Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. CGC-08-479622
RIVERA, J.
Plaintiff Bradshaw & Associates, P.C., (Bradshaw) appeals from a court order granting a motion to set aside default and judgment. The trial court granted the motion after finding that defendants Mary Lonergan and Patricia Lonergan (individually, Mary and Patricia; collectively, the Lonergans) and Therese Murphy demonstrated excusable neglect pursuant to Code of Civil Procedure section 473, subdivision (b) (§ 473(b)). The sole question on appeal is whether the trial court abused its discretion in granting the motion. Finding no abuse of discretion, we affirm.
Therese Murphy is no longer a party to this lawsuit because any debt that she may have owed to Bradshaw was discharged by the United States Bankruptcy Court on November 10, 2009.
I. FACTUAL BACKGROUND
Bradshaw filed a complaint for breach of contract in the San Francisco Superior Court on September 9, 2008, seeking damages for unpaid attorney fees from its former clients, the Lonergans. Prior to this, the parties had submitted their dispute to nonbinding fee arbitration before the San Francisco Bar Association. At arbitration, it was determined that Bradshaw owed the Lonergans money for fees paid in excess of the actual value of Bradshaw’s services. Dissatisfied with the result, Bradshaw filed its complaint which was served on the Lonergans on September 13, 2008. When no answer was filed, Bradshaw requested entry of default on October 15, 2008, but the default was rejected. After two more attempts, defaults were entered against Patricia and Mary on October 20, 2008, and October 21, 2008, respectively. On October 24, 2008, a clerk’s judgment was entered against the Lonergans in the amount of $97,892.90.
The Lonergans moved for relief on December 5, 2008. Their motion to set aside the default and judgment was partly grounded on the claim that they committed mistakes of fact and law amounting to excusable neglect. In support of their motion, Mary submitted a declaration stating that they, the Lonergans, believed bankruptcy was their best course of action because it would relieve them of having to defend against Bradshaw’s lawsuit. In anticipation of a possible lawsuit from Bradshaw, the Lonergans looked into bankruptcy even before being served with Bradshaw’s complaint. According to the declaration, the Lonergans’ involvement in the prior litigation, for which they had hired Bradshaw as their legal representative, strained their finances. As a result, they were unable to hire an attorney to represent them when Bradshaw filed this lawsuit against them.
After consulting with a bankruptcy attorney on October 18, 2008, the Lonergans learned that they were wrong in their belief that bankruptcy was their best course of action. Filing for bankruptcy was not a sound option because any possible benefits of filing would be outweighed by the associated negative repercussions. By the time the Lonergans met with the bankruptcy attorney and learned this information, the deadline to file their answer to the pending complaint had passed.
The Lonergans proceeded to seek a pro bono attorney or one who would work on a contingency basis to represent them, but they were unsuccessful in their search. Around this time, the Lonergans learned that a judgment had been entered against them on October 24, 2008. Less than a month later, on November 18, 2008, the Lonergans were able to hire their current representative, James E. Toothman & Associates (Toothman), who had represented them at the arbitration hearing against Bradshaw. Soon thereafter, Toothman contacted Bradshaw to request that it set aside the default judgment and allow the case to be tried on the merits. Bradshaw rejected this request and the Lonergans subsequently moved for relief.
In their motion, the Lonergans argued that their mistaken belief of fact they would file for bankruptcy, and that their mistakes of law regarding when they could file for bankruptcy, the chapter they could file under, and the result they would receive if they filed, all prevented them from submitting an answer to Bradshaw’s complaint. They further argued that their neglect in filing an answer to Bradshaw’s complaint was excusable because their actions in addressing the lawsuit were reasonably prudent. The trial court granted the Lonergans’ motion after finding that they demonstrated excusable neglect.
II. DISCUSSION
A. Standard of Review
A trial court may set aside a default on the grounds of “mistake, inadvertence, surprise, or excusable neglect.” (§ 473(b).) A motion to set aside the default must be made “within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.” (Ibid.)
“A motion seeking relief under section 473 is addressed to the sound discretion of the trial court; its decision will not be overturned on appeal absent a clear showing of abuse of discretion.” (Rivercourt Co. Ltd. v. Dyna-Tel, Inc. (1996) 41 Cal.App.4th 1477, 1480.) However, the trial court’s discretion is not without limits. It must be “ ‘ “ ‘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.’ ” ’ ” (Ibid.)
“ ‘ “Section 473 is often applied liberally where the party in default moves promptly to seek relief, and the party opposing the motion will not suffer prejudice if relief is granted. [Citations.] In such situations ‘very slight evidence will be required to justify a court in setting aside the default.’ [Citations.]...” ’ [Citation.]” (Fasuyi v. Permatex, Inc. (2008) 167 Cal.App.4th 681, 695 (Fasuyi).) Furthermore, “[i]t is the policy of the law to favor, whenever possible, a hearing on the merits. 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. [Citation.]” (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478 (Shamblin).)
B. The Trial Court Did Not Abuse Its Discretion
Bradshaw argues that the court erred in finding the Lonergans’ actions excusable and in, thus, granting them relief, because their actions were not those that a reasonably prudent person would have taken. In applying the deferential standard of review discussed above, we find no abuse of discretion.
“The neglect to be excusable must be an act or omission which might have been committed by a reasonably prudent person under the same circumstances. [Citations.]” (Transit Ads, Inc. v. Tanner Motor Livery, Ltd. (1969) 270 Cal.App.2d 275, 279.) The evidence shows that the Lonergans operated under a mistaken belief that bankruptcy was their best course of action and, accordingly, took steps to address their predicament by consulting with a bankruptcy attorney. In fact, as the record demonstrates, the Lonergans looked into filing for bankruptcy even before being served with Bradshaw’s complaint. Furthermore, although tardy in meeting with a bankruptcy attorney, the Lonergans quickly began their search for legal representation soon after learning that bankruptcy was not a sound option. In sum, given the financial situation in which the Lonergans found themselves, we cannot conclude that a reasonably prudent person operating under the same circumstances would not have pursued a similar path, or that the Lonergans’ strategy was unreasonably imprudent.
In support of its argument that the Lonergans were remiss and their actions were inexcusable, Bradshaw repeatedly asserts, without pointing to any supporting evidence, that the Lonergans had access to legal representation through Toothman all along, and no reasonably prudent person would wait more than 30 days after being served to contact counsel. However, the Lonergans averred that they sought out bankruptcy counsel even before the action was filed, and upon learning that bankruptcy was not an option attempted to find pro bono or contingent fee counsel. After these unsuccessful efforts the Lonergans contacted Toothman. Accordingly, the evidence does not support Bradshaw’s contention that the Lonergans inexcusably delayed their search for counsel.
Bradshaw cites two cases in which abuse of discretion was found in setting aside default judgments to support its argument that the Lonergans’ actions were inexcusable. These cases are distinguishable. In Yarbrough v. Yarbrough (1956) 144 Cal.App.2d 610, 615, the defendant moved to set aside default on the grounds that he mislaid documents and did not find them until after he was in default. The defendant in Yarbrough did not aver any facts as to why, how, or where he mislaid the documents nor did he explain what attempts he made to find them or why he did not find them sooner. The Court of Appeal found that the trial court abused its discretion because the defendant’s affidavit failed to disclose “a sufficient excusable inadvertence or neglect to permit the trial court to set aside the default.” (Ibid.) Here, in contrast, the Lonergans’ declarations set forth the efforts they undertook to address the pending lawsuit against them.
Elms v. Elms (1946) 72 Cal.App.2d 508 is similarly distinguishable. In Elms, the defendant husband moved to set aside a posttrial judgment of annulment partly on the grounds of excusable neglect. (Id. at p. 511.) The defendant in Elms, however, failed to adduce any evidence demonstrating such excusable neglect. (Id. at p. 520.) On the contrary, the court found that his behavior evidenced “first, a definite plan to permit a judgment of annulment and, second, a subsequent change of mind.” (Id. at p. 515.) Prior to trial, the defendant had authorized his lawyer to stipulate that the trial might be tried in his absence as a default case. (Id. at p. 510.) The defendant later failed to show up at his trial despite having been previously notified of the trial date and after having been heard to state several times by different witnesses that he did not plan to attend his trial. (Id. at pp. 510, 516, 518-519.) The Court of Appeal found that the trial court abused its discretion in vacating the judgment of annulment because: (1) the defendant’s affidavits failed to disclose “mistake, surprise, inadvertence or excusable neglect”; and (2) the defendant failed to demonstrate that “a different result would probably follow another trial.” (Id. at p. 520.) Here, in sharp contrast, there was never a trial in which proof was adduced and upon which a judgment was based. Furthermore, unlike in Elms, there is evidence in the record demonstrating that the Lonergans took the lawsuit against them very seriously and, thus, undertook reasonable actions to address the lawsuit. Also, unlike in Elms, there is evidence indicating that a different result could occur if this case were tried on its merits.
“The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court. [Citations.]” (Shamblin, supra, 44 Cal.3d at pp. 478-479.) While the Lonergans’ argument-that their mistakes of fact and law surrounding their plan to file for bankruptcy caused them to delay filing an answer-may not be the most compelling showing of excusable neglect, we cannot say that the trial court exceeded the bounds of reason by finding the Lonergans’ actions excusable. As previously stated, when the party in default acts promptly to seek relief and the opposing party has not shown it will suffer prejudice if relief is granted, the default can be set aside on very slight evidence. (Fasuyi, supra, 167 Cal.App.4th at p. 695.) The Lonergans moved for relief within the allotted time period-less than two months after default was entered-and Bradshaw has not asserted it will suffer any prejudice if relief is granted.
In applying the highly deferential standard of review discussed above, and in light of the judicial presumption favoring trial on the merits, we find no abuse of discretion in the trial court’s decision to grant relief from default.
III. DISPOSITION
The order setting aside the default is affirmed.
We concur: REARDON, Acting, P.J.SEPULVEDA, J.