CALIFORNIA CAPITAL INSURANCE COMPANY et al. v. CORY MICHAEL HOEHN
S277510
Supreme Court of California
November 18, 2024
Justice Jenkins authored the opinion of the Court, in which Chief Justice Guerrero and Justices Corrigan, Liu, Kruger, Groban, and Evans concurred.
Third Appellate District C092450; Placer County Superior Court SCV0026851
We granted review in this case to decide whether these decisions are correct. We hold that they are not. As explained below, we conclude that this judicially created rule finds no footing in the statute‘s text, has not been adopted by the Legislature, and lacks any sound justification. We reverse the Court of Appeal‘s judgment.
On June 16, 2009, fire destroyed the building in which defendant Cory Michael Hoehn and his roommate, Forest Kroll, had leased an apartment. An investigator for the building‘s insurer, plaintiff California Capital Insurance Company (California Capital or the company), determined that “careless smoking” on the patio caused the fire. Although the investigator reached no conclusion about who started the fire or who was present when it began, California Capital sued Hoehn and Kroll in March 2010 for “general negligence,” alleging that they caused the fire due to “improperly discarded smoking materials.” The company asked for $472,326 in damages.
In March 2010, the company attempted to serve Hoehn with a complaint and summons in the lawsuit. The affidavit supporting the return of service stated that the summons and complaint were left with Shannon Smith and identified Smith as “Girlfriend,” “Co-Occupant,” and “a competent member of the household.” A copy of the summons and complaint was also mailed to Hoehn‘s address. (See
In April 2011, approximately a year after attempting to serve Hoehn, California Capital requested and obtained a default judgment against Hoehn for $486,528, based on an investigator‘s declaration that careless smoking habits caused the fire.
In March 2018, California Capital assigned its rights to the default judgment to Sequoia Concepts, Inc. Based on a May 2018 writ of execution, the sheriff of Placer County, in January 2020, served on Hoehn‘s employer an earnings withholding order, placing a lien on Hoehn‘s wages in order to begin payment of the default judgment.
In March 2020, Hoehn filed a motion to set aside the default judgment. In a supporting declaration, he stated as follows: He did “not recall receiving or seeing the Summons or Complaint at any time.” Shannon Smith “did not live with” him at the apartment and he “never received a summons or complaint or any legal paperwork from [her] at any time.” He “did not receive any request for judgment or notice of a default judgment hearing” in the case. He learned that there had been a default judgment against him in January 2020, when his employer informed him that a lien had been placed on his wages. He promptly contacted an attorney who filed the motion to set aside the default judgment.
The Court of Appeal affirmed. Relying on Trackman v. Kenney (2010) 187 Cal.App.4th 175 (Trackman) and Rogers v. Silverman (1989) 216 Cal.App.3d 1114 (Rogers) — and rejecting Hoehn‘s criticisms of those decisions — the court concluded that relief under
We granted review.
II. DISCUSSION
A. The Legal Framework
“An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under the circumstances, to apprise interested parties of the pendency of the action and afford them the opportunity to present their objections.’ [Citation.] Failure to give notice violates ‘the most rudimentary demands of due process of law.‘” (Peralta v. Heights Med. Ctr., Inc. (1988) 485 U.S. 80, 84 (Peralta).) Accordingly, the high court has held that due process does not permit a state to require parties not properly served to show a meritorious defense in the underlying action before they can have their default judgments vacated. (Id. at p. 86.) Likewise, California courts have held that “compliance with the statutory procedures for service of process is essential to establish personal jurisdiction . . . . Thus, a default judgment entered against a defendant who was not served with a summons in the manner prescribed by statute is void.” (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444; see 2 Witkin, Cal. Procedure (6th ed. 2021) Jurisdiction, § 119, p. 721.)
Under an interlocking set of statutes and judicial rules, a party who has not been properly served (constructively or personally), or who has been
As these courts have articulated the rule, a defendant may seek relief from default for improper service more than two years after the default judgment as follows: First, a motion to vacate based on the ground of extrinsic fraud or mistake may be made at any time. (Gibble, supra, 67 Cal.App.4th at p. 314.) Second, “‘[a] judgment or order that is invalid on the face of the record . . . may be set aside on motion, with no limit on the time within which the motion must be made.‘” (Trackman, supra, 187 Cal.App.4th at p. 181.) This rule has also been applied when uncontested extrinsic evidence shows that the defendant was never properly served. (See Thompson v. Cook (1942) 20 Cal.2d 564, 569-570.) Third, a judgment or order valid on its face but claimed to be void based on extrinsic evidence may be attacked in an independent equitable action without time limits. (See County of San Diego v. Gorham (2010) 186 Cal.App.4th 1215, 1228 (Gorham); Groves v. Peterson (2002) 100 Cal.App.4th 659, 670, fn. 5 (Groves) [“an independent action in equity to set aside a judgment” for defective service of process “is not subject to a time limit“].)
Heidary v. Yadollahi (2002) 99 Cal.App.4th 857, 862), that proposition is not in dispute. Rather, the question here is a narrower one: whether those in Hoehn‘s position may bring a motion in the original action more than two years — in his case almost nine years — after the default judgment‘s entry, or whether they must file an independent equitable action.
B. The Significance of the Rogers Rule
Although existing law allows defendants in Hoehn‘s position to seek invalidation of a default judgment through an independent equitable action, the viability of the Rogers rule (see Rogers, supra, 216 Cal.App.3d at p. 1126), which precludes him from filing a
types of cases, makes the filing of separate actions effectively impossible for most people facing debt collection claims.
It has indeed been documented that a large proportion of defendants in debt collection actions are not represented by counsel. (See Holland, Junk Justice: A Statistical Analysis of 4,400 Lawsuits Filed by Debt Buyers (2014) 26 Loy. Consumer L.Rev. 179, 208-210 [analysis of six studies finds that two percent of debtors were represented by an attorney].) Moreover, “the vast majority of consumers lose the vast majority of cases by default the vast majority of the time.” (Id. at p. 179; see id. at pp. 208-210 [finding in those studies 85 percent of debtors served with complaints did not respond].) That high default rate is likely attributable in part to inadequate and even fraudulent service. The filing of false affidavits to conceal a lack of lawful service has reportedly become a common practice among debt collectors and has been given its own name — “sewer service” — so denominated because “the server throws the documents ‘down the sewer’ and then falsifies its affidavit of service.” (Fed. Trade Com., Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration (July 2010) p. 8, fn. 22, <https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-bureau-consumer-protection-staff-report-repairing-broken-system-protecting/debtcollectionreport.pdf> [as of November 12, 2024]; see Freeman v. ABC Legal Services, Inc. (N.D.Cal. 2011) 827 F.Supp.2d 1065, 1068, fn. 1 [defining sewer service as “‘failing to serve a debtor and filing a fraudulent affidavit attesting to service so that when the debtor later fails to appear in court, a default judgment is entered against him‘“].) Moreover, communities of color are significantly more likely to be impacted by the questionable debt collection practices of companies that specialize in buying and collecting debts. (See Center for Responsible Lending, Court System Overload: The State of Debt Collection in Cal. after the Fair Debt Buyer Protection Act (2020) pp. 5-6.)
While these assertions were not tested in the trial court, respondent does not contest them here. The significant concerns they raise suggest why resolution of the question before us matters. The real-world difficulties the Rogers rule may pose for defendants attempting to obtain relief from unjust default judgments, and the fact that such judgments may be all too common, form the backdrop against which we consider Hoehn‘s request to repudiate that rule.
1. Historical Background
In California‘s earliest days, “terms of court” limited the time in which motions could be brought. Generally, no motion could be entertained “to set aside a judgment on any ground, including that of want of jurisdiction over the person of the defendant in the action in which the judgment was entered, after the expiration of the term in which it was entered.” (Bell v. Thompson (1862) 19 Cal. 706, 708-709.) An exception to that rule — appearing in section 68 of the Practice Act, the predecessor to
California‘s 1879 Constitution abolished terms of court (see In re Gannon (1886) 69 Cal. 541, 544), but the term-of-court era provided a kind of template for what followed.
After terms of court were abolished, the rule developed that when a party sought to invoke the courts’ inherent power to vacate void judgments, “unless the judgment is void on the face of the judgment-roll the court‘s action to set it aside must have been invoked within a reasonable time.” (Richert v. Benson Lumber Co. (1934) 139 Cal.App. 671, 674, citing Smith v. Jones (1917) 174 Cal. 513, 515.) As for what constituted a “reasonable time,” the judicial consensus eventually settled on
The Legislature revamped
Section 473a was repealed and replaced by
At issue in Rogers was a
As noted, most California courts have followed Rogers‘s rule that a motion for relief from default judgment valid on its face, but void for improper service, must be made within the two-year period that
The case that comes closest to departing from the Rogers rule is Gorham, supra, 186 Cal.App.4th 1215. There, the defendant moved to set aside a default judgment almost 10 years after its entry, and he established through declarations and supporting documents that he had been incarcerated at the time the proof of service falsely claimed that he had been personally served at a former residence. Although the court could have ruled for the defendant on grounds of extrinsic fraud, it instead relied on a broader constitutional principle: “Because [the defendant] was never served with the complaint and summons . . . the trial court never obtained personal jurisdiction over him [citation], and the resulting default judgment was, and is, therefore void, not merely voidable, as violating fundamental due process.” (Gorham, at p. 1230.) Gorham referenced the Rogers line of cases only obliquely (id. at p. 1228) and did not discuss it.
With this history in mind, we consider whether the Legislature intended to impose a two-year limit on
One inference is that the omission of any express time limit in
On the other hand, under a familiar canon of statutory construction, legislative silence may indicate legislative acquiescence. “‘[A] legislature is
analogous topics [and] . . . to intend the same well-settled meaning of these words unless it expressly states otherwise.‘” (Korbel v. Chou (1994) 27 Cal.App.4th 1427, 1431.) Thus, when the Legislature codified the courts’ inherent power to vacate void judgments, it knew that courts had imposed by analogy the one-year deadline for challenging default judgments when constructive service did not result in actual notice, and it arguably acquiesced in that rule. (See One 1941 Chrysler Sedan, supra, 81 Cal.App.2d at p. 22 [codification of courts’ inherent power to vacate void judgments did not alter the time limit for bringing motions to invoke that power]; Rogers, supra, 216 Cal.App.3d at pp. 1123-1124.) Relatedly, what is now designated as
But another inference from legislative silence, and the one we find the most plausible, is that the Legislature took no position on the rule‘s validity. As we have longed recognized, legislative inaction supplies only a weak reed upon which to lean in inferring legislative intent. (Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93, 116.) Legislative acquiescence is especially unpersuasive when it is “invoked to show the Legislature has acquiesced in judicial decisions applying judicial doctrines . . . . When a precedent is challenged as incorrectly extending such a doctrine, it is primarily up to the courts to reconsider its correctness.‘” (People v. Brown (2012) 54 Cal.4th 314, 327-328, citing People v. Superior Court (2010) 48 Cal.4th 1, 21.) As noted, the deadline for bringing motions to vacate judgments void for lack of proper service originated as a rule that courts devised to regulate their inherent power to vacate void judgments before that power was codified. (See Vaughn v. Pine Creek Tungsten Co., supra, 89 Cal.App. at p. 761.) The fact that the Legislature eventually codified that power in
The question thus arises: Should we uphold the rule that, where extrinsic evidence is relied on to show that a judgment is void for improper service, a
First, as we have seen, courts devised the rule against the background of early practice in this state, where motions pertaining to a given case had to be made within the court‘s term. After terms of court were abolished, courts continued to require that motions to set aside default judgments be made within a short time frame — a “reasonable time” — or otherwise challenged in an independent action, at least when evidence was required to demonstrate the judgment was void and evidentiary questions might arise. (See Norton v. Atchison, etc. R. R. Co., supra, 97 Cal. at p. 392, [“Under our present system, terms of court are abolished, and a motion to set aside a judgment would have to be made within a reasonable time“].)
Second, in determining what constituted the outer boundaries of a “reasonable time” in which to bring such a motion, courts concluded that the motion was sufficiently analogous to a motion made to vacate a valid judgment where proper constructive service had not resulted in actual notice. As noted, in Rogers, it was the defendant who benefited from, and thus argued for, that rule. (Rogers, supra, 216 Cal.App.3d at p. 1123.) Rogers was on firm ground in reasoning that a person who received no notice of an action because of defective service should not be in a worse position than a person who received no notice after proper constructive service. But it is unclear why the former should be treated the same as the latter. A person moving for relief under
Thus, from early on, courts, after a brief grace period, disapproved of proceeding by motion to vacate a default judgment when the judgment‘s invalidity depended on evidence outside the judgment roll that might require an adversarial proceeding. In People v. Harrison (1890) 84 Cal. 607, 607-608, the defendant sought, 16 years after the judgment‘s entry, to vacate the judgment for lack of personal service and other alleged defects in service that were not apparent on the judgment‘s face. The court stated: “‘We know of no provision of law which can be held to authorize the vacation of a judgment on a mere motion after so long a time.‘” (Id. at p. 608.) A motion seeking to vacate a judgment void on its face, on the other hand, might be entertained by motion at any time because it would not involve an adversarial evidentiary hearing. (See, e.g., People v. Greene (1887) 74 Cal. 400, 402-403, 405 [where it is evident from the judgment roll that the defendant was not personally served, and there was no affidavit showing publication of the summons, the judgment may be vacated by motion 11 years after default judgment].)
Nonetheless, the cases recognize that motion proceedings to vacate a default judgment may be given collateral estoppel effect when the trial court in its discretion allows a hearing on the motion and permits oral testimony. (Groves, supra, 100 Cal.App.4th at p. 668 [citing “(Darlington v. Basalt Rock Co. (1961) 188 Cal.App.2d 706, 709, 710, [10 Cal. Rptr. 556] [judge held hearing, made clear the court did not restrict the party to affidavits, interrogated a witness, and gave party full opportunity to develop the issues by oral testimony]; Preston v. Wyoming Pac. Oil Co. (1961) 197 Cal.App.2d 517, 527, [17 Cal. Rptr. 443] [trial court held hearings in which much oral testimony and other evidence was received]; see Sarten v. Pomatto (1961) 192 Cal.App.2d 288, 300-301, [13 Cal. Rptr. 588] [dictum, recognizing principle that ‘where the trial of an issue on a motion is as comprehensive as the trial of the same issue in a suit’ collateral estoppel would apply])“].)
We do not lightly part ways with longstanding Court of Appeal precedent. But we conclude that such a step is appropriate in this case. The Rogers rule lacks either a statutory basis or a clear and credible rationale.10 We hold that a
lawsuit when his wages were garnished almost nine years after a default judgment had been entered, this case well illustrates the fundamental injustice that results from the lack of notice. Moreover, as noted, requiring the filing of an independent equitable action in order to vacate a default judgment for lack of proper service has the potential for adding additional costs and burdens on defendants. (See ante, at pp. 8-9.) Procedural hurdles that are unnecessary to the fair adjudication of default judgments should not stand in the way of the vindication of a defendant‘s due process rights. Because the rule in Rogers that
E. Extrinsic Fraud and Mistake
As noted, Hoehn also claims the default judgment should be vacated on the grounds of “extrinsic fraud or mistake.” The Court of Appeal parsed that term and declined to consider Hoehn‘s claim of “extrinsic mistake,” finding that he “did not clearly advance” that theory in the trial court. Considering the truncated claim of “extrinsic fraud” alone, the Court of Appeal, following one line of appellate cases, held that a defendant seeking relief from a default judgment on that basis must demonstrate the plaintiff‘s “inequitable conduct,” some intentional effort to “lull [the defendant] into a state of false security.” (Gibble, supra, 67 Cal.App.4th at p. 314.) It found no such showing in the present case.
We agree that Hoehn has not shown, and indeed does not claim, inequitable conduct on the part of California Capital or its successor. We disagree, however, with California Capital‘s assertion that Hoehn waived or forfeited the claim of “extrinsic mistake.” In his trial court briefing, he asserted that the default judgment was “void due to extrinsic fraud or mistake.” (Italics added.) Although he used the term “extrinsic fraud” more frequently in his trial court brief, it is clear from the context that he also used the general term “extrinsic fraud” to encompass both extrinsic fraud and extrinsic mistake.
It is unclear whether the Court of Appeal in the present case would have reached the same conclusion had it considered the merits of Hoehn‘s
III. DISPOSITION
The Court of Appeal upheld the trial court‘s judgment that Hoehn‘s
JENKINS, J.
We Concur:
GUERRERO, C. J.
CORRIGAN, J.
LIU, J.
KRUGER, J.
GROBAN, J.
EVANS, J.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion California Capital Insurance Co. v. Hoehn
Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published)
Review Granted (unpublished) XX NP opn. filed 10/19/22 – 3d Dist.
Rehearing Granted
Opinion No. S277510
Date Filed: November 18, 2024
Court: Superior
County: Placer
Judge: Michael W. Jones
Counsel:
Kazan, McClain, Satterley & Greenwood and Denyse F. Clancy for Defendant and Appellant.
California Western School of Law, William J. Aceves; UC Irvine, School of Law and Paul L. Hoffman for Erwin Chemerinsky, Pooja Dadhania, David Freeman Engstrom, Kenneth S. Klein, Mark Rosenbaum and Gary C. Williams as Amici Curiae on behalf of Defendant and Appellant.
Alan Charles Dell‘Ario for Consumer Attorneys of California and American Association for Justice as Amici Curiae on behalf of Defendant and Appellant.
David S. Nahmias, Seth E. Mermin; Noah Zinner, Katherine R. Sass; and Leigh E. Ferrin for the UC Berkeley Center for Consumer Law & Economic Justice, Bay Area Legal Aid, OneJustice, Community Legal Aid SoCal, East Bay Community Law Center, Impact Fund, Legal Aid Association of California, Legal Assistance for Seniors, Los Angeles Center for Law and Justice, Mental Health Advocacy Services, Neighborhood Legal Services of Los Angeles County, Public Counsel and Western Center on Law and Poverty as Amici Curiae on behalf of Defendant and Appellant.
Edmond B. Siegel & Associates, Edmond B. Siegel; Andrew Altholz; Law Offices of Steven J. Horn and Steven J. Horn for Plaintiff and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Denyse F. Clancy
Kazan, McClain, Satterley & Greenwood, A Professional Law Corporation
55 Harrison Street, Suite 400
Oakland, CA 94607
(510) 302-1000
Steven J. Horn
Law Offices of Steven J. Horn
5737 Kanan Road, #722
Agoura Hills, CA 91301
(818) 409-6055