Syelsky v. Edwards
Filed 1/27/14 Syelsky v.
Edwards CA2/7
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prohibits courts and parties from citing or relying on opinions not certified
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
LISA SYELSKY and VLADIMIR SYELSKY,
Plaintiffs and
Appellants,
v.
JEFFREY EDWARDS,
Defendant and
Respondent.
B247866
(
Super. Ct. No.
SC115235)
APPEAL, from a judgment of the
Bobbi Tillmon, Judge. Reversed with
directions.
Law Offices of Ronald N. Richard and
Nicholas A. Bravo for Plaintiffs and Appellants.
Ezra Brutzkus Gubner, David Seror,
Michael W. Davis for Defendant and Respondent.
________________________
Appellants
Vladimir and Lisa Syelsky sued Jeffrey Edwards, alleging breach of a promissory
note, breach of fiduciary duty, and fraud.
After Edwards failed to answer the complaint, the Syelskys obtained entry
of default and, subsequently, a default judgment. Edwards moved to set aside both the default
and the default judgment. Over the
Syelskys’s objections, the trial court did so.
We reverse, and remand for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
The
Syelskys filed a complaint on December 14, 2011 alleging that
they had hired Edwards in 2006 as a loan broker to obtain a line of credit on
their residence. In the course of that
relationship, they agreed to loan money to him, for which he executed a note,
and later a deed of trust. Edwards
failed to pay the sums owing, and the property subject to the deed of trust was
foreclosed on by the senior beneficiary.
The complaint alleged three causes of action for
fiduciary duty as a broker, and fraud. The
Syelskys’s attorney personally served the complaint on Edwards on December 16, 2011.
Edwards
failed to answer the complaint and on January 23, 2012, only 38 days after service, the Syleskys served and filed a
request for entry of default; the court entered the default that same day. On May 1, 2012,
the Syelskys sought judgment by default; the court entered the judgment on May 11, 2012.
On
November 9,
2012, Edwards moved to set aside the
default judgment pursuant to Code of Civil Procedure section 473(b).
answer, generally denying the allegations of the complaint, with his pleadings.
Edwards asserted that his failure to
file an answer was based, in part, on a conversation with the Sylelskys’s
attorney at the time of service. Edwards
stated in his declaration that the attorney had represented that it would be to
Edwards’s benefit to allow the matter to proceed to judgment, because the
complaint was a technicality to allow the Syelskys to collect damages against
Edwards’s former employer, which would then offset the amounts Edwards owed on
the loans.
The
Syelskys opposed the motion, arguing both that the motion was untimely and that
Edwards had failed to make the necessary statutory showing. In Edwards’s reply, he urged the court to
consider both the statutory and equitable authority that permitted the relief
he sought.
The court heard the matter
on March 20,
2013, and granted the motion on March 25, 2013, setting aside the default and the judgment, and ordering the
proposed answer deemed filed and served on that date. In its minute order, the court concluded that
Edwards had sufficiently demonstrated mistake, inadvertence, and/or excusable
neglect to warrant discretionary relief
under section 473(b), and that the motion had been timely filed. The Syelskys filed a timely appeal.
A. Mechanisms for Relief From Default
California law
favors the resolution of cases on their merits, rather than by default. (See
975, 980.) The Legislature has provided
a statutory mechanism for relief from default in section 473, which provides,
in relevant part: “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.â€
We
review the trial court’s determinations under the statute for abuse of
discretion, keeping in mind that “Code of Civil
Procedure, section 473 . . . , is remedial in
its nature and is to be liberally construed. [Citation.]
The policy of the law is to have every litigated cause tried on its
merits; and it looks with disfavor on a party who, regardless of the merits of
his cause, attempts to take advantage of the mistake, surprise, inadvertence,
or neglect [the statute uses the term “excusable neglectâ€]
of his adversary. (14 Cal.Jur. 1075, § 116.) Reviewing courts have always looked with
favor on orders excusing defaults and permitting controversies to be heard on
their merits. Such orders are rarely
reversed, and never unless it clearly appears that there has been a plain abuse
of discretion. [Citation.]
the showing under section 473 of the Code of Civil Procedure is not strong, or
where there is any doubt as to the setting aside of a default, such doubt
should be resolved in favor of the application. [Citation.] All presumptions will be
indulged in favor of the correctness of the order, and the burden is on the appellant
to show that the court’s discretion was abused.†(Emphasis added.) Andres v. Armstrong (1959) 168 Cal.App.2d 344, 347,
The
statutory scheme imposes on a party the obligation to file a motion for relief
in a timely manner, and in any event within six months of the judgment,
dismissal, order or proceeding. (See,
relief must be procedurally proper, and within time limits].) Because relief from a default judgment,
without relief from the default itself, would be illusory relief, allowing
another default judgment to be entered, the time generally runs from the entry
of the default, rather than from the time of the judgment. Rutan v.
Summit Sports, Inc. (1985) 173 Cal.App.3d 965, 970 (overruled by statute on
other grounds, see Sugasawara v. Newland
(1994) 27 Cal.App.4th 294, 296-297.)
A
trial court may also grant relief from default on equitable grounds, even where
the statutory requirements have not been met, by finding extrinsic fraud or
mistake. “A judgment against a party
may be set aside in equity when it is obtained by extrinsic fraud or mistake. (See 8 Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court, § 223, pp.
727-728; id., § 231, pp. 741-742.)
The ‘essential characteristic’ of extrinsic fraud ‘is that it has the
effect of preventing a fair adversary hearing, the aggrieved party being deliberately
kept in ignorance of the action or proceeding, or in some other way
fraudulently prevented from presenting his claim
or defense.â€â€™ (8 Witkin, supra,
§ 223, p. 727.) Extrinsic mistake is ‘a
term broadly applied when circumstances extrinsic to the litigation have
unfairly cost a party a hearing on the merits. [Citations.]â€â€™ (Rappleyea v. Campbell, supra,
8 Cal.4th at p. 981.) ‘“Relief is
denied, however, if a party has been given notice of an action and has not been
prevented from participating therein.â€â€™ (Kulchar
v. Kulchar (1969) 1 Cal.3d 467, 472.)
(Parage v. Coudel (1997)
60 Cal.App.4th 1037, 1044.)
In this case, Edwards has
presented evidence that he was affirmatively misled by the Syelskys’s lawyer in
an attempt to prevent him from challenging the complaint. He asserts the doctrine of
doctrine includes efforts to convince a party not to obtain counsel. (See Heymann
v. Franchise Mortgage Acceptance Corp. (2003) 107 Cal.App.4th 921, 926.) The question is whether the party claiming the
relief was “fraudulently prevented from fully participating in the proceeding.†(
within the discretion of the trial court.
B. The Relief Granted
Exceeded the Statutory Provision On Which the Court
Relied
Here,
the motion was filed within six months of the judgment, but almost nine months
after the entry of the default. As the
trial court had discretion to view the separate procedures as separate events,
it would not have abused its discretion by finding the motion to set aside the
default judgment was timely, and addressing the default itself separately. (Rutan
v. Summit Sports, Inc., supra,
173 Cal.App.3d at pp. 965, 970 [because the default and the default
judgment are separate procedures, one may be set aside without the other under
appropriate circumstances].)
The
trial court did not do so, however, finding the motion timely without
distinguishing between the two events.
The court also did not expressly consider whether there were equitable
grounds for relief. Although Edwards
asserts on appeal that the trial court’s determination should be affirmed on
equitable grounds, the Syelskys assert that argument was waived. We do not agree with either position.
Edwards
directed the trial court to Rappleyea,
supra, in which the Supreme Court recognized that a motion, not timely
under the statute, could nonetheless be granted on equitable grounds. “After six months from entry of default, a
trial court may still vacate a default on equitable grounds even if statutory
relief is unavailable. [Citations.]†8 Cal. 4th 975,
981. Where, as here, a default judgment
has been entered, however, the trial court must find exceptional circumstances
to grant equitable relief. (
Rappelyea court noted, courts have
applied a three-part test to determine whether equitable relief may be granted:
first, the party seeking relief must show a meritorious defense; second, that
party must identify an excuse which the court finds to be satisfactory for the
failure to present the defense; and, finally, that party must have acted
diligently to set aside the default. (
1143, 1147-1148 and In re Marriage of
Stevenot (1984) 154 Cal.App.3d
1051, 1071.)
The trial court did not,
however, make this determination, which necessarily rests on issues of fact. We decline to substitute our judgment for that
of the trial court, but instead remand to permit the trial court to consider
the evidence and weigh the equities in the first instance. (See
Rutan v. Summit Sports, Inc., supra,
173 Cal. App.3d 965 at p. 974.)
DISPOSITION
We reverse the order setting aside the default and the default
judgment, and remand for the trial court to consider the factual showings of
each party and to determine whether to exercise its discretion to grant
equitable relief. Each party is to bear
its own costs on appeal.
ZELON,
J.
We concur:
PERLUSS, P. J.
WOODS, J.
name="_ftn1" title="">[1] All further statutory references, unless
otherwise noted, are to the Code of Civil Procedure.
