Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC291117, Irving S. Feffer, Judge.
Law Offices of Keith F. Elder, Ira Cohen, Keith F. Elder for Defendants and Appellants.
Robert L. Conn, in pro. per., for Plaintiff and Respondent.
BOREN, P.J.
Three years after a default judgment against them by plaintiff Robert Conn (an attorney and counsel on appeal herein), defendants Marcus Fontaine, Ramona Fontaine, and Norma Ruiz moved on equitable grounds to vacate the judgment. Defendants claimed extrinsic fraud based on the alleged misconduct of their former defense counsel, John Thomas Logan, who purportedly abandoned them.
The trial court denied the motion to vacate because defendants failed to produce evidence of a meritorious defense, failed to articulate a satisfactory excuse for not presenting a defense to the original action, and failed to show reasonable diligence in seeking to set aside the default once they discovered it. We find no abuse of discretion and affirm.
FACTUAL AND PROCEDURAL SUMMARY
In 1986, Marcus Fontaine purchased a residence on Astaire Avenue in Culver City (hereinafter, the property). Marcus Fontaine--who is incarcerated for a forgery conviction and has prior convictions for postal fraud and Medi-Cal fraud--purchased the property in the names of his mother and sister to hide his ownership of the property from creditors. On January 9, 1991, a judgment was entered against Marcus Fontaine, his mother Ramona Fontaine, and his sister Barbara Fontaine and in favor of Morris Fox (Fox v. Fontaine (No. WEC 099510)), premised on Marcus Fontaine’s breach of contract and the ensuing fraudulent conveyance of the property to hinder the recovery of claims.
In December of 1994, Marcus Fontaine obtained a loan secured by the property. However, to do so, he recorded forged documents to make it appear as if an IRS lien for over $2 million and two different judgments had been released. The recorded certificate of release of the federal tax lien bore the forged signature of an IRS representative, and the two recorded forms of the acknowledgments of satisfaction of judgment bore the forged signatures of Robert Conn. The liens in fact still existed, and the forged lien releases facilitated Marcus Fontaine’s ability to obtain a new loan.
In 1997, Robert Conn filed an acknowledgment of assignment of judgment signed by Morris Fox, by which Fox assigned the 1991 judgment to Robert Conn. By 2002, the IRS lien was more than 10 years old and had expired, but the original judgment lien, then owned by Robert Conn, had been renewed and thus was valid and enforceable.
On March 4, 2002, Ramona Fontaine transferred the property to her niece, Norma Ruiz, and a new loan was recorded against the property. The new loan entailed several written representations and a declaration signed by Ruiz that she would occupy the property within 30 days of closing and that it would be her primary residence. Prior to the sale, satisfaction of judgment forms were filed acknowledging full satisfaction of the 1991 judgment. However, no amount of money was ever paid toward satisfaction of the 1991 judgment, and Robert Conn’s signature was forged on the acknowledgment of satisfaction of judgment forms.
In February of 2003, because of the forgeries of Robert Conn’s signature that allowed a loan to be secured against the property without first paying off the 1991 judgment, Conn filed the underlying lawsuit. In a second amended complaint, Conn alleged causes of action for fraudulent conveyance, conspiracy, abuse of process, cancellation of instrument, quiet title, and cloud on title.
On June 20, 2003, Marcus and Ramona Fontaine filed an answer to the complaint through their former defense attorney, John Thomas Logan. Norma Ruiz filed no response. In December of 2003, the answer by Marcus and Ramona Fontaine was stricken because of their failure to appear for a case management conference, failure to pay monetary sanctions, failure to attend court-ordered mediation, failure to attend the postmediation hearing in the case, and failure to attend the hearing regarding the OSC re terminating sanctions.
On March 10, 2004, a default judgment was entered jointly and severally against Marcus Fontaine, Ramona Fontaine, Norma Ruiz, and Laura Ortiz (a beneficiary named in the 2002 deed of trust). On March 29, 2004, an amended default judgment was filed. The judgment specified monetary damages in the amount of $185,000, plus punitive damages of $100,000.
On February 21, 2007, Marcus Fontaine, Ramona Fontaine, and Norma Ruiz filed a motion to vacate the default judgment. The three defendants claimed extrinsic fraud based on the alleged gross misconduct of their former attorney, Logan, who purportedly had abandoned them. Additionally, Ruiz claimed that the substituted service of summons and complaint on her was improper and could not support a default judgment because she was a resident of Massachusetts and never resided at the property, and that the affidavit of service was fatally defective.
On May 24, 2008, the trial court denied the motion to vacate because defendants failed to satisfy the basic prerequisites to obtain nonstatutory, equitable relief from the default judgment. Specifically, the court found that they failed to produce evidence of a meritorious defense, failed to articulate a satisfactory excuse for not presenting a defense to the original action, and failed to show reasonable diligence in seeking to set aside the default once they discovered it. The trial court also noted that the defendants failed to explain the multiple factual inconsistencies between their declarations and the other documentary evidence.
The present appeal, authorized pursuant to Code of Civil Procedure section 904.1, subdivision (a)(2), is from the denial of the motion to vacate the default judgment.
DISCUSSION
I. General legal principles.
Where, as here, a motion for relief from default is filed after the six-month statutory deadline set forth in Code of Civil Procedure section 473, the only possible basis for relief is the inherent, equitable power of the court to set aside a judgment on the ground of extrinsic fraud or mistake. (Olivera v. Grace (1942) 19 Cal.2d 570, 578; Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294, 1300.) To obtain relief, the party must establish: a meritorious defense; a satisfactory excuse for not presenting a defense to the original action; and diligence in seeking to set aside the default once it was discovered. (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982; Falahati v. Kondo (2005) 127 Cal.App.4th 823, 833.) Relief on the ground of extrinsic fraud or mistake is not available to a party who had been given notice of the action and yet fails to appear, unless the party was prevented from participating in the action. (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 472.)
The equitable relief from default is available only where the fraud or mistake was extrinsic, meaning that the party was denied the opportunity to be heard and an “‘unjust judgment’” resulted “‘without a fair adversary hearing.’” (Kulchar v. Kulchar, supra, 1 Cal.3d at p. 471.) If the fraud or mistake goes to the merits of the action or occurred at trial (such as a failure to fully investigate a claim), it is deemed intrinsic and not a ground for relief. (In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1069.)
Extrinsic mistake warranting relief from default exists where a party was deprived of a hearing by reason of counsel’s “positive misconduct.” (Aldrich v. San Fernando Valley Lumber Co. (1985) 170 Cal.App.3d 725, 739.) Extrinsic mistake occurs where an attorney’s extreme failure to act “suggests positive misconduct through a total failure to represent [the] client” (People v. One Parcel of Land (1991) 235 Cal.App.3d 579, 584) and amounts to counsel’s de facto substitution out of the case (see Orange Empire Nat. Bank v. Kirk (1968) 259 Cal.App.2d 347, 353-354).
When a trial court’s order on a motion to vacate a default judgment is appealed, the standard of review is whether such order was an abuse of the trial court’s discretion. (Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488, 503.) “[T]he order will not be disturbed unless an abuse of discretion clearly appears.” (Orange Empire Nat. Bank v. Kirk, supra, 259 Cal.App.2d at p. 352.)
II. The trial court did not abuse its discretion in denying equitable relief from default because defendants failed to satisfy the three requisite elements for relief.
In the present case, defendants failed to satisfy the necessary elements for equitable relief from default. To set aside a judgment based on extrinsic fraud or mistake all three of the following elements must be satisfied: “first the defaulted party must show that it has a meritorious case; secondly it must articulate a satisfactory excuse for not presenting a defense to the original action; and lastly it must demonstrate that it was diligent in seeking to set aside the default once it had been discovered.” (Aldrich v. San Fernando Valley Lumber Co., supra, 170 Cal.App.3d at p. 738.)
Defendants’ motion to vacate did not establish a meritorious defense.
A showing of a meritorious defense is a prerequisite before a court may invoke its equitable power to vacate a default judgment after the statutory six-month period has passed. On appeal, defendants assert that the pleading in the original verified answer filed by former Attorney Logan on behalf of defendants pled sufficient facts which, if believed, adequately satisfied the requirement of showing the existence of a meritorious defense. (First Small Business Inv. Co. v. Sistim, Inc. (1970) 12 Cal.App.3d 645, 649-650.)
Apart from the fact that the answer by defendants to the first amended complaint was stricken by the court as part of the terminating sanctions imposed, there is no indication that such answer to the first amended complaint was made part of the motion to vacate. Thus, the trial court could not have abused its discretion in failing to account for information not presented to it.
Indeed, counsel’s memorandum of points and authorities in support of the motion to vacate focused on the misconduct of and abandonment by former Attorney Logan, but was silent in asserting a meritorious defense. In supplemental points and authorities, counsel claimed by way of self-serving argument that there was a meritorious defense (arguing the absence of any forgery or fraudulent transfer). However, counsel failed to rely on the verified answer to the complaint or to present relevant documentary evidence. For the purposes of a motion to vacate a default judgment, counsel’s mere argument was insufficient because “whether a party has a meritorious position is to be determined solely from his affidavits, declarations and pleadings.” (First Small Business Inv. Co. v. Sistim, Inc., supra, 12 Cal.App.3d at p. 651, italics added.)
Moreover, one of the three defendants, Norma Ruiz, never filed any answer to the complaint.
On appeal, defendants also point to Marcus Fontaine’s declaration in support of the motion to vacate. However, he merely declared in a self-serving and unsupported manner that “I believe that a trial on the merits will result in a Judgment favorable to me, to my mother and in particular to Norma Ruiz.” Such a conclusory belief does not satisfy the requirement of pleading facts which, if believed, would show an adequate defense.
Hence, the trial court could not have abused its discretion in failing to consider the verified answer as a defense because it was never presented to it for consideration and has been focused on for the first time on appeal.
Defendants failed to establish a satisfactory excuse for not presenting a defense to the original action.
“Although the policy of the law is to favor a hearing on the merits of a case, courts are not required to set aside default judgments for defendants who flagrantly ignore the responsibility to present a defense. The burden of a party who has had a default entered against him is not limited to merely articulating the existence of a meritorious case. The defendant must also demonstrate a satisfactory excuse for not responding to the original action in a timely manner.” (Stiles v. Wallis (1983) 147 Cal.App.3d 1143, 1148.)
In the present case, Marcus Fontaine’s declaration in support of the motion for relief from default indicated, in pertinent part, that former Attorney Logan represented him, as well as Ramona Fontaine and Norma Ruiz, in the present lawsuit. Marcus Fontaine also acknowledged that “when I was first incarcerated [on September 16, 2003,] the Judge had me brought to his courtroom for 16 consecutive days while trying to ascertain the location of [former attorney] Mr. Logan,” who also represented Marcus Fontaine on his federal criminal matter.
We note that as indicated at the web site of the State Bar of California, John Thomas Logan (bar No. 66623) was disciplined and suspended from the practice of law on several occasions. Logan’s eligibility to practice law was suspended for two months from January 11, 2003, to March 11, 2003, suspended again for approximately two weeks from September 16, 2003, through October 1, 2003, and again on April 15, 2004 (for one day); since March 5, 2008, he has not been eligible to practice law. (See http://members.calbar.ca.gov/search/member_detail.aspx?x=66623)
The failure of former Attorney Logan to appear in court on 16 separate court days in the criminal matter should have put Marcus Fontaine on notice that he should have changed attorneys or at least kept a more watchful eye on counsel’s handling of the defense in the present case. This clear warning as to Attorney Logan’s dereliction occurred approximately six months prior to the March 10, 2004, default judgment and left abundant time to engage a new attorney.
Marcus Fontaine’s incarceration in the criminal matter did not automatically relieve him of the duty to act in a timely fashion in the present civil action. (Aheroni v. Maxwell (1988) 205 Cal.App.3d 284, 293.) Conn argues that Marcus Fontaine and the other two defendants simply opted not to defend themselves in this civil litigation because they had in the past always been able to create forged documents to overcome any judgment lien.
However, we need not speculate as to motivation. The bottom line is that the defendants failed to carry their burden of articulating a satisfactory excuse for not presenting a defense to the civil action resulting in the default judgment.
Defendants did not diligently seek to set aside the default judgment.
Defendants did not act diligently to set aside the default after learning of it. As indicated in Conn’s declaration in opposition to the motion to vacate the default judgment, on December 13, 2004, Conn contacted Attorney Frank Sanes, who had represented Marcus and Ramona Fontaine in the litigation resulting in the 1991 judgment in favor of Fox. Conn specifically confirmed to Sanes his intention to execute judgment against the property.
As previously indicated, Marcus Fontaine was also coordinating the defense for Ruiz, so Sanes was apparently acting on behalf of all three defendants at that time.
However, defendants waited to move to vacate the default judgment until February of 2007, over two years after their prior attorney, Sanes, was aware of Conn’s intention to execute judgment. Such lack of diligence by defendants thus supports the trial court’s refusal to exercise of its equitable discretion to vacate the default judgment.
Moreover, defendants received multiple written notices from Conn regarding the default judgment. Specifically, defendants received (1) prejudgment notices when forms for request for entry of default judgment were mailed to them, (2) written notices after the default judgment was entered, and then (3) two memoranda of costs after judgment forms which were mailed to each defendant on August 1, 2005 (with extra copies sent to Ruiz in Massachusetts). Still, defendants waited approximately a year and a half from the date of the memoranda of costs before seeking to set aside the default judgment. Such circumstances again demonstrate a lack of diligence and support the trial court’s refusal to exercise its equitable discretion to vacate the default judgment.
Accordingly, the defendants failed to satisfy the three requisite elements for relief from default, and the trial court did not abuse its broad discretion in denying equitable relief.
III. The claim by defendant Norma Ruiz of defective service is based on the wrong proof of service and is contradicted by her own admission.
Norma Ruiz contends that the substituted service on her was invalid because no ZIP code was shown for the mailing of the summons and complaint on the proof of service form. However, her argument is based on the proof of service form filed on November 6, 2003, not the corrected proof of service form filed on December 12, 2003, which included the ZIP code as part of the entire address.
The summons and complaint were mailed to the address of that property. Ruiz, at the time she signed several loan documents, stated under penalty of perjury that the property would be her primary residence within 30 days of closing. The situation is thus distinguishable from Zirbes v. Stratton (1986) 187 Cal.App.3d 1407, 1416-1417, where substituted service was at the parent’s address on Stratton’s driver’s license and premised on the improper assumption that a parent would necessarily inform Stratton of the service.
Moreover, the failure to use the correct ZIP code would invalidate what would otherwise be sufficient notice only in “the absence of proof notice was actually received.” (Moghaddam v. Bone (2006) 142 Cal.App.4th 283, 288.) In the declaration by Norma Ruiz in support of the motion to vacate she admits, “That in mid September I learned that a copy of the summons and complaint had been mailed to me at the [property in question],” and that former Attorney Logan “would handle the matter.” Thus, she actually did receive notice of the summons and complaint.
Accordingly, the contention by Norma Ruiz of defective service is without merit.
DISPOSITION
The judgment is affirmed.
We concur: DOI TODD, J., ASHMANN-GERST, J.