Stafford v. Mach

• Decision Date: 16 June 1998
• Docket Number: No. A080474,A080474
• Citation: 75 Cal.Rptr.2d 809,64 Cal.App.4th 1174
• Court: California Court of Appeals Court of Appeals
• Parties: , 65 Cal.App.4th 573C, 98 Cal. Daily Op. Serv. 4637, 98 Daily Journal D.A.R. 6579 Lee R. STAFFORD et al., Plaintiffs and Appellants, v. Toan MACH, Defendant; Allstate Insurance Company, Intervener and Respondent.

Page 809

75 Cal.Rptr.2d 809

64 Cal.App.4th 1174, 65 Cal.App.4th 573C,

98 Cal. Daily Op. Serv. 4637,

98 Daily Journal D.A.R. 6579

Lee R. STAFFORD et al., Plaintiffs and Appellants, v. Toan MACH, Defendant Allstate Insurance Company, Intervener and Respondent.

No. A080474.

Court of Appeal, First District, Division 2, California.

June 16, 1998.

As Modified on Denial of Rehearing July 8, 1998.

Review Denied Sept. 2, 1998.

Albert E. Levy, Newport Beach, Cotter & Del Carlo and Richard A. Canatella, San Francisco, for Appellants.

Ropers, Majeski, Kohn & Bentley, Los Angeles, George G. Weickhardt, Pamela J. Zanger, San Francisco, for Respondent.

HAERLE, Associate Justice.

I. INTRODUCTION

Appellants (Staffords) seek reversal of the trial court's order setting aside a default and a default judgment under section 473 of the Code of Civil Procedure ¹ in favor of Allstate Insurance Company (Allstate) in a suit brought by the Staffords against and eventually settled with Allstate's insured. They contend the trial court abused its discretion by granting relief when Allstate waited to file its motion on the last day of the six-month limitation period provided by section 473 without an adequate explanation to justify the prolonged delay. We agree and accordingly reverse the order setting aside the default and default judgment.

II. FACTS AND PROCEDURAL HISTORY

On January 23, 1996, a car driven by defendant Toan Mach struck the Staffords' car. The Staffords, an elderly couple, sustained various personal injuries and property damage as a result of the collision. Soon thereafter the Staffords hired attorney Richard Canatella to represent them in connection with the accident.

Mach was insured by Allstate at the time of the accident. Canatella wrote to Allstate and informed them of his representation, and also requested a statement of Mach's automobile policy coverage and confirmation that Mach admitted fault for the accident. Allstate's claims department acknowledged Canatella's representation in a letter dated February 2, 1996. One week later, Allstate also acknowledged that Mach was at fault.

On June 24, 1996, Canatella made a policy limits demand to Allstate on behalf of the Staffords. Allstate's claims department acknowledged receipt of this settlement demand on June 26, 1996, and then forwarded the case to Willie Roberson, an Allstate claims analyst, for review. After two months had passed without word from Roberson, Canatella called Roberson on September 9, 1996, to inquire about the status of the case. Roberson did not return the call. Canatella then left three more messages during the next week, which Roberson also failed to return. Finally, Canatella wrote Roberson a letter, confirming the four phone calls and requesting a status report. Roberson still did not respond.

On October 18, 1996, the Staffords filed a complaint for negligence against Mach Toan, aka Dennis Chang, aka Jim Wong. A process server for the Staffords attempted personal service of the summons and complaint on Mach at his residence, 1210 45th Avenue in San Francisco, five times between October 30 and November 15, 1996. On the sixth attempt on November 18, 1996, Mach answered the door, but did not reveal his identity. The process server reported that "an Asian male answered the door" and when the server asked for Mach, the male "began asking a lot of questions such as why [the server] was asking for the subject and who sent [the server]." The server then informed the male that he had legal documents for Mach and asked him to show identification. The male said he never heard of Mach before, refused to show identification, and threatened to call the police. The server then "announced drop service" and left the papers with him. On the proof of service filed with the court, the server noted that the person he served was "John Doe, co-occupant, (Asian M, 5' 6", 150 lbs, 30-40 YR, Blk Hair)." On November 20, 1996, the server mailed the summons and complaint to Mach at the same address. On December 30, 1996, Canatella filed an amendment to the complaint, declaring that the true name of the defendant was Toan Mach, not "Doe" as previously stated.

Mach declared that he delivered the summons and complaint to an Allstate agent, Priscilla Lau, who then forwarded them to Roberson. At that time, Mach informed Lau that he had received these papers in the mail. ² Roberson had a conversation with Mach on December 18, 1996, during which Mach apparently claimed not to have been "personally served" with the papers. ³ R ObersonRoberson also noted that Mach has some difficulty understanding English. Roberson informed Mach that Allstate could not answer the complaint or hire an attorney to represent him until Mach was personally served, and that, if and when he was personally served in the future, he should send the papers to Allstate. Other than speaking to Mach, Allstate undertook no other investigation into whether service of process was properly effectuated.

As requested by the Staffords, a default was entered in San Francisco Superior Court on December 31, 1996. A hearing date regarding entry of judgment was set for February 13, 1997, ⁴ and a notation of that date appeared on the notice of default. The default and notice of the February 13 hearing was mailed to Mach at his San Francisco address and to Allstate, under the assigned claim number, at its South San Francisco address where Roberson worked. Mach received this notice of default in the mail and claimed to have personally delivered a copy of it to Lau at Allstate's 19th Avenue, San Francisco office. He declared that Lau informed him she would forward the papers to Roberson at the South San Francisco office and that Allstate would appoint counsel to represent him. Lau admitted to receiving an envelope that appeared to have been sent by mail and forwarding it to Allstate's claims department, but denied telling Mach that the company would appoint counsel to represent him. ⁵ Roberson claimed to have spoken to Mach in the middle of January and to have discussed the "legal papers" which Mach had recently received. Roberson stated that he asked Mach to send him the papers, but that Mach did not comply. Roberson denied receiving any notice of the default or default judgment date.

The superior court entered a default judgment against Mach on February 13. The court found that Mach had been properly served, notice of the default and court judgment hearing had been mailed to both Mach and Allstate, and the Staffords were entitled to a judgment against Mach in the amount of $440,000. Notice of entry of the default judgment was mailed on February 13, both to Mach at his residence and to Allstate at its South San Francisco address, under the assigned claim number. Canatella also mailed Roberson a letter on the same day, informing him of the default judgment [64 Cal.App.4th 1180] and demanding that Allstate issue a draft for the judgment amount within 30 days. Roberson admitted to receiving this letter and claimed that this was the only notice of the default judgment he had ever received. Roberson never responded to the letter.

On May 6, the Staffords modified the default judgment of February 13 to include the name "Quy Mach" as a co-judgment debtor under the judgment. ⁶ On May 19, Canatella wrote Roberson again, urging Allstate to pay the policy limits, which Roberson had yet to provide. Once more, Roberson failed to respond. The Staffords then attempted to enforce the judgment against Mach by recording an abstract of the judgment against Mach's family's residence located at 1210 45th Avenue in San Francisco. On June 10, Mach agreed to assign his bad faith cause of action against Allstate to the Staffords in exchange for their agreement not to execute the default judgment against him.

On June 30, attorneys for Allstate filed motions to intervene and to set aside the default and default judgment pursuant to section 473. At the same time, and over Mach's objections, Allstate-appointed counsel for Mach also filed motions to quash service of the summons and complaint and to set aside the default and default judgment. On July 22, the trial court granted Allstate's motion to intervene and set aside the default and default judgment as to Allstate, but not as to Mach. Notice of entry of the order in favor of intervener Allstate was served on September 8. The Staffords timely filed this appeal.

III. DISCUSSION

A. Standard of Review

It is clearly established that "[a] motion for relief under section 473 is addressed to the sound discretion of the trial court and an appellate court will not interfere unless there is a clear showing of an abuse." (Davis v. Thayer (1980) 113 Cal.App.3d 892, 904, 170 Cal.Rptr. 328.) The discretion conferred upon the trial court, however, is not a " ' "capricious or arbitrary discretion, but an impartial discretion, guided and controlled in its exercise by fixed legal principles. It is not a mental discretion, to be exercised ex gratia, but a legal discretion, to be exercised in conformity with the spirit of the law and in a manner to subserve and not to impede or defeat the ends of substantial justice." ' [Citations.]" (Carroll v. Abbott Laboratories, Inc. (1982) 32 Cal.3d 892, 898, 187 Cal.Rptr. 592, 654 P.2d 775 (Carroll ).)

It is also the policy of the law to favor, whenever possible, a hearing on the merits. (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478, 243 Cal.Rptr. 902, 749 P.2d 339.) "Appellate courts are much more disposed to affirm an order when the result is to compel a trial on the merits than when the default judgment is allowed to stand." (Id. at p. 478, 243 Cal.Rptr. 902, 749 P.2d 339.) These policies favoring relief from default and deference to the trial court's exercise of discretion do not, however, "transform appellate courts into mere spectators." (Iott v. Franklin (1988) 206 Cal.App.3d 521, 527, 253 Cal.Rptr. 635.) "However strong the preference for a trial...