Rappleyea v. Campbell

884 P.2d 126, 8 Cal. 4th 975, 35 Cal. Rptr. 2d 669, 94 Cal. Daily Op. Serv. 9190, 94 Daily Journal DAR 16973, 1994 Cal. LEXIS 6035

• Court: California Supreme Court
• Decided: December 1, 1994
• Docket: S035028
• Status: Published

Opinions

Opinion

MOSK, J.

—The question is whether a default must be set aside and a default judgment reversed on the ground of abuse of discretion. We conclude that they must be, and reverse the Court of Appeal’s judgment.

Defendants, Arizona residents, were personally served with a summons and complaint on November 1, 1990. Defendants chose to proceed in propria persona and had an Arizona lawyer, apparently an old friend of theirs, telephone the Los Angeles Superior Court for information on filing procedures. The clerk’s office told the lawyer’s staff that the filing fee was $89, according to the lawyer’s sworn statement. Defendants answered by mail from Arizona on or about November 26, enclosing $89. The clerk’s office received the answer by November 29.

The clerk’s office had misadvised defendants’ informal counsel. The $89 fee was correct for a single defendant’s answer. The correct filing fee for two defendants to answer was $159. The clerk’s error led to a default judgment against defendants of $200,240.39.

The procedural alchemy that transformed a $70 error into a judgment for more than $200,000 is not particularly complicated. Defendants had 30 days to file their answer after they were served. (Code Civ. Proc., § 412.20, subd. (a)(3).) Their answer, if filed when first presented, hence would have been timely. But when the Los Angeles Superior Court Clerk’s Office received defendants’ answer and $89 check, it rejected and returned the answer. Defendants promptly sent back their answer with the correct fee, and the answer was filed on December 11, 1990.

Hence defendants’ answer was filed eight days late. Meanwhile, on December 4,1990, the first possible day to do so, plaintiff had applied to the clerk to enter default against defendants. Plaintiff mailed a copy of his application to defendants. The clerk entered defendants’ default that day.

The record leaves murky the course of events after plaintiff applied for defendants’ default. (Both plaintiff and defendants seek judicial notice of various documents they believe will clarify matters. (Evid. Code, §§ 452, 459, subd. (a).) The requests are denied.) In brief, plaintiff contends he repeatedly warned defendants they must apply to the court for relief from default, but defendants paid no heed. Defendants in effect contend plaintiff led them to miss the deadline to apply for statutory relief from default by falsely saying he would stipulate to such an application. It is difficult to discern exactly who said what to whom after the default. The scanty record shrouds much of the case in mist.

Whatever communications occurred, the parties agree defendants were naive to rely on themselves to protect their substantial legal interests in terms of money involved. They disagree about whether that naiveté compels a legal remedy. Naiveté does not, but two key undisputed facts do. As stated, the clerk’s office misinformed defendants about the amount of money due for an answer by two defendants. And as we explain, plaintiff misinformed defendants about the legal effect of the resulting default. These facts govern our decision, rather than a view that defendants’ improvident initial self-representation particularly entitles them to the balm of relief from default. Procedural law cannot cast a sympathetic eye on the unprepared, or it will soon fragment into a kaleidoscope of shifting rules.

On May 24, 1991, plaintiff’s counsel diametrically misdescribed California law to these lay defendants, writing to inform them that “You may not claim that the default entered was taken against you through inadvertence, mistake, or excusable neglect.” (Italics added.) To the contrary, Code of Civil Procedure section 473 (hereafter section 473) provides that a court has discretion to relieve a party “from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. Application for this relief. . . shall be made within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.” (The quoted language of section 473 is slightly but not materially different from that in effect in 1991.) The effect of plaintiff’s letter, intended or not, was to advise these self-represented Arizona defendants they had forfeited California legal rights that they in fact retained under section 473 before the statute’s six-month limitation expired.

Late in October 1991 defendants learned a default judgment might soon be entered against them. The court mailed a minute order to them announcing that “[t]he Court would enter judgment for plaintiff against the Camp-bells (and others) if [plaintiff’s] papers were sufficient.” The court’s communication apparently sounded an alarm that plaintiff’s asserted warnings failed to do, because defendants quickly moved to set aside the clerk’s entry of default, appearing in propria persona on December 9, 1991. The motion was argued and on January 15, 1992, was denied on the ground that good cause had not been shown under section 473. Defendants then retained counsel, who filed a motion for reconsideration. That motion was denied as untimely.

Meanwhile, plaintiff’s case was suffering its own setbacks. Plaintiff was unable to prove his damages and thereby obtain a judgment until after defendants had moved for, and been denied, relief from default. Indeed, on several occasions the court ordered plaintiff “to show cause why sanctions should not be imposed for your failure to file default prove-up.” At each scheduled hearing, including two after the motion for relief from default was filed, the matter was continued, usually at plaintiff’s request. But at one prove-up hearing in May 1991 plaintiff failed to appear or to obtain a continuance, and the court imposed $500 in sanctions against his counsel. In October 1991 plaintiff did try to prove damages, but failed. It was the latter proceeding that motivated the court to warn defendants a default judgment could be entered.

A default judgment was finally entered on January 29, 1992. Defendants appealed. A divided Court of Appeal affirmed.

There is little question we would have found an abuse of discretion if relief had been denied within the six-month period governed by section 473. Because the law favors disposing of cases on their merits, “any doubts in applying section 473 must be resolved in favor of the party seeking relief from default [citations]. Therefore, a trial court order denying relief is scrutinized more carefully than an order permitting trial on the merits.” (Elston v. City of Turlock (1985) 38 Cal.3d 227, 233 [211 Cal.Rptr. 416, 695 P.2d 713]; see also Miller v. City of Hermosa Beach (1993) 13 Cal.App.4th 1118, 1136 [17 Cal.Rptr.2d 408].)

The trial court in fact ruled on the ground that good cause was not shown under section 473 to set aside the default. The legal basis for that ruling was incorrect, because more than six months had elapsed from the entry of default, and hence relief under section 473 was unavailable. (Aldrich v. San Fernando Valley Lumber Co. (1985) 170 Cal.App.3d 725, 735, fn. 3 [216 ].) But we cannot undo the effect of the ruling or the ensuing judgment on the ground that the court may have misapplied section 473 as long as any other correct legal reason exists to sustain either act. (See D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19 [112 Cal.Rptr. 786, 520 P.2d 10].)

Moreover, the order denying the motion to vacate the default is not independently appealable. (Jade K. v. Viguri (1989) 210 Cal.App.3d 1459, 1465 [258 Cal.Rptr. 907].) However, there is authority for the view that it may be reviewed on an appeal from the judgment, as was noticed here. (Winter v. Rice (1986) 176 Cal.App.3d 679, 682 [222 Cal.Rptr. 340].) As plaintiff does not challenge the order’s reviewability, we will review both the entry of default and the judgment that followed it.

We therefore inquire whether there is another ground on which the court could properly have denied the motion to set aside the default. The question is one of the court’s equitable power. If the court could properly refuse to invoke that power to vacate the order, its ruling and the ensuing judgment must be sustained.

After six months from entry of default, a trial court may still vacate a default on equitable grounds even if statutory relief is unavailable. (Olivera v. Grace (1942) 19 Cal.2d 570, 575-576 [122 P.2d 564, 140 A.L.R. 1328].) We review a challenge to a trial court’s order denying a motion to vacate a default on equitable grounds as we would a decision under section 473: for an abuse of discretion. (In re Marriage of Park (1980) 27 Cal.3d 337, 347 [165 Cal.Rptr. 792, 612 P.2d 882]; see Weitz v. Yankosky (1966) 63 Cal.2d 849, 854, 856 [48 Cal.Rptr. 620, 409 P.2d 700] [default judgment].)

One ground for equitable relief is extrinsic mistake—a term broadly applied when circumstances extrinsic to the litigation have unfairly cost a party a hearing on the merits. (In re Marriage of Park, supra, 21 Cal.3d at p. 342; cf. In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1066-1067 [202 Cal.Rptr. 116] [criticizing rule].) “Extrinsic mistake is found when [among other things] ... a mistake led a court to do what it never intended . . . .” (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 471-472 [82 Cal.Rptr. 489, 462 P.2d 17, 39 A.L.R.3d 1368]; see Sullivan v. Lumsden (1897) 118 Cal. 664, 669 [50 P. 777] [referees’ use of wrong map was extrinsic mistake and equitable relief was available because “ ‘it is not a mistake of the law, or an inadvertent conclusion as to what the law is, but a mistake or inadvertence in doing something not intended to be done.’ ”].)

When a default judgment has been obtained, equitable relief may be given only in exceptional circumstances. “[W]hen relief under section 473 is available, there is a strong public policy in favor of granting relief and allowing the requesting party his or her day in court. Beyond this period there is a strong public policy in favor of the finality of judgments and only in exceptional circumstances should relief be granted.” (In re Marriage of Stevenot, supra, 154 Cal.App.3d at p. 1071; see Aheroni v. Maxwell (1988) 205 Cal.App.3d 284, 291 [252 Cal.Rptr. 369].)

Apparently to further the foregoing policy, one appellate court has created a stringent test to qualify for equitable relief from default on the basis of extrinsic mistake. “To set aside & judgment based upon extrinsic mistake one must satisfy three elements. First, the defaulted party must demonstrate that it has a meritorious case. Second[ ], the party seeking to set aside the default must articulate a satisfactory excuse for not presenting a defense to the original action. Last[ ], the moving party must demonstrate diligence in seeking to set aside the default once . . . discovered.” (Stiles v. Wallis (1983) 147 Cal.App.3d 1143, 1147-1148 [195 Cal.Rptr. 377], italics added.) The stringent three-part formula of Stiles was followed by In re Marriage of Stevenot, supra, 154 Cal.App.3d at page 1071, an extrinsic fraud case.

But this case is unlike Aheroni v. Maxwell, supra, 205 Cal.App.3d 284, In re Marriage of Stevenot, supra, 154 Cal.App.3d 1051, or Stiles v. Wallis, supra, 147 Cal.App.3d 1143, because the policy of leaving judgments final is not implicated here as it was in those decisions. Plaintiff did not obtain a default judgment until January 29, 1992, by which time defendants had moved for, and been denied, relief from default. In the meantime, plaintiff had shown scant interest in obtaining a judgment. Thus, to the extent the policy disfavoring equitable relief is based on an understandable distaste for the forfeiture of a judgment, which is vested personal property (Civ. Code, § 14, subd. 3; Anglo-California T. Co. v. Oakland Rys. (1924) 193 Cal. 451, 468-469 [225 P. 452]), the policy’s basis is weaker in this case. Indeed, the record before us strongly suggests that the prejudice to plaintiff from defendants’ motion, if that motion had succeeded, would have been virtually nil.

We need not decide, however, whether a test much different from that articulated in Marriage of Stevenot, supra, 154 Cal.App.3d at page 1071, and Stiles v. Wallis, supra, 147 Cal.App.3d at pages 1147-1148, applies to requests for equitable relief when a default judgment has not been entered. Even under that stringent three-pronged test this case’s odd facts entitle defendants to relief.

We first examine whether defendants have a satisfactory excuse for failing to timely answer in the original action. To our minds, this is the same as asking whether an extrinsic mistake occurred—as relevant here, whether “a mistake led a court to do what it never intended . . . (Kulchar v. Kulchar, supra, 1 Cal.3d at pp. 471-472.) We conclude that the clerk’s misunderstanding of the number of answering defendants constituted an extrinsic mistake. The court never intended to have defendants send the fee applicable to a sole defendant and thereby default, but that was the effect of the clerk’s ministerial action.

Defendants’ situation is similar to that of the defendant in Baske v. Burke (1981) 125 Cal.App.3d 38 [177 Cal.Rptr. 794] who, when served with a summons and complaint for partition and sale of a valuable painting, wrote to the court clerk at least five times. “These communications were placed in the court records but [were] never filed as a response or answer to [the] complaint—despite [the defendant’s] written request to ‘do what was needed [to] file,’ an offer to ‘pay fees needed’ and [her] claim of right [to] nA interest’ in the painting.” (Id. at p. 41, fourth set of brackets in original.)

On those facts, Baske v. Burke, supra, 125 Cal.App.3d 38, properly affirmed an equitable order setting aside the entry of default on the ground of extrinsic mistake caused by clerical error, even though almost a year and a half had elapsed from the entry of default. “The doctrine of relief in equity from mistake has applied where the mistake is that of the clerk of the court.” (Id. at p. 44.)

We next examine whether the defense has merit. Ordinarily a verified answer to a complaint’s allegations suffices to show merit. (Stiles v. Wallis, supra, 147 Cal.App.3d at p. 1148.) The answer here was not verified, but neither was the complaint. Moreover, the answer did deny, admit, or otherwise respond to the allegations. And the Arizona lawyer who informally aided defendants declared under oath that he believed “these Defendants have a very good (and certainly a justiciable) defense to the Plaintiff’s claim.” On the combined strength of these facts, we believe defendants have sufficiently shown merit.

The final prong of the stringent three-part test set forth in Stiles v. Wallis, supra, 147 Cal.App.3d at page 1148, is whether defendants diligently tried to set aside the default once discovered.

“The greater the prejudice to the responding party, the more likely it is that the court will determine that equitable defenses such as laches or estoppel apply to the request to vacate a valid judgment.” (In re Marriage of Stevenot, supra, 154 Cal.App.3d at p. 1071.) Of the three items a defendant must show to win equitable relief from default, diligence is the most inextricably intertwined with prejudice. If heightened prejudice strengthens the burden of proving diligence, so must reduced prejudice weaken it. Under that view, and given this record, we believe defendants have sufficiently shown diligence.

Prejudice to a plaintiff is obviously less if judgment has not been entered when a defendant seeks equitable relief. Therefore, we believe the diligence prong simply cannot assume the importance here that it would in the ordinary case wherein the trial court would be reversing a judgment and divesting a plaintiff of a property right by granting equitable relief from default. Indeed, the court kept admonishing plaintiff that if he himself did not try more diligently to prove damages, he would be sanctioned, and once his counsel was sanctioned for failing to appear at a prove-up hearing. This indifference belies any claim plaintiff might make of eagerness to obtain an early judgment. And plaintiff incorrectly told defendants they had forfeited their legal right to seek statutory relief. These unusual facts greatly weaken any possible assertion of prejudice, and correspondingly lower the burden on defendants of showing diligence.

Under this reduced standard, defendants were not callously derelict in seeking to set aside the default. To be sure, they did not move for relief from default until December 9, 1991, more than a year after this litigation ensued; and plaintiff asserts, with some confirming evidence, that he warned defendants they were in default. However, the evidence that before October 1991 defendants understood the legal consequences to them personally of being in default, in a case with 12 other named and 20 Doe defendants, is confined to the boilerplate language on the face of the summons. When in October 1991 the court told defendants they might soon face a default judgment, they acted quickly. We believe defendants acted diligently enough to satisfy that requirement for equitable relief.

Having satisfied all three prongs of the stringent test, we conclude that the clerk’s entry of default must be set aside and the default judgment reversed.

We draw our conclusion narrowly. The clerk’s error and plaintiff’s incorrect statement of the law together persuade us that the court abused its discretion when it denied defendants’ motion. These rare events should not combine to make defendants suffer a $200,240.39 judgment without a hearing on the merits.

As alluded to, however, we make clear that mere self-representation is not a ground for exceptionally lenient treatment. Except when a particular rule provides otherwise, the rules of civil procedure must apply equally to parties represented by counsel and those who forgo attorney representation. (See Lawrence v. Superior Court (1988) 206 Cal.App.3d 611, 619, fn. 4 [253 Cal.Rptr. 748].) To the extent it articulates a contrary view, Pete v. Henderson (1954) 124 Cal.App.2d 487, 491 [269 P.2d 78, 45 A.L.R.2d 58] should very rarely, if ever, be followed. A doctrine generally requiring or permitting exceptional treatment of parties who represent themselves would lead to a quagmire in the trial courts, and would be unfair to the other parties to litigation. Although in reaching our decision we have incidentally considered whether parties in defendants’ position would reasonably have relied on advice from the clerk’s office and whether they would have understood the meaning of a default, our focus is on the clerk’s and plaintiff’s incorrect advice rather than on defendants’ ill-advised self-representation.

The Court of Appeal’s judgment is reversed with directions to reverse the default judgment and to instruct the trial court to set aside the entry of default.

Kennard, J., and Arabian, J., and George, J., concurred.

ARABIAN, J.

I concur fully in the opinion by Justice Mosk.

Defendants, an out-of-state couple who unwisely chose to represent themselves, timely presented their answer for filing. But in a story line worthy of a Franz Kafka novel, an innocent $70 error at the outset led, after a series of misadventures, to a $200,000 default judgment. Defendants should have moved to set aside the default immediately, but unwisely chose to continue negotiating with plaintiff’s lawyer. Their delay, however, pales before that of plaintiff, who faced repeated orders to show cause why sanctions should not be imposed for his own delays before he finally proved his damages after defendants had requested and been denied relief from default. I find it insidious that plaintiff’s attorney wrote his first “get tough” letter to defendants a scant few days before the six-month period of Code of Civil Procedure section 473 expired. Coincidence? Or was plaintiff stringing defendants along until the six months had passed?

The majority is correct that special privileges cannot be shown litigants who choose to represent themselves. But they should not be penalized because they represent themselves. In extreme cases like this, legal technicalities must, and under our statutes may, be tempered by justice.

Justice Johnson stated in dissent in the Court of Appeal that these defendants “were at a special disadvantage since they resided in another state. . . . Time limits and procedural technicalities they lacked the expertise to know about were turned against [them] at every stage of the proceedings.

“Their adversary, represented by counsel, took advantage of [defendants’] lack of counsel and their ignorance of California procedure to tie them in knots. He and his lawyer alternately lulled these [defendants] into a belief [plaintiff] would sign a stipulation to vacate the default and then misinformed them they had no grounds for a motion to vacate the default. When they ultimately received notice from the court they could and should seek to vacate the default, it was too late to proceed under Code of Civil Procedure section 473. In a cursory proceeding, the trial court denied relief under equity .... Then when they finally realized what had happened to them and found a California lawyer to represent them, it was found to be too late. Sorry, no reconsideration. The game is over.

“. . . Equity demands, and the law allows, relief from default in this case.”

I agree.

George, J., concurred.