Opinion
B316351 B318921
06-08-2023
BEN SOLEIMANI.COM, INC., Plaintiff and Respondent, v. BRIGHTPEARL, INC., Defendant and Appellant.
Dentons US, Jae K. Park, Derek A. Auito and Gaspare J. Bono for Defendant and Appellant. Plante Lebovic, Brian C. Plante, Ira D. Lebovic and Gregory M. Golino for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. 20STCV05473, Robert B. Broadbelt, Judge.
Dentons US, Jae K. Park, Derek A. Auito and Gaspare J. Bono for Defendant and Appellant.
Plante Lebovic, Brian C. Plante, Ira D. Lebovic and Gregory M. Golino for Plaintiff and Respondent.
COLLINS, J.
Plaintiff and respondent Ben Soleimani.com, Inc. ("Soleimani") filed a breach of contract action against defendant and appellant Brightpearl, Inc. After personally serving the operative complaint and summons on Brightpearl's designated agent for service of process, Soleimani obtained entry of default and, later, a default judgment against Brightpearl.
Brightpearl subsequently appeared and filed a motion to set aside the default judgment pursuant to Code of Civil Procedure section 473.5. subdivision (b), asserting it lacked actual notice of the action. Despite being in default, it also filed a motion to compel arbitration, citing an arbitration provision incorporated into the parties' contract. The trial court denied the motion to set aside the default judgment, concluding that proper service to Brightpearl's designated agent for service of process provided Brightpearl with actual notice of the lawsuit. Brightpearl filed a notice of appeal.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
While that appeal was pending, the trial court denied Brightpearl's motion to compel arbitration. The trial court concluded it had no jurisdiction to hear the motion due to both the existing judgment and pending appeal, and that no arbitrable controversy existed because judgment already had been entered. Brightpearl appealed the order. We consolidated the appeals.
Soleimani moved to dismiss both appeals as untimely. Brightpearl opposed the motion. The motion is not well taken and is denied. Both appeals are timely under the applicable California Rules of Court.
The order denying the motion to set aside the default judgment is affirmed. Contrary to Brightpearl's contentions, the arbitration provision in the parties' contract did not deprive the trial court of subject matter jurisdiction to enter a default judgment. We further agree with the trial court that proper, personal service upon Brightpearl's designated agent effected actual notice on the corporation for purposes of section 473.5. In light of our conclusion that the default judgment remains in effect, we dismiss the appeal of the order denying the motion to compel arbitration as moot.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
I. Entry of Default and Default Judgment
Soleimani filed a breach of contract action against Brightpearl on February 11, 2020. Soleimani filed a first amended complaint (FAC) against Brightpearl on September 29, 2020. In the FAC, Soleimani alleged that it entered into a contract with Brightpearl on or about September 27, 2019, pursuant to which Brightpearl agreed to install and have "up and running" certain software by "mid-December" 2019 in exchange for Soleimani's upfront payment of $41,750.00. Soleimani alleged that it timely made the payment, but Brightpearl failed to uphold its end of the bargain. Soleimani asserted causes of action for breach of contract, money had and received, and fraud. It sought $41,750.00 in actual damages and punitive damages according to proof.
According to a proof of service form filed on November 5, 2020, Soleimani personally served CT Corporation System with the FAC, summons, and other related documents on October 1, 2020. It is undisputed that CT Corporation System was Brightpearl's designated agent for service of process as defined in section 416.10, subdivision (a), and that Soleimani properly and personally served CT Corporation System. Brightpearl did not appear.
Section 416.10, subdivision (a) provides that a summons may be served on a corporation "by delivering a copy of the summons and the complaint" to "the person designated as agent for service of process as provided by any provision of Section 202, 1502, 2105, or 2107 of the Corporations Code ...."
On February 23, 2021, Soleimani filed a request for entry of default and clerk's judgment. Soleimani represented that it had mailed a copy of the form to Brightpearl at its Austin, Texas address prior to filing it, on January 19, 2021. The clerk entered default on February 23, 2021. On February 25, 2021, the trial court scheduled an order to show cause re: entry of default judgment for May 6, 2021.
On April 22, 2021, Soleimani filed an ex parte application for entry of default judgment against Brightpearl, in the contract amount of $41,750.00 plus interest. It concurrently filed a declaration in support of its allegations and requested damages, a copy of its contract with Brightpearl,, and a declaration in support of its interest calculation of $5,554.98, accruing at a rate of $11.43/day. Soleimani waived attorney fees related to the default judgment.
Brightpearl makes much of Soleimani's failure to include a copy of the "Terms and Conditions of Service" referenced in the contract, in which the arbitration provision is contained. As discussed more fully below, the burden to prove the existence of a valid arbitration provision falls on the party seeking to arbitrate legal claims.
The trial court entered default judgment for Soleimani and against Brightpearl on April 26, 2021. The default judgment awarded Soleimani $41,750.00 in damages, $5,554.98 in prejudgment interest, and $621.40 in costs.
II. Motion to Set Aside Default Judgment
Brightpearl asserts that it moved to set aside both the default and the default judgment and repeatedly refers to this motion as a "motion to set aside default and default judgment." These assertions are at odds with the contents of the motion, which is titled "Motion to Set Aside Default Judgment," and states that Brightpearl is "seeking an order setting aside the default judgment against Brightpearl that was entered on April 26, 2021." They are also inconsistent with the memorandum of points and authorities supporting the motion, which requests only that the default judgment be set aside. Neither the motion nor the supporting memorandum "expressly argued both the default and the default judgment should be set aside under section 473.5," nor is it otherwise "pellucid" from any portion of the appellate record that Brightpearl also sought to set aside the default. (Luxury Asset Lending, LLC v. Philadelphia Television Network, Inc. (2020) 56 Cal.App.5th 894, 909.) We accordingly consider the motion as one to set aside the default judgment. We note, however, that the characterization of the motion has no effect on the ultimate outcome of this appeal.
Approximately six weeks later, on June 2, 2021, Brightpearl filed a motion to set aside the default judgment pursuant to section 473.5, which authorizes a party against whom default or default judgment was entered to "serve and file a notice of motion to set aside the default or default judgment and for leave to defend the action" "[w]hen service of a summons has not resulted in actual notice . . . in time to defend the action." (§ 473.5, subd. (a).) A section 473.5 motion must "be accompanied by an affidavit showing under oath that the party's lack of actual notice in time to defend the action was not caused by his or her avoidance of service or inexcusable neglect," as well as "a copy of the answer, motion, or other pleading proposed to be filed in the action." (§ 473.5, subd. (b).)
Brightpearl attached the sworn declaration of Justin Press, one of its senior vice presidents. Press asserted that he first learned of the action on May 3, 2021, when an employee scanned the application for entry of default and clerk's judgment that Soleimani mailed on January 19, 2021 and filed on February 23, 2021. Press further asserted that he "contacted CT Corporation Service [sic]" on May 4, 2021, and learned that it had been served with the summons and complaint and sent them to Brightpearl's Texas address via UPS. Press stated that Brightpearl never received the UPS package, though UPS records showed it was delivered on October 5, 2020; he surmised "the parcel was left unattended by UPS and became lost, or it was received by someone unaffiliated with Brightpearl who failed to deliver it to Brightpearl."
The trial court sustained Soleimani's evidentiary objections to several paragraphs of Press's declaration, including the paragraph supporting the May 3, 2021 discovery date. The trial court nevertheless expressly relied on that paragraph twice in its ruling on the motion and appears to have credited the assertion. The parties do not address this discrepancy in their appellate briefing. We do not consider the other paragraphs stricken from the declaration.
Brightpearl argued that this turn of events deprived it of actual notice of the action. It further argued that it met the other requirements for relief under section 473.5, because it timely filed the motion to set aside and its lack of notice of the suit was not due to its avoidance of service or inexcusable neglect. Brightpearl additionally contended that "justice will not be served if the default judgment is allowed to stand," because the contract between Soleimani and Brightpearl incorporated the Terms and Conditions of Service containing both an arbitration provision and a forum selection provision designating New York courts as the judicial venue. It requested that the court "set aside the default judgment and allow Brightpearl to file a motion to compel arbitration."
Despite being in default and thus not permitted to file such a motion (see Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 385-386; Garcia v. Politis (2011) 192 Cal.App.4th 1474, 1479), Brightpearl separately filed a motion to compel arbitration instead of filing with its notice of motion to set aside the default judgment "a copy of the . . . motion . . . proposed to be filed in the action." (§ 473.5, subd. (b).) We summarize the motion to compel arbitration and related proceedings in section III, infra.
In addition to the Press declaration, Brightpearl also attached to its motion a copy of the document it received from Soleimani, a copy of a text conversation Press had with a UPS customer service representative, and a copy of Brightpearl's contract with Soleimani, including the Terms and Conditions of Service. Brightpearl also provided a declaration from one of its attorneys, to which it attached the online register of trial court actions and a copy of the Statement of Information on file with the California Secretary of State identifying CT Corporation System as its agent for service of process. It also attached a copy of an email counsel sent to Soleimani's counsel summarizing a May 5, 2021 conversation in which Soleimani's counsel refused Brightpearl's counsel's request to "stipulate to set aside the default judgment entered against Brightpearl."
The email did not mention the default. It did, however, state that Soleimani and its counsel "had several phone calls and exchanged email correspondence with [Brightpearl] advising them of the lawsuit." This putative correspondence, and any potential impact it may have had on Brightpearl's awareness of the suit, is not addressed elsewhere in the record or briefing.
Soleimani opposed the motion. Soleimani contended that Brightpearl, a corporation, could only act through its agents and therefore could obtain actual notice only through an agent with the proper authority. That agent, Soleimani argued, was Brightpearl's designated agent for service of process, CT Corporation System, whom it properly served. Soleimani further asserted it would be "completely inequitable" and "against public policy" to set aside the default judgment where a corporation elects to designate an agent for service of process while "disavowing service of a summons and complaint" made on that agent.
Brightpearl filed a reply in support of its motion. It also provided a declaration from its Employee Experience Manager, who was responsible for visiting Brightpearl's office weekly during the pandemic to collect and distribute mail. She stated that she was the only employee with this responsibility, no other employees were authorized to sign for and accept parcels or packages, and she did not see an envelope or parcel containing the summons or FAC until she "saw a document tilted, 'Request for Entry of Default'" on May 3, 2021. It is unclear whether the trial court considered this belatedly filed declaration.
The trial court provided a tentative ruling denying the motion in advance of the August 30, 2021 hearing. The appellate record does not contain a reporter's transcript or settled statement regarding this hearing. After the hearing, the court adopted its tentative ruling as its final ruling.
In the ruling, the court accepted Soleimani's argument. Citing Pulte Homes Corp. v. Williams Mechanical, Inc. (2016) 2 Cal.App.5th 267 (Pulte Homes), it reasoned that a corporate defendant acquires actual notice only through an agent, and Brightpearl designated and held out CT Corporation System as its agent for service of process. The court therefore concluded that proper service of the FAC and summons on Brightpearl's designated agent for service of process "constituted actual notice of those documents to Defendant, whether or not Defendant was subsequently notified by its agent." The court further concluded that Brightpearl thus had not "met its burden to establish that service of the summons and First Amended Complaint has not resulted in actual notice to Defendant in time to defend the action, as required by Code of Civil Procedure section 473.5, subdivision (a)."
The court referred to the motion as one to "set aside the default judgment" and gave no indication it considered the motion to encompass the entry of default.
Brightpearl filed a notice of appeal on October 28, 2021. The notice of appeal stated that Brightpearl was appealing the order entered on August 30, 2021. A checkbox on the notice of appeal also indicated that Brightpearl was appealing an "order after judgment."
III. Motion to Compel Arbitration
As noted above, Brightpearl filed a motion to compel arbitration on June 2, 2021, the same day it moved to set aside the default judgment. In the memorandum of points and authorities accompanying the motion, Brightpearl argued that the arbitration provision in the Terms and Conditions of Service incorporated into the parties' contract required Soleimani to submit its claims to arbitration in New York. It further contended that the interstate contract was governed by the Federal Arbitration Act (FAA), which deprived the court of jurisdiction to take any action beyond ordering the matter to arbitration. Brightpearl requested that the court compel arbitration of the claims and stay the litigation until the arbitration concluded. It attached a copy of the contract and Terms and Conditions of Service to the motion.
Soleimani filed a "limited opposition" to the motion. Without citing any authority, it contended that the trial court had "no jurisdiction to entertain any motions by Defendant unless or until the default and default judgment are set aside." (The motion to set aside the default judgment was still pending at the time.) Soleimani requested the court remove the motion to compel arbitration from its calendar. The court did not remove the motion, but it continued the hearing to January 2022.
In its reply, Brightpearl contended the court had jurisdiction to rule on the motion because section 473.5, subdivision (b) "mandates that Brightpearl file the motion to compel arbitration at the time it filed the motion to set aside the default judgment." It further asserted that the existence of a judgment "does not determine the Court's jurisdiction."
The court heard the motion to compel arbitration on January 21, 2022, well after Brightpearl had filed its appeal from the denial of the motion to set aside. The appellate record does not contain a reporter's transcript or settled statement regarding the hearing. Adopting its tentative ruling the same day, the court denied the motion for three reasons. First, it concluded it had no jurisdiction to compel arbitration "because (1) the court has entered judgment on those claims, and (2) ordering the parties to submit those claims to be adjudicated by an arbitrator could result in changing the judgment by confirmation of any award issued by the arbitrator." Second, the court concluded it lacked jurisdiction "to issue an order that would affect the judgment or the order denying Defendant's motion to set it aside" "in light of the pending appeal from the court's August 30, 2021 order denying Defendant's motion to set aside the default judgment." Third, the court concluded it could not order the parties to arbitrate their "controversy" in accordance with section 1281.2 because "no controversy exists because those claims have already been adjudicated by the judgment entered by the court."
Brightpearl filed a notice of appeal from the order on February 14, 2022. We consolidated the appeal with Brightpearl's previously filed appeal.
DISCUSSION
I. Motion to Dismiss Appeals as Untimely
A. Motion and Opposition
Soleimani moved to dismiss both Brightpearl's appeals as untimely. It argues that the first appeal is untimely under California Rules of Court, Rules 8.104 and 8.108 (Rules 8.104 and 8.108) because it was filed more than 180 days after default judgment was entered. Soleimani contends that the second appeal is untimely under California Rules of Court, Rule 8.712 (Rule 8.712) because it was filed more than 20 days after the trial court denied the motion to compel arbitration.
Brightpearl opposed the motion. It contends that its first appeal is from the order denying its motion to set aside the default judgment, and was timely filed 59 days after that order was entered on August 30, 2021. Brightpearl argues that the second appeal is timely because the motion to compel arbitration was "inextricably tied" to the motion to set aside. It asserts that by denying the motion to set aside, the trial court "effectively denied Brightpearl 'leave to defend the action' and rejected the filing of Brightpearl's proposed response to Soleimani's complaint," which "is the error from which Brightpearl appeals."
B. Analysis
"'[T]he timely filing of an appropriate notice of appeal or its legal equivalent is an absolute prerequisite to the exercise of appellate jurisdiction.'" (K.J. v. Los Angeles Unified School Dist. (2020) 8 Cal.5th 875, 881.) Under Rule 8.104(b), "no court may extend the time to file a notice of appeal. If a notice of appeal is filed late, the reviewing court must dismiss the appeal."
Rule 8.104(a)(1) sets forth the timeframes in which an appeal may be filed, "[u]nless a statute or rules 8.108, 8.702, or 8.712 provide otherwise." It provides that a notice of appeal "must be filed on or before the earliest of: (A) 60 days after the superior court clerk serves on the party filing the notice of appeal a document entitled 'Notice of Entry' of judgment or a filed-endorsed copy of the judgment, showing the date either was served; (B) 60 days after the party filing the notice of appeal serves or is served by a party with a document entitled 'Notice of Entry' of judgment or a filed-endorsed copy of the judgment, accompanied by proof of service; or (C) 180 days after entry of judgment." (Cal. Rules of Court, Rule 8.104(a)(1).) The word "judgment" as used in this section includes other appealable orders. (Rule 8.104(e).)
Rule 8.108 "operates only to extend the time to appeal otherwise prescribed in Rule 8.104(a)." (Cal. Rules of Court, Rule 8.108(a).) Rule 8.108(c) provides, "If, within the time prescribed by rule 8.104 to appeal from the judgment, any party serves and files a valid notice of intention to move-or a valid motion-to vacate the judgment, the time to appeal from the judgment is extended for all parties until the earliest of: (1) 30 days after the superior court or a party serves an order denying the motion or a notice of entry of that order; (2) 90 days after the first notice of intention to move-or motion-is filed; or (3) 180 days after judgment."
Soleimani contends that Brightpearl's first appeal is untimely even under the longest period of 180 days provided by these two rules. This contention is not well taken. Soleimani's argument rests upon a blatant mischaracterization of the appeal as being from the default judgment entered April 26, 2021 rather than the August 30, 2021 order denying the motion to set aside that judgment. The notice of appeal explicitly states that Brightpearl "appeals from the following judgment or order in this case, which was entered on (date): August 30, 2021," and identifies the appealed order as "[a]n order after judgment." There is no plausible way to understand this filing as an appeal from the default judgment itself. Even if there were, "[i]t is axiomatic that notices of appeal will be liberally construed to implement the strong public policy favoring the hearing of appeals on the merits." (Norco Delivery Service, Inc. v. Owens Corning Fiberglas, Inc. (1998) 64 Cal.App.4th 955, 960.) The notice of appeal would meet this threshold, given its unambiguous identification of the August 30, 2021 order.
Soleimani's challenge to the second appeal is similarly unavailing. It asserts that Rule 8.712 shortens the time to appeal from an order denying a motion to compel arbitration to 20 days. This argument initially appears persuasive because Rule 8.712(b) provides, "The notice of appeal must be served and filed on or before the earlier of: (1) Twenty days after the superior court clerk serves on the party filing the notice of appeal a document entitled 'Notice of Entry' of the order dismissing or denying a petition to compel arbitration or a filed-endorsed copy of the order, showing the date the order was served; or (2) Twenty days after the party filing the notice of appeal serves or is served by a party with a document entitled 'Notice of Entry' of the order dismissing or denying a petition to compel arbitration or a filed-endorsed copy of the order, accompanied by proof of service."
However, Rule 8.712 is part of a chapter of the California Rules of Court that "govern[s] appeals under Code of Civil Procedure section 1294.4 from a superior court order dismissing or denying a petition to compel arbitration." (Cal. Rules of Court, rule 8.710(a).) Section 1294.4 applies to appeals from orders denying motions to compel arbitration that involve "a claim under the Elder and Dependent Adult Civil Protection Act . . . in which a party has been granted a preference pursuant to Section 36 of [the Code of Civil Procedure]." (§ 1294.4, subd. (a).) This case involves a contract dispute between two corporations, not claims under the Elder and Dependent Adult Civil Protection Act. The "shortened notice of appeal period" (§ 1294.4, subd. (c)(2)) set forth in Rule 8.712 does not apply here. The notice of appeal from the order denying the motion to compel was filed on February 14, 2022, 24 days after the order was filed. The second appeal is thus well within the timeframes provided in Rule 8.104(a).
Both appeals are timely under the applicable rules. Soleimani's motion to dismiss accordingly is denied.
II. Order Denying Motion to Set Aside Default Judgment
A. Jurisdiction
Brightpearl first contends the default judgment is void as a matter of law because "the FAA divests the superior court of any power to render any ruling, much less a judgment, where the parties to suit agreed in writing to arbitrate and selected the American Arbitration Association rules to govern arbitration." It asserts that "where a valid agreement to arbitrate exists, such as here, the superior court's jurisdiction is limited to compelling arbitration, absent a showing of fraud, duress, or unconscionability to invalidate the agreement." Brightpearl argues that there was no such showing here, and it is accordingly "entitled to judgment in its favor in the superior court action." We review these legal questions de novo. Whether a judgment is void is a question of law that we review de novo. (Calvert v. Al Binali (2018) 29 Cal.App.5th 954, 962 (Calvert).) "[A]n order incorrectly denying relief from a void judgment is also void, as it gives effect to the judgment." (Ibid.) Neither the default judgment nor the order denying relief therefrom is void.
"[J]urisdictional errors are of two types. 'Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties.'" (People v. American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 660 (American Contractors).) A judgment is void when the court lacks jurisdiction in this fundamental sense. (Ibid.) The phrase "lack of jurisdiction" is not limited to this first, fundamental type, however. "It may also be applied to a case where, though the court has jurisdiction over the subject matter and the parties in the fundamental sense, it has no "jurisdiction" (or power) to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites.'" (Id. at p. 661.) "When a court has fundamental jurisdiction, but acts in excess of its jurisdiction, its act or judgment is merely voidable." (Ibid.)
The trial court had fundamental jurisdiction here. An agreement to arbitrate is not a "usurpation or ouster of the judicial power vested in the trial court of this state by our Constitution." (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796 (Brock); see Cal. Const., art. VI, § 10.) "As a result, there is nothing to prevent one of the parties to a contractual arbitration provision from resorting initially to an action at law. [Citations.] The other party, if determined to pursue arbitration, must then take action to compel arbitration. [Citation.] 'A right to compel arbitration is not . . . self-executing. If a party wishes to compel arbitration, he must take active and decided steps to secure that right, and is required to go to the court where the [other party]'s action [at law] lies.' [Citation.] Consequently, the party seeking to enforce the contractual arbitration clause must file the section 1281.2 petition in the action at law (or raise it as an affirmative defense in the answer) or else the right to contractual arbitration is waived." (Brock, supra, 10 Cal.App.4th at pp. 1795-1796.) The mere existence of an arbitration provision does not render the default judgment void.
None of the authorities cited by Brightpearl is to the contrary. It emphasizes guidance from the Supreme Court that the FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." (Dean Witter Reynolds, Inc. v. Byrd (1985) 470 U.S. 213, 218.) However, such action by a trial court requires that the trial court be timely apprised of the existence of a valid arbitration agreement. Citing Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355, Brightpearl also asserts that the FAA preempts state law requiring judicial resolution of claims where the parties agreed to arbitrate them. It has not pointed to any relevant statutory schemes here; its authorities regarding the Workers' Compensation Act and the Domestic Violence Prevention Act are inapposite to this common law contract action. (See Greener v. Workers' Comp. Appeals Board (1993) 6 Cal.4th 1028; Polin v. Cosio (1993) 16 Cal.App.4th 1451.) Its invocation of federal statutory schemes that restrict the jurisdiction of state courts, including those governing intellectual property rights, admiralty and maritime claims, sovereign immunity, and tribal immunity, is equally inapt.
In its reply brief, Brightpearl asserts that Soleimani "is unable to refute" any of its arguments. To be sure, Soleimani does not squarely address Brightpearl's contentions. Regardless of Soleimani's arguments, however, Brightpearl ultimately bears the burden of demonstrating reversible error. (Jameson v. Desta (2018) 5 Cal.5th 594, 609.) It has not done so with regard to the court's exercise of jurisdiction.
B. Actual Notice
Brightpearl alternatively contends that the trial court's "interpretation of Section 473.5 and its conclusion that [the statute] applies disparately among natural persons and corporate entities is inconsistent with the expressed legislative intent behind Section 473.5 and prior precedent." It further argues that the court's order was "contrary to the spirit of the law" and "defeats the ends of justice." We review questions of statutory interpretation de novo. (Lopez v. Ledesma (2022) 12 Cal.5th 848, 857.) We review an order denying relief under section 473.5 for abuse of discretion. (Shapell Socal Rental Properties, LLC. v. Chico's FAS, Inc. (2022) 85 Cal.App.5th 198, 212.)
As stated above, section 473.5 authorizes a trial court to afford a party relief from default or default judgment "[w]hen service of a summons has not resulted in actual notice . . . in time to defend the action." (§ 473.5, subd. (a).) The movant must request relief within the time period specified in the statute (ibid.) and show "(1) he received through no inexcusable fault of his own, no actual notice of the action in time to appear and defend, and had not made a general appearance; (2) a default or default judgment has been entered against him by the court; (3) he acted with reasonable diligence in serving and filing the notice of motion to set aside the default or default judgment; and (4) he has a meritorious defense." (Goya v. P.E.R.U. Enterprises (1978) 87 Cal.App.3d 886, 891 (Goya).) If these showings are made, the court "may set aside the default or default judgment on whatever terms as may be just and allow the party to defend the action." (§ 473.5, subd. (c).)
Here, the trial court concluded Brightpearl failed to show it lacked actual notice of the action. This was not an incorrect interpretation of the statute or an abuse of discretion.
Section 473.5 requires that a defendant seeking to set aside a default or default judgment demonstrate a lack of actual notice of the suit. It does not define the term "actual notice." Civil Code section 18 defines actual notice as that "which consists in express information of a fact." (Accord, Black's Law Dict. (11th ed. 2019) [defining "actual notice" as "[n]otice given directly to, or received personally by, a party"].) In the particular context of section 473.5, Rosenthal v. Garner (1983) 142 Cal.App.3d 891, 895 (Rosenthal) holds that "'actual notice' means genuine knowledge of the party litigant and does not contemplate notice imputed to a principal from an attorney's actual notice." (Emphasis added.) Other cases also recognize that "'actual knowledge' has been strictly construed, with the aim of implementing the policy of liberally granting relief so that cases may be resolved on their merits." (Olvera v. Olvera (1991) 232 Cal.App.3d 32, 39-40; see also Tunis v. Barrow (1986) 184 Cal.App.3d 1069, 1077; Ellard v. Conway (2001) 94 Cal.App.4th 540, 547.) Brightpearl contends this line of case law compels the conclusion that "the knowledge of Brightpearl's agent for service cannot be imputed to mean Brightpearl's actual notice of the lawsuit."
We disagree. The foundational case in this line, Rosenthal, is readily distinguishable because it involves the unique agency relationship between a party and its counsel. Counsel can in no sense of the word be equated with the party it represents, which itself must receive actual notice under section 473.5. (See Brown v. Superior Court (2004) 116 Cal.App.4th 320, 330 ["the fundamental rule is that the attorney is not a party to the client's action"]; see also Black's Law Dict. (11th ed. 2019) [defining "party" as "[o]ne by or against whom a lawsuit is brought; anyone who is both directly interested in a lawsuit and has a right to control the proceedings, make a defense, or appeal from an adverse judgment"].) Indeed, Rosenthal expressly "reject[ed] the notion that there is an identity of attorney and client so as to invariably impute to a client the attorney's inaction concerning his notice of new litigation to which the client is an unknowing party defendant." (Rosenthal, supra, 142 Cal.App.3d at p. 895 [emphasis added].) In the context of a corporation and its agents, however, such identity necessarily exists. As the trial court recognized, "a corporation, as an artificial entity created by law, can only act in affairs through its natural person agents and representatives." (CLD Constr., Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.) A corporation thus "can have actual notice only through an agent who has the appropriate authority." (Pulte Homes, supra, 2 Cal.App.5th at p. 274.)
The general rule is that "[a]s against a principal, both principal and agent are deemed to have notice of whatever either has notice of, and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other." (Civ. Code, § 2332; see also id. § 2330 ["An agent represents his principal for all purposes within the scope of his actual or ostensible authority, and all the rights and liabilities which would accrue to the agent from transactions within such limit, if they had been entered into on his own account, accrue to the principal."]; Sullivan v. Centinela Valley Union High School District (2011) 194 Cal.App.4th 69, 77.) Rosenthal asserts this rule "'should not be applied to meet the requirement of actual knowledge'" (Rosenthal, supra, 142 Cal.App.3d at p. 895), but at least one court appears to have rejected that guidance and concluded that a corporate defendant had actual notice of a lawsuit "by service on its designated agent" and was therefore not entitled to relief under section 473.5. (Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294, 1300.) Pulte Homes reached the same result, holding that "notice to the person designated by the corporation as its agent for service of process is actual notice." (Pulte Homes, supra, 2 Cal.App.5th at p. 274.) Courts elsewhere have agreed. (See Williams v. Meeker North Dawson Nursing, LLC (Okla. 2019) 455 P.3d 908, 915 ["Meeker blurs the legal definition of actual notice and the layman's definition of actual notice. There is no question that Meeker's registered agent received actual notice of the litigation in the form of service of process, as attorney Scates testified as to the fact. Further, there is no question that knowledge of the agent is imputed onto the principal. [Citations.] Therefore, Meeker had actual knowledge of the suit. This Court will not allow corporations or other entities operating in Oklahoma to take advantage of Oklahoma citizens by allowing them to avoid litigation by claiming lack of actual notice when their registered agents have been properly served as required by Oklahoma law."].) Brightpearl contends that Pulte Homes, supra, 2 Cal.App.5th 267 is distinguishable and should be limited to its facts. While Pulte Homes is not on all fours with the instant case, we nevertheless find it instructive and persuasive. In Pulte Homes, a corporate defendant, Williams Mechanical, Inc. (Williams) was suspended by the Secretary of State in 2011 and dissolved in 2012. (Pulte Homes, supra, 2 Cal.App.5th at p. 270.) In 2013, plaintiff Pulte Homes served a summons and complaint on Williams's designated agent for service of process, attorney Morris, by substituted service. Morris admitted he received the documents but did not take any action because Williams was dissolved and he had no information about its liability insurance carrier. (Id. at pp. 270-271.) Pulte Homes later obtained default and default judgment against Williams. Williams moved to set both aside under sections 473, subdivision (b) and 473.5. (Id. at p. 271.) The court set aside the default and the default judgment. (Id. at p. 272.) Pulte Homes appealed, and the court of appeal reversed.
As relevant here, the appellate court distinguished Rosenthal, supra, 142 Cal.App.3d 891, on the ground that "a person cannot have actual notice through an agent, but a corporation can have actual notice only through an agent who has the appropriate authority." (Pulte Homes, supra, 2 Cal.App.5th at p. 274.) It continued, "Presumably notice to the board of directors or to the president of a corporation would be sufficient to constitute actual notice; indeed, in the case of a functioning corporation, it is arguable that it is necessary. [Citations.] Here, however, Williams dissolved in 2012 and has been wound up.... At least under these circumstances, we believe that notice to the person designated by the corporation as its agent for service of process is actual notice. An agent for service of process has the necessary authority because the corporation has expressly held that person out to the world as authorized to receive notice of actions. Indeed, in the case before us, if actual notice to Morris was not sufficient to make a default judgment stick, who else was there?" (Id. at p. 274.)
Brightpearl, a functioning corporation that characterized itself as "an upstanding corporate citizen" during oral argument, points to the dicta suggesting that notice to a corporation's board of directors or president is "arguably necessary" and urges us to limit the holding of Pulte Homes to dissolved corporations. We decline to follow the dicta and see no principled basis to confine the holding. Like Williams, Brightpearl has a designated agent for service of process. If personal service on such an agent does not constitute actual notice to the designating corporation, there is no point to this agency relationship.
Indeed, service on a designated agent was long ago deemed to be personal service on the corporation itself, when the predecessor statute to section 473.5 required a defendant to be personally served. (See Koski v. U-Haul (1963) 212 Cal.App.2d 640, 643-644.) If service on an agent is deemed to be personal service on a corporation, it can also constitute actual notice to that corporation. Were this not the case, plaintiffs would bear the costs of any breakdowns in the relationships between corporations and their agents for service of process, and agents for service of process would have no reason to timely communicate with their principals. As explained in Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 505 fn. 7, "There are significant policy reasons for placing the burden of ensuring proper internal document delivery on corporate defendants rather than on plaintiffs. In virtually every situation in which service of process on a foreign corporate defendant is attempted by mail, that defendant could assert lack of service by simply allowing an employee to sign for the document and then claiming that the particular individual to whom the documents were addressed never received the document. This could occur despite the fact that other officers or agents for service of process did, in fact, receive the documents. It would also allow corporate defendants to simply ignore otherwise valid service of process (i.e., service that is reasonably calculated to give the defendant notice of the action and an opportunity to defend itself) by instructing employees who receive the mail to withhold or destroy the documents rather than pass them along to the addressee."
Brightpearl has not shown that the court abused its discretion by concluding Brightpearl had actual notice of the suit.
III. Order Denying Motion to Compel Arbitration
Brightpearl contends the court erred by denying its motion to compel arbitration. It asserts that the court lacked jurisdiction to rule on the motion due to its pending appeal of the order denying the motion to set aside, and further contends that if the court had jurisdiction, it should have ruled in Brightpearl's favor. Even if we were to agree and reverse the order, the ruling would have no practical effect given our affirmance of the order denying the motion to set aside the default judgment. With the judgment in place, there is no arbitrable controversy between the parties. When no effective relief can be granted, an appeal is properly dismissed as moot. (E.g., MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 214.) We accordingly dismiss the appeal from the order denying the motion to compel arbitration as moot.
DISPOSITION
The motion to dismiss the appeals as untimely is denied.
The order denying the motion to set aside the default judgment is affirmed. The appeal from the order denying the motion to compel is dismissed as moot. The parties shall bear their own costs of appeal.
We concur: CURREY, ACTING, P. J., ZUKIN, J. [*]
[*] Judge of the Los Angeles County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.