Bae v. T.D. Service Co. of Arizona
199 Cal. Rptr. 3d 282
Cal. Ct. App.2016Background
- Plaintiff James Bae (initially as an individual dba and later a Nevada corporation C & H Natural Food) sued after a nonjudicial foreclosure sale of Glen Ivy property, alleging wrongful foreclosure, bankruptcy-stay violation, failure to give notices, conversion, negligence, and conspiracy.
- T.D. Service Company (trustee) filed an unchallenged Civil Code §2924l declaration of nonmonetary status stating it was named solely as trustee and disclaimed monetary liability; no party objected within the statutory period.
- Plaintiff obtained a clerk-entered default (requests mailed to trustee but not to trustee’s counsel) and later a default judgment awarding $3,000,000 against T.D. despite the prior §2924l declaration.
- Trustee’s counsel learned of the default and judgment only when plaintiff attempted to levy on trustee’s accounts, and moved (years later) to set aside the default and default judgment on grounds including extrinsic mistake and procedural errors in obtaining default.
- The trial court granted relief and set aside the default and default judgment; plaintiff appealed. The Court of Appeal affirmed, concluding equitable relief (extrinsic mistake) was warranted because the unchallenged §2924l declaration precluded monetary liability and the clerk/trial court erred in entering default and judgment without notice to counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred in setting aside the clerk’s default and default judgment | Bae: court lacked basis to vacate; procedural time limits and statute do not permit relief | T.D.: unchallenged §2924l declaration made trustee a nominal, non‑monetary defendant; clerk/judge erred and extrinsic mistake justifies equitable relief | Affirmed — relief proper under extrinsic mistake; three‑part Rappleyea test satisfied |
| Whether an unchallenged §2924l declaration bars entry of default/judgment for monetary damages | Bae: trustee must still participate or renew declaration after amendment; plaintiff sought damages via default | T.D.: unchallenged declaration exempts trustee from participation and monetary awards; plaintiff had to object or move under CCP §473 | Held for T.D.: §2924l relieved trustee from participation and monetary liability absent timely objection/motion |
| Whether failure to mail default/default‑judgment applications to trustee’s counsel prejudiced trustee | Bae: notice to trustee suffices; no prejudice shown | T.D.: failure to mail to counsel violated CCP §587 affidavit requirement and deprived counsel of opportunity to act | Held for T.D.: nondisclosure to counsel was prejudicial and supports equitable relief |
| Whether equitable relief was barred by time limits (CCP §§473, 473.5) | Bae: motion untimely; statutory relief unavailable beyond periods | T.D.: sought equitable (extrinsic mistake) relief, which can be granted outside statutory windows when exceptional circumstances exist | Held: equitable relief available; because of extrinsic mistake, court properly vacated default/judgment |
Key Cases Cited
- Rappleyea v. Campbell, 8 Cal.4th 975 (1994) (sets three‑part test for vacating default judgment for extrinsic mistake: meritorious defense, satisfactory excuse, diligence)
- Kachlon v. Markowitz, 168 Cal.App.4th 316 (2008) (explains Civil Code §2924l procedure and trustee’s limited liability after unchallenged declaration)
- Ferraro v. Camarlinghi, 161 Cal.App.4th 509 (2008) (discusses clerk’s ministerial role in entering defaults and limits on default entry)
- Biancalana v. T.D. Service Co., 56 Cal.4th 807 (2013) (describes statutory scheme governing nonjudicial foreclosure sales)
- Cruz v. Fagor America, Inc., 146 Cal.App.4th 488 (2007) (reviews standards and timing for vacating default judgments under CCP §473)