Opinion
B296885
08-03-2020
EMIL HARTOONIAN, Individually and as Trustee, etc., Plaintiff and Respondent, v. TIGRIS ENTERPRISES, LLC et al., Defendants and Appellants.
Fayer Gipson, Gregory A. Fayer and Michelle K. Millard for Defendants and Appellants. DorenfeldLaw, David Dorenfeld and Mazyar H. Mazarei for Plaintiff 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. LC104873) APPEAL from a judgment of the Superior Court of Los Angeles County. Huey P. Cotton, Judge. Affirmed. Fayer Gipson, Gregory A. Fayer and Michelle K. Millard for Defendants and Appellants. DorenfeldLaw, David Dorenfeld and Mazyar H. Mazarei for Plaintiff and Respondent.
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Tigris Enterprises, LLC (Tigris) and Johnny Mansour (collectively, Mansour) appeal from the trial court's denial of Mansour's motion to set aside a default judgment in favor of respondent Emil Hartoonian and The Nainootrah Trust (collectively, Hartoonian). Hartoonian borrowed money from Mansour. The debt was later documented with a promissory note and secured with a trust deed on Hartoonian's home, which was not to be recorded unless Hartoonian defaulted. A dispute developed about how much Hartoonian actually owed and whether he was in default. Mansour recorded the deed.
Hartoonian sued for breach of contract and related claims, including a claim to quiet title on Hartoonian's residence. Mansour did not file an answer. Hartoonian took his default, and, after an evidentiary hearing, the trial court entered a judgment on the default that: (1) awarded Hartoonian damages in the amount of $5,373.63 and a comparable amount of attorney fees, along with costs and prejudgment interest; (2) declared the trust deed void and quieted title to Hartoonian's residence; and (3) deemed the promissory note to be paid in full. Ten months after the judgment was entered, Mansour moved unsuccessfully to set it aside.
Mansour argues that the trial court should have set aside the judgment for three reasons. First, Mansour claims that the judgment was the result of extrinsic fraud or mistake, as he relied on a third party to respond to Hartoonian's complaint and did not realize that his defense of the lawsuit had been mishandled. Second, Mansour argues that the judgment is void because no default judgment is permitted on a quiet title claim. Third, he claims that the judgment exceeded the relief requested in Hartoonian's complaint by declaring the promissory note to be paid in full.
We reject all three arguments and affirm.
BACKGROUND
1. Hartoonian's Complaint
Hartoonian filed his complaint (Complaint) on November 15, 2015. The Complaint alleged that Hartoonian borrowed $300,000 from Mansour in May 2012. Hartoonian and Mansour orally agreed that Hartoonian would repay the loan within six months and that he would pay interest at an annual rate of 10 percent.
Hartoonian did not repay the money within six months, but instead borrowed an additional $33,000 in various installments from January to July 2013. From October 2013 to January 2014 Hartoonian then repaid $175,000.
In April 2014, Mansour claimed that Hartoonian owed a total of $259,992.91. Hartoonian's Complaint alleged that Mansour's calculation included usurious interest and "points" that Mansour unilaterally added to the outstanding loan amounts. According to the Complaint, based on the cumulative interest allowed by law and specified by the parties' agreement, only $218,833.68 should have been due in April 2014.
The Complaint alleged that Mansour demanded Hartoonian execute a written agreement memorializing the amount that Mansour claimed was due upon threat of "immediate litigation." Accordingly, on November 14, 2014, Hartoonian executed a promissory note (Note) secured by a deed of trust on his residence (Trust Deed). Under the terms of the Note, the Trust Deed was to be held by a " 'mutually agree[ed] upon third-party,' " and was not to be recorded unless Hartoonian defaulted on his repayments.
In October 2014, just before executing the Note, Hartoonian made an additional payment of $80,000. Hartoonian claimed he should have owed only $150,005.87 after that payment. Instead, the Note required repayment of $180,000.
Hartoonian made monthly payments on the Note. In March 2015, Mansour (through his entity, Tigris) wrongfully claimed that Hartoonian was in default and threatened to immediately record the Trust Deed. In May and June of 2016, Mansour again wrongfully accused Hartoonian of default and threatened to record the Trust Deed. On June 17, 2016, Mansour did record the deed. Hartoonian later learned that, contrary to the terms of the Note, the Trust Deed had been in Mansour's possession since it was signed.
Following execution of the Note in November 2014, Hartoonian made payments to Mansour in the total amount of $87,938.90. Hartoonian claimed that, after those repayments, the amount due under the Note should have been $82,431.97. However, Mansour demanded $120,077.25.
Hartoonian's Complaint alleged causes of action for: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) violation of California's usury laws; (4) violation of the federal Truth in Lending Act; (5) declaratory relief; and (6) quiet title.
2. Proceedings in the Trial Court
Mansour did not retain counsel after he was served with the Complaint. Instead, as discussed further below, he hired a nonlawyer third party to handle the case and to advise him concerning the documents that he should file while representing himself in propria persona.
Mansour did not file an answer. Instead, he removed the action to federal court on March 3, 2017.
Hartoonian moved to remand. Mansour did not respond to the remand motion, and the district court granted the motion on April 20, 2017.
While the case was in federal court, Hartoonian took Mansour's default, which was entered on March 10, 2017. The trial court set aside that default at a case management conference on April 4, 2017, following the remand from federal court. The trial court set a further case management conference for August 8, 2017, which was to include consideration of the "Status of Bankruptcy."
Apparently the notice of stay that Mansour filed in superior court when he removed the case led the court to believe that the stay was on account of a pending bankruptcy.
Hartoonian again took Mansour's default on June 2, 2017.
At the continued case management conference on August 8, 2017, the trial court requested a report on the status of Mansour's purported bankruptcy and continued the case management conference to October 20, 2017. Mansour did not attend the August 8, 2017 conference.
Prior to the October 20 conference, Hartoonian's counsel filed a declaration informing the court that there was no record of any bankruptcy by Mansour. At the October 20 conference, Mansour's counsel confirmed that the bankruptcy had been "discharged." The trial court then conducted a "Default Prove-Up Hearing for Quiet Title." Hartoonian testified, and the court received 17 exhibits. Based on that evidence, the trial court entered judgment in favor of Hartoonian.
The October 20, 2017 judgment (Judgment) found in favor of Hartoonian on each of his causes of action, except for his fourth cause of action for violation of the federal Truth in Lending Act, which Hartoonian dismissed without prejudice. The Judgment awarded Hartoonian: (1) general and special damages of $5,373.63; (2) costs in the amount of $435.00; (3) prejudgment interest in the amount of $532.89; and (4) attorney fees of $5,279.02. The Judgment also declared the Trust Deed void. Finally, in hand-printed language, the Judgment stated that the Note "is deemed paid in full."
Hartoonian served the Judgment on Mansour on October 23, 2017.
3. Mansour's Motion to Set Aside the Default
On August 30, 2018, more than 10 months after the Judgment was filed and served, Mansour filed a "motion to vacate default and default judgment." The motion argued that the Judgment was void as a matter of law because: (1) the court's declaration that the Note was "paid in full" exceeded the relief requested in the Complaint; and (2) the trial court improperly entered a default judgment on Hartoonian's quiet title cause of action without an opportunity for Mansour to present evidence.
The motion also requested that the trial court set aside the Judgment on the ground of extrinsic fraud and mistake. Mansour filed his own declaration in support. Mansour explained that he had relied on a third party, Stephen C. Mills, to handle his defense of the action. Mills had previously assisted Hartoonian when Hartoonian helped Mansour in a short sale of Mansour's home. Mansour also understood that Hartoonian and Mills "had worked together in the past."
Mills was not a lawyer, but he told Mansour that he was "part of a group of people (including attorneys and connections throughout the judicial system) who had done work previously for Hartoonian and were owed money by him." Mills convinced Mansour to let him handle the case, and Mansour therefore transferred his "case file" from the attorney who had been representing him to Mills.
Mansour paid Mills $10,000 for his services. Mills told Mansour that the attorneys in his " 'group' " could not appear in court, so Mansour should sign pleadings himself. When there were documents to file, Mills presented them to Mansour for signature and then filed them on Mansour's behalf. Mansour never had any contact with a lawyer.
Mansour testified that, "[a]fter a couple of months, [he] began to realize that Mills was gravely mishandling the case." However, Mills provided repeated assurances that everything that was going on in the lawsuit "was part of his plan." Mansour relied on those assurances until a levy was placed on Mansour's bank account in April 2018, six months after the Judgment had been entered.
Mansour then sought counsel and attempted to obtain his file from Mills, but Mills was "non-responsive." Mansour finally obtained his case file from Mills in mid-June 2018.
4. The Trial Court's Ruling
The trial court denied Mansour's motion to set aside the Judgment in a written ruling on March 5, 2019. The court rejected Mansour's argument that the court had entered an improper default judgment on Hartoonian's quiet title claim. The court noted that it had held an evidentiary hearing on October 20, 2017, "at which plaintiff presented testimony and evidence showing his entitlement to default judgment." The court found that, although Hartoonian was not required to serve notice of the hearing on Mansour because Mansour was in default, Hartoonian had in fact served a notice of the hearing. Although the notice did not appear in the court file, the court noted that service was "confirmed in the declaration of defense counsel."
The trial court also mistakenly stated that "defendants do not argue that they did not receive notice." In fact, Mansour had submitted a reply declaration in which he denied that he had received the notice.
The court also rejected Mansour's argument that the Judgment was void because it awarded relief that exceeded the relief requested in the Complaint. The court cited the Complaint's request for a declaration " 'describing the total amount due on the [Note], if any' " (italics added), which implied that the amount due might be zero. The court also cited the Complaint's prayer for "other such relief as this Court may deem just and proper."
The court also denied Mansour's request for equitable relief. The court concluded that Mansour sought such relief "on some vague allegation that [his] former attorney was a known associate of plaintiffs. To the extent that the default was entered as a result of attorney negligence, the remedy is a timely motion under [Code of Civil Procedure section] 473(b) or a malpractice action."
DISCUSSION
1. The Judgment Is Not Void as the Result of Extrinsic Fraud or Mistake
Mansour argues that the Judgment should be vacated as the result of either extrinsic fraud or mistake. He claims that he mistakenly relied on Mills's assurances that he and his "group" were handling Mansour's defense. He also asserts that Mills's conduct was a deliberate, fraudulent effort to sabotage his defense. He bases that assertion on the "pre-existing relationship" between Mills and Hartoonian, which Mansour identifies as the only "logical reason" why Mills would fail to represent Mansour adequately against Hartoonian's lawsuit.
We review the trial court's denial of Mansour's request for equitable relief from the Judgment for abuse of discretion. (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981 (Rappleyea).)
a. The governing law
Code of Civil Procedure section 473 provides several ways to challenge a default judgment. Under section 473, subdivision (b), a party may file a motion seeking relief from a judgment or other order "taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect." However, such a motion must be brought within six months after the judgment or other order was taken. Mansour filed his motion to vacate the Judgment more than 10 months after it was entered, and relief under section 473, subdivision (b) was therefore unavailable to him.
Subsequent undesignated statutory references are to the Code of Civil Procedure.
Section 473, subdivision (d) also provides that, upon noticed motion, a court may "set aside any void judgment or order." There is no statutory time limit for such a motion. (Airs Aromatics, LLC v. CBL Data Recovery Technologies, Inc. (2018) 23 Cal.App.5th 1013, 1022-1023 (Airs).)
In addition to these statutory grounds for challenging a judgment, courts "have the inherent authority to vacate a default and default judgment on equitable grounds such as extrinsic fraud or extrinsic mistake." (Bae v. T.D. Service Co. of Arizona (2016) 245 Cal.App.4th 89, 97, citing Rappleyea, supra, 8 Cal.4th at p. 981.) A court's authority to provide such equitable relief is not limited by the six-month period in section 473, subdivision (b). (Bae, at p. 98.)
There is no clear distinction between extrinsic fraud and mistake. In any individual case, "It does not seem to matter if the particular circumstances qualify as fraudulent or mistaken in the strict sense." (In re Marriage of Park (1980) 27 Cal.3d 337, 342.) Rather, "those terms are given a broad meaning and tend to encompass almost any set of extrinsic circumstances which deprive a party of a fair adversary hearing." (Ibid.)
Extrinsic fraud "usually arises when a party is denied a fair adversary hearing because he has been 'deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting his claim or defense.' " (Kulchar v. Kulchar (1969) 1 Cal.3d 467, 471 (Kulchar), quoting 3 Witkin, Cal. Procedure, p. 2124.) Extrinsic fraud may be present " '[w]here the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practised on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; or where the attorney regularly employed corruptly sells out his client's interest to the other side.' " (Estate of Sanders (1985) 40 Cal.3d 607, 614, quoting United States v. Throckmorton (1878) 98 U.S. 61, 65-66.) For example, in Sanders our Supreme Court found extrinsic fraud when the executor of an estate deliberately misled a family member concerning the status of her inheritance until she had missed the opportunity to challenge the decedent's will, which the executor had previously induced the decedent to change to his benefit. (Sanders, at pp. 615-617.)
Even in the absence of deliberate deception, a default judgment may be set aside on the ground of extrinsic mistake if the default was the result of a party's excusable neglect. (Kulchar, supra, 1 Cal.3d at p. 471.) Such excusable neglect may occur when a party reasonably relies on an interested third party (such as a codefendant or an insurer) to defend an action. (Weitz v. Yankosky (1966) 63 Cal.2d 849, 855-856 (Weitz).) However, relief will be denied when "the complaining party has contributed to the fraud or mistake giving rise to the judgment" through the complaining party's own negligence. (Kulchar, supra, 1 Cal.3d at p. 473.)
A stringent three-part test applies to motions for equitable relief from default once a default judgment has been entered. (Rappleyea, supra, 8 Cal.4th at p. 982.) A moving party must: (1) demonstrate that it has a meritorious case; (2) articulate a satisfactory excuse for not presenting a defense to the original action; and (3) demonstrate diligence in seeking to set aside the default once discovered. (Ibid.)
b. The trial court's analysis
As discussed above, the trial court characterized the basis for Mansour's request for equitable relief as a "vague allegation" that Mansour's "former attorney was a known associate of plaintiffs." The court concluded that, "[t]o the extent that the default was entered as a result of attorney negligence, the remedy is a timely motion under [section] 473(b) or a malpractice action."
We disagree with the analysis. The trial court incorrectly identified Mills as an attorney and suggested that Mansour could sue him for malpractice. The court apparently concluded that Mansour's only available remedy was a timely motion under section 473, subdivision (b).
However, even if the trial court's analysis was incorrect, we must affirm the court's ruling if it is supported by any legally correct reason. (Rappleyea, supra, 8 Cal.4th at p. 981; D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19.) Several such reasons are present here.
c. Mansour did not reasonably rely on Mills to handle his defense
First, Mansour did not provide a satisfactory excuse for failing to present a defense. (Rappleyea, supra, 8 Cal.4th at p. 982.)
Mansour did not provide any evidence of extrinsic fraud. Mansour's claim that Mills acted deliberately and at Hartoonian's behest in sabotaging Mansour's defense is supported only by speculation. The only evidence of fraud that Mansour identifies is his testimony that Hartoonian and Mills had "worked together in the past." Evidence of a prior business relationship between Mills and Hartoonian does not support an inference that Hartoonian enlisted Mills in a scheme to cause Mansour's default.
Mansour's argument that such a scheme is the only logical reason for Mills's conduct is unpersuasive. Mills's incompetent handling of Mansour's defense is consistent with Mills's lack of legal training, and Mills's incentive to take on that task is consistent with the fact that Mansour paid him to do so. While the record suggests that Mills lied to Mansour about the status of Mansour's case, there is no evidence that Mills did so at Hartoonian's behest.
Mansour also did not demonstrate extrinsic mistake, because he did not show that he reasonably relied on Mills to handle his case. Mills was not a lawyer. And Mansour acknowledged that he never actually had any contact with any lawyers who purportedly worked in Mills's "group." Mansour also admitted that, at least by mid-2017—before the default judgment had been entered—he "began to realize that Mills was gravely mishandling the case." Yet Mansour did not consult a lawyer or attempt to investigate the significance of what had occurred in his case under Mills's watch, even after he learned that his default had been taken. Rather, he simply accepted Mills's assurances that Mills was working on setting aside the default.
In late May 2017, five months before the Judgment was entered, Mansour had already told Mills that he was "running out of patience" with Mills's purported efforts to set aside the default. Then on August 8, 2017—still more than two months before the hearing on the default judgment—no one attended a case management conference on Mansour's behalf. Mansour claims that Mills told him no one showed up for that hearing, but a notice that Hartoonian served on Mansour reflects that Hartoonian's counsel in fact attended the conference. That notice also informed Mansour of another court date on October 20, 2017. Mansour did not bother to attend that hearing despite Mills's obvious failure to represent his interests. In Mansour's absence, the court held an evidentiary hearing and entered judgment in favor of Hartoonian. Clearly, Mansour's own negligence "contributed to the fraud or mistake giving rise to the judgment." (Kulchar, supra, 1 Cal.3d at p. 473.)
Ironically, there apparently was no default at that time. As discussed above, default was entered at Hartoonian's request on March 10, 2017, after the action had been removed to federal court. That default was set aside on April 4, 2017, and default was again entered on June 2, 2017, at Hartoonian's request after the case had been remanded to state court.
Mansour relies on cases holding that a defaulting party may provide a satisfactory excuse by showing that his or her attorney engaged in egregious neglect amounting to "positive misconduct." (Orange Empire Nat'l Bank v. Kirk (1968) 259 Cal.App.2d 347, 353-354 (Orange Empire) [attorney did nothing to defend a client after the client had retained him, despite assurances that the attorney would handle the matter]; see Aldrich v. San Fernando Valley Lumber Co. (1985) 170 Cal.App.3d 725, 730-735 (Aldrich) [client's complaint was dismissed for failure to comply with court order to respond to interrogatories after the client's counsel was suspended from the practice of law]; People v. One Parcel of Land (1991) 235 Cal.App.3d 579, 584 [attorney totally failed to represent client by failing to oppose a default judgment motion and to return client's calls].)
The problem with this argument is that Mansour was not represented by an attorney. Mills is not a lawyer, and Mansour did not retain any other counsel. The few documents that Mansour filed in the case he signed as a pro. per. litigant. Mansour never even received informal legal advice from a lawyer. He admitted that he never had any personal contact with an attorney in Mills's purported "group."
The reasoning of the cases finding an acceptable excuse for default based upon an attorney's positive misconduct is that a client is entitled to rely on the expertise and diligence of the attorney that he or she hires. As the court explained in Aldrich, " 'Clients should not be forced to act as hawklike inquisitors of their own counsel, suspicious of every step and quick to switch lawyers.' " (Aldrich, supra, 170 Cal.App.3d at p. 739, quoting Daley v. County of Butte (1964) 227 Cal.App.2d 380, 392.) When a lawyer completely betrays the trust that a client has bestowed, the lawyer's conduct is not attributed to the client. (See Orange Empire, supra, 259 Cal.App.2d at p. 353 ["An attorney's authority to bind his client does not permit him to impair or destroy the client's cause of action or defense"].)
Here, Mansour chose to rely upon a nonlawyer to handle his defense. He forfeited any right to rely upon the protections that the attorney licensing rules give the public and surrendered any ability to pursue a malpractice action for his counsel's negligence. Unlike a party who hires an attorney, Mansour was not entitled to " 'sit back in peace and confidence without suspicious inquiries and without incessant checking on counsel.' " (Aldrich, supra, 170 Cal.App.3d at p. 739.)
Where a party to an action "relies upon a codefendant or other third party to conduct his defense . . . , the test is not whether counsel was inexcusably negligent but whether there was reasonable reliance by the party upon the one undertaking to defend him." (Bailey v. Roberts (1969) 271 Cal.App.2d 282, 286; see Weitz, supra, 63 Cal.2d at p. 855.) The record shows that Mansour did not reasonably rely on Mills to protect his interests. At a minimum, Mansour should have known that he could not rely on Mills after Hartoonian sought Mansour's default and Mansour "began to realize that Mills was gravely mishandling the case." Mansour's explanation that Mills persuaded him that the default was "part of his strategy" is not reasonable in light of Mills's evident incompetence and his repeated failures to protect Mansour's interests.
Cruz v. Fagor America, Inc. (2007) 146 Cal.App.4th 488 (Cruz) is instructive here. In that case, a company failed to respond to a personal injury complaint and then received a notice of a request for default. (Id. at pp. 504-505.) The company provided the notice to its insurer. (Id. at pp. 506-508.) Several months later the company received a request for entry of a default judgment. (Ibid.) The court concluded that the company "could not reasonably believe its insurer was defending against the default while it was receiving repeated indications that its insurer was not." (Id. at p. 508.)
Similarly, Mansour received repeated indications that Mills was not protecting his interests but he nevertheless did not seek counsel or assume responsibility for his own defense. Mansour could not reasonably rely on Mills under these circumstances.
d. Mansour did not act diligently to set aside the Judgment
The same analysis applies to Mansour's purported reliance on Mills to set aside the Judgment. A party who relies on a third party to set aside a default judgment must show that the reliance was reasonable. (Cruz, supra, 146 Cal.App.4th at p. 507, fn. 9.)
Notice of the default judgment was served on Mansour in October 2017. At oral argument, Mansour claimed that he did not receive it. However, Hartoonian's counsel filed a declaration in the trial court in which he testified that the default judgment was served on Mansour, and attached as an exhibit a copy of the default judgment containing a proof of service on Mansour. The proof of service shows that the default judgment was mailed to the same address in Bell Canyon as earlier pleadings, including the initial summons and complaint and the notice of the continued case management conference on August 8, 2017. Mansour returned an acknowledgment of receipt of the summons and complaint, and also clearly received the notice of the case management conference; a text message attached to his declaration contains a copy of it.
In the trial court, Mansour did not deny that he received the default judgment. Mansour testified in his declaration only that he did not "become aware of the effect of the entry of default judgment" until his bank account was levied in April 2018. (Italics added.) Thus, the record does not support Mansour's claim that he never received the default judgment.
Mansour should have known (or should have taken steps to find out) the significance of a judgment. Rather than seeking counsel or filing a motion to set aside the Judgment himself, Mansour continued to rely on Mills.
Even after requesting his file from Mills in April 2018, Mansour waited more than four months to file his motion to set aside the Judgment. Mansour argues that Mills's refusal to transfer his file hampered his efforts. But Mills's refusal to cooperate does not fully explain the delay. Other than Mansour's own declaration and his text messages with Mills, all the documents that Mansour ultimately submitted in support of his motion to set aside the Judgment were available from the court's files. In fact, that is where Mansour apparently obtained them.
Mansour's continued reliance on Mills to set aside the Judgment after it was entered was not reasonable. Nor was his months-long delay in filing a motion to set aside the Judgment even after he had severed his relationship with Mills. Mansour's lack of diligence in moving to set aside the Judgment is therefore a second ground supporting the trial court's decision to deny Mansour's request for equitable relief.
2. The Trial Court Did Not Err in Entering Judgment on Hartoonian's Quiet Title Cause of Action
Section 764.010 provides that in a quiet title action a court may not enter judgment by default, but must consider evidence of a plaintiff's title and such evidence "as may be offered" concerning a defendant's claims. Several courts have interpreted this section to mean that before entering judgment on a plaintiff's quiet title claim, a trial court must conduct an evidentiary hearing and consider any evidence that a defaulted defendant might present. (See Harbour Vista, LLC v. HSBC Mortgage Services Inc. (2011) 201 Cal.App.4th 1496 (Harbour Vista); Nickell v. Matlock (2012) 206 Cal.App.4th 934 (Nickell).)
That section reads in full: "The court shall examine into and determine the plaintiff's title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of a plaintiff's title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law." (§ 764.010.)
The record in this case shows that the trial court in fact conducted an evidentiary hearing on Hartoonian's quiet title cause of action. The court's minute order for the October 20, 2017 hearing states that the court conducted a "Default Prove-Up Hearing for Quiet Title." The hearing included live testimony from Hartoonian and consideration of 17 exhibits. The court found in favor of Hartoonian "[b]ased on the evidence and testimony presented in court."
Mansour argues that judgment on Hartoonian's quiet title claim was nevertheless improper because Mansour was not given notice of the hearing and therefore did not have an opportunity to present evidence on his own behalf. However, as the trial court correctly recognized, Mansour was not entitled to notice. (§ 1010; Harbour Vista, supra, 201 Cal.App.4th at p. 1505 [once a defendant's default is taken, the plaintiff "is no longer required to serve documents on it or give notice of any future court dates"].) Indeed, the court in Harbour Vista noted that, although a defaulted defendant has a right to participate in an evidentiary hearing under section 1010 prior to judgment, without notice or a right to participate in other proceedings "the most likely outcome is that the defaulting defendant will not learn of the hearing to adjudicate title until it is too late to attend." (Harbour Vista, at p. 1505.)
Later in its opinion, the court in Harbour Vista stated that "[i]f a court holds a properly noticed evidentiary hearing and no defendant turns up, then the court renders judgment 'in accordance with the evidence and the law,' based on what it has before it." (Harbour Vista, supra, 201 Cal.App.4th at p. 1508, italics added.) It is unclear what the court meant by a "properly noticed" hearing because, as mentioned, the court also correctly explained that a defaulted defendant is not entitled to receive notice. In any event, it is clear both from the court's opinion in Harbour Vista and from section 1010 that "proper" notice need not include notice served on a defaulted defendant. (See § 1010 ["No bill of exceptions, notice of appeal, or other notice or paper, other than amendments to the pleadings, or an amended pleading, need be served upon any party whose default has been duly entered or who has not appeared in the action or proceeding"].)
In any event, there is evidence that Hartoonian served a notice of the hearing. The record includes a "notice of hearing on entry of judgment by default" with a proof of service stating that it was mailed to Mansour on September 26, 2017. The notice advised that Hartoonian "will move for entry of Judgment" on October 20, 2017. The notice cited section 764.010 as well as Harbour Vista, supra, 201 Cal.App.4th 1496, and Nickell, supra, 206 Cal.App.4th 934.
The notice was not filed, and Mansour testified that he did not receive it. However, the trial court found that the notice was "served on defendants," noting that service was confirmed in the declaration of defense counsel.
That is sufficient evidence that the notice was in fact served. We will not revisit the trial court's finding on this issue. (Ramos v. Homeward Residential, Inc. (2014) 223 Cal.App.4th 1434, 1440-1441 [appellate court defers to factual determinations made by the trial court in considering evidence on a motion to vacate a default judgment].)
Mansour asserts in his opening brief that this notice "appears to have been simply manufactured after the fact by Hartoonian's counsel in an attempt to show notice." This is a serious allegation. An accusation that opposing counsel committed perjury and engaged in a fraud on the court should not be made lightly. While we do not decide the facts, we would expect that such an allegation would be based on something more than the evidence that Mansour cites. Mansour points out that the notice was not filed; the signature on the proof of service does not match the name; and the notice cites the same cases that Mansour later cited in his moving papers on his motion to set aside the Judgment. But, as discussed further below, Mansour does not cite any requirement that the notice be filed. While the signature discrepancy might show carelessness, it does not support an accusation of fraud against an officer of the court. And the fact that the notice cites the relevant cases for the conduct of an evidentiary hearing under section 764.010 is not surprising, much less evidence of perjury.
Mansour argues that even if the notice was served, it was not sufficient because it was not filed. We reject the argument.
Hartoonian was not required to provide notice to Mansour at all; the fact that he did not file the notice that he served is immaterial. Moreover, Hartoonian cites no requirement that notice of a hearing under section 764.010 must be filed. Nor does he cite authority for a general rule that a notice of hearing must be filed. Indeed, in the analogous area of uncontested trials, proof that the adverse party was served with notice of the trial is accomplished through evidence at trial rather than by filing the notice. (See § 594, subd. (b).) Thus, even if notice of the hearing under section 764.010 were required here, Mansour has failed to show that the notice Hartoonian provided was inadequate.
3. The Relief Awarded in the Judgment Does Not Exceed the Relief Requested in the Complaint
Section 580, subdivision (a) provides that the relief granted to a plaintiff upon a defendant's default "cannot exceed that demanded in the complaint." Section 585, subdivision (b) similarly provides that upon a defendant's default, the "court shall hear the evidence offered by the plaintiff, and shall render judgment in the plaintiff's favor for that relief, not exceeding the amount stated in the complaint."
Exceptions apply when notice is given in a statement of damages in a personal injury action under section 425.11 or in a punitive damage statement under section 425.115. Neither of those exceptions applies here.
The primary purpose of section 580 is to "guarantee defaulting parties adequate notice of the maximum judgment that may be assessed against them." (Greenup v. Rodman (1986) 42 Cal.3d 822, 826.) Such notice is required by due process. (Ibid.) Notice of the amount sought in a complaint "enables a defendant to exercise his right to choose—at any point before trial, even after discovery has begun—between (1) giving up his right to defend in exchange for the certainty that he cannot be held liable for more than a known amount, and (2) exercising his right to defend at the cost of exposing himself to greater liability." (Id. at p. 829.) Because of the importance of providing a fair hearing to the defaulting party, section 580 is strictly construed. (Id. at p. 826.) Even actual notice of the defaulting party's potential liability "may not substitute for service of an amended complaint." (Ibid.)
Mansour argues that the Judgment is void under section 580 because it awarded relief beyond what Hartoonian requested in the Complaint. Mansour argues that the Complaint sought only a declaration that Hartoonian's own calculation of the outstanding balance due under the Note was correct and therefore did not provide notice that a judgment might deem the entire amount due under the Note to be paid in full.
As mentioned, the trial court concluded that two allegations in the complaint provided adequate notice that the court might deem the Note to be paid in full. First, the court cited paragraph 60 of the Complaint, which sought a declaration "describing the total amount due on the note, if any." (Italics added.) Second, the court cited the Complaint's prayer for relief, which included a typical general request for "[o]ther such relief as this Court may deem just and proper." We review the trial court's ruling de novo. (Cruz, supra, 146 Cal.App.4th at p. 496.)
Some courts, including the court in Cruz, have interpreted the language of section 473, subdivision (d) that a court "may" set aside a void judgment to mean that a court may exercise its discretion not to grant relief from a default judgment even if the judgment is void. (See Cruz, supra, 146 Cal.App.4th at p. 495; see also discussion in Airs, supra, 23 Cal.App.5th at p. 1023.) However, as the court explained in Airs, cases interpreting section 580 "appear to require reversal," and that approach makes sense in light of section 580's strict mandate. (Airs, at p. 1023.) We need not consider this issue because the trial court did not purport to exercise any discretion to preserve a void judgment, and in any event we hold that the Complaint provided adequate notice.
The general prayer for "other such relief" clearly was not sufficient to put Mansour on notice of a possible finding that the Note had been paid in full. In Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 493-494, our Supreme Court rejected the argument that a prayer for damages "in excess of $20,000" was sufficient to provide notice that a default judgment might be entered for $26,457.50. The court reasoned that section 580's goal of "fundamental fairness" would be undermined "if the door were opened to speculation, no matter how reasonable it might appear in a particular case, that a prayer for damages according to proof provided adequate notice of a defaulting defendant's potential liability." (Id. at p. 494.) A request for "other relief" is just as vague, or perhaps even vaguer, than a request for damages "according to proof."
The Complaint's request for a declaration concerning the amount due on the Note, "if any," presents a closer question. While vague, that phrase did provide a specific limit on the amount of money at stake in Hartoonian's cause of action for declaratory relief. Mansour claimed a finite amount of money due under the Note, and paragraph 60 indicated that he could lose it all.
However, Mansour argues that the "if any" language amounted to no more than a boilerplate allegation in light of specific allegations in the Complaint concerning the amounts that Hartoonian actually paid under the Note. Mansour cites allegations in the Complaint stating that Hartoonian paid a total of $87,938.90 on the Note from November 2014 (when the Note was executed) to June 2016. Mansour points out that this amount falls far short even of the $180,000 principal amount due under the Note. Thus, Mansour claims that none of the allegations in the Complaint, even taken as true, "would entitle Hartoonian to a declaration that the Note has been paid in full."
However, this analysis only accounts for allegations in the Complaint concerning payments after the Note was executed. The Complaint alleges that the original principal amount of the Note included over $35,000 in illegal usurious interest and "points" on the amounts that Hartoonian had previously borrowed. The Complaint alleges that Hartoonian agreed to this amount only under the threat of immediate litigation. The Complaint also alleges that after the Note was executed Mansour continued to demand usurious repayment terms by improperly adding interest for October 2014 and by charging improper late fees each month.
The specific allegations of the Complaint, including allegations concerning the total amount of money that Hartoonian borrowed from Mansour and the total amount that he repaid, show that Hartoonian paid off more than the original principal amount of the loans. According to the Complaint, Hartoonian borrowed a total amount of $333,000. He allegedly paid Mansour $255,000 before the Note was executed and $87,938.90 after, for a total repayment of $342,938.90.
Paragraph 49 of the Complaint requested relief under California's usury laws. Hartoonian claimed that, "[a]s a result of Defendants', and each of them [sic], usurious interest demands, Plaintiff is seeking a nullification of all interest on the loan(s) such that Defendant(s), and each of them, should only be entitled to the principle [sic] sum, less payment(s) already made." (Italics added.) As mentioned, the Complaint alleged that Hartoonian had actually repaid Mansour $9,938.90 more than the total principal amount that Hartoonian had borrowed ($342,938.90 - $333,000 = $9,938.90). Thus, applying the specific request for relief in paragraph 49 of the Complaint, Hartoonian owed nothing under the Note.
Because the parties' initial briefing did not discuss the effect of this particular request for relief, we provided the parties with an opportunity under Government Code section 68081 to submit a letter brief on the issue.
In his letter brief, Mansour argues that the Complaint's allegations about usurious terms in the loans prior to the Note are irrelevant because the Note "effected a novation or settlement of the prior debt whereby the parties agreed to compromise their past dispute over amounts due and enter into a new, valid, separate and independent agreement." However, a number of cases hold that successive agreements that incorporate an original usurious obligation are all tainted by the original usury. (See Westman v. Dye (1931) 214 Cal. 28, 38 (Westman) [where a note was given as a renewal of a prior indebtedness, "the taint of usury in the original transaction attached to all renewals thereof"]; Hardwick v. Wilcox (2017) 11 Cal.App.5th 975, 994 (Hardwick) [where usurious loans were rolled over into subsequent notes, "the original taint of usury" attached to the whole family of consecutive obligations]; Shirley v. Britt (1957) 152 Cal.App.2d 666, 669-670 ["where usurious interest is exacted, the defense of usury, not only in the particular note sued upon, but in all of its predecessors where it exists . . . is available to the maker as a defense"].) Moreover, Mansour does not explain why a second agreement to pay usurious interest on a prior loan would be any more valid than the first. (See Stock v. Meek (1950) 35 Cal.2d 809, 817 [the theory of the usury laws is that "society benefits by the prohibition of loans at excessive interest rates, even though both parties are willing to negotiate them"].)
In any event, the issue is not whether Mansour would have been able to establish a novation if he had defended the action, but whether he was on notice of the relief that the trial court ordered. The Complaint provided such notice by alleging that usurious interest from the prior loans was rolled over into the principal amount in the Note, and by seeking cancelation of "all interest on the loan(s)." That remedy was colorable in light of the governing law. Mansour therefore had sufficient notice that the trial court would find that the Note had been paid in full.
Mansour also argues that he was not on notice of the possibility that interest on the loans prior to the Note would be canceled because the statute of limitations had run on such a remedy. The law does not support his argument. Apart from the issue of whether the statute of limitations is an affirmative defense that may be waived, case law establishes that the statute of limitations does not run on the collection of usurious interest payments so long as the usurious loan remains unpaid. (Hardwick, supra, 11 Cal.App.5th at p. 992.) That is because any payment of usurious interest is deemed to apply to the principal amount and may be set off against the principal in actions to collect the debt. (Ibid.) And, in an agreement with usurious terms, all interest payments are deemed to be payments of usurious interest: "if the contract calls for a greater rate of interest than that permitted by the statute, the transaction is usurious, and no interest can be collected thereon." (Westman, supra, 214 Cal. at p. 39.)
In sum, the Complaint: (1) requested a declaration in paragraph 60 concerning the total amount due on the Note, "if any;" (2) requested relief in paragraph 49 consisting of a "nullification of all interest"; and (3) contained specific allegations showing that Hartoonian had repaid more than he had borrowed. When considered together, these allegations were sufficient to provide Mansour with notice that a judgment might include a declaration that the Note had actually been paid in full.
The Judgment found in favor of Hartoonian on his third cause of action for violation of the usury laws, which included the request for relief in paragraph 49. Although the trial court did not rely on paragraph 49 in upholding the Judgment, our review is de novo, and we must affirm on any legally sufficient ground. We therefore reject Mansour's argument that the Judgment was void under section 580.
DISPOSITION
The judgment is affirmed. Hartoonian is entitled to his costs on appeal.
NOT TO BE PUBLISHED.
LUI, P. J. We concur:
ASHMANN-GERST, J.
CHAVEZ, J.