Outdoor Imports, Inc. v. Stanoff

• Decision Date: 11 May 1970
• Citation: 86 Cal.Rptr. 593,7 Cal.App.3d 518
• Parties: OUTDOOR IMPORTS, INC., a California Corporation, Plaintiff and Appellant, v. Nat STANOFF, Defendant and Respondent. Civ. 35312.
• Court: California Court of Appeals Court of Appeals

Page 593

86 Cal.Rptr. 593

7 Cal.App.3d 518

OUTDOOR IMPORTS, INC., a California Corporation, Plaintiff and Appellant, v. Nat STANOFF, Defendant and Respondent.

Civ. 35312.

Court of Appeal, Second District, Division 1, California.

May 11, 1970.

Cooney & Cooney, Terrence W. Cooney, Sherman Oaks, and Harold E. Hanson, for appellant.

Hansen & Dillmann, Van Nuys, for respondent.

LILLIE, Associate Justice.

On September 3, 1968, plaintiff sued defendant for conversion of merchandise; default judgment in the amount of $23,783.50 was entered October 22, 1968. On March 7, 1969, defendant filed notice of motion to vacate default and default judgment. Plaintiff appeals from order granting the motion.

The following background was presented to the trial court by way of supporting declarations of defendant and his counsel, Mr. Hansen. Plaintiff was incorporated in 1966; defendant was a director and secretary-treasurer and owned 50% Of the stock, D'Anfrasio owned the other 50%; the board of directors consisted of defendant, D'Anfrasio and Terrence W. Cooney, attorney for plaintiff who kept all records and upon whom the parties relied for advice. Differences arose between defendant and D'Anfrasio and in April 1968 they met informally in Mr. Cooney's office where D'Anfrasio orally agreed to buy defendant's stock in plaintiff corporation and Mr. Cooney was to prepare the papers; the papers were never prepared, the agreement never reduced to writing and D'Anfrasio never complied, thus defendant continued to act as secretary-treasurer, countersigning all corporate checks. In August 1968 defendant consulted his lawyer, Mr. Hansen, about the corporate affairs and on August 28, Mr. Hansen wrote Mr. Cooney requesting certain corporate information, including the status of stock issued, copies of bylaws and corporate minutes.

On September 3, 1968, defendant was served with copy of summons and complaint which bore no date, case number or other confirmation showing an action had been filed, and appeared to be a copy of an unfiled lawsuit (attached to defendant's declaration is copy of unnumbered, undated summons served on him (Exh. A)). ¹ Thus, in the light of his differences with D'Anfrasio and the fact that he had received no notice of any board meeting at which the filing of a lawsuit was discussed and knew of no corporate action authorizing the same, defendant believed that no lawsuit had actually been filed and that the papers were served on him solely as a threat to force him to agree to less favorable terms for the sale to D'Anfrasio of his interest in plaintiff corporation. He immediately advised Mr. Hansen who explained to him that there was no necessity for filing an answer to an unfiled lawsuit. During this time Mr. Hansen had several telephone conversations with Mr. Cooney and a letter from him dated September 9, 1968, but at no time did Mr. Cooney make any reference to a lawsuit. Thus, based upon his knowledge of defendant's differences with D'Anfrasio, the fact that the papers served on defendant appeared to be copies of an unfiled lawsuit, the absence of corporate action for authority to file an action and Mr. Cooney's silence concerning the same knowing he represented defendant, Mr. Hansen did not believe any lawsuit had in fact been filed.

It was not until the end of October ² or early November 1968 when his bank account was levied upon that defendant learned of the lawsuit and advised Mr. Hansen who immediately contacted Mr. Cooney, informed him of the purported service and suggested that they attempt a settlement of the ownership of plaintiff corporation; Mr. Cooney agreed. To that end the principals met in Mr. Cooney's office on December 6, 1968, but after subsequent telephone conversations, it became evident that settlement negotiations had failed. Mr. Cooney, who had not furnished the corporate books requested in August, finally made them available to Mr. Hansen for inspection around the middle of December 1968; they disclosed one board meeting on October 11, 1966, but no others except a purported meeting not noticed and attended only by Mr. Cooney and D'Anfrasio on April 11, 1968, at which, on the assertion that defendant 'declined' to perform his duties as secretary-treasurer, Mr. Cooney was purportedly elected as secretary and the president purportedly authorized to sign all checks alone. The facts of this purported meeting and its outcome were withheld from defendant and no notification was ever given to him of his alleged removal; defendant continued to sign the corporate checks. The foregoing was largely uncontroverted by the brief affidavit of Mr. Cooney.

A motion for relief from default under section 473, Code of Civil Procedure, is addressed to the sound discretion of the trial court and its ruling thereon will not be disturbed on appeal in the absence of a clear showing of abuse of discretion. (Weitz v. Yankosky, 63 Cal.2d 849, 854, 48 Cal.Rptr. 620, 409 P.2d 700; Freeman v. Goldberg, 55 Cal.2d 622, 625, 12 Cal.Rptr. 668, 361 P.2d 244; Beard v. Beard, 16 Cal.2d 645, 647, 107 P.2d 385; McNeil v. Blumenthal, 11 Cal.2d 566, 567, 81 P.2d 566.) It is well settled that appellate courts have always been and are favoraby disposed toward orders excusing defaults and permitting controversies to be adjudicated upon their merits. Such orders are rarely reversed and never unless it clearly appears that there has been a plain abuse of discretion. (Lynch v. Spilman, 67 Cal.2d 251, 257--258, 62 Cal.Rptr. 12, 431 P.2d 636; Weitz v. Yankosky, 63 Cal.2d 849, 854--855, 48 Cal.Rptr. 620, 409 P.2d 700; Benjamin v. Dalmo Mfg. Co., 31 Cal.2d 523, 525, 190 P.2d 593.)

The issues before the trial court were whether defendant's neglect to file an answer within the statutory time was excusable (Weitz v. Yankosky, 63 Cal.2d 849, 855, 48 Cal.Rptr. 620, 409 P.2d 700), he had a meritorious defense (Lynch v. Spilman, 67 Cal.2d 251, 259, 62 Cal.Rptr. 12, 431 P.2d 636) and he acted seasonably to set aside default after discovering it had been entered (Benjamin v. Dalmo Mfg. Co., 31 Cal.2d 523, 528, 190 P.2d 593). Since the issues raised by defendant's motion were tried on affidavits, we are "bound by the same rule as where oral testimony is presented for review.' (Citations.) When an issue is tried on affidavits, the rule on appeal is that those affidavits favoring the contention of the prevailing party establish not only the facts stated therein but also all facts which reasonably may be inferred therefrom, and where there is a substantial conflict in the facts stated, a determination of the controverted facts by the trial court will not be disturbed.' (Griffith Co. v. San Diego Col. for Women, 45 Cal.2d 501, 508, 289 P.2d 476, 480; Luz v. Lopes, 55 Cal.2d 54, 62, 10 Cal.Rptr. 161, 358 P.2d 289; Beckett v. Kaynar Mfg. Co., Inc., 49 Cal.2d 695, 699, 321 P.2d 749.) The rule is applied to orders made on motions for relief from default under section 473, Code of Civil Procedure. (Lynch v. Spilman, 67 Cal.2d 251, 259, 62 Cal.Rptr. 12, 431 P.2d 636.)

In granting the motion the trial court necessarily concluded that default had been taken against defendant through his 'inadvertence and excusable neglect'; inherent in this conclusion is the factual finding either that defendant was served one day (September 3, 1968) ³ before the summons was in fact issued (September 4, 1968) or that he was served on September 4, 1968, with copy to summons and complaint not conformed to the original. It is undisputed that the copy served on defendant...