Modelos Y Disenos Omega S v. Architectural Materials U.S.
| Docket Number | D083369 |
| Decision Date | 02 December 2024 |
| Parties | MODELOS Y DISENOS OMEGA S, DE R.L., Plaintiff and Respondent, v. ARCHITECTURAL MATERIALS USA, INC. et al., Defendants and Appellants. |
| Court | California Court of Appeals |
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. 37-2022-00014140-CU-BC-CTL Kenneth J. Medel, Judge. Affirmed.
Gupta Evans & Ayres, Ajay Gupta, and Aurora Gallardo for Defendants and Appellants.
Seltzer Caplan McMahon Vitek and Ricardo Arias for Plaintiff and Respondent.
Modelos y Disenos Omega S, de R.L. (MDO) filed a complaint against Architectural Materials USA, Inc. (AMI), Gregory Romine, and Victor Maple (collectively, Appellants) for breach of contract based on Appellants' failure to pay amounts due under a 2021 settlement agreement between the parties. Thereafter, counsel for the parties began discussing settlement of the breach of contract suit. Although they had not reached an agreement, Appellants did not file responses to the complaint or timely request extensions of time to do so. Therefore, MDO requested and received entry of default.
Appellants subsequently filed a motion to vacate and set aside the default. After receiving briefing and holding a hearing, the court denied the motion to vacate. Eventually, the court entered a default judgment against Appellants.
Appellants now appeal the trial court's denial of their motion to vacate and set aside the default arguing the court abused its discretion in finding they had not shown surprise or excusable neglect under Code of Civil Procedure[1] section 473 subdivision (b). They further contend the court erred in subsequently entering a default judgment against Romine and Maple because they maintain neither could be held individually liable under the settlement agreement. MDO responds that Appellants forfeited the latter argument by failing to properly raise it below and that the court did not abuse its discretion in denying Appellants' motion.
We agree the court did not abuse its discretion in denying Appellants' motion to vacate the default and conclude Appellants have not demonstrated that we may address their liability argument on appeal of a default judgment. Accordingly, we affirm the judgment.
In June 2019, Appellants purchased metal panels from MDO for $302,306.83. MDO contends that it completed the contract, but Appellants failed to pay the remaining balance of $125,457.36. In August 2021, MDO sued Appellants alleging the same nine causes of action against each of them.
On December 22, 2021, MDO and Appellants reached a settlement. The settlement agreement called for AMI to pay MDO $100,000 in installments, with the first installment of $15,000 being due on the same day the settlement agreement was executed and the next $15,000 installment due on February 28, 2022. It further included a provision entitling the prevailing party to recover reasonable attorney fees and other fees, costs, and expenses, should a party need to sue to enforce the terms of the settlement agreement.
Appellants made only the first installment payment. Counsel for MDO contacted former counsel for Appellants twice in March 2022 regarding the late payment. Despite Appellants' counsel's reassurance that he would check with his client, no payment was forthcoming.
On April 7, 2022, MDO's counsel sent a letter regarding the past due payment to Appellants' former counsel via certified mail and included a complaint. Appellants' attorney responded that he did not represent Appellants with respect to this new matter and, thus, could not accept service of the complaint on their behalf.
On April 15, 2022, MDO filed its complaint for breach of the settlement agreement. After incurring significant challenges and expense, MDO's process server was able to serve all three Appellants. Although the parties' calculations differ, it appears Romine's responsive pleading was due by June 8, 2022, AMI's was due by June 10, 2022, and Maple's was due by June 14, 2022.[2]
Ajay Gupta contacted MDO's counsel, Ricardo Arias, on May 23, 2022, to inform him that Gupta had been retained by AMI, Romine, and Maple and wished to discuss options for resolving the matter. During a phone call the next day, Gupta relayed Appellants' offer of $25,000 to cure the breach and be reinstated into the payment plan. He did not request an extension of time in which to file responsive pleadings.
On June 1, 2022, Arias e-mailed Gupta rejecting the offer and making a counteroffer of $38,000. He stated that the counteroffer was his client's "best and final offer" and that "If your clients do not accept our offer, we will go forward and get a judgment against them." Two weeks later, having heard nothing from Gupta, Arias instructed his legal assistant to prepare and file an entry of default.
On June 20, 2022, Gupta e-mailed Arias that, due to cash flow struggles, the best AMI could do was to pay $15,000 up front. He further stated that he did not expect MDO to be moved by this position, given that it was less than the prior offer, and asked for an extension of one week to file a responsive pleading.
Gupta did not hear back from Arias, but about an hour later, the default was entered, and copies were mailed to the three Appellants at their last known addresses (which included the agent for service of process for AMI). There is no indication in the record that Gupta was served or notified.
On June 27, 2022, Gupta e-mailed Arias requesting that MDO stipulate to set aside the default. He followed up on July 6, 2022, and indicated he would file a motion to vacate if he did not hear from Arias in the next two days. Arias responded the next day, stating that his client would not stipulate, and pointing out that Gupta had not requested an extension before the time for responding to the complaint had expired.
Appellants filed their motion to vacate and set aside the default on July 20, 2022. MDO sought a default judgment on July 29, 2022, and thereafter opposed Appellants' motion. Appellants filed a reply, and the court heard argument on the matter.
On December 22, 2022, the court denied the motion, explaining that it did not find Appellants "delayed responding to the Complaint based upon 'surprise, inadvertence of [sic] excusable neglect.'" Additionally, the court stated:
While settlement negotiations were occurring, the Court does not find that plaintiff or plaintiff's counsel acted in such a manner that encouraged defendants not to file a timely response to the Complaint. In fact, communication from plaintiff's counsel indicated 'If your clients do not accept our offer, we will go forward and get a judgment against them.' Nor did defendant or defense counsel ever request a delay in entry of default or request an extension to file [a] responsive pleading."
In September 2023, MDO filed an ex parte application for a default judgment. The court granted the application and entered the judgment on September 20, 2023.
An order denying a motion to vacate a default is not independently appealable but may be reviewed on an appeal from the subsequent judgment. (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981; accord Gudarov v Hadjieff (1952) 38 Cal.2d 412, 418 and Winter v. Rice (1986) 176 Cal.App.3d 679, 682.) The court's" 'ruling on a motion for discretionary relief under section 473 shall not be disturbed on appeal absent a clear showing of abuse.'" (Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 257 (Zamora).)
We find no abuse of discretion in this case. Section 473, subdivision (b) provides that "[t]he 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." (§ 473, subd. (b).) Here, as below, Appellants contend the default should have been set aside due to counsel's surprise or excusable neglect.
As to the first argument, Appellants contend counsel was surprised because the parties were in the midst of ongoing and good faith settlement negotiations. However, Appellants cite no authority for the proposition that they may ignore court rules and deadlines simply because the parties are discussing settlement. The law is clear that the defendant must answer the complaint or file a demurrer within 30 days after service of the complaint.
(§§ 412.20, subd. (a)(3) [answer or demurrer]; 430.40 [demurrer]; Cal. Rules of Court,[3] rule 3.110(d) [both].) Although "[t]he parties may stipulate without leave of court to one 15-day extension beyond the 30-day time period prescribed for the response after service of the initial complaint[,]" Appellants' did not request such a stipulation prior to the expiration of the 30-day response period. They also did not separately make a timely request to the court for an extension of time to respond. (Rule 3.110(e) [].) And, as the court noted, Appellants point to no evidence that MDO or its counsel gave them reason to believe they did not need to file a timely response. As a result, they had no basis for believing they would be excused from any consequences resulting from their failure to respond. Furthermore referring to the status of the settlement negotiations as proceeding in "good faith" was somewhat disingenuous at that point. MDO...
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