Opinion
A158052
06-29-2021
DONNA O'BALLE, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant and Respondent.
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. CGC-10275693
MILLER, J.
Plaintiff Donna O'Balle appeals from the trial court's June 2019 order granting a motion by Fireman's Fund Insurance Company (Fireman's Fund) to set aside a 2015 default judgment that had been entered against Fireman's Fund's insured, Associated Insulation of California, Inc. (Associated) in an asbestos personal injury case.
We previously vacated a similar order: in February 2019 we issued an opinion that vacated the trial court's December 2016 order granting Fireman's Fund's motion and remanded the matter for the trial court to provide a clearer explanation of its ruling. (O'Balle v. Fireman's Fund Insurance Company (Feb. 19, 2019, A151530) [nonpub. opn.] (O'Balle).) On remand, the trial court did precisely that.
Because O'Balle fails to show that the trial court has abused its discretion, we affirm.
APPLICABLE LAW
A trial court may grant equitable relief from a default judgment “only in exceptional circumstances.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981 (Rappleyea).) When a defaulted party seeks equitable relief from default on the basis of extrinsic mistake, as is the case here, the party must (1) demonstrate that it has a meritorious case, (2) articulate a satisfactory excuse for not defending the original action, and (3) “ ‘demonstrate diligence in seeking to set aside the default once... discovered.' ” (Id. at p. 982.)
We review an order setting aside a default judgment on equitable grounds for abuse of discretion. (Rappleyea, supra, 8 Cal.4th at p. 981.) “As a result, we may reverse only if we conclude the trial court's decision is ‘ “so irrational or arbitrary that no reasonable person could agree with it.”' [Citation.] That a different decision could have been reached is not sufficient because we cannot substitute our discretion for that of the trial court. The trial court's ruling must be beyond the bounds of reason for us to reverse it. [Citation.]” (Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241, 1249 (Mechling)[affirming orders setting aside default judgments in cases with facts similar to those before us].)
FACTUAL AND PROCEDURAL BACKGROUND
A. The Prior Appeal
O'Balle filed a complaint against multiple defendants in 2010 alleging personal injuries from exposure to asbestos dating back to the 1980's. (O'Balle, supra, at p. 1.) One of the defendants was Associated, which had apparently gone out of business years before, and which did not respond to the complaint. (Id. at pp. 1-2.) O'Balle filed a request for entry of default against Associated in May 2011 and an amended request in March 2012. (Id. at p. 2.) In February 2012, before the amended request for default was filed, O'Balle's counsel notified Fireman's Fund of O'Balle's lawsuit and demanded coverage. (Ibid.) The notice did not mention that O'Balle was seeking a default against Associated. (Ibid.)
In its March 2012 response to the notice, Fireman's Fund stated that it had searched its records and “had ‘not located any reference or policies of insurance issued to [Associated] under any [Fireman's Fund] company.' ” (O'Balle, supra, at p. 2.) Fireman's Fund asked O'Balle's counsel to send it any policies or “ ‘secondary information,' ” and stated it would take no further action until it reviewed those materials. (Ibid.) There was no response from O'Balle's counsel. (Ibid.)
More than 3 years later, in July 2015, a default judgment of $2, 191, 750 was entered against Associated. Notice of entry of the judgment was not served on Fireman's Fund. (O'Balle, supra, at p. 2.)
In August 2016, Fireman's Fund moved to set aside the default and default judgment on equitable grounds. (O'Balle, supra, at p. 2.) Fireman's Fund argued that the case was a classic example of extrinsic mistake, and supported its motion with an attorney declaration stating that it had issued liability insurance to Associated; that in February 2016 it “first retained counsel to defend any asbestos claims made against” Associated; and that Associated's corporate status had been suspended. (Ibid.) O'Balle argued in opposition that Fireman's Fund failed to present evidence to satisfy the requirements for equitable relief from default judgment. (Ibid.)
By the time of the December 2016 hearing on the motion, oral argument on the merits of the motion had apparently taken place, and, as we noted in our earlier opinion, “counsel for the parties appeared to understand that the trial court would grant Fireman's Fund's motion as to the default judgment and deny it as to the default.” (O'Balle, supra, at p. 2-3.) As relevant here, the only argument at the December 2016 hearing concerned the form of the court's order. (Ibid.) Although the trial court judge said he was granting relief from the default judgment based on equitable principles, he did not state how the principles applied, either on the record or in the written order that followed. (Ibid.)
The record contained no transcript of that earlier argument. (O'Balle, supra, at p. 3.)
We vacated the order and remanded “to allow the trial court to explain how it exercised its discretion in granting Fireman's Fund's motion for relief from the default judgment.” (O'Balle, supra, at p. 5.)
Counsel for Fireman's Fund had represented to us that the trial court, which had presided over numerous cases like the one before us, was familiar with facts and circumstances not reflected in the record. (O'Balle, supra, at pp. 3, 5.) This case is but one of several appeals filed in this appellate district arising from orders granting motions by Fireman's Fund to be relieved of default judgments against Associated. O'Balle's was the only case assigned to this division. Of the others, several were consolidated in Division Five, which issued a published opinion affirming the trial court's order setting aside the entry of default judgment (i.e., Mechling, supra). Several were consolidated in Division Four, which issued a nonpublished opinion affirming the trial court (Londene v. Associated Insulation of California, Inc. (Feb. 1, 2019, A149605, A149607, A149610, A149612) [nonpub. opn.]), and several were consolidated in Division One, which also issued a nonpublished opinion affirming the trial court. (Harig v. Asbestos Corp. Limited (Mar. 28, 2019, A149972) [nonpub. opn.].)
B. Remand and Second Appeal
On remand, the trial court ordered the parties to submit briefs addressing the legal and equitable grounds to set aside the default judgment. The trial court also ordered Fireman's Fund to submit affidavits indicating when it located any insurance policies issued to Associated by any Fireman's Fund company, when Fireman's Fund discovered that default judgment had been entered, and what steps Fireman's Fund took after discovering the default judgment. Fireman's Fund provided that information, but O'Balle objected to the introduction of new evidence into the record.
In June 2019, the trial court issued a new order setting aside the default judgment. The trial court stated that it was “mindful of O'Balle's objection” to the evidentiary submission and that the order would explain how the court had exercised its discretion in issuing the December 2016 order. The order stated as follows:
As the trial court described the evidentiary submission in its June 2019 order, Fireman's Fund submitted declarations stating that it first located the liability policy covering Associated on February 11, 2016, and that its counsel located the default and default judgment in this case on April 27, 2016.
“The Court sets aside the default judgment... on equitable grounds of extrinsic mistake because Fireman's Fund did not have notice of the lawsuit against Associated and never had an opportunity to present its case in court. [Citation to Rappleyea, supra.]
“Between March 1, 2016 and August 31, 2016, Fireman's Fund filed motions in several other cases to set aside judgments entered against Associated. Fireman's Fund filed its motion to set aside the... default judgment in this case on August 30, 2016. Of the many motions that came before this Court, counsel for Fireman's Fund submitted the same declaration, stating, among other things, ‘It was in February 2016 that Fireman's Fund first retained counsel to defend any asbestos claims made against [Associated], and thereafter Fireman's Fund made its first appearance in this case.'
“The Court finds that Fireman's Fund acted with sufficient diligence to satisfy the requirement for equitable relief, notwithstanding an absence in the record as to when Fireman's Fund located the policy applicable to Associated or discovered that judgment had been entered. Fireman's Fund responded to O'Balle's notice of her lawsuit and demand for coverage, stating in March 2012 that it had searched its records and had ‘not located any reference or policies of insurance issued to [Associated] under any [Fireman's Fund] company.' It further requested that O'Balle forward any alleged policies and/or secondary information for it to review and stated it would take no further action until that time. O'Balle did not respond. Three years later, in July 2015, O'Balle entered the default judgment. Within seven months, Fireman's Fund hired counsel and within another six months, it filed its motion to set aside the default and default judgment. Given O'Balle's lack of response and failure to notify Fireman's Fund of the entry of judgment despite Fireman's Fund's letter in March 2012, the Court finds that Fireman's Fund was not dilatory, as it did not believe it had issued any policy to Associated.
“The Court finds that exceptional circumstances exist to grant equitable relief. (Rappleyea, supra, 8 Cal.4th at 981-982.) Fireman's Fund has met its burden of proving diligence and is entitled to litigate the liability of its insured on the merits. Any prejudice to O'Balle is outweighed by prejudice to Fireman's Fund, considering Fireman's Fund did not believe it had issued any policy to Associated, O'Balle waited three years before entering the default judgment against Associated, and the judgment is in excess of two million dollars.”
O'Balle timely appealed from the June 2019 order.
We now grant Fireman's Fund's unopposed request for judicial notice, which we took under submission for decision with the merits.
DISCUSSION
O'Balle contends that the trial court erred by setting aside the default judgment based solely on the fact that Fireman's Fund never had its day in court and without any evidence of a meritorious defense, a satisfactory excuse, or the necessary diligence. We disagree.
First, O'Balle mischaracterizes the trial court's ruling. The court's order shows that the court considered the facts of the case, including the timeline of events and the history of communication (and non-communication) between the parties, to conclude the circumstances were exceptional and warranted equitable relief. The court did not rule that equitable relief was appropriate simply because Fireman's Fund did not have its day in court. Instead, the court concluded that equitable relief was appropriate in view of its finding that Fireman's Fund lacked the opportunity to have its day in court in a particular set of circumstances that included O'Balle contacting Fireman's Fund to seek coverage, but utterly failing to notify Fireman's Fund that she was seeking a default or even to serve Fireman's Fund with notice of the default judgment itself more than three years later.
Second, there was evidence before the court to support the court's implicit findings that Fireman's Fund had a meritorious defense and a satisfactory excuse, as well as evidence to support the court's explicit finding that Fireman's Fund acted with sufficient diligence.
We begin with the requirement of a meritorious defense. There is no dispute that O'Balle's alleged exposure to asbestos occurred decades ago; that neither Associated nor Fireman's Fund defended the suit she filed; and that O'Balle obtained a default judgment of over $2.1 million with an unchallenged showing of damages and causation. (O'Balle, supra, at pp. 1-3.) From this the court could reasonably infer that the “damages award would have been impacted had Fireman's fund presented a defense and challenged [her] proof of causation and damages” and that Fireman's Fund had a sufficiently meritorious defense to entitle it to an adversary proceeding. (Mechling, supra, 29 Cal.4th at pp. 1247-1248.)
The court could also reasonably conclude that Fireman's Fund articulated a satisfactory excuse for not defending O'Balle's lawsuit. Shortly after Fireman's Fund was notified by O'Balle's counsel of the lawsuit in 2012 (notification that did not include information about O'Balle seeking a default), it informed O'Balle that after searching its records it had not located any applicable policy and asked O'Balle to provide further information, but none was ever forthcoming. (O'Balle, supra, at p. 2.) From this, the trial court could reasonably infer that Fireman's Fund did not believe that Associated was its insured, which the court could properly view as a satisfactory excuse for not defending the suit. (Mechling, supra, 29 Cal.4th at p. 1248.)
On the record here, we find no abuse of discretion in the trial court's conclusion that Fireman's Fund established the necessary diligence in seeking to set aside the default judgment, even in the absence of information in the record as to when Fireman's Fund located the relevant insurance policy or discovered that a default judgment had been entered. Fireman's Fund hired counsel within seven months of the entry of judgment and filed its motion to set the judgment aside within six months after that. As the trial court explained, it viewed Fireman's Fund as adequately diligent in view of O'Balle's failure to respond to Fireman's Fund's March 2012 letter, and her failure to notify Fireman's Fund of the entry of the default judgment. (See Mechling, supra, 29 Cal.App.5th at p. 1244 [no abuse of discretion in granting equitable relief from default judgments entered in 2013 and 2015 where notice of entry of judgment not served on Fireman's Fund, and Fireman's Fund retained counsel in 2016 and moved for relief five months after the retention].)
Finally, in ruling on “a motion to set aside a default judgment on equitable grounds, the ‘court must weigh the reasonableness of the conduct of the moving party in light of the extent of the prejudice to the responding party.' ” (Mechling, supra, 29 Cal.4th at pp. 1248-1249.) The trial court did so, concluding that any prejudice to O'Balle was outweighed by prejudice to Fireman's Fund, and explaining the basis for its conclusion.
In sum, we conclude that O'Balle has failed to demonstrate that the trial court abused its discretion in granting Fireman's Fund's motion to vacate the default judgment against Associated.
DISPOSITION
The order appealed from is affirmed. Fireman's Fund shall recover its costs on appeal.
WE CONCUR: Kline P.J., Stewart, J.