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.
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 naivete compels a legal remedy. Naivete 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.
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.
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 Cal.Rptr. 300].)
When a default judgment has been obtained, equitable relief may be given only in exceptional circumstances. "[W]hen relief under section 473 is
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 a 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.
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
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] `1/4 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.
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.
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.
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
"... Equity demands, and the law allows, relief from default in this case."
George, J., concurred.
I respectfully dissent. The majority undertake to rescue these litigants from the consequences of their own procrastination. In so doing, the majority create uncertainty in the law and encourage others to seek review in this court of decisions which are correctly decided by the Court of Appeal and present no important issue of law. (Cal. Rules of Court, rule 29(a).)
While reciting in detail a litany of error and omission which placed defendants in the unfortunate position of judgment debtors, the majority fail to identify the sole issue in this case. That question is whether the Court of Appeal erred in holding that the trial court did not abuse its discretion in refusing to grant equitable relief to defendants. It did not. Moreover, the Court of Appeal properly applied the rule governing appellate review of such discretionary trial court rulings, a rule which the majority fail even to acknowledge, let alone apply. Since the majority appear to have overlooked the applicable law, it is appropriate to restate it in the hope that the bench and bar will not construe this aberrational decision as a repudiation of its force.
"In reviewing the evidence in support of a [Code of Civil Procedure] section 473 motion, we extend all legitimate and reasonable inferences to uphold the judgment. The disposition of such a motion rests largely in the discretion of the trial court, and its decision will not be disturbed on appeal
The Court of Appeal, recognizing that a ruling on a section 473 motion or on a motion addressed to the equitable power of the court to set aside a default or default judgment lies within the sound discretion of the trial court, properly refrained from simply substituting its judgment for that of the trial court. The majority fail to explain the manner in which the Court of Appeal erred in doing so. Instead it proceeds to do that which neither the Court of Appeal nor this court may do. It has substituted its judgment for that of the trial court. I find no explanation in the majority opinion for this failure to acknowledge or apply well-established law.
Nor do I find an explanation of the relevance of many of the evidentiary facts recited and relied on by the majority. The erroneous advice given defendants by the clerk regarding the filing fee is relevant only insofar as it establishes that the default was taken as a result of a mistake by defendants
The statement of plaintiff's counsel regarding the grounds on which relief from default might be sought is relevant only if defendants were misled by the statement and that fact contributed to defendants' failure to file a timely section 473 motion. The record permits an inference that the statement was not directed to, and defendants would not have understood the advice to be directed to, whether they could seek relief from default on the basis of the filing fee misunderstanding, however. Instead, it appears to have been directed to defendants' delay in seeking relief for what was then five months from the time they learned that the default had been entered, notwithstanding advice from plaintiff's counsel that they would have to seek judicial relief from that action.
Alternatively, the trial court may have concluded that defendants' delay of five months after learning that default had been entered, a delay that occurred before they were advised by plaintiff's counsel that they could not claim inadvertence, mistake or excusable neglect, was itself a sufficient basis on which to deny the motion. Section 473 does not permit a litigant to delay for six months in seeking relief from default. Rather, it requires that the motion be made "within a reasonable time, in no case exceeding six months, after the judgment...." (Ibid.) Six months is the outside limit. "Defendant has not cited, nor has independent research disclosed, any case in which a court has set aside a default where, in making application therefor, there has been an unexplained delay of anything approaching three months after full
The majority assert that the record is "murky" regarding the events after plaintiff applied to have defendants' default entered. (Maj. opn., ante, at p. 979.) It is so only because the majority fail to imply that the trial court made all findings on disputed evidence necessary to support its ruling. When one does so, there is no murk. Based on undisputed evidence, and assuming that the trial court made all the findings on disputed facts and drew all reasonable inferences from the facts that would support its ruling, the record shows the following:
Defendants were notified by mail of the request for entry of default. That notice was given to them prior to the filing of the request. They were informed when their untimely answer to the complaint was filed that their default had been entered. Exhibits attached to their motion to set aside the default confirm that defendants were aware in December 1990 that their default had been entered. They were advised by plaintiff's counsel both before and after the default was entered that, even with stipulations, a motion to set aside the default would have to be made. Plaintiff himself gave defendants the same advice. Neither plaintiff nor his counsel represented to defendants that he would stipulate to set aside the default, however. Finally, plaintiff's counsel did not receive a copy of a stipulation to set aside the default from defendants until November 3, 1991, 11 months after entry of default, and that document was signed only by Ken Campbell.
As the majority acknowledge, defendants' motion was not made within six months and the sole source of authority to set aside the judgment lies in the trial court's equitable power to set aside the judgment on grounds that "extrinsic factors have prevented one party to the litigation from presenting his or her case." (In re Marriage of Park (1980) 27 Cal.3d 337, 342 [165 Cal.Rptr. 792, 612 P.2d 882].) Here, however, since defendants knew immediately that their default had been taken, the question is not whether an extrinsic factor prevented them from filing their answer and litigating the merits, but whether any extrinsic factor led to their failure to file a reasonably timely section 473 motion. The majority identify no evidence which the trial court could not reasonably have disbelieved or rejected as a basis for concluding that relief from default was warranted. The record establishes
It is irrelevant for these purposes that the trial court mistakenly believed that it was ruling on a motion made pursuant to section 473. Had the motion been a timely section 473 motion, there would be no basis for a conclusion that the trial court erred in rejecting that evidence or for holding that the court abused its discretion in denying the section 473 motion. It follows that there is no basis in the same evidence for an exercise of the court's equitable power to set aside the judgment. A party seeking equitable relief must make an even stronger showing than that necessary for relief under section 473 (Aheroni v. Maxwell (1988) 205 Cal.App.3d 284, 291 [252 Cal.Rptr. 369]), which these defendants did not do. There are no extrinsic facts that the trial court did not consider when it denied what it believed was a section 473 motion.
The law governing relief on grounds of extrinsic fraud discussed in Kulchar v. Kulchar (1969) 1 Cal.3d 467 [82 Cal.Rptr. 489, 462 P.2d 17, 39 A.L.R.3d 1368], on which the majority rely, has no application here. Equitable relief on grounds of extrinsic fraud or mistake is not a substitute for section 473 relief. When fraud or mistake is discovered within the time limits established by section 473, relief is available pursuant to that section. This is not a policy question related to the importance of finality of judgment, as the majority suggest. The Legislature has established the time within which relief on grounds of mistake may be sought by a party who is aware of the mistake. The failure to seek that relief on a timely basis necessarily forecloses the availability of equitable relief unless time of discovery of the mistake or fraud or other circumstances made it impossible for the party to make a timely motion under section 473. Deeming the motion one for equitable relief does not expand the time within which a motion should be made by a party who is aware of the grounds for such
Nor is lack of prejudice to the opposing party determinative.
There is no basis in this record for a conclusion that the trial court abused its discretion in denying defendants' motion to set aside their default or for holding that defendants are entitled to equitable relief. The Court of Appeal did not err in affirming the judgment of the trial court. I would affirm the judgment of the Court of Appeal.
Lucas, C.J., and Werdegar, J., concurred.
The scope of appellate review is no broader in cases such as this in which the trial court ruled on the basis of conflicting affidavits without holding an evidentiary hearing. "In the consideration of an order made on affidavits involving the decision of a question of fact, the appellate court is 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 College for Women (1955) 45 Cal.2d 501, 508 [289 P.2d 476, 47 A.L.R.2d 1349].) This rule applies to review of rulings on section 473 motions. (Lynch v. Spilman (1967) 67 Cal.2d 251, 259 [62 Cal.Rptr. 12, 431 P.2d 636]; Outdoor Imports, Inc. v. Stanoff (1970) 7 Cal.App.3d 518, 522 [86 Cal.Rptr. 593].) If the reviewing court were free to reject the inferences presumably drawn by the trial court, it would not be deciding if the trial court clearly abused its discretion in denying relief. Instead it would substitute its judgment for that of the trial court by deciding the merits of the 473 motion itself. Any ruling on such a motion would then be subject to appeal not on abuse of discretion grounds, but simply on an invitation to the appellate court to disagree with the trial court on the strength of the evidence.
Counsel's assessment that a motion on the stated grounds to set aside the default would not be found meritorious ultimately proved to be accurate. The trial court denied the motion because "good cause was not shown."