GODINEZ v. BAKER

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Court of Appeal, Second District, Division 6, California.

Lupe GODINEZ, et al., Plaintiffs and Appellants, v. Terry Harland BAKER, et al., Defendants and Respondents.

Civ. No. B068447.

Decided: December 21, 1993

Chern, Brenneman & Garcia and Gertrude D. Chern, Santa Maria, for plaintiffs and appellants. Hamrick, Garrotto, Briskin & Pene, Gregory J. Amantia, Jon A. Barrio and Roman Y. Nykolyshyn, Thousand Oaks, for defendants and respondents.

Within six months of the filing of a default judgment by plaintiffs, both counsel for plaintiffs and defendants discuss the possibility of a stipulation to set aside the default judgment.   Defense attorney mistakenly believes that plaintiffs' attorney has orally agreed to toll the time provisions of Code of Civil Procedure section 473.1  More than a year after entry of the default judgment, defense attorney moves to set aside the judgment on the grounds of excusable neglect.

Here we hold, absent extrinsic fraud or mistake, the trial court has no jurisdiction to set aside the default judgment.

FACTS

Plaintiffs filed and served a personal injury action against defendants.   Defendants failed to answer and plaintiffs ultimately secured a default judgment in the amount of $100,000 for damages, filed in the Santa Barbara Superior Court on November 2, 1990.

Fifteen months later, in April of 1992, defendants filed a motion to set aside the default pursuant to section 473.   The trial court ultimately granted the motion to set aside the default and denied plaintiffs' motion for reconsideration.

We reverse.   The trial court abused its discretion because there was no substantial evidence to support the granting of the motion.

Defendants moved to set aside the default “pursuant to section 473 and pursuant to the equitable powers of the court.”   The grounds stated for relief were “mistake, inadvertence, surprise, or excusable neglect of moving party” and “of counsel.”

In the motion to set aside the default, counsel for defendants acknowledged she learned of the default in February of 1991 and asserted that it was agreed between both parties that the applicable time to file a motion under 473 would be tolled so that settlement negotiations could be conducted.

In support of the motion defense counsel attached as Exhibit A a copy of correspondence dated February 4, 1991, from defense counsel Frances K. Prince to plaintiffs' counsel Richard Brenneman.   The letter states that Mr. Brenneman requested information about insurance coverage.   The letter informs him that the applicable insurance policy is with National Union Insurance with a limit of $2 million dollars.   The letter further states that Mr. Brenneman has agreed to toll the limitation period in which defense counsel would have to file a motion to set aside the default.

Also attached to defendants' motion is another letter from the defense law firm dated March 10, 1992, and addressed to Mr. Brenneman.   This letter refers to an earlier request to receive medical records and indicates a hope that the matter might be resolved.   This letter is signed by defense counsel Jeffrey F. Briskin.

In plaintiffs' opposition to defendants' motion to set aside the default, plaintiffs' attorney Richard Brenneman declares that he never received the letter dated February 4, 1991, from Ms. Prince.   He points out that the letter shows no letterhead and bears no return address.   He declares that the statements attributed to him in the letter are false.   He states that he told Ms. Prince, either on January 31 or February 1 of 1991, that he would consider setting aside the default, but that he “would have to be provided with the name of the insurance company providing coverage, verification that there was in fact coverage, and a willingness to provide it, and stating the policy limits.”   The zip code on the February 4 letter 93006–7779, is different than the zip code for Mr. Brenneman's office which is 93456.

On February 7, 1992, Mr. Brenneman wrote to defendants' insurer's adjusters.   He points out that in his initial conversation with Ms. Prince on January 31, 1991, he offered to enter into a stipulation to toll the time period within which to set aside the default only if defendants' insurance carrier was willing to consider settling the entire case.   He states that Ms. Prince said she would contact the carrier and let him know what their position would be.   He never received a reply.

On April 10, 1992, defense counsel informed Brenneman that there was no insurance coverage for the case.

At the hearing on the motion the court stated that it did not think Mr. Brenneman received the February 4 letter from Ms. Prince.   The court then said, “I think that there could have been an agreement, and if there wasn't—I mean, it has to be an explicit agreement.   It can't be a good faith reliance.   There has to be an agreement.”  “I don't think they ever got the written instrument.   I think a lot of time's passed and they don't recall it.   There's sufficient evidence there because of the occurrences thereafter to indicate that the party asserting it relied upon it.   Therefore, that's some proof that it occurred.  [¶] They're not making—I don't think they're making that up.   I think Ms. Price [sic, Prince] or Mrs. Price believes it occurred.   I accept that.   And, therefore, I find that there was excusable neglect because 473 has now been expanded past the six months.”

The court then goes on to say, “I believe she believed there was an agreement and that there was one.   Or, if there's a misunderstanding, that is, if she believes that those things were said and acts thereon and both sides act thereon, that's an indication the agreement occurred.”

DISCUSSION

Section 473 provides in 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 made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order or proceeding was taken.”   The section also goes on to state that if an attorney makes a claim for relief due to mistake, inadvertence, surprise, or excusable neglect, the court shall vacate any default provided the application for relief is made no more than six months after entry of judgment.

“The six month outside time limit for granting relief is jurisdictional and the court may not consider any motion made after that period has elapsed.  [Citations.]”  (Stevenson v. Turner (1979) 94 Cal.App.3d 315, 156 Cal.Rptr. 499.)

Section 283 provides in part that, “An attorney and counselor shall have authority:  1. To bind his client in any of the steps of an action or proceeding by his agreement filed with the Clerk, or entered upon the minutes of the Court, and not otherwise․”  (See Roscoe Moss Co. v. Roggero (1966) 246 Cal.App.2d 781, 786, 54 Cal.Rptr. 911.)

Defendants contend that the letters sent back and forth are substantial evidence of a stipulation to toll the six month period.   The trial court found on overwhelming evidence, however, that Mr. Brenneman did not receive the February 4 letter.   There is simply no evidence of a written stipulation.   The letter from the defense firm of March 10, 1992, asking for medical records and hoping to resolve the plaintiffs' claims, does not suffice to establish a written stipulation.   Nor does the letter of Mr. Brenneman to the insurance adjusters dated February 7, 1992, constitute a written stipulation.   That letter sets forth his understanding of the terms upon which he would be willing to vacate the default judgment.

 We agree with plaintiffs that once the six month period has passed, equitable relief may not be granted on Code of Civil Procedure section 473 grounds.   We also agree that Desper v. King (1967) 251 Cal.App.2d 659, 59 Cal.Rptr. 657, does not help defendants.

The Desper court affirmed an order setting aside a default judgment pursuant to 473 after the six month deadline had passed.   Defendant, an employee of a corporation, notified his employer that he had been served with a lawsuit.   He justifiably relied upon the employer and its carrier to take care of the matter.   The employer had misplaced the summons and complaint during a period when he was recuperating from an illness and only working part time at the office.

Under the court's inherent equity power to grant relief in the case of extrinsic fraud or extrinsic mistake the trial court acted properly.   The defendant had justifiably relied upon a third party to appear and defend him and had timely advised his employer that he had been served with process.   Defendant had been deprived of his opportunity to defend and was unaware of the pending legal proceedings.   The equitable grounds for relief present in Desper, and in the cases cited by the dissent are absent here.

 Extrinsic mistake usually comes into play where there is reliance upon a third party to protect the rights of the aggrieved party.  (See 8 Witkin, Cal.Procedure (3d ed. 1985) Attack on Judgment and Trial Court, § 213, p. 617.)   The dissent relies on Witkin's comments concerning the broad discretion of the trial court to grant relief from default.  (See dis. opn., post p. 799.)   Witkin also points out, however, that the six-month period for bringing a motion under section 473 is a “jurisdictional limitation, which deprives the court of power to grant relief after the six month period has elapsed.  [Citations.]”  (8 Witkin, Cal.Procedure (3d ed. 1985) Attack on Judgment in Trial Court, § 169, p. 573, emphasis in original.)

We further disagree with the dissent's characterization of the default judgment as a $100,000 windfall.   A superior court judge heard the evidence adduced at the default hearing, and made a decision.   The record of those proceedings is not before us, and we are therefore in no position to make such an evaluation.   In any event, there is nothing in the record that even remotely suggests the trial court acted as it did because it considered the default hearing to be unfair.   Even if there were such an indication, our holding would be the same.

The trial court's order vacating judgment is reversed.   Costs are awarded to plaintiffs.

I respectfully dissent.   As Mr. Witkin has indicated:  “An order granting [equitable] relief will generally be upheld under two well established principles:  First, the broad discretion of the trial judge cannot be disturbed except for manifest abuse.  [Citation.]   Second, the remedial provisions of the statute should be liberally applied and the power freely exercised to carry out the policy in favor of trial on the merits.  [Citations.]”  (8 Witkin Cal. Procedure (3d ed. 1985) Attack on Judgment in Trial Court, § 180, p. 582.)

Contrary to Mr. Witkin's sage advice, the majority here find an abuse of discretion.   The policy of law favoring a trial on the merits has been eviscerated and an apparent $100,000 windfall is the result.   Plaintiffs' medical damages are approximately $1,000 apiece!   The trial court properly recognized the unfairness and corrected it.   We should affirm.

The salient facts are fairly stated in the majority opinion.   Ms. Prince, counsel for the defendants, was aware of the default and default judgment and could have made a motion to set aside within the six-month period specified in Code of Civil Procedure section 473.   Believing that she had an agreement with plaintiffs' counsel to vacate the default, Ms. Prince delayed filing such a motion.   When she moved to set aside the default the trial court said:  “I think Ms. Prince or Mrs. Price believes it occurred.   I accept that.   And, therefore, I find that there was excusable neglect because 473 has now been expanded past the six months.”

While perhaps inartfully phrased, the trial court's comment has reference to the line of decisions which, notwithstanding the time limitation of Code of Civil Procedure section 473, allow the grant of relief pursuant to the inherent equity power of the trial court.   This principle is succinctly summarized in In re Marriage of Coffin (1976) 63 Cal.App.3d 139, 149, 133 Cal.Rptr. 583:  “ ‘A trial court has an inherent equity power under which, apart from statutory authority, it may grant relief from a default judgment obtained through extrinsic fraud or mistake.  [Citations.]   That equitable power may be invoked by the party seeking to set aside the default judgment either by the filing of a separate suit for the purpose or by a motion made in the action in which the default was taken.  [Citations.]   The time limit for the filing of such motion or separate suit is a reasonable time from discovery of the default judgment irrespective of when it may actually have been entered.  [Citations.]’ ”

Here, there was a mistake and our Supreme Court has recognized that the phrase, “extrinsic mistake” is “․ given a broad meaning and tend[s] to encompass almost any set of extrinsic circumstances which deprive a party of a fair adversary hearing.   It does not seem to matter if the particular circumstances qualify as fraudulent or mistaken in the strict sense.  [Citations.]”  (In re Marriage of Park (1980) 27 Cal.3d 337, 342, 165 Cal.Rptr. 792, 612 P.2d 882.)

“[M]istake is extrinsic when it deprives the unsuccessful party of an opportunity to present his case to the court.  [Citations.]”  (Westphal v. Westphal (1942) 20 Cal.2d 393, 397, 126 P.2d 105, emphasis added.)  “The terms ‘intrinsic’ and ‘extrinsic’ fraud or mistake are generally accepted as appropriate to describe the two different categories of cases to which these policies of the law apply [citation].   They do not constitute, however, a simple and infallible formula to determine whether in a given case the facts surrounding the fraud or mistake warrant equitable relief from a judgment.  [Citations.]   It is necessary to examine the facts in the light of the policy that a party who failed to assemble all his evidence at the trial should not be privileged to relitigate a case, as well as the policy permitting a party to seek relief from a judgment entered in a proceeding in which he was deprived of a fair opportunity fully to present his case.”  (Jorgensen v. Jorgensen (1948) 32 Cal.2d 13, 19, 193 P.2d 728.)

“Relief [on grounds of extrinsic mistake] has also been extended to cases involving negligence of a party's attorney in not properly filing an answer.  [Citations.]”  (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 472, 82 Cal.Rptr. 489, 462 P.2d 17.)   Settlement discussions lulling the defendants into a false sense of security is an adequate ground for relief within the six month limitation period.  (Beard v. Beard (1940) 16 Cal.2d 645, 648, 107 P.2d 385.)   Lulling a defendant into not timely bringing a Code of Civil Procedure section 473 motion has been held to be an adequate reason to equitable relief after the six month period has expired.  (Lieberman v. Aetna Ins. Co. (1967) 249 Cal.App.2d 515, 527, 57 Cal.Rptr. 453.)

The overall policy to the law is fairness.  (Gardiner Solder Co. v. SupAlloy Corp., Inc. (1991) 232 Cal.App.3d 1537, 1543–1544, 284 Cal.Rptr. 206.)   Where, as here, the trial court credits the defense attorney's claim that “․ it would be agreeable to toll all applicable statutes ․,” fairness requires that the six month provisions of Code of Civil Procedure section 473 be included.

In my view, fairness requires affirmance of the order setting aside the default judgment.

FOOTNOTES

1.   All statutory references are to the Code of Civil Procedure unless otherwise stated.

GILBERT, Associate Justice.

STEVEN J. STONE, P.J., concurs.