Opinion
H024835.
10-22-2003
CHAK GUDE, Plaintiff and Respondent, v. CEO INTERACTIVE.COM, INC., Defendant and Appellant.
Defendant CEO Interactive.com, Inc., appeals from an order after judgment, wherein it was denied relief from default under Code of Civil Procedure section 473, subdivision (b). Defendant contends the trial court abused its discretion in denying relief, because the default was the result of surprise and extrinsic mistake. We reject defendants claim of abuse of discretion and affirm the judgment.
STATEMENT OF THE CASE AND FACTS
On March 30, 2001, plaintiff Chak Gude filed an action for fraud and recission against defendant. On May 9, 2001, plaintiff served the summons and complaint on defendants registered agent for service of process in Delaware, CT Corporation, Inc. Upon receipt of the summons and complaint, CT Corporation sent it to defendants incorporator, Sheldon Lustig of Lustig and Associates in Illinois. At the time he was sent the summons and complaint, Lustig no longer represented defendant. There is a dispute in the record as to when Lustig notified CT Corporation of the fact he no longer represented defendant. The record contains a letter from Lustig to CT Corporation dated March 15, 2001, wherein he stated he no longer represented defendant, and provided an address for defendant in Canada. However, a representative of CT Corporation declared that Lustig called its offices after June 18, 2001, to provide the correct address for defendant in Canada. Defendant did not receive a copy of the summons and complaint before June 19, 2001.
Plaintiff files no response brief to this appeal.
On June 11, 2001, plaintiff secured a default. Initially, defendants Chief Executive Officer tried to appear in pro per to have the default set aside. When she learned that a corporation cannot appear in pro per, she hired an attorney to have the default set aside. On October 11, 2001, defendant filed a motion to set aside default. The hearing on the motion was postponed by request of plaintiffs counsel. The motion was heard on November 20, 2001, and on December 3, 2001, the trial court issued an order denying the motion without prejudice, on the grounds that defendant had not satisfied its burden of proof that it was entitled to relief under Code of Civil Procedure section 473, subdivision (b). On December 14, 2001, plaintiff secured a default judgment in the amount of $35,000, plus costs and interest. Defendant did not file a notice of appeal of the default judgment.
All statutory references are to the Code of Civil Procedure unless otherwise stated.
On May 3, 2002, defendant filed a second motion to set aside default. In this motion, defendant included additional evidence regarding the fact it did not receive the summons and complaint until after the default was entered. On May 20, 2002, the trial court denied the motion.
On May 30, 2002, defendant filed a motion to reconsider ruling on motion to set aside default judgment. The trial court denied the motion to reconsider on July 22, 2002.
Defendant filed a notice of appeal on August 2, 2002.
DISCUSSION
Relief from default under section 473, subdivision (b)
Defendant asserts the trial court abused its discretion in denying the two motions to set aside default and the motion to reconsider. We disagree.
Because defendant did not file a notice of appeal of the first motion to set aside default, which was denied on December 3, 2001, we are not considering it on appeal. We therefore only consider the second motion to set aside default, and the subsequent motion to reconsider, from which defendant filed a timely notice of appeal.
Defendants second motion to set aside default, which was filed on May 3, 2002, was brought pursuant to section 473, subdivision (b), 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."
Because the law favors disposing of cases on their merits, "any doubts in applying section 473 must be resolved in favor of the party seeking relief from default [citations omitted]. Therefore, a trial court order denying relief is scrutinized more carefully than an order permitting trial on the merits." (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 980 (Rappleyea), citing Elston v. City of Turlock (1985) 38 Cal.3d 227, 233.) Because the trial court denied relief under section 473, we review its decision under a heightened abuse of discretion standard.
With respect to a request to set aside default under section 473, entry of default begins the running of the six-month time frame within which a motion for relief must be brought. (Weiss v. Blumencranc (1976) 61 Cal.App.3d 536 (Blumencranc).) In Blumencranc, the court stated: "[T]he six-month period [under section 473, subdivision (b)] runs from the date of entry of default rather than from the date of entry of the default judgment [citations]." (Id. at p. 541.)
In the instant case, default was entered on June 11, 2001, putting the final date for filing a motion to set aside default under section 473 at December 11, 2001. The motion to set aside default under consideration in this appeal was filed on May 3, 2002, well beyond the December 11, 2001, cut-off date. Therefore, because the motion to set aside default was untimely under section 473, the trial court did not abuse its discretion in denying it.
Equitable relief from default
Although more than six months passed from the entry of default and the filing of the motion to set aside default, making relief under section 473 unavailable, the trial court had equitable power to grant relief from default independent of the statute. (Rappleyea, supra, 8 Cal.4th at p. 981, citing Olivera v. Grace (1942) 19 Cal.2d 570, 575-576.) During the six-month statutory period, a strong public policy favors granting relief and allowing the moving party its day in court. After the six-month statutory period has passed, however, a strong public policy favors the finality of judgments and relief should be granted only in exceptional circumstances. (Rappleyea, supra, 8 Cal.4th at pp. 981-982.) These policy factors notwithstanding, this court reviews a challenge to a ruling on an equitable motion to vacate according to the same standard as that accorded a ruling under section 473: abuse of discretion. (Id. at p. 981.)
On appeal, defendant asserts it is entitled to relief under the equitable doctrine of extrinsic mistake, because the default occurred as a result of third parties failure to provide defendant with prompt notice of the pending action. In making this assertion, defendant relies heavily on the fact that either CT Corporation, or Lustig, or both are at fault in not sending the summons and complaint to defendant in a timely fashion. Such failure by a third party, as well as defendants justifiable reliance on that party, can form a basis for an equitable remedy of relief from default. (Shields v. Siegel (1966) 246 Cal.App.2d 334, 340-342.)
While it is true that justifiable reliance on third parties resulting in a default against defendant may form the basis for relief, such fact must be proven through a sufficient showing of extrinsic mistake. "To set aside a judgment based upon extrinsic mistake one must satisfy three elements. First, the defaulted party must demonstrate that it has a meritorious case. Secondly, the party seeking to set aside the default must articulate a satisfactory excuse for not presenting a defense to the original action. Lastly, the moving party must demonstrate diligence in seeking to set aside the default once it had been discovered." (Stiles v. Wallis (1983) 147 Cal.App.3d 1143, 1147-1148.)
In the instant case, defendant does not provide an adequate record on appeal for this court to review whether there was an abuse of discretion by the trial court in denying the motion on equitable grounds. Specifically, defendant elected to proceed under California Rules of Court, rule 5.1, and filed an appendix in lieu of a clerks transcript. As such, defendant had an obligation to include such "any item listed in rule 5(b)(3) that is necessary for the proper consideration of the issues . . . ." (Rule 5.1(b)(1)(B), italics added.) Defendant failed to satisfy this requirement in its appendix. For example, although the appendix contains the first page of the notice of motion requesting relief from default under section 473, it does not contain the entire notice. Additionally, the appendix does not contain a memorandum of points and authorities to accompany the partial notice of motion. As a result, we have no record to show that defendant requested relief from default based on anything other than section 473, which was untimely under the six-month time frame set forth in the statute. There is no indication from the record that defendant requested relief from default based on the equitable doctrine of extrinsic mistake, or whether defendant demonstrated the existence of the three necessary elements of extrinsic mistake, most notably the requirement that it demonstrate it has a meritorious defense. (Stiles v. Wallis, supra, 147 Cal.App.3d at pp. 1147-1148.)
Compounding the insufficiency of the appendix to demonstrate defendants request for relief on equitable grounds, the reporters transcript and the courts orders are equally silent. Specifically, the transcript from the motion for relief on May 16, 2002, as well as the motion for reconsideration on July 18, 2002, are silent on the three elements of extrinsic mistake, and focus entirely on defense counsels reason for not filing a timely motion for relief under section 473 within the statutory time limits. Further, the two orders issued by the trial court are silent as to the grounds for denial.
Defendant does not provide sufficient record on appeal to demonstrate that it satisfied the three requirements under Stiles to be entitled to equitable relief from default under the doctrine of extrinsic mistake. On appeal, we do not presume the trial court committed error in denying the motions. On the contrary, the decisions of the trial court are presumed to be correct and the appellant has the burden of overcoming this presumption by affirmatively showing error on an adequate record. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1140-1141; Brown v. Boren (1999) 74 Cal.App.4th 1303, 1320-1321.) Defendant has failed to provide this court with an adequate record from which we can ascertain whether it presented evidence on the three elements for relief under the equitable doctrine of extrinsic mistake. It necessarily follows that defendant also has failed to demonstrate that the trial court abused its discretion in denying it equitable relief under the doctrine of extrinsic mistake. (Health Maintenance Network v. Blue Cross of So. California (1988) 202 Cal.App.3d 1043, 1056.)
The judgment must be affirmed because the record provided by defendant is inadequate to conclude the trial court abused its discretion in denying the motion for relief from default on equitable grounds. (See, e.g., Aguilar v. Avis Rent A Car System, Inc. (1999) 21 Cal.4th 121, 132 ["We reject defendants claim . . . because they failed to provide this court with a record adequate to evaluate [their] contention"].)
DISPOSITION
The judgment is affirmed.
WE CONCUR: Rushing, P.J., and Mihara, J.