Weitz v. Yankosky

• Decision Date: 19 January 1966
• Court: California Supreme Court
• Parties: , 409 P.2d 700 Harry WEITZ, Plaintiff and Appellant, v. John Joseph YANKOSKY, Defendant and Respondent. L. A. 28497.

Page 620

48 Cal.Rptr. 620

63 Cal.2d 849, 409 P.2d 700

Harry WEITZ, Plaintiff and Appellant, v. John Joseph YANKOSKY, Defendant and Respondent.

L. A. 28497.

Supreme Court of California, In Bank.

Jan. 19, 1966.

Memel, Memel, Jacobs & Weissburg and Stanley K. Jacobs, Hollywood, for plaintiff and appellant.

Kinkle, Rodiger, Graf & Dewberry and William B. Rodiger, Los Angeles, for defendant and respondent.

PETERS, Justice.

Plaintiff Weitz appeals from an order granting a motion to set aside a default judgment against defendant Yankosky.

The facts set forth in the affidavits and points and authorities of the parties are as follows:

On April 19, 1961, defendant backed his automobile out of a private driveway, and plaintiff, in his automobile, ran into defendant's car. After reporting the accident to the police department, defendant telephoned his insurance agent, Mr. Needham, informing his of the accident. Defendant then filed an SR-1 form with the Department of Motor Vehicles, stating that he had an automobile liability insurance policy with Trinity Universal Insurance Company.

Sometime in May, defendant was contacted by Allstate Insurance Co., plaintiff's insurance carrier. A settlement was agreed upon, under which Allstate paid defendant for his property damage and over $300 for his personal injuries. Defendant thought that this ended the matter. But it did not.

On June 2 plaintiff filed an action against defendant based on the accident. A summons and complaint were served on defendant on June 4. Following the instructions in his insurance policy, he then (on the same day) mailed the summons and complaint to Trinity at its home office in Dallas, Texas. At this time he was not aware that Trinity had a claims office in Los Angeles. The summons and complaint were never received by Trinity in Dallas.

On November 17, 1961, a request for entry of default was filed, and on May 31, 1962, a default judgment was entered against defendant in the amount of $5,177.75 plus costs. Defendant was not notified and had no knowledge of these proceedings.

After defendant mailed the summons and complaint, he made no inquiry of Trinity as to the status of the case because 'I had thought I had settled with the insurance company (Allstate) and I didn't inquire, and the time lapse was a great deal of time and I thought that it was all taken care of.' Defendant averred in his affidavit that until April of 1963 he 'had no knowledge that any default judgment had been taken against him and continued to believe that the insurance carrier had either disposed of the matter or was handling it without contacting him.'

He next heard of the problem on December 23, 1962, when he received a notice from the Department of Motor Vehicles that his driver's license was to be revoked shortly because there was an unpaid judgment outstanding against him. On January 2 or 3, 1963, he went to see Mr. Needham, the agent who had sold him the insurance policy. Defendant told Needham he thought the matter had been taken care of. Needham said he would check on it. He then phoned Trinity (not specified which office, Dallas or Los Angeles). An employee of Trinity stated that, as far as its records showed, the matter had been taken care of, that there was no record of a judgment, and that there must have been some sort of 'clerical error.' Needham told defendant to get a financial responsibility form from the Department of Motor Vehicles, complete it and send it in, which defendant did. At this same meeting, Needham apparently informed defendant that Trinity had an office in Los Angeles.

Towards the end of February or the beginning of March, the financial responsibility form was returned by the state to defendant with instructions that it was necessary for Trinity to sign it. Defendant then went to Trinity's Los Angeles office for this signature. When he got there, Mr. McCormick was assigned as his adjuster. Defendant told McCormick all of the facts, and McCormick said that he would contact the Dallas office and take care of the matter.

Defendant's license had been revoked on December 25, 1962. After the above conversation with McCormick, defendant turned in his license to the Department of Motor Vehicles.

On March 25, 1963, plaintiff's attorney, Mr. Jacobs, wrote to defendant and asked him to contact Jacobs. About April 1, defendant went to Jacobs' office and was advised by Jacobs of the default judgment and was also advised to contact his insurance company for immediate assistance 'and/or' to retain a private attorney.

Defendant knew a lawyer by the name of Cassman who did work for his employer. Defendant spoke to Cassman and asked him to help him, but he did not employ him. Cassman called Jacobs sometime in April, and Jacobs explained the facts to him. Nothing further was done by Cassman.

After defendant had spoken to Jacobs on April 1, he went directly to McCormick who said he would look into the matter. Thereafter, defendant had further telephone conversations with McCormick about the case. In these conversations defendant learned that Trinity had not received the summons and complaint.

On April 18, McCormick phoned Jacobs and asked for a meeting. The two met on April 22, and McCormick requested that the default be set aside, which request was refused. Jacobs demanded payment and threatened to bring a direct action against Trinity under Insurance Code section 11580 to recover the amount of the default judgment. McCormick said that Trinity would defend such a suit on the ground that defendant had not cooperated. He did not then state that he intended to make a motion to set aside the default.

On April 24, Jacobs sent a demand letter to Trinity. Apparently receiving no satisfactory reply, he filed for plaintiff a direct action against Trinity on May 1, serving summons and complaint on Trinity on June 7. Trinity answered on June 18, 1963, denying the essential allegations of the complaint and setting up an affirmative defense of lack of cooperation on the part of the insured.

It does not appear when defendant learned of the breakdown in negotiations between Jacobs and McCormick, of the filing of the direct action against Trinity, or of the answer filed by Trinity asserting the defense of lack of cooperation.

During the first week in July, McCormick came to defendant's place of work to speak with him. At this meeting, defendant signed a 'reservation of rights' agreement to the effect that Trinity was not waiving any defenses against defendant by helping him to set aside the default judgment.

On July 23, plaintiff took defendant's deposition as part of the plaintiff's action against Trinity. Defendant then learned that Trinity had employed an attorney, Mr. Alsop, to represent him in trying to set aside the default judgment. Also at that time, Jacobs first learned that Alsop intended to move to set aside the judgment against defendant.

Plaintiff received notice of defendant's intended motion to set aside the default judgment on August 1. The notice was filed on August 9, 1963, and, pursuant to the notice, the motion was made on August 30.

At no time was a demand for payment made directly to defendant.

The trial court found the relevant facts in favor of defendant and granted the motion to set aside the default judgment. A reconsideration was denied.

A motion to set aside a default judgment is addressed to the sound discretion of the trial court, and, in the absence of a clear showing of abuse of discretion where the trial court grants the motion, the appellate court will not disturb the order. It is the policy of the law to favor, wherever possible, a hearing on the merits, and appellate courts are much more disposed to affirm an order where the result is to compel a trial upon the merits than they are when the judgment by default is allowed to stand and it appears that a substantial defense could be made. Stated another way, the policy of the law is to have every litigated case tried upon its merits, and it looks with disfavor upon a party, who, regardless of the merits of the case, attempts to take advantage of the mistake, surprise, inadvertence, or neglect of his adversary. (Freeman v. Goldberg, 55 Cal.2d 622, 625, 12 Cal.Rptr. 668, 361 P.2d 244; Waybright v. Anderson, 200 Cal. 374, 377, 253 P. 148; Berri v. Rogero, 168 Cal. 736, 740, 145 P. 95; Crane v. Kampe, 225 Cal.App.2d 200, 204-205, 37 Cal.Rptr. 220; Stout v. Bakker, 212 Cal.App.2d 78, 82-83, 27 Cal.Rptr. 661; see Benjamin v. Dalmo Mfg. Co., 31 Cal.2d 523, 525, 190 P.2d 593.)

As defendant's motion was made more than six months after the default was entered, it was not directed to the court's statutory power to grant relief for mistake or excusable neglect under Code of Civil Procedure section 473. ¹ (Phillips v. Trusheim, 25 Cal.2d 913, 917, 156 P.2d 25; Thompson v. Vallembois, 216 Cal.App.2d 21, 24, 30 Cal.Rptr. 796.) It was directed to the court's inherent equity power under which, apart from its statutory authority, the court has the power to grant relief from a default judgment where there has been 'extrinsic' fraud or mistake. (Hallett v. Slaughter, 22 Cal.2d 552, 557, 140 P.2d 3; Olivera v. Grace, 19 Cal.2d 570, 574-575, 122 P.2d 564, 140 A.L.R. 1328; Hill v. Johnson, 194 Cal.App.2d 779, 781-782, 15 Cal.Rptr. 236.)

Where a default is entered because defendant has relied upon a codefendant or other interested party to defend, the question is whether the defendant was reasonably justified under the circumstances in his reliance or whether his neglect at attend to the matter was inexcusable. (Santa Barbara Live Stock & Farming Co. v. Thompson, 46 Cal. 63, 64; Crane v. Kampe, supra, 225 Cal.App.2d 200, 205-207, 37 Cal.Rptr. 220; Stout v. Bakker, supra, 212 Cal.App.2d 78, 82-83, 27 Cal.Rptr. 661; Montijo v. Sherer & Co., 5 Cal.App. 736, 738-739, 91 P. 261; see 1 Freeman on Judgments (5th ed. 1925) § 246, pp. 492-494.) This rule has been held applicable where an...