Opinion
B299852
04-15-2021
PENG CHEN et al., Plaintiffs and Appellants, v. SHAO FA CHIU, Defendant and Respondent.
InHouse Co. Law Firm, Alexander Chen and William Walz for Plaintiffs and Appellants. Law Offices of Tony M. Lu and Tony M. Lu for Defendant and 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC587952) APPEAL from a judgment of the Superior Court of Los Angeles County, Holly Fujie, Judge. Affirmed. InHouse Co. Law Firm, Alexander Chen and William Walz for Plaintiffs and Appellants. Law Offices of Tony M. Lu and Tony M. Lu for Defendant and Respondent.
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Peng Chen and Xueling Li appeal the trial court's ruling vacating the default judgment and setting aside the default they had obtained against Shao Fa Chiu in litigation arising from a business transaction. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In July 2015, appellants filed a complaint against United Faith Enterprise, Inc. (UFE), George Tsai, and Chiu. They filed a proof of service of summons indicating they had served Chiu by substituted service by leaving a copy of the summons, complaint, and other documents with the person in charge at UFE's office. Appellants later served an amended complaint on Chiu by substituted service at UFE's address.
Chiu made no appearance in the litigation. On September 6, 2017, appellants obtained a default judgment against him in the amount of $1,133,850.80. All documents concerning the default and default judgment were served on Chiu by substituted service at UFE's address. I. Motion to Vacate Default and Default Judgment
On March 11, 2019, Chiu filed a motion to vacate the default judgment and set aside his default pursuant to Code of Civil Procedure sections 473, subdivision (d) and 473.5 on the grounds the substituted service was improper and he had no actual notice he was being sued. Chiu submitted a declaration in which he stated he had known of the lawsuit because his friend Tsai had told him about it. However, he had been unaware he was named in the litigation and a default judgment had been entered against him until he hired counsel to represent him in another action in December 2018.
All undesignated statutory references are to the Code of Civil Procedure.
Chiu declared he had never worked at or for UFE, he had never received compensation from or been a shareholder of UFE, he had never used UFE's address as his mailing address, he had no duties for UFE, and he never participated in UFE meetings. UFE was attempting to develop land belonging to Chiu, and Chiu made decisions over the development of his own land, but he did not make decisions for UFE.
Tsai declared he had borrowed money from Chiu on behalf of UFE for a real estate development. Tsai wanted Chiu to be UFE's CEO and a shareholder, but Chiu was not interested. Without Chiu's knowledge, Tsai listed Chiu as the CEO of UFE in documents submitted to the California Secretary of State. At the time, Tsai did not think this would harm anyone and he thought it was not a "big deal." Tsai's plans did not come to fruition, as neither Chiu nor anyone else invested money in UFE, and UFE never developed Chiu's land.
Tsai confirmed Chiu did not work for UFE, and UFE never paid him any compensation. Chiu had no duties or decision-making power at UFE. Chiu retained authority over development of his own property, which was never within UFE's portfolio or assets. Tsai declared Chiu did not use UFE's address as his mailing address or office. Tsai recalled telling Chiu appellants were suing him and UFE, but he never told Chiu that he (Chiu) was being sued as well, and Tsai never gave Chiu any legal documents related to the action. Chiu never acknowledged to Tsai that he was aware he was being sued.
In his declaration, Tsai stated several statements attributed to him in his deposition transcript were not accurate. He identified a number of irregularities in the taking of the deposition, particularly that the interpreter had said she was not a certified interpreter and was very unclear at times. He recalled being in a daze at the deposition due to the translation, the long questions, the attorneys speaking over one another, and debate between the attorneys about accurate translations. He had not reviewed his deposition transcript to make corrections; no one had translated the transcript to him, and he did not believe he signed any transcript. Tsai acknowledged the transcript of his deposition stated he testified Chiu knew he was being sued. Tsai did not know why the transcript said this, because he never had any understanding that Chiu was aware he was personally involved in the lawsuit. The deposition transcript also said he testified Chiu made business decisions for UFE and he (Tsai) had to obtain Chiu's consent to use UFE's money. This was not correct: What Tsai had said was that Chiu made decisions about his own land, not UFE's internal affairs. He had to ask Chiu for approval because UFE wanted to develop Chiu's land. Tsai felt obligated to share information about significant UFE expenditures because UFE owed Chiu money and Tsai did not want Chiu to worry. Tsai also declared he did not know why his deposition transcript said there was no note between UFE and Chiu concerning money Chiu lent to UFE. He did not recall how the word "note" had been translated to him at deposition, but in fact there were six written loan agreements between UFE and Chiu's company in 2013 and 2014.
Portions of Tsai's declaration submitted to the trial court confirmed the interpreter was not certified and she had asked that the record "reflect that I'm not a certified translator and my Chinese is limited when it comes to legal lexicons, so I only do as much as my—to the best of my ability." Interpretation problems occurred repeatedly during the deposition and were noted by both counsel. Additionally, Tsai had responded affirmatively when asked whether there were any "reasons that might affect [his] ability to give complete and honest testimony today," but counsel did not follow up on that answer, instead proceeding to other introductory questions how depositions are conducted.
Chiu's wife, Pearl Chiu, submitted a declaration stating she and her husband had been running their family business full-time for many years; while she was familiar with the loan agreements between their company and UFE, she had never heard of the claim that Chiu worked for UFE or made decisions for it, nor had she ever heard or known of Chiu being UFE's CEO.
A UFE employee, Joyce Tung, declared she recalled someone coming to UFE's office in 2015 or 2016 looking for Shao Fa Chiu; she told the visitor she did not know who that was. The person left some paperwork and left. Either the same person or another person came to UFE once or twice more asking for Shao Fa Chiu, and she again told the person that she did not know the person they were looking for. She did not recall what she had done with the paperwork the person had left. II. Opposition to Motion to Vacate the Judgment
Appellants argued the default and default judgment were proper because Chiu had actual knowledge of the litigation, as evidenced by Tsai's deposition testimony. They further argued Tsai's deposition testimony demonstrated Chiu had willfully avoided service and there was no excusable neglect. To support these arguments, appellants submitted Tsai's entire 114-page deposition transcript without the highlighting required by California Rules of Court, rule 3.1116(c) to direct the court to the specific portion(s) on which they relied. The court declined to consider Tsai's deposition in ruling on the motion.
Appellants argued the weight of the evidence demonstrated Chiu operated out of and used UFE's business address. They submitted expert testimony of a certified questioned document examiner opining that Chiu had signed multiple corporate resolutions, bank account authorizations, and checks of UFE. They pointed to UFE's filing with the Secretary of State listing Chiu as CEO and providing the address they used for substituted service.
Appellants also submitted the declaration of Jerry Chen, who worked as UFE's office manager for six months in 2015. He declared he had reported directly to Tsai and Chiu and he understood them to be the owners of UFE. Tsai and Chiu shared an office in which Chiu had his own desk. According to Chen, Chiu came to UFE to work at his desk "in regular intervals of five to seven business days." He had seen Chiu at least a dozen times in UFE's office at his desk or speaking with Tsai. Chen recalled Chiu being present at UFE meetings on at least two occasions. Finally, he declared he had seen Tung in meetings with Tsai and Chiu; moreover, Tung was the head of human resources and accounting. There was no doubt in Chen's mind that Tung was familiar with Chiu and aware of his identity and role at UFE.
Appellants provided the declaration of Ginny Lin, a former chief financial officer of UFE. Lin declared she founded UFE with Tsai and Chiu in 2013, and Chiu was at all times the director, shareholder, and CEO of UFE. Lin stated she, Chiu, and Tsai regularly met and decided on UFE's company direction and strategy, and they signed multiple corporate documents. Chiu came to the office at least once per week, and he had his own desk. Lin detailed the course of events leading up to her discovery of financial improprieties by Chiu and Tsai. Her employment was terminated after she disclosed those improprieties to appellants and a financial institution. Her termination letter, signed by Tung, was carbon copied to "CEO Michael Chiu." Chiu went by the names "Michael Chiu" and "Shao Fa Chiu."
Appellants contended Chiu's deep involvement in UFE's affairs was shown by his signatures on many banking documents and the deposition testimony of Fanny Fan, an account manager at the bank where UFE held accounts and a line of credit. However, the court declined to consider Fan's deposition testimony because appellants submitted her full 117-page deposition transcript to the court without highlighting relevant portions.
Appellants challenged the declarations filed in support of the motion to vacate the judgment as self-serving and internally inconsistent. They contended Tsai's declaration lacked credibility and his complaints about the interpreter at his deposition were fabricated. Appellants claimed Chiu's declaration lacked credibility because it was inconsistent and conflicted with records bearing his signature. They asserted Tung's declaration she did not know, or know of, a Shao Fa Chiu was not credible because she carbon copied Lin's termination letter to "CEO Michael Chiu." Finally, they argued Pearl Chiu's declaration lacked credibility because, as an employee of the accounting department at their company, she should have noticed her husband had signed a 2014 check on behalf of UFE.
Appellants argued the judge at the default hearing had found service of process had been proper and Chiu had not proven the judgment was void. They argued justice did not require the judgment to be set aside, Chiu had failed to establish the elements necessary for equitable relief, and equity demanded Chiu be denied relief because of the doctrines of laches, estoppel, and unclean hands. Finally, appellants requested an evidentiary hearing if the court was inclined to vacate the judgment. III. Ruling and Further Proceedings
In a detailed written order, the trial court found the declarations of Tsai and Pearl Chiu supported Chiu's assertion he had no actual notice of the litigation. The court found appellants' contention that Chiu operated out of UFE and used it as a business address, as well as the declarations they provided to support their argument, "unpersuasive for purposes of showing actual notice." The court noted appellants "cite[d] no legal authority to warrant the inference that conflicting declarations warrant an inference of actual notice for purposes of setting aside a default and default judgment." The court found Chiu had no actual notice of the litigation, vacated the default judgment, and set aside Chiu's default.
Appellants moved for reconsideration on the grounds that the court's prior failure to consider the two depositions was reversible error; the weight of the evidence was in favor of denying the motion to vacate; substituted service had been proper because underfunded UFE operated as a joint venture between Tsai and Chiu in which the two were de facto partners; the court had failed to consider their equitable defenses of laches and unclean hands; and Chiu had not been diligent in seeking relief from default. Finally, appellants requested an evidentiary hearing because the facts were in dispute.
The trial court denied the motion for reconsideration. With respect to the previously-excluded depositions, the court found appellants had made no more than a conclusory assertion about what Fan's deposition would have shown with respect to the question of actual notice, and even if Tsai's deposition testimony had been considered "there still would have existed contradictory evidence with respect to whether Defendant had actual notice of this action." Moreover, the court noted, appellants had not shown Chiu's failure to appear in the action despite actual notice was due to neglect. Noting the strong public policy favoring resolution of disputes on their merits, the court declined to rescind its prior ruling based on the deposition testimony.
The court ruled appellants' arguments about service of process were not new facts, circumstances, or law that could serve as a basis for reconsideration as appellants had not provided any substantive argument or legal authority to support the proposition that because UFE's corporate veil should be pierced due to underfunding, substitute service was proper. The court found the authority on which appellants relied not pertinent; appellants seemed to confuse the issue of Chiu's personal liability vis-a-vis the actions of UFE with the issue of substitute service. The court also found the purported evidence appellants cited had already been presented to the court and was not new.
As for appellants' contention that the court had failed to consider their equitable arguments, the court noted it had considered all arguments made in opposition to the motion to vacate the default judgment. It found appellants "only made mere argument with respect to the applicability of laches and unclean hands without citing to any supporting evidence." These defenses failed to present new facts, circumstances, or law necessary to serve as a basis for a motion for reconsideration. The court noted appellants did not even assert that the defenses satisfied the standard nor did they provide any new evidence on this point.
The trial court rejected appellants' argument Chiu had not been diligent in seeking relief after discovering the existence of the litigation because he discovered it in December 2018 and did not move to vacate the default until March 2019. The court noted section 473, subdivision (b) provides that motions to vacate a default judgment may be filed for a period of six months after the moving party becomes aware of the judgment. Last, the court found inapposite the authority cited by appellants in support of their request for an evidentiary hearing because it pertained to a request for an evidentiary hearing in the context of a motion to compel arbitration, and it found the credibility of the witnesses could be evaluated through the discovery process and at trial, if necessary.
The trial court denied the request for an evidentiary hearing and the motion for reconsideration. This appeal followed.
DISCUSSION
Section 473.5 allows a litigant to obtain relief from a default or default judgment if "service of a summons has not resulted in actual notice to a party in time to defend the action and a default or default judgment has been entered against him or her in the action." (§ 473.5, subd. (a).) Relief under section 473.5 is available only where the defendant's lack of actual notice "was not caused by his or her avoidance of service or inexcusable neglect." (Id., subd. (b).) We review a ruling granting relief from default under this provision for an abuse of discretion. (Ramos v. Homeward Residential, Inc. (2014) 223 Cal.App.4th 1434, 1444 (Ramos).) "In reviewing the court's grant of discretionary relief from default, we note: 'It 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.] Therefore, when a party in default moves promptly to seek relief, very slight evidence is required to justify a trial court's order setting aside a default.' " (Ibid.) " ' " 'Even in a case where the showing . . . is not strong, or where there is any doubt as to setting aside of a default, such doubt should be resolved in favor of the application.' " ' " (Ibid.)
The trial court did not abuse its discretion in granting the motion to set aside the default and default judgment. Chiu's declaration that he had no actual notice of the litigation, supported by the declarations of Tsai, Pearl Chiu, and Tung, was sufficient to establish the service of summons had not resulted in actual notice to Chiu of the lawsuit. Chiu's evidence, moreover, demonstrated his failure to be aware of the litigation was not caused by his avoidance of service or inexcusable neglect but by the service of the summons and complaint by substituted service at a business where he did not work and where the person who received the documents did not know who he was. The evidence supported the trial court's ruling, and we cannot say it "exceeded the bounds of reason." (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478 (Shamblin).)
Appellants argue Tsai's deposition testimony demonstrated Chiu had actual knowledge of the litigation which he chose to ignore. Not only did the trial court exclude this evidence because it was not presented in accordance with the California Rules of Court, but also, as the trial court noted in ruling on the motion for reconsideration, even if this evidence were considered, it merely demonstrated a conflict in the evidence. On one side was Tsai's deposition, and on the other was his declaration, in which Tsai explained that the deposition transcript did not accurately set forth his understanding of the facts and that the proceedings were interpreted by an uncertified interpreter who experienced difficulty interpreting the deposition questions and responses. The trial court resolved the factual dispute and concluded Chiu did not receive actual notice of the lawsuit. That there exists evidence to support the opposite position does not demonstrate an abuse of discretion by the trial court. "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." (Shamblin, supra, 44 Cal.3d at pp. 478-479.)
Appellants allege Chiu's declaration is "fraught with inconsistencies" and assert their evidence showed he worked at and for UFE, participated in UFE meetings and corporate decisions, and was deeply involved in the affairs of UFE, even taking out a line of credit in UFE's name. They contend that "[b]ased on the evidence submitted in opposition to Chiu's motion, this Court should find that Chiu utilized and operated out of UFE's address and that service of process on Chiu at the UFE address was proper." As they did in the trial court, appellants argue the declarations of Chiu, Tsai, Pearl Chiu, and Tung were not credible and should be given little or no weight, but "[i]t is not our function as a reviewing court to reweigh the evidence, resolve conflicting evidence and inferences, or to judge the credibility of the witnesses." (Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 806, disapproved on other grounds in Kim v. Toyota Motor Corp. (2018) 6 Cal.5th 21, 38, fn. 6.)
Appellants also maintain Chiu's statement in his declaration that the he never used the UFE address as his mailing address constituted an implied admission that he did use it as his physical address, but it is clear when read in context that Chiu separately addressed physical and mailing addresses: Two sentences before this statement where Chiu specifically declared he never worked at UFE, and elsewhere in the declaration he identified his work address and how long he had been working at that address. --------
Appellants complain the trial court "disregard[ed] [their] evidence under [a] technicality." They do not, however, contend the trial court erred in declining to consider entire deposition transcripts whose relevant passages were not indicated as required by the California Rules of Court. They allege the court "unjustly favored" the evidence presented by Chiu, which is in essence a complaint that the court did not see things appellants' way. Failing to rule in one's favor does not mean the court did not consider one's evidence or failed to consider the evidence equitably. Moreover, the trial court's resolution of the immense factual disputes here was consistent with the policy of favoring a hearing on the merits. (Ramos, supra, 223 Cal.App.4th at p. 1444.) We understand the intensity of appellants' belief that their evidence proved Chiu was intimately involved with UFE and had actual notice of the litigation, but the trial court's ruling was supported by the evidence presented and may not be disturbed. " '[V]ery slight evidence is required to justify a trial court's order setting aside a default' " when a timely motion is made, and even when the showing " ' " 'is not strong, or where there is any doubt as to setting aside of a default, such doubt should be resolved in favor of the application.' " ' " (Ibid., italics omitted.)
Appellants devote the remainder of their opening brief to arguing Chiu was not entitled to relief from default and the default judgment under section 473, subdivision (d). As we have concluded the trial court did not abuse its discretion in granting Chiu's motion to vacate the default judgment under section 473.5, we need not determine whether the ruling was correct under other provisions of law. (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19 [decision must be sustained on appeal if correct on any theory of the law applicable to the case].)
DISPOSITION
The judgment is affirmed. Respondent shall recover costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
STRATTON, J. We concur:
BIGELOW, P. J.
GRIMES, J.