Monday, June 17, 2013

$1.7 million default judgment is possible, even after a 473(b) motion.

Obtaining a default judgment is not easy. And if the judgment debtor later moves to set default and a judgment aside, especially if done on "mandatory" grounds of attorney's mistake [CCP 473(b)], courts often read it as equally a mandatory requirement to grant the requested relief. Often, but not always. This recent case presents a rare situation, when a simple act of submitting a declaration with an acknowledgement of fault did not help. The case is even more unique because of its facts: the judgment at stake was for a significant amount of $1.7 million, and the party asking to set it aside submitted not one, but several declarations regarding its attorney's fault.

The case is Even Zohar Constr. & Remodelling, v. Bellaire Townhouses, 215 Cal.App.4th 277 (Cal. App. 2d Dist. 2013), App. Case No. B239928. Defendants failed to file a responsive pleading on time, then were notified* about the request for default and still haven't filed anything, while the plaintiff worked its way through a prove-up hearing and obtained a default judgment, in the amount of $1,701,116.70.

Only after that, the defendants made their move and asked for relief based on the attorney's inadvertence or mistake. The trial court found attorney's supporting declaration "too vague and conclusory ... not credible ... and ... entirely too general. It [did] not show attorney [] solely at fault in not filing a timely responsive pleading."

The defendants have not gave up and re-filed the same motion again, supplying it with an updated declaration regarding attorney's fault, and two more supporting declarations from other attorneys. The court still did not accept the story, and added a comment that the additionally declared facts were not new and could be included in the first original declaration. Yet the court vacated the judgment and set aside default, on the grounds that the second motion was brought under CCP 1008** and, therefore, the relief was mandatory, even if there were no fault shown by the attorney.

Appellate court disagreed and observed that: (a) for a mandatory relief, attorney's admission of fault must be straightforward (and the subject declaration failed that test); and (b) CCP 1008 applies to all applications for renewal of any previous motion, including a motion made under CCP 473.

I can also add that the plain language of CCP 473 provides that the "court shall***" grant the relief "unless the court finds that the default or dismissal was not in fact caused by the attorney's mistake, inadvertence, surprise, or neglect." In the subject case, it looks undisputed that the trial court did make this finding. It should then have followed as a sufficient "unless" to prevent the court from granting a relief, even within the Standard Microsystems rule.

* Albeit by email and fax, but the issue of service was not discussed in the appellate decision.
** Based on Standard Microsystems Corp. v. Winbond Electronics Corp., 179 Cal.App.4th 868, 893-894 (2009).
*** The word "shall" does not necessarily mean "must." See Brian Gardner's article on this word's usage.

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