Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County No. CIV700577, John P. Wade, Judge.
Law Office of Jeff Grotke and Jeff Grotke for Plaintiff and Appellant.
Law Office of Alan T. Holmes and Alan T. Holmes for Defendant and Respondent.
OPINION
RAMIREZ, P.J.
Plaintiff and appellant Humberto Perez (Perez) challenges the trial court’s ruling granting the motion of defendant and respondent Peggy Sue Smith (Smith) to set aside a default and default judgment under Code of Civil Procedure section 473 for “excusable neglect.” Specifically, Perez argues the court abused its discretion when it found that Smith acted reasonably when she relied on the assurances of her ex-husband, and co-owner of the property in question, that he had hired an attorney and would defend the lawsuit on behalf of them both. As discussed below, we conclude that the trial court did not abuse its discretion when it granted Smith’s motion.
All section references are to the Code of Civil Procedure unless otherwise indicated.
Statement of Facts and Procedure
On April 18, 2007, Perez filed a complaint in the superior court alleging three causes of action. The factual basis of the complaint was that on November 1, 2003, Daun Smith, Smith’s ex-husband, entered into a written agreement with Perez for the purchase of Daun Smith’s commercial property and auto repair and towing business. Perez and Daun Smith also entered into a lease agreement, whereby Perez would run the business and make lease payments while retaining the option to purchase the property. The complaint also alleged that in April 2007, a person named Kham Buntoum told Perez that Buntoum would be purchasing the property. The complaint alleged that Smith was aware of the sale agreement and allowed and encouraged her husband to act as her agent in the transaction, and so she was bound by his actions. The three causes of action were: (1) breach of contract damages against Smith and Daun Smith; (2) specific performance against Daun Smith; and (3) intentional interference with contract against Buntoum.
Smith and Daun Smith divorced at some point, though each apparently retained their respective 50 percent interest in the property.
Perez was a long-time employee of Daun Smith’s business, Empire Auto Body and Towing.
Smith did not answer the complaint, and so her default was entered on May 29, 2007. On July 31, 2007, the court entered a default judgment against all three defendants. The judgment provided that Smith and Daun Smith must convey title to the business and property to Perez at a sale price of $520,000, that “the defendant” would carry a note for 45 percent of the purchase price at six percent, that attorney fees of $8,500 were to be paid from escrow, and that damages and costs of $8,500 were awarded against Buntoum. The clerk of the court was authorized to sign any documents necessary to complete the sale.
On September 14, 2007, Smith filed an “ex parte application for order shortening time for hearing and service of motion to set aside default and default judgment . . . .” Attached to the application was the motion, memorandum of points and authorities and exhibits. In her motion, Smith argued that Daun Smith did not have the power and authority to enter into the purchase agreement without her because they owned the property together. Attached to the motion was a Grant Deed dated June 3, 2004, and recorded on June 15, 2004, transferring the property from “Daun E. Smith and Peggy Smith, husband and wife as joint tenants” to “Daun E. Smith, a married man as his sole and separate property, as to an undivided 50% interest and Peggy Sue Smith, an unmarried woman, as to an undivided 50% interest, as tenants in common.” Smith alleged that she had not agreed to sell her interest in the property to Perez and that she did not know about the purchase agreement until Perez filed the lawsuit. Smith argued that the default and default judgment should be set aside for excusable neglect under section 473, subdivision (b). Smith alleged that, upon being served with the complaint, she telephoned Daun Smith and he assured her that he had retained an attorney to respond to the lawsuit. Smith alleged that Daun Smith asked her to pay half of the attorney fees, but that she refused. Smith further alleged that she called Daun Smith again after receiving the notice of default, and that he assured her his attorney was handling the matter. Smith only retained an attorney after receiving a copy of the default judgment. Smith further argued that the default judgment was void because the complaint requested relief in the form of specific performance only against Daun Smith, whereas the judgment granted relief in excess of that demanded in the complaint, i.e., granted specific performance against Smith as well. Finally, Smith argued that she had a meritorious defense to the entire action in that she had not signed the purchase agreement and had not authorized Daun Smith to do so on her behalf. No opposition from Perez to Smith’s motion appears in the record.
The hearing on Smith’s motion was held on October 10, 2007. The trial court commented that “This is a real close call.” The court rejected Smith’s argument that the complaint did not request specific performance of the breached contract against her. However the court concluded that Smith’s reliance upon her ex-husband’s representations that he would defend the lawsuit was reasonable, even after the default was entered. “The estranged husband or separated husband, whatever their status is, he led Miss Smith to believe that even after the defaults occurred, that he was—that his attorney would have these set aside. And I find that under the circumstances, it was reasonable for her to believe that. And I think the reason that it was reasonable was that he had an interest in protecting himself, and she believed that he probably would protect himself. [¶] . . . This is a person who is a co-defendant, a husband whose interests are coincidental with the interests of [Smith].” The court granted Smith’s motion and entered an “order setting aside default and default judgment.” This appeal followed.
Discussion
Perez argues that the trial court abused its discretion when it found that Smith acted reasonably in relying on her ex-husband to defend the lawsuit, and thus erred when it granted her motion to set aside the default and default judgment based on “excusable neglect” under section 473, subdivision (b).
“The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect.” (§ 473, subd. (b)).
Except where the moving party submits an attorney affidavit of fault, relief under section 473 for “‘mistake, inadvertence, surprise, or excusable neglect’” is discretionary. (Lorenz v. Commercial Acceptance Ins. Co. (1995) 40 Cal.App.4th 981, 989.) Because such a motion is addressed to the sound discretion of the trial court, its ruling will not be disturbed on appeal absent a clear showing of abuse. (Carroll v. Abbott Laboratories, Inc. (1982) 32 Cal.3d 892, 897-898, superceded by statute on another point as stated in Rotter v. Bernemen 227 Cal.App.3d. 1239, 1243.) The burden of showing an abuse of discretion rests on the appellant. (Broadway Fed. etc. Loan Assoc. v. Howard (1955) 133 Cal.App.2d 382, 401.) On review, we may not substitute our judgment for that of the trial court’s express or implied findings if they are supported by substantial evidence. (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143.) All issues of credibility are within the province of the trier of fact, so all conflicts are resolved in favor of the respondent. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 925-926.)
The law specific to whether reliance on a third party to defend a lawsuit is “excusable neglect” is set forth in a case discussed by the court and the parties, Cruz v. Fagor America (2007) 146 Cal.App.4th 488 (Cruz). “‘Reliance on a third party constitutes a satisfactory excuse only if it is reasonable.’ [Citations] ‘With regard to whether the circumstances warranted reliance by the defendant on a third party, the efforts made by the defendant to obtain a defense by the third party are, of course, relevant.’ [Citation] ‘The defendant cannot reasonably rely on the third party’s continued assurances in light of contrary information showing the third party is providing no defense.’ [Citation]” (Id. at p. 507.)
We agree with the trial court that this was a close case. In her declaration in support of the motion to set aside the default, Smith stated that she called Daun Smith, then her ex-husband, upon receiving a copy of the complaint. Daun Smith told her that “he had retained an attorney to represent [them] in the action” and asked her to pay half the attorney fees. Smith stated that she told Daun Smith that he should pay for the attorney himself, and ended the conversation after he said that he would. After Smith received a copy of the default, she again telephoned Daun Smith. Smith “informed me that our attorney was working on the matter and that our attorney had told him that it would take two years before anything could be done with the property and that in the meantime, the attorney was taking all steps necessary to reinstate the action.”
We cannot say that the trial court abused its discretion here. Under the criteria set forth in Cruz, Smith made a good faith, reasonable effort to get her ex-husband to defend the suit, first upon receiving the complaint and again after being notified of the default. Smith called him and asked him what he was going to do about the lawsuit. Smith acted reasonably in relying on Daun Smith’s assurances that he had already hired an attorney who was taking care of the matter, even though she refused to share in paying for the attorney. This is because they both shared an equal interest in the property, and so Smith was reasonable in believing Daun Smith’s representations that he was defending his own interest. For the same reasons, even after being notified of the default, Smith acted reasonably in relying on Daun Smith’s assurances that his lawyer was taking care of the matter, in that Daun Smith gave an explanation that a reasonably prudent non-lawyer would accept—that the “attorney had told [Daun Smith] that it would take two years before anything could be done with the property and that in the meantime, the attorney was taking all steps necessary to reinstate the action.”
Although Perez argues that Smith’s reliance on Daun Smith’s assurances was unreasonable because Daun Smith had an Internal Revenue Service lien on the property, and thus had no interest to protect, there is no evidence on the record that this is true, or whether and when Smith was aware of this fact and its implications for Daun Smith’s motivation to defend the lawsuit. In addition, we believe it was reasonable for Smith to believe Duan Smith, even though she had not been contacted by the attorney. This is because it appears from the record that Smith was not involved in the auto repair business or in the transaction that resulted in this lawsuit. Thus, Perez has not established in this appeal that the trial court abused its discretion when it found that Smith’s failure to defend against the lawsuit was a result of “excusable neglect” under section 473, subdivision (b).
Disposition
The ruling of the trial court granting Smith’s motion to set aside the default and default judgment is affirmed. Smith is to recover her costs on appeal.
We concur: GAUT, J., MILLER, J.