Opinion
E080877
02-07-2024
KRISTOPHER L. DREYER, Plaintiff and Appellant, v. TURNING POINT EDUCATION, INC et al., Defendants and Respondents.
Kristopher L. Dreyer, in pro. per., and for Plaintiff and Appellant. Garcia Rainey Blank &Bowerbank, John E. Bowerbank, Jeffrey M. Blank, and Joanne C. Chan, for Defendants and Respondents.
NOT TO BE PUBLISHED
APPEAL from the Superior Court of Riverside County. No. CVRI2103782 Eric A. Keen, Judge. Affirmed.
Kristopher L. Dreyer, in pro. per., and for Plaintiff and Appellant.
Garcia Rainey Blank &Bowerbank, John E. Bowerbank, Jeffrey M. Blank, and Joanne C. Chan, for Defendants and Respondents.
OPINION
RAPHAEL J.
Appellant sued respondents for breach of contract and obtained a default judgment after respondents failed to appear. According to respondents, they first learned of the lawsuit when they received a notice of appellant's attempts to enforce it months later. The trial court denied their motion to set aside the judgment after crediting appellant's claims about service of process. Nevertheless, the trial court set aside the default judgment, but not the default, and ordered a new damages prove-up hearing because appellant failed to include a settlement agreement which purported to release the claims in this lawsuit when proving damages at the first prove-up hearing. We conclude the trial court did not abuse its discretion.
I
FACTS
On August 12, 2021, appellant Kristopher L. Dreyer sued Turning Point Education Inc. (Turning Point) and its owner and chief executive officer, Zhen Li Yu, alleging they breached a management agreement as well as the settlement the parties entered in February 2020 to resolve their dispute. He claimed contract damages of $233,000. Dreyer also alleged Zhen committed fraud by knowingly misrepresenting facts to induce him to sign the management agreement.
Dreyer attached to the complaint an executed copy of the management agreement, entered April 25, 2019, and a memorandum of understanding of the related sale by Dreyer to Turning Point of Carnegie Education CA LLC and Carnegie Schools LLC. Dreyer did not attach a copy of the settlement agreement, though the complaint said a copy would be attached.
On August 25, Dreyer filed proof of service of process forms for both defendants. The forms stated that Lydia Dreyer "personally delivered the [summons and complaint] to the part[ies] or person authorized to receive service of process for the part[ies]" to 920 W. 6th Street, in Ontario at 11:30 on August 25, 2021, by leaving the documents with "Peggy, school receptionist." The forms indicate Lydia Dreyer is not a registered California process server.
On October 6, Dreyer filed amended proof of service of process forms for both defendants. The forms stated that Lydia Dreyer "personally delivered the [summons and complaint] to the part[ies] or person authorized to receive service of process for the part[ies]" to 920 W. 6th Street, in Ontario at 11:00 a.m. on October 4, 2021. The forms say Zhen Li Yu was served personally and Hellen Yu, Turning Point's corporate secretary, was served as the company's authorized agent under Code of Civil Procedure section 416.10. The forms again state Lydia Dreyer is not a registered California process server.
Zhen and Turning Point did not respond to the complaint, and on November 9, 2021, Dreyer applied for default judgment. In an accompanying declaration, Dreyer elaborated on the dispute. He said the parties entered a contract for Dreyer to provide management services to Turning Point for $300,000. Defendants paid Dreyer $67,000 but failed to make additional payments. Dreyer claimed he "received information that Zhen Li Yu, before signing the contract, never intended to pay [him] the full contract amount, inducing him to sign the manager contract and rely on Zhen Li Yu's guarantee." Dreyer filed a proof of service the same day stating Lydia Dreyer served the request for default on Turning Point and Yu by placing it in the mail. The clerk of court entered judgment against both defendants under Code of Civil Procedure section 585, subdivision (b).
The trial court held a prove-up hearing and entered a default judgment against both defendants on February 22, 2022. The judgment awarded Dreyer $233,000 in damages and $650 in costs. On February 25, Lydia Dreyer signed a proof of service stating she sent the judgment to Turning Point, Zhen Li Yu, and Hellen Yu by mail at the same address on 6th Street in Ontario. However, the proof of service was filed in a separate case Dreyer brought against different defendants, not this case. The record does not clear up this discrepancy.
On November 9, 2022, Turning Point and Zhen Li Yu filed an ex parte application under Code of Civil Procedure section 473.5 to set aside the entry of default and default judgment and enjoin efforts to enforce the judgment. They alleged Dreyer did not properly serve them, and they did not have actual notice of the lawsuit until he began efforts to enforce the judgment. They asserted Dreyer had committed service of process fraud and noted the unregistered process server is a relative of Dreyer's. They also alleged their payment of $67,000 to Dreyer was made as satisfaction of a settlement under which Dreyer released all claims against Turning Point and Yu.
The trial court deemed the ex parte application a motion to set aside the default judgment under section 473.5 and denied the motion as untimely without prejudice to refiling by December 19, 2022. The court also issued a temporary restraining order against transfer of the funds being held by the sheriff's department. Turning Point and Yu moved to vacate the default judgment on December 13, 2022 and also submitted an answer to Dreyer's complaint. In briefing, they conceded they could not obtain relief under section 473 because they had responded more than a year after the purported service of process. However, they sought relief under the trial court's inherent authority to vacate a default judgment on equitable grounds because they were deliberately kept in ignorance of the action and prevented from presenting their meritorious defenses.
In attached signed declarations, Zhen Li Yu and Hellen Yu represented they were never served with the summons and complaint. Hellen Yu identified herself as secretary for Turning Point and represented Dreyer did not serve the summons and complaint on her in Ontario on October 4, 2021, as the process server said. She said she was present at the school that day but was not served then or at any other time. She also represented the parties had settled the dispute over the termination of the management agreement and attached a copy of the settlement agreement. Zhen Li Yu identified herself as the CEO and CFO of Turning Point. She said she was travelling in China from July 29 through December 12, 2021, and could not have been served personally. She attached a copy of her passport showing she had travelled to and returned from China on those dates. She also represented she believed Dreyer had received all payments required under the parties' settlement agreement. Their memorandum in support says they first received notice of the lawsuit when they were served a copy of the notice of levy under a writ of execution to JP Morgan Chase Bank on October 28, 2022.
The trial court held a hearing and granted the motion to set aside the default judgment on February 17, 2023. The trial court took evidence and heard testimony from Lydia Dreyer and Kristopher Dreyer. The court found Lydia Dreyer credible on the issue of service and therefore ruled against Turning Point and Yu on whether extrinsic fraud justified their delay in seeking to overturn the default judgment. Nevertheless, the court granted the motion because Dreyer had failed to include the settlement agreement in evidence before the hearing to prove damages. The court noted that the settlement was "referenced in the complaint as an attachment . . . [but] was not attached to the complaint. The court has taken judicial notice of the complaint and verified that the Settlement Agreement was not attached to the complaint. The Settlement Agreement was introduced at the hearing on this motion as Exhibit 1. Additionally, after hearing the testimony of Plaintiff, the court is not convinced that the requested damages in the complaint are just. The court is required to render a default judgment only for that relief . . . as appears by the evidence to be just [citation]. Therefore, it is up to plaintiff to prove-up the right to relief by introducing sufficient evidence to support his claim. Without such evidence, the court may refuse to grant the default judgment for any amount, notwithstanding defendant's default." The trial court then set a default prove-up hearing for March 17, 2023.
We take judicial notice on our own motion that Dreyer is involved in other lawsuits before the same panel of this court in which he is accused of having engaged in service of process fraud to obtain default judgments. (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 235-236, fns. 2 & 3 [appellate court on its own motion may take judicial notice of records of other cases].) Each of these cases was handled by a different trial judge, so the cumulative conduct may not have been considered in trial court. Service of process fraud is obviously improper and corrosive of the functioning of the courts. In this case, the trial court concluded there was no fraud. Our analysis does not require us to review the court's factual finding. We caution, however, that such conduct, if established, could warrant civil sanctions and even referral to the district attorney for consideration of criminal charges.
On March 9, 2023, Dreyer filed a notice of appeal of the postjudgment order under section 904.1, subdivision (a)(2).
II
ANALYSIS
Dreyer argues the trial court erred by setting aside the default judgment against Turning Point and Yu. We disagree.
The trial court set aside the default judgment because Dreyer failed to submit the parties' settlement agreement before the prove-up hearing. The details of the settlement were important evidence in determining whether Dreyer was entitled to the damages he claimed. Upon realizing the court had been deprived of that evidence, the court lost confidence in the grounds for entering a default judgment for $233,650. The court did not use this omission in setting aside both the default judgment and the default, however, only the default judgment itself. The default remains in effect. That is why the trial court set a new prove-up hearing rather than granting Turning Point and Yu leave to answer Dreyer's complaint.
A trial court has inherent power to set aside a judgment when the court acted through inadvertence or in ignorance of some material fact of record. (Key System Transit Lines v. Superior Court (1950) 36 Cal.2d 184, 187-188.) "[W]here the court is deceived or is laboring under a mistake or misapprehension as to the state of the record or as to the existence of extrinsic facts upon which its action is predicated, it has inherent power to vacate a judgment which would not otherwise have been rendered." (Ibid.)
That is what happened here. It was Dreyer's burden at the prove-up hearing to establish he was entitled to the damages he claimed in his complaint. The complaint itself incorporated the parties' settlement agreement by reference, but Dreyer failed to attach the settlement to the complaint. As a result, when it came time for the trial court to determine what damages Dreyer had established would be just, the court did not consider whether the settlement released the claims Dreyer brought in his lawsuit or whether defendants had compensated him for a portion of those damages. When the settlement agreement was produced in evidence in litigating the dispute over notice and service of process, the court realized the omission and its materiality to the decision to award Dreyer damages in the default judgment. It was within the trial court's inherent authority to set aside the default judgment under those circumstances and set a new prove-up hearing to determine whether Dreyer is entitled to the damages he claims.
III
DISPOSITION
We affirm the order setting aside default judgment. Respondents are entitled to their costs on appeal.
We concur: RAMIREZ P. J. MILLER J.