification would resolve the matter.”  During a telephone conversation with Bob
Gibson on March 16, 2011,
Gibson informed Dr. D’Angelo “it was likely a modification would not be worked
out” and Dr. D’Angelo “‘should take the Complaint seriously.’”  Dr. D’Angelo contacted an attorney to represent
him in this action.

            Attorney
Christopher Neary also submitted a declaration in support of defendants’ motion
to set aside default.  He stated Dr.
D’Angelo contacted him on March 16,
2011 regarding representation in this action.  On March
22, 2011, Neary faxed a letter to plaintiff’s counsel, requesting
plaintiff stipulate to set aside the default and allow defendants to answer the
complaint.  In the letter, Neary informed
plaintiff’s counsel that Dr. D’Angelo had been trying to negotiate a loan modification
with plaintiff’s representatives, Jeff Schneider and Bob Gibson.  Neary also explained:  “Dr. D’Angelo got the impression that he
should not worry about the Complaint until they made a decision on whether or
not to modify the loan.  On March 16, 2011, Bob called to inquire
whether additional information requested by Mr. Schneider had been forwarded
and during the same conversation, Mr. Gibson indicated that Dr. D’Angelo should
take the Complaint seriously because there was an indication that the modification
would not be successful.  [¶]  The default was applied for the same
day.  Dr. D’Angelo brought the Complaint
to me after you had submitted the request for default.”  In the letter, Neary also pointed out the
corporate defendant is not a party to the agreement.  Plaintiff did not respond to Neary’s March 22, 2011 letter.

            Defendants
brought the motion to set aside default, under Code of Civil Procedurehref="#_ftn1" name="_ftnref1" title="">>[1]
section 473, subdivision (b), on grounds the default was taken against
defendants “through mistake, inadvertence, surprise and excusable
neglect.”  Defendants argued:  “Here, the default was requested a mere 40
days after the Complaint was filed during a time period when the Defendant was
actively negotiating with the Plaintiff for a loan modification which
negotiations would have resolved the litigation.  Defendant was under the impression that he
was not expected to respond to the litigation during the negotiating process
and that he had an extension of time to respond as it was anticipated a response
to the Complaint would not be necessary.” 
Defendants also asserted: 
“Defendant first became aware that Plaintiff expected him to respond to
the lawsuit on the same date Plaintiff requested his default be taken.  In that Defendant lives in Mendocino
County, California, in Northern
California, and the action is pending in Los
Angeles County, it
was unrealistic for defendant to retain an attorney and get an answer on file
on March 16, 2011.”

            Defendants
argued the motion was timely, brought well within the six-month statutory time
limit.  They also asserted their
diligence in that they had immediately contacted an attorney when plaintiff’s
representative informed Dr. D’Angelo there would not be a loan modification and
to take the complaint seriously.  Six days
after that March 16, 2011 conversation with Bob Gibson, defendants’
attorney made a written request that plaintiff stipulate to set aside the
default.  Plaintiff did not respond to
the letter from defendants’ counsel. 
Defendants also argued plaintiff would suffer no prejudice if the action
was decided on the merits.  Defendants
attached their proposed answer to their motion to set aside default.

            Plaintiff
filed an opposition to defendants’ motion to set aside default.  Robert Gibson submitted a declaration in
support of plaintiff’s opposition.  He
stated he was the Northwest Regional Portfolio Manager of plaintiff, in charge
of the collections and customer service departments.  In November 2010, he began having discussions
with Dr. D’Angelo’s “office manager, Michelle,” and spoke with her “[o]n
multiple occasions . . . regarding the possibility of a loan
modification.”  According to Gibson’s
declaration:  “During those discussions
with Michelle, I indicated to her that if Dr. D’ANGELO stopped paying on the
loan it would be considered in default and would likely not be considered for a
loan modification, and that despite
the fact that we were in the process of trying to approve the loan modification
that [plaintiff] would continue to move forward with the process if monthly
payments were not made.”  Gibson
stated he informed Michelle on March 16, 2011 that plaintiff’s “credit
department declined the request for a loan modification.”  Gibson denied ever speaking directly with Dr.
D’Angelo during the loan modification discussions.

            In the
opposition, plaintiff argued defendants did not present any evidence in
connection with their motion to set aside default demonstrating defendants’
failure to respond to the complaint was the result of mistake, inadvertence,
surprise or excusable neglect within the meaning of section 473.

            Defendants
filed a reply brief in support of their motion to set aside default.  Defendants attached a declaration from
Michelle Williamson.  She stated, in
pertinent part:  “In the regular course
and scope of my duties as Office Manager, I make payments on behalf of Phillip
D’Angelo D.D.S., Inc.  During the months
of January 2011, February 2011 and March 2011, I made the regular monthly
payments from Phillip D’Angelo D.D.S., Inc. to Plaintiff.  Specifically, a payment of $4,163.63 was made
on January 20, 2011; a payment of $4,163.63 was made on January 31, 2011; and a
payment of $4,163.63 was made on March 3, 2011.”

            Defendants
also attached to their reply brief
another declaration from Dr. D’Angelo. 
He stated:  “Prior to March 16, I
had direct discussions with Robert Gibson and an underwriter employed by
Plaintiff.  Mr. Gibson also communicated
with me through Michelle Williamson who is my officer manager.”  Dr. D’Angelo set forth in his declaration
that, on March 16, 2011, Gibson told Williamson the loan would not be
modified.  When Dr. D’Angelo contacted
Neary on March 16 regarding representation in this action, he did not yet know
plaintiff had requested entry of default.

            In their
reply brief, defendants argued: 
“Defendants do not assert that Plaintiff acted in bad faith, but rather
that Defendants were mistaken as to the need to respond to the Complaint while
negotiations for a loan modification were ongoing, and Defendants were
surprised when their default was taken simultaneously with the end of the
negotiations.  [¶]  It is undisputed that the loan modification
discussions were ongoing prior to and following service of the Complaint.  It is also undisputed that Plaintiff told
Defendants that the legal process would be suspended during negotiations if
Defendants continued making loan payments.”

            On June 29,
2011, the trial court issued a tentative ruling which it adopted as its final
ruling after the parties submitted on the tentative.  The ruling states:  “The Court does not find mistake,
inadvertence, surprise or excusable neglect on the part of defendants in failing
to file an answer while negotiating a loan modification.  Therefore, the Court does NOT grant relief
under the discretionary portions of CCP section 473(b) for a party’s mistake,
inadvertence, surprise or excusable neglect. 
[¶]  It was not excusable or
reasonable to avoid filing an answer. 
The summons clearly indicates that defendant has 30 days to file a
response with the Court.  [¶]  The motion to set aside the default is
DENIED.”

            On August
24, 2011, defendants filed a notice of
appeal from the order denying their motion to set aside default.  On March 15, 2012, this court dismissed the
appeal on plaintiff’s motion because an order denying a motion to set aside
default is not an appealable order.  (>Rappleyea v. Campbell (1994) 8 Cal.4th
975, 981.)

            On April
26, 2012, the trial court entered a default judgment.  On June 3, 2012, defendants filed this appeal
from the judgment.

DISCUSSION

            Defendants
contend the trial court abused its discretion in denying their motion to set
aside default.  We agree.

            Under
section 473, subdivision (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. . . . ”

            In deciding
whether a party’s mistake, inadvertence, surprise or neglect is excusable,
“‘the court inquires whether “a reasonably prudent person under the same or
similar circumstances” might have made the same error.”’  [Citation.]” 
(Zamora v. Clayborn Contracting
Group, Inc. (2002) 28 Cal.4th 249, 258.) 
Where the mistake, inadvertence, surprise or neglect is excusable “and
the party seeking relief has been diligent, courts have often granted relief
pursuant to the discretionary relief provision of section 473 if no prejudice
to the opposing party will ensue.”  (>Ibid.) 


“‘A ruling on a motion for
discretionary relief under section 473 shall not be disturbed on appeal absent
a clear showing of abuse.’ 
[Citation.]”  (>Zamora v. Clayborn Contracting Group, Inc.,
supra, 28 Cal.4th at p. 257.)  “‘[B]ecause 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 [Citations].  Therefore, a trial court order denying relief
is scrutinized more carefully than an order permitting trial on the
merits.  [Citations.]’”  (McCormick
v. Board of Supervisors (1988) 198 Cal.App.3d 352, 360.)

Plaintiff concedes it was in
negotiations with Dr. D’Angelo regarding a modification of the loan at issue in
the complaint, up to and including March 16, 2011, the date plaintiff served
defendants by mail with the request for entry of default.  According to the declaration of plaintiff’s
representative Robert Gibson, during the loan modification discussions, Gibson
informed Dr. D’Angelo plaintiff “would continue to move forward with the
process if monthly payments were not made.” 
(Underlining and bold font in original omitted.)  The declaration of defendant’s office
manager, Michelle Williamson, establishes Dr. D’Angelo made “regular monthly
payments” on the loan on January 20, 2011, January 31, 2011 and March 3, 2011.  Gibson does not state he informed Dr. D’Angelo plaintiff would move forward
with the litigation unless the loan was made current. 

It is undisputed the first date
plaintiff informed Dr. D’Angelo plaintiff had declined the loan modification
was March 16, 2011, the date plaintiff served defendants by mail with the
request for entry of default.  On that
same date, before having been informed plaintiff had requested entry of
default, defendants contacted their attorney to represent them in this action.

            Based on
the evidence before us, we find a reasonably prudent person would have believed
he had additional time to respond to the complaint before default would be
taken.  The evidence establishes
plaintiff informed Dr. D’Angelo it would not move forward with this action so long
as he was making payments on the loan and the parties were still negotiating a
loan modification.  On March 16, 2011,
Gibson informed Dr. D’Angelo to “‘take the Complaint seriously’” because the
loan modification was being declined.  It
is undisputed plaintiff did not inform Dr. D’Angelo it was going to request
entry of default that same day.

            Defendants
did take the complaint seriously.  That
same day, Dr. D’Angelo contacted an attorney to represent them in this
action.  On March 22, 2011, six days
after plaintiff served defendants by mail with the request for entry of
default, defendants’ attorney faxed a letter to plaintiff’s counsel requesting
that plaintiff stipulate to set aside the default.  In the letter, defendants’ attorney
questioned why plaintiff was proceeding against the corporate defendant when
that party was not a borrower or signatory to the agreement.  Plaintiff never responded to this
letter.  On May 13, 2011, less than two
months after the trial court entered default, defendants filed their motion to
set aside default.

            Defendants
established default was entered against them due to excusable mistake, surprise
and neglect.  Prior to March 16, 2011, it
was reasonable for Dr. D’Angelo to believe plaintiff would not request entry of
default because a loan modification would resolve the litigation.  Dr. D’Angelo had continued to make payments
on the loan.  On March 16, 2011, the last
day of negotiations, plaintiff served defendants by mail with a request for
entry of default with no prior notice they intended to do so and without affording
defendants even one day to file an answer with the court.  Six days later, defendants requested in
writing that plaintiff stipulate to set aside the default and plaintiff ignored
the request.  In opposition to
defendants’ motion to set aside default, plaintiff has demonstrated no
prejudice.

            “There can
be no doubt that a trial court may find excusable neglect or surprise where
settlement negotiations are being had between counsel, and where there is an
oral or implied understanding that no default will be taken without notice, and
counsel takes such a default without notice.” 
(Yarbrough v. Yarbrough (1956)
144 Cal.App.2d 610, 616.)  This principle
applies equally where the negotiations occur between the parties directly
rather than through counsel.  (>Stegge v. Wilkerson (1961) 189
Cal.App.2d 1, 4-5.)

            The trial
court abused its discretion in denying defendants’ motion to set aside
default.  The material evidence is not in
conflict.href="#_ftn2" name="_ftnref2" title="">>[2]  Defendants established they were reasonably
surprised to learn plaintiff had served a request for entry of default with no
prior notice to defendants on the date loan modification negotiations ended and
filed the request the next day.  The
trial court apparently ignored the actual circumstances which occurred between
these parties when it found:  “It was not
excusable or reasonable to avoid filing an answer.  The summons clearly indicates that defendant
has 30 days to file a response with the Court.” 
Applying this rationale, courts would never vacate defaults because the
summons always states the defendant has 30 days to respond to the
complaint.  As discussed above, the law
favors trial on the merits where excusable mistake, inadvertence, surprise or
neglect is shown and the opposing party will suffer no prejudice.  Any doubts are resolved in favor of the party
seeking relief from default.  (>Zamora v. Clayborn Contracting Group, Inc.,
supra, 28 Cal.4th at p. 258; >McCormick v. Board of Supervisors, >supra, 198 Cal.App.3d at p. 360.)

DISPOSITION

            The
judgment is reversed.  Defendants are
entitled to recover costs on appeal.

NOT TO BE PUBLISHED.

 

           

 

                                                                                                            CHANEY,
J.

We concur:

 

 

 

                        MALLANO,
P. J.

 

 

 

                        ROTHSCHILD,
J.