Ford v. Krug, A116327 (Cal. App. 5/14/2008)
| Decision Date | 14 May 2008 |
| Docket Number | A118824,A116327 |
| Court | California Court of Appeals Court of Appeals |
| Parties | LEATHAN FORD, Plaintiff and Respondent, v. EDWARD KRUG et al., Defendants and Appellants. LEATHAN FORD, Plaintiff and Respondent, v. EDWARD KRUG, Defendant and Appellant. |
Appeal from the San Mateo County, Super. Ct. No. 443878.
We conclude in these two consolidated appeals before us that the trial court erred by denying appellants' motions to set aside a series of judgments entered against them in this procedurally convoluted action. We find that one of the judgments entered pursuant to a stipulation by appellants' counsel is void for lack of implied or express authority; the others must be set aside under the mandatory and discretionary provisions of Code of Civil Procedure section 473. We therefore reverse the denials of the motions to vacate the judgments, and reverse all of the judgments entered in the case against appellants.
Late in 2003, respondent Leathan Ford defaulted on the mortgage payments for her home in Daly City, and one of the mortgage holders recorded a Notice of Trustee's sale of the property, with a scheduled sale date of January 20, 2004. Soon thereafter, Ford was contacted by real estate agent appellant Clayton Chamberlin,1 an associate of appellant Edward Krug in the licensed real estate brokerage firm known as Horizon Land & Loan (Horizon). After discussions with appellants, respondent entered into a "Residential Lease with Option to Re-Purchase" agreement (the agreement) with them. Pursuant to the terms of the agreement, which are not at issue in this appeal, appellants arranged to sell the property through Chamberlin to investors Alexander Gabovich and Michael Harbison for a purchase price of $453,006. Appellants advanced some money to respondent and unsuccessfully attempted to obtain postponement of the scheduled trustee's sale. In exchange, on December 31, 2003, respondent executed a temporary quitclaim deed which conveyed the property to Chamberlin for the benefit of the assigned buyers, Gabovich and Harbison.
By January 24, 2004, escrow closed on the sale of the property to Gabovich and Harbison, and they received the deed to the property. In accordance with the terms of the agreement, respondent leased the property for a monthly rent of $2,300, which was less than her prior mortgage payments, and received an option to repurchase the property for a purchase price of $510,000, subject to the new loan obtained by Gabovich and Harbison. Appellants received repayment of the loan advances made to respondent, and a commission of $24,000.
Respondent failed to make rental payments as specified in the agreement, whereupon Gabovich and Harbison initiated unlawful detainer proceedings against her. On December 23, 2004, respondent filed an action against appellants, Gabovich and Harbison for breach of fiduciary duty, fraud, conspiracy to commit fraud, and violations of the Home Equity Sales Contracts Act and the Mortgage Foreclosure Consultant Act (the Acts). Respondent sought damages, rescission, declaratory and injunctive relief.
On March 25, 2005, appellants, through their attorney Elizabeth Reifler, filed answers to the complaint and a cross-complaint against respondent, Gabovich and Harbison for fraud, misrepresentation, defamation, and comparative indemnity. After respondent twice demurred to the action against her, a first and then a second amended cross-complaint were filed by appellants, the latter on September 13, 2005. Defendants Gabovich and Harbison also filed a cross-complaint against appellants, which was served upon Reifler in August of 2005.
Respondent settled her action against Gabovich and Harbison, and sought to obtain a good faith settlement determination (Code Civ. Proc., § 877.6). The trial court subsequently sustained the objection of appellants and declined to approve the settlement agreement. The parties were ordered to proceed to mediation, and the case was set for trial on April 24, 2006.
Respondent filed a motion for summary adjudication of her statutory claims brought pursuant to the Acts on October 21, 2005. She sought damages from appellants in the total amount of $477,688.90, plus reasonable attorney fees and costs.
While Reifler continued to represent appellants in the action, but before any opposition to the motion for summary adjudication was filed, she resolved an unrelated disciplinary proceeding brought against her by the State Bar for repeated failure to competently perform legal services for a client. In September of 2005, Reifler agreed to accept public reproval from the State Bar and a two-year period of probation, with specified conditions, among them: to retain the assistance of an attorney or clerical services as necessary to assure her coverage of litigation and other practice matters; and to comply with her Lawyer Assistance Program Participation Agreement. Reifler designated Andrew Alger as the attorney to provide legal assistance services to her pursuant to the condition of her probation. Appellants were not aware of the discipline imposed upon Reifler by the State Bar or the condition that she "was not allowed to practice law without associating an attorney and/or clerical staff."
Reifler did not enlist the services of Andrew Alger or any clerical staff to assist her with appellants' case. She also repeatedly failed to timely file opposition papers and responses to discovery requests during the course of the proceeding.
On December 22, 2005, respondent's counsel granted Reifler's request for an extension of time until January 6, 2006, to file opposition to respondent's summary adjudication motion. The hearing date on the motion was continued from January 9, to January 30, 2006. Reifler requested another extension of time to file opposition on January 5, 2006, for reasons that included flood damage to her home and office, associated recurring power outages, her husband's terminal illness and related disability, and her own illness and deteriorating mental state that inhibited her performance of legal services for appellants. Respondent's counsel agreed to grant Reifler a further extension only on the condition that she sign a stipulation for entry of a judgment against appellants if the opposition was not filed by January 20, 2006. Reifler advised Krug that the proposed stipulation, onerous as it was, should be signed to avoid a judgment in favor of respondent "by default" on the summary adjudication motion related to the first and second causes of action. Krug told Reifler to "do whatever [she] needed to do."
Reifler drafted and signed a stipulation on January 6, 2006, which did not specify any "dollar amount" of the judgment in favor of respondent in the event opposition was not filed by the extended due date. Respondent's counsel sent to Reifler a form of judgment to be attached as Exhibit 1 to the stipulation, which specified the "exact amount of the judgment," $477,688.90, plus reasonable attorney fees and costs. Reifler signed the stipulation and filed it with the court, but claimed that due to her impaired state of mind she neither reviewed the amount of the judgment stated in the exhibit nor agreed to it. The stipulation provided that if appellants "fail to file their opposition to Plaintiff's Motion for Summary Adjudication of Issues by January 20, 2006, Plaintiff shall be entitled to judgment on the issues addressed in that motion, in the form attached as Exhibit 1 hereto."
Krug did not examine the stipulation or the judgment, and was not aware of its terms. He had no knowledge of the $477,688.90 amount of judgment agreed to by Reifler, and did not give her authority to stipulate to judgment in that amount. Chamberlin was never contacted about the stipulation and had no knowledge of it.
Reifler failed to file opposition to the motion for summary adjudication by the stipulated January 20, 2006 deadline. On January 24, 2006, respondent applied ex parte to enter the stipulated judgment. Reifler contested the entry of judgment by filing a declaration in which she recited the reasons for her failure to timely file the opposition, and maintained that the opposition had by then been completed. On January 24, 2006, the trial court entered judgment in favor of respondent on the first two causes of action of her complaint in accordance with the stipulation. The judgment was filed and served upon Reifler the next day.
Still pending was the remainder of the action, which included: a second motion for summary adjudication of the fraud and negligent misrepresentation causes of action of the cross-complaint filed against respondent by appellants; the cross-complaint filed by Gabovich and Harbison against appellants; the cross-complaint of appellants against Gabovich and Harbison; and the additional causes of action of respondent's complaint against appellants.
Reifler's husband died on January 31, 2006, and she became seriously ill with a respiratory infection and depression. Thereafter, she failed to afford any representation to appellants in the case: she cancelled a scheduled mediation; she filed no opposition to respondent's second summary adjudication motion; she did not appear at a mandatory settlement conference scheduled for April 7, 2006, or file a settlement conference statement; she did not file an answer to the cross-complaint of Gabovich and Harbison against appellants; she did not appear at a trial scheduled for April 24, 2006; she did not prosecute the cross-complaint of appellants against Gabovich and Harbison; she did not appear at a hearing on respondent's request for an award of attorney fees from appellants. Reifler also ceased communicating with her clients. Appellants were not aware of Reifler's failure to take any action on their behalf in the proceedings.
The case thus proceeded to entry of a series of judgments against app...
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