Opinion
2d Civil No. B220347
09-22-2011
DELIA CABRERA, et al. , Plaintiffs and Appellants, v. ALICIA VILLA dba RESTAURANT 4 HERMANOS, Defendant and Respondent.
Allen K. Hutkin, for Appellant. No appearance for Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.111.5.
(Super. Ct. No. CV 050978)
(San Luis Obispo County)
Appellants, Delia Cabrera and Brench Monroy Ambriz, appeal from an order setting aside a default and default judgment in their action for unpaid wages. The trial court granted respondent Alicia Villa relief from default on extrinsic mistake grounds. It found that respondent reasonably believed that her ex-husband, who owned and managed the restaurant where appellants worked, would provide a defense. We affirm. (Weitz v. Yankosky (1966) 63 Cal.2d 849, 854-855.)
Procedural History
In 2002, respondent separated from her husband, Ignacio Villa, and filed a petition for marital dissolution. (Alicia Villa v. Ignacio Villa, Sup. Ct. Monterey County, Case No. DA 31016.) Ignacio owned and managed Restaurant 4 Hermanos in Paso Robles (restaurant) where appellants worked as waitresses. On October 3, 2006 a judgment of marital dissolution was entered awarding Ignacio the restaurant and all restaurant assets and liabilities.
Appellants' Wage Action
In 2005, while the martial dissolution action was pending, appellants sued for back wages. The first amended complaint alleged that the restaurant did not pay minimum wage, overtime, double time, or provide employee meal and rest breaks. Appellants served the first amended complaint on March 29, 2006, and entered a May 3, 2006 default against Ignacio Villa and respondent doing business as Restaurant 4 Hermanos. Appellants took no further steps to obtain a default judgment because a statement of damages was not served. (Code Civ. Proc., §§ 425.10, subd. (a)(2); 425.11, subd. (c).)
On June 4, 2007, more than a year later, appellants vacated the default and filed a second amended complaint for unpaid wages, statutory penalties, restitution, injunctive relief, and punitive damages. Appellants served the second amended complaint by substituted service and entered a July 20, 2007 default. On December 5, 2007, a $170,000+ default judgment was entered against "Ignacio Pena Villa and Alicia Villa, dba Restaurant 4 Hermanos."
Respondent's Bankruptcy
On February 1, 2008, appellants recorded an abstract of judgment, creating a lien on respondent's house. Respondent filed a Chapter 13 bankruptcy petition, hired an attorney to represent her in state court, and filed a motion on April 24, 2008, to set aside the default and default judgment. The trial court denied the motion without prejudice based on the automatic bankruptcy stay. (11 U.S.C. § 362(a).)
On July 16, 2008, the bankruptcy court lifted the stay so that respondent could move forward on her motion to vacate the default and default judgment in state court. After Respondent refiled the motion, the trial court vacated the default and default judgment on extrinsic mistake grounds. The court found that "this case is about paying for breaks and payroll and that kind of thing. There's never been any assertion that [respondent] had any involvement in that. [¶] So that's why I always felt it was a question of equity . . . . [S] he has, what appears to be, a meritorious defense. And to me that's -- that's what is telling."
Extrinsic Mistake
Where a motion to vacate a default judgment is made more than six months after default is entered, the motion is directed to the trial court's inherent equity power to grant relief from a default or default judgment procured by extrinsic fraud or mistake. (Gibble v. Car-Lene Research, Inc.(1998) 67 Cal.App.4th 295, 314.) "'To set aside a judgment based on 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.' [Citation.]" (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982.)
Appellants argue that respondent has not made an adequate showing of extrinsic mistake. We disagree. Ignacio repeatedly told respondent that the lawsuit did not involve respondent, that he would take care of the matter, and that nothing more was required of respondent. Respondent believed him because Ignacio was awarded the restaurant in the dissolution proceeding. The $170,000+ default judgment was entered a year later.
It has often been held that "[r]eliance on a third person to protect the rights of the aggrieved party may . . . make out a case of extrinsic mistake. [Citations.]" (8 Witkin, Cal. Procedure (5th ed. 2008) Attack on Judgment in Trial Court, § 232, p. 843.) That is the case here. "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 to attend to the matter was inexcusable. [Citations.]" (Weitz v. Yankosky, supra, 63 Cal.2d at p. 855.)
Respondent reasonably relied on her ex-husband to respond to the action and provide a defense. She did not speak or write English, had the equivalent of a third grade education in Mexico, and never attended school in the United States. Ignacio, on the other hand, was experienced in business matters, owned and managed the restaurant, and told respondent that the lawsuit involved the restaurant, not respondent. Before and after the default, Ignacio said that he would take care of the matter, causing respondent to believe that Ignacio would provide her a defense. Based on the judgment of martial dissolution, respondent's language barrier and inability to read and understand the legal documents, and Ignacio's representations that the lawsuit had nothing to do with respondent, the evidence supports the finding that the default and default judgment was procured by extrinsic mistake.
Diligence
Appellants argue that respondent waited too long. "One moving in equity to set aside a default judgment must act diligently in making his motion after he learns of the default judgment. . . . [¶] . . . Lack of prejudice is one of the factors the trial court may properly consider in determining whether defendant acted diligently.
The other factor to be considered is whether defendant in light of the circumstances known to him acted unreasonably in not filing the motion to set aside the default judgment earlier. As already pointed out, a court, in determining whether a default judgment was secured by excusable extrinsic mistake, may properly determine that the defendant's conduct was excusable where he relied upon another interested person to assert the defense and his reliance was reasonably justified under the circumstances." (Weitz v. Yankosky, supra, 63 Cal.2d at pp. 856, 857.)
Here the motion to vacate the default and default judgment was filed nine months after the July 20, 2007 default. The trial court did not err in finding that the delay was reasonable. Appellants allowed the action to languish 13 months after the first default, vacated the default by ex parte order, and served the second amended complaint by constructive service before entering a new default.
Citing Rappleyea v. Campbell, supra, 8 Cal.4th 975, the trial court found that appellants' long delay in prosecuting the case was a salient factor in granting relief from default. "[H]ad Plaintiffs not waited a year to file the Second Amended Complaint and if Plaintiffs had not needed CCP 473 relief themselves to perfect their judgment, the entry of default, default judgment and recordation of the lien would have occurred 1 year sooner so that Defendant's alleged delay in bankruptcy court would not have occurred . . . . It was the recordation of the lien which prompted Defendant to respond with a Motion to Vacate."
Appellants presented no evidence that the bankruptcy petition was filed in bad faith to delay the state court proceeding. Even in cases where the reasons for delay are not compelling, the appellate court must defer to the trial court's finding that a trial on the merits outweighs any prejudice to the plaintiff if the default judgment is set aside. (Shamblin v. Brattain (1988) 44 Cal.3d 474, 479.)
Appellants rely upon Stiles v. Wallis (1983) 147 Cal.App.3d 1143 (Stiles) for the principle that "courts are not required to set aside default judgments for defendants who flagrantly ignore the responsibility to present a defense." (Id., at p. 1148.) There the defendant/real estate broker was granted relief from default 20 months after a default judgment. Defendant was born in Australia and claimed that he was unfamiliar with California law. Defendant also claimed that his employer, Avalon Realty, was supposed to provide a defense but offered no evidence that Avalon Realty promised to provide representation or that defendant asked it to do so.
We reversed the order granting relief from default because defendant failed to demonstrate a satisfactory excuse for not responding to the complaint. Defendant "was born in an English speaking country, became a citizen of Australia, a nation that uses English as its primary language and then moved to California. Once in this state [defendant] obtained a real estate brokers license. [Defendant's] ability to obtain a real estate license demonstrates both his sophistication in business matters as well as his familiarity with the English language. [Defendant] clearly had the capacity to understand the significance of the message contained on the summons. [Defendant's] case is further undermined by the fact that the appellants' attorney made several requests of the respondent to submit an answer to the court before a default was entered. [Defendant] chose simply to ignore the requests." (Stiles, supra, 147 Cal.App.3d at p. 1149.)
Unlike Stiles, respondent did not read or write English, did not have a professional license, had nothing to do with restaurant payroll, and had separated from Ignacio before she was served with the complaint. Ignacio repeatedly told respondent that he would take care of the lawsuit and that it did not involve respondent. Respondent believed him because Ignacio was awarded all the restaurant assets and obligations in the martial dissolution proceeding.
Appellants took a default judgment against "Ignacio Pena Villa and Alicia Villa, dba Restaurant 4 Hermanos" more than a year after the marital dissolution Unlike Stiles, there is no evidence that appellants warned respondent that a default would be entered if she failed to respond to the first or second amended complaint. The trial court noted that the second amended complaint "stated the numbers $1,500,000 as potential damages while the default judgment statement of damages was $170,000 which, no doubt, added confusion to an already confusing situation. One who does not speak English, could infer from the drastic change in dollars that a defense was ongoing. The 13 month delay between the first default and the substituted service of the Second Amended Complaint would have also added to Defendant's confusion."
One can also infer that respondent did not believe she was being sued in her individual capacity. The second amended complaint stated that respondent was doing business as Hermanos 4 Restaurant and that Ignacio and respondent were the "owners and/or operators" of the restaurant and the "co-employers" of appellants. Appellants entered a default and default judgment against "Ignacio Pena Villa and Alicia Villa, dba Restaurant 4 Hermanos," consistent with respondent's belief that the lawsuit was Ignacio's responsibility. All of that changed when appellants recorded a lien on respondent's house based on the theory respondent was liable in her individual capacity. Respondent promptly filed for bankruptcy, hired an attorney to represent her in state court, and filed a motion for relief from default that would have been granted but for the bankruptcy stay.
Appellants cite no authority that a defendant who asserts his or her federal right to bankruptcy protection forfeits his or her right to relief from default based on extrinsic mistake. Fidelity Fed. Sav. & Loan Assn. v. Long (1959) 175 Cal.App.2d 149 is inapposite and states that relief from default is improper where the defendant files a bankruptcy petition in bad faith to delay the proceedings. There, "the default occurred as a result of an intentional and deliberate failure to appear and defend. . . Neither one's change of mind nor his inexcusable negligence is ground for vacating a judgment." (Id., at p. 155.)
Appellants argue that the trial court ignored the prejudicial impact of the bankruptcy filing but it is not our function to reweigh the evidence or determine witness credibility. (Shamblin v. Brattain, supra, 44 Cal.3d at. pp. 478-479.) "Even though contrary findings could have been made, an appellate court should defer to the factual determinations made by the trial court when the evidence is in conflict." (Id., at p. 479.) Respondent's declarations and proposed answer meet the meritorious defense requirement. It is irrelevant whether respondent will ultimately prevail on the defense at trial. (See e.g., Ludka v. Memory Magnetics International (1972) 25 Cal.App.3d 316, 323-324.)
Appellants claim that respondent often helped or directed kitchen staff and waitresses but there is no evidence that respondent was in charge of payroll or held herself out as the owner, operator, or manager of the restaurant. Respondent's son worked as a full time cook and stated that he never saw respondent at the restaurant, never saw respondent supervise or direct restaurant employees, and that respondent had "absolutely nothing to do" with the management or operation of the restaurant.
Conclusion
Although public policy supports the finality of judgments, a default and default judgment may be set aide where, as here, circumstances extrinsic to the litigation have unfairly cost a party an adversary hearing on the merits. (Rappleyea v. Campbell, supra, 8 Cal.4th at p. 981; In re Marriage of Park (1980) 27 Cal.3d 337, 342.) "[A]ppellate 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 a substantial defense could be made." (Weitz v. Yankosky, supra, 63 Cal.2d at p. 854.)
The evidence here supports the finding that respondent has a meritorious defense, has a satisfactory excuse for not responding to the wage action, and was diligent in seeking relief from default. Balancing the hardships, the trial court found that it would be unfair to vacate the $35,836 default judgment in favor of a third waitress who has since died. With respect to appellants, the trial court stated "this is not an easy decision. I really do think [respondent] had a reason for what she did. I think she has a defense that could work."
The third waitress, Monica Arraya, died January 29, 2009 and is not a party to the appeal.
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Appellants request that we reweigh the evidence and substitute our notions of fairness for those of the trial court. This we cannot and will not do.
The judgment (order setting aside default and default judgment) is affirmed. Respondent is awarded costs on appeal.
NOT TO BE PUBLISHED.
YEGAN, Acting P.J. We concur:
COFFEE, J.
PERREN, J.
Barry T. LaBarbera, Judge
Superior Court County of San Luis Obispo
Allen K. Hutkin, for Appellant.
No appearance for Respondent.