Ffa Farm Labor Servs. v. B&a Int'l Farm Labor Servs., Inc.
| Decision Date | 26 February 2018 |
| Docket Number | F073513 |
| Court | California Court of Appeals Court of Appeals |
| Parties | FFA FARM LABOR SERVICES et al., Plaintiffs and Appellants, v. B & A INTERNATIONAL FARM LABOR SERVICES, INC. et al., Defendants and Respondents. |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINIONAPPEAL from a judgment of the Superior Court of Fresno County. Kristi Culver Kapetan, Judge.
Miller & Ayala and Nathan S. Miller for Plaintiffs and Appellants.
Baker Manock & Jensen, Steven M. Crass and Diane E. Coderniz for Defendants and Respondents.
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In this business dispute, a judgment was entered against defendants B & A International Farm Labor Services, Inc. (B&A), Ayala Farms, Inc., Piedad Ayala, Bernardo Ayala, and Central Valley Equipment Rental when they failed to appear on the date set for trial. At that time, plaintiffs FFA Farm Labor Services, Inc. (FFA), Saul Camacho, Laura Gilbert, and Imelda Moreno proceeded to prove-up their claims against defendants in defendants' absence. Upon learning of the judgment, defendants filed a motion seeking to have the judgment set aside under Code of Civil Procedure1 section 473 and the court's inherent equitable power. The trial court granted the motion, finding defendants had adequately shown extrinsic mistake warranting the requested relief. Plaintiffs appeal from the order setting aside the judgment. Because plaintiffs have failed to meet their burden of demonstrating a clear abuse of discretion, we affirm the order of the trial court.
On September 26, 2013, plaintiffs filed their complaint against defendants for alleged breach of contract, fraud and defamation arising out of the parties' prior business relationship. The complaint alleged, among other things, that FFA made a series of loans to several of defendants, which included loans in the following amounts: (1) $101,126.12; (2) $255,267.21; (3) $1,000, and (4) $2,379.29. Allegedly, defendants failed to repay the money borrowed and breached their promises to do so. Further, the complaint alleged B&A, Bernardo Ayala and Piedad Ayala agreed that plaintiffs would purchase 60 tractors and defendants would rent the tractors from plaintiffs. According to the complaint, the agreed rental amount was $750 per tractor per month for a period of three months each year for five years, for a total rental obligation of $675,000. Allegedly, defendants failed to pay any portion of the rental amount as agreed. As a result, plaintiffs were forced to return the tractors to the lender, who then sold the tractors at an auction, which resulted in a deficiency on the loan procured to purchase the tractors in the sum of approximately $150,000. Additionally, the complaint alleged Bernardo Ayala and Piedad Ayala made false statements defaming the reputations of Camacho,Gilbert, and Moreno. Specifically, said defendants allegedly told people that plaintiffs stole or embezzled money from defendants.
Defendants filed their answer to the complaint on November 21, 2013. Defendants also filed a cross-complaint against plaintiffs, the operative pleading being the first amended cross-complaint filed on February 27, 2014 (the cross-complaint). The cross-complaint alleged the individual cross-defendants (i.e., Camacho, Gilbert and Moreno) formerly worked for B&A and, unbeknownst to B&A, used confidential proprietary information of B&A to solicit B&A's customers through unfair competitive means. Moreover, the cross-complaint alleged that plaintiffs/cross-defendants conspired with one another to embezzle substantial sums of money from B&A through an elaborate scheme purportedly involving the generation of false and fraudulent vendor invoices, the creation of phony payroll checks, opening accounts for plaintiffs'/cross-defendants' personal benefit, and other means. The cross-complaint sought damages against plaintiffs/cross-defendants on theories of recovery that included civil conspiracy, conversion, and intentional interference with prospective economic advantage.
Defendants were initially represented in this case by David Emerzian of the law firm of McCormick, Barstow, Sheppard, Wayte & Carruth LLP (McCormick Barstow). However, sometime in 2014, defendants' tax attorney, Thomas P. Hogan, discovered McCormick Barstow may have previously represented plaintiffs. Defendants took steps to remove Emerzian, and the McCormick Barstow firm, from further representation in this matter and substituted their tax attorney, Hogan, as their attorney of record. Substitution of attorney forms confirming this change of legal counsel were filed by defendants in the trial court on July 23, 2014. However, the new arrangement did not last long. According to defendants, Hogan's law office insisted on a large retainer that defendants could not pay "due to the funds embezzled by Plaintiffs and the ongoing IRS litigation." At Hogan's request, defendants signed substitution of attorney formsremoving Hogan as their attorney of record and causing defendants to be self-represented (i.e., no legal counsel) in this litigation, which substitution of attorney forms were filed in the trial court on December 11, 2014.
In January of 2014, while Emerzian was acting as attorney of record for defendants, the trial court mailed a case management conference minute order to the parties' respective attorneys, setting the trial date in this case for May 11, 2015. The minute order also stated that a trial readiness hearing was scheduled for May 8, 2015, and a mandatory settlement conference was scheduled for April 14, 2015. Defendants maintain they were not aware of the trial and other hearing dates. In November 2014, during the period of time Hogan represented defendants herein, an associate in Hogan's law firm informed defendants she would be requesting a continuance of the trial date due to her planned maternity leave in "May/June" of 2015. According to defendants, Hogan's associate never followed up with them about a potential continuance. On December 11, 2014, Hogan's law firm substituted out of the case, as noted above. Defendants purportedly heard nothing further about this action.
Defendants did not appear at the mandatory settlement conference on April 14, 2015, they did not appear at the trial readiness hearing on May 8, 2015, and, most importantly, they did not appear at the trial on May 11, 2015.
On May 11, 2015, at the time and place set for trial of this matter and upon defendants' failure to appear for same, plaintiffs proceeded to prove-up their case in defendants' absence. After plaintiffs' evidence was presented, the Honorable Alan M. Simpson entered judgment in favor of plaintiffs and against defendants. A written judgment was entered by the trial court on June 5, 2015.2 Under the plaintiffs' complaint, the trial court awarded damages to FFA in the sum of $1,189,332.14 againstB&A, Central Valley Equipment Rental, and Ayala Farms, Inc. Additionally, the trial court awarded $10,000 each to Camacho, Moreno, and Gilbert against Piedad Ayala and Bernardo Ayala. Regarding the cross-complaint, the judgment was in favor of cross-defendants/plaintiffs.
There is nothing in the record to indicate plaintiffs ever served notice of entry of judgment on defendants. According to defendants, they (defendants) first learned of the existence of the judgment against them about seven months later, in early January of 2016, when a notice of levy and a writ of execution seeking to collect on the judgment were delivered to B&A's business office.
On January 11, 2016, defendants filed their motion to vacate default judgment. One of the principal grounds for the motion was that "equitable grounds exist to vacate the judgment due to extrinsic fraud and mistake."
According to the declarations presented in support of defendants' motion, when Hogan was substituted out of the case in December of 2014, defendants were "not aware that this action was still open and pending." As set forth in the declaration of Bernardo Ayala, defendants were The declarations of Piedad Ayala and Gracy Villalvazo alleged the same facts and the same misunderstanding based on the IRS litigation. Thus, defendants maintained they mistakenly assumed this action was inactive or stayed in light of the related IRS litigation.
Additionally, according to the declarations filed in support of the motion, defendants had heard in conversation with others in the agricultural industry that FFA was no longer an active corporation, which tended to further confirm their understanding that this action was not active. A January 2016 printout from the California Secretary of State's official Web site was presented to the trial court by defendants' legal counsel in connection with defendants' motion. The printout reflected FFA was, at the time of the printout (i.e., January 2016), suspended as a corporation by the Franchise Tax Board.
Defendants further asserted in their motion that they had "received no information whatsoever regarding this action" between December 2014 and December 2015 and were "not aware" of the dates...
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