On December 17, 2010 a
Order
was filed
involving a dispute between
Ross, Jean,
Ross, Robert,
and
Acco Engineered Systems, Inc.,
Advanced Mechanical,
Advance Mechanical Contractors, Inc.,
Air Systems Mechanical Contractor,
A & K Heating Company, Inc.,
Albay Construction Company,
Allen-Simmons Heating & Sheet Metal Company Inc.,
Allied Fire Protection,
Allied Sprinkler Company, Inc.,
Allsberry Mechanical Corporation,
Anderson, Rowe & Buckley, Inc.,
Associated Insulation Of California,
A. Teichert & Son, Inc.,
Balliet Bros. Construction Corporation,
Banner Drywall & Painting Co. Inc.,
Barnes Construction Co.,
Bayer Cropscience Inc.,
Bayer Cropscience, Inc., Successor To Amchem,
Bell Products Inc.,
Beta Mechanical Contractors, L.P.,
Bragg Investment Company, Inc.,
Cahill Construction Co., Inc.,
Cahill Construction Services, Inc.,
Cahill Contractors, Inc.,
California Drywall Co.,
Castro Construction, Inc.,
C.C. Moore & Co. Engineers,
Cincinnati Valve Company,
Cjr Plastering,
Clausen-Patten, Inc.,
Clausen-Patten, Inc., A Dissolved Corporation,
Climate Air, Inc.,
Climate Control Co., Inc.,
Collins Electrical Company, Inc.,
Commair Mechanical Services,
Consolidated Insulation, Inc.,
Cosco Fire Protection, Inc.,
Cosco Sprinkler,
Critchfield Mechanical, Inc.,
C & R Plastering, Inc.,
Csk Auto, Inc.,
Cupertino Electric, Inc.,
Delucchi Sheet Metal Works,
Dilland Sederberg Plumbing,
Does 1-8500,
Domco Products Texas Inc.,
Domco Products Texas, L.P.,
Donovan Construction,
Dorn Refrigeration,
Dorn Refrigeration And Air Conditioning,
Dpr Construction,
Duro Dyne Corporation,
D.W. Nicholson Corporation,
D. Zelinsky & Sons, Inc.,
Emil J. Weber Electric Co.,
Erwin Mechanical Inc.,
Ex- Fme, Inc. (Fka Fischbach And Moore Electric,,
Fairmont Hotel Company,
Fluor Corporation,
Foley Electric Co.,
Foley Electric, Inc.,
Fuller Floors,
General Mills, Inc.,
Giampolini & Co.,
Graybar Electric Company, Inc.,
Hanson Permanente Cement, Inc. Formerly Known As,
Harold Beasley Plumbing And Heating, Inc.,
Harry Lee Plumbing & Heating,
H & C Investment Associates, Inc.,
Henry C. Beck Company,
Imperial Plastering & Drywall,
Insulation Specialties, Inc.,
James A. Nelson Co., Inc.,
Johnson Controls, Inc.,
Jones Plastering Company,
Joseph Bruno Sheet Metal Co., Inc.,
J.T. Thorpe & Son, Inc.,
J.W. Mcclenahan Company,
J.W. Mcclenahan Company, Inc.,
Kentile Floors, Inc.,
Laub Sheet Metal Works,
Lone Star Industries, Inc.,
Mack Construction Co.,
Magee, Robert,
Malm Metal Products, Inc.,
Marine Engineering And Supply Company,
Marshco Auto Parts, Inc.,
Mattock Construction Company,
Mcclure Electric, Inc.,
Metropolitan Life Insurance Company,
Michael Brothers,
Midstate Mechanical, Inc.,
Mitchell Bros. Truck Lines, Inc.,
Monsanto Company, Sued As "Pharmacia Corporation",
Oakfabco, Inc.,
Ortho-Craft,
Pacific Fireproofing,
Pacific Mechanical Corporation,
Parker Insulation Contracting & Supply Co. Inc.,
Perini Corporation,
Pharmacia Corporation, Which Will Do Business In,
Pribuss Engineering,
Pribuss Engineering, Inc.,
Raymond Interior Systems-North,
Red Top Electric Co. Emeryville, Inc.,
Robert Magee,
Rollie R. French, Inc.,
Rollins Construction,
Rountree Plumbing & Heating Inc.,
Scott Co. Of California,
S F L, Inc.,
S.J. Amoroso Construction Co., Inc.,
Slakey Brothers, Inc.,
Sugden Engineering Co.,
Swinerton Builders,
Temper Insulation,
Temporary Plant Cleaners, Inc.,
Texaco, Inc.,
The Goodyear Tire & Rubber Company,
The W.W. Henry Company,
Tuttle And Bailey Corp,
Van Mulder Sheetmetal,
Van-Mulder Sheet Metal, Inc.,
Walnut Creek Sheet Metal, Furnace & Air,
W.C. Thomason,
W.C. Thompson,
Webcor Builders, Inc.,
Westburne Supply, Inc.,
Willard Electric,
Wright Schuchart Harbor,
Wright Schuchart Harbor Company,
Ross, Jean,
Ross, Robert,
for civil
in the District Court of San Francisco County.
Preview
1 CHRISTOPHER D. STRUNK (SBN: 214110)
cstrunk@grsm.com
2 JAMES H. MOKHTARZADEH (SBN: 319860)
ELECTRONICALLY
jmokhtarzadeh@grsm.com
3 GORDON REES SCULLY MANSUKHANI, LLP F I L E D
Superior Court of California,
1111 Broadway, Suite 1700 County of San Francisco
4 Oakland, CA 94607
Telephone: (510) 463-8685 07/20/2022
5 Facsimile: (510) 984-1721 Clerk of the Court
BY: SANDRA SCHIRO
Deputy Clerk
6 Attorneys for Intervenor TRAVELERS INDEMNITY CO.,
intervening on behalf of defunct corporation SFL, INC.
7
8 SUPERIOR COURT OF CALIFORNIA
9 COUNTY OF SAN FRANCISCO
10 ROBERT ROSS and JEAN ROSS ) CASE NO. CGC-10-275731
)
11 Plaintiffs, ) MEMORANDUM IN SUPPORT OF
Gordon Rees Scully Mansukhani, LLP
) INTERVENOR TRAVELERS
12 vs. INDEMNITY COMPANY’S MOTION
1111 Broadway, Suite 1700
)
) TO SET ASIDE DEFAULT AND
Oakland, CA 94607
13 C.C. MORE & CO. ENGINEERS ET AL, DEFAULT JUDGMENT ENTERED
) AGAINST SFL, INC.
14 Defendants. )
) Accompanying Documents:
15 ) 1. Motion and Notice of Motion
) 2. Declaration of Christopher D. Strunk
16 ) 3. Declaration of Scott Homersham
) 3. [Proposed] Order
17 )
) Date: August 15, 2022
18 ) Time: 9:30 a.m.
) Dept: 514
19 Judge: Hon. Cynthia Ming-Mei Lee
)
20 )
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION .............................................................................................................. 5
4 II. STATEMENT OF FACTS ................................................................................................. 5
5 A. SFL was dissolved in May 1993 ............................................................................. 5
6 B. Plaintiffs took a default against SFL in April 2012, nineteen years after its
dissolution, and waited five years until May 2017 to enter a default
7 judgment ................................................................................................................. 6
8 C. Plaintiffs tendered this case to Travelers in May 2020, three years after the
default judgment was entered against SFL ............................................................. 7
9
D. Counsel’s efforts to resolve the case have been conscientious and
10 continuous since October 2020 ............................................................................... 8
11 III. ARGUMENT .................................................................................................................... 10
Gordon Rees Scully Mansukhani, LLP
12 A. There is a strong policy in California favoring resolution of cases on the
1111 Broadway, Suite 1700
merits..................................................................................................................... 10
Oakland, CA 94607
13
B. Travelers has standing to set aside the default entered against its insured
14 SFL, Inc................................................................................................................. 10
15 C. Because SFL did not receive proper notice of the default, the default is
void and should be set aside.................................................................................. 11
16
D. Travelers has satisfied the burdens necessary to set a aside the default and
17 default judgment entered against SFL on equitable grounds ................................ 12
18 1. Travelers can, and has, demonstrated a meritorious defense .................... 13
19 2. Travelers was not aware of this case, nor the default and default
judgment until well after they were entered ............................................. 13
20
3. Diligence is a concept that flows both ways ............................................. 14
21
a. Travelers has been diligent ........................................................... 14
22
b. Plaintiffs delayed five years before entering a default
23 judgment against SFL, and another three to tender the
judgment to Travelers ................................................................... 15
24
4. Extrinsic mistake justifies setting aside the default and default
25 judgment ................................................................................................... 15
26 IV. CONCLUSION ................................................................................................................. 17
27
28
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 Bernards v. Grey
(1950) 97 Cal.App.2d 679 ........................................................................................................ 10
5
Clemmer v. Hartford Ins. Co.
6 (1978) 22 Cal.3d 865 ................................................................................................................ 10
7 Ellard v. Conway
(2001) 94 Cal.App.4th 540 ....................................................................................................... 11
8
Heidary v. Yadollai
9 (2002) 99 Cal.App.4th 857 ....................................................................................................... 11
10 Jade K. v. Viguri
(1989) 210 Cal.App.3d 1459 .................................................................................................... 14
11
Gordon Rees Scully Mansukhani, LLP
Kasperbauer v Fairfield
12 (2009) 171 Cal.App.4th 229 ..................................................................................................... 12
1111 Broadway, Suite 1700
Oakland, CA 94607
13 Kramer v. Traditional Escrow, Inc.
(2020) 56 Cal.App.5th 13 ......................................................................................................... 12
14
Manson, Iver & York v Black
15 (2009) 176 Cal.App.4th 36 ....................................................................................................... 15
16 Mechling v. Asbestos Defendants
(2018) 29 Cal.App.5th 1241 ......................................................................................... 13, 15, 16
17
Murray & Murray v. Raissi Real Estate Development, LLC
18 (2015) 223 Cal.App.4th 379 ..................................................................................................... 10
19 Olivera v. Grace
(1942) 19 Cal.2d 570 .......................................................................................................... 12, 13
20
Peralta v. Heights Med. Ctr.
21 (S. Ct. 1988) 485 U.S. 80 .......................................................................................................... 11
22 Plotitsa v. Superior Court
(1983) 140 Cal.App.3d 755 ...................................................................................................... 11
23
Rappleyea v. Campbell
24 (1994) 8 Cal.4th 975 ................................................................................................................. 12
25 Rochin v. Pat Johnson Mfg. Co.
(1998) 67 Cal.App.4th 1228 ..................................................................................................... 11
26
Ryan v. Rosenfeld
27 (2017) 3 Cal.5th 124 ................................................................................................................. 10
28
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 Shields v. Siegel
(1966) 246 Cal.App.2d 334 ...................................................................................................... 13
2
Sindler v. Brennan
3 (2003) 105 Cal.App.4th 1350 ................................................................................................... 11
4 Stiles v. Wallis
(1983) 147 Cal.App.3d 1143 .................................................................................................... 13
5
Tomassi v. Scarff
6 (2000) 85 Cal.App.4th 1053 ..................................................................................................... 10
7 Weitz v. Yankosky
(1966) 63 Cal.2d 849 ................................................................................................................ 10
8
Western Heritage Insurance Company v. Superior Court
9 (2011) 199 Cal.App.4th 1196 ..................................................................................................... 5
10 Ziller Electronics Lab GmbH v. Sup. Ct.
(1988) 206 Cal.App.3d 1222 .................................................................................................... 11
11
Gordon Rees Scully Mansukhani, LLP
Statutes
12
1111 Broadway, Suite 1700
Code of Civil Procedure
Oakland, CA 94607
13 Section 128.7 ............................................................................................................................ 10
14 Code of Civil Procedure
Section 473 ......................................................................................................................... 11, 12
15
Rules
16
Rules of Court
17 Rule 3.110 ................................................................................................................................. 15
18
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27
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 I. INTRODUCTION
2 The Court should set aside the default and default judgment entered against
3 defunct corporation SFL, Inc. (“SFL”) for two reasons. First, the judgment is void. There
4 is no record that SFL ever received notice of this action nor the default taken against it as
5 the proofs of service list individuals who are not the registered agent for the defunct
6 corporation. Alternatively, the Court should set aside the judgment because Intervenor
7 Travelers Indemnity Company, insurance carrier for SFL, did not get notice of the default
8 or the judgment until years after they were entered, has meritorious defenses to Plaintiffs’
9 claims and claimed damages, and has been endeavoring to negotiate a resolution with
10 Plaintiffs’ counsel.
11 Equity demands that the default and default judgment should be set aside, and that
Gordon Rees Scully Mansukhani, LLP
12 Travelers be permitted to intervene and defend the interests of its insured. 1
1111 Broadway, Suite 1700
Oakland, CA 94607
13 II. STATEMENT OF FACTS
14 A. SFL was dissolved in May 1993
15 SFL was first registered with the California Secretary of State on January 7, 1987
16 after what appeared to be multiple mergers with predecessor entities and was assigned
17 entity number C1396102. (See Declaration of Christopher D. Strunk in Support of
18 Travelers’ Motion to Set Aside (“Strunk Decl.”), ¶2, Exhibit D.) Six years later, on May
19 10, 1993, SFL elected to dissolve, stating “the corporation’s known debts have been
20 actually paid” and “the corporation’s known assets have been distributed.” (Strunk Decl.,
21 ¶3, Exhibit A.) Importantly, the Secretary of State’s website identifies SFL’s agent for
22 service of process as Blair Sweet, Jr., with an address of 4030 Birch St., #103, Newport
23 Beach, CA 92660. (Strunk Dec., ¶4.) Moreover, the California Secretary of State
24
25
1 Although Travelers brings this motion to set aside, Travelers does not waive, and expressly
26 preserves, its right to seek declaratory judgment at a later date and time that it is not bound by the
default against its insured. Travelers may make any arguments necessary to defend its own
27 interests, both now and if/when it should bring its own action. (See Western Heritage Insurance
Company v. v. Superior Court (2011) 199 Cal.App.4th 1196, 1211 [“[W]e have concluded
28 that an intervening insurer is not bound by a default taken against its insured.”].)
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 identifies multiple corporate entities in existence over the years, which use some iteration
2 of the tradename “SFL.” 2
3
B. Plaintiffs took a default against SFL in April 2012, nineteen years after
4 its dissolution, and waited five years until May 2017 to enter a default
judgment
5
6 Plaintiffs filed their second amended complaint on May 16, 2011 alleging Plaintiff
7 Robert Ross contracted colon cancer, asbestosis and pleural disease from exposure to
8 asbestos during his career as an insulator. A year later, Plaintiffs took a default against
9 SFL on April 5, 2012. The Proof of Service on the summons and default (and later
10 attached to the default judgment) did not serve SFL’s agent for service of process.
11 Instead, Plaintiffs’ proof of service of the summons showed service of process on, as
Gordon Rees Scully Mansukhani, LLP
12 typed by Plaintiffs’ counsel, “Kim Massey, Office Manager, Authorized to Accept
1111 Broadway, Suite 1700
Oakland, CA 94607
13 Service of Process” at 12115 Lakeside Ave., Lakeside, CA 92040-1712. Plaintiffs’ proof
14 of service of process of the entry of default, however, lists “Thomas M. Towne,
15 Authorized Agent for Service” at the same address. Five years later, on May 2, 2017, this
16 Court entered a default judgment in the amount of $1,395,967.72 against SFL. Plaintiffs
17 filed a dismissal of their entire complaint on March 15, 2019. (Strunk Decl., ¶5; A true
18 and correct copy of the Proofs of Service is attached to the Strunk Decl. as Exhibit B.)
19 In their moving papers, Plaintiffs contend Mr. Ross’s exposures relative to SFL
20 occurred over two weeks during 1978 while employed by Consolidated Insulation.
21 Specifically, Plaintiffs’ moving papers assert that Mr. Ross recalled seeing SFL
22 contractors while he was performing duct insulation at Embarcadero Center #3 in San
23 Francisco for an unspecified two-week period in 1978. SFL was insured by a liability
24 policy issued by Travelers under two (2) policies from February 1, 1973 to February 1,
25
2 1) S.F.L. Inc. which was registered on February 25, 1981 and is now suspended by the
26 Franchise Tax Board; 2) SFL Inc., which was incorporated on June 23, 1952 and was merged out
(“SFL I”) ; 3) SFL, Inc. which was registered on March 7, 1967 and is now suspended by the
27 Franchise Tax Board (“SFL II”); and 4) SFL, Inc. which was registered on January 7, 1987 and
is now dissolved. True and correct copies of excerpts from the records of the Secretary of State
28 are attached to the Strunk Decl. as Exhibit D.
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 1974 and February 1, 1974 until the purported cancellation on August 14, 1974.
2 (Declaration of Scott Homersham (“Homersham Decl.”) at ¶ 4.)
3 C. Plaintiffs tendered this case to Travelers in May 2020, three years after
the default judgment was entered against SFL
4
5 Travelers was not made aware of the subject case, or any cases, filed against SFL,
6 Inc. until May 7, 2020, after the default judgment was entered against SFL when
7 Plaintiffs’ counsel sent a letter advising of the default judgment. The tender letter was
8 from Plaintiffs’ counsel to Travelers “and its associated companies, Aetna Casualty and
9 Surety Co., United States Fidelity and Guaranty Company.” The letter noted that,
10 “[Plaintiffs] have reason to believe that Travelers issued general liability and umbrella
11 liability insurance covering SFL, Inc.” There was no reference to what policy numbers or
Gordon Rees Scully Mansukhani, LLP
12 years of policies were at issue. (Homersham Decl. at ¶ 5.) Given the very limited
1111 Broadway, Suite 1700
Oakland, CA 94607
13 information and the need to research multiple entities and documents from many decades
14 ago, the time and resources required to determine if any policies existed took
15 approximately five months to identify two policies from 1973 and 1974. In prior tenders
16 from the Brayton firm, Travelers has, on occasion, learned that the insured and named
17 defendant were not the same. In other situations, Travelers has also learned that the
18 policies were not applicable to the claims of the case. (Homersham Decl. at ¶ 6.)
19 Additionally, when this case was tendered to Travelers, so too were three other
20 cases implicating SFL.3 Further complicating these issues, one of the complaints, Jerry
21 Verworn v. Soco West, Inc. et al., lists a company named “Daniels Dry Wall, Inc” as an
22 alternate entity for SFL. Accordingly, Travelers needed to search for any policies that
23 may be associated with “SFL, Inc.” and/or “Daniels Dry Wall, Inc.” Once Travelers
24 identified policies issued to SFL, this case, and all other cases implicating SFL, were
25
26
27 3Joan McLain, et al. v. Crane Co. et al., SFSC Case. No. CGC-13-276208; Patricia Casey et al.,
v. Kaiser Gypsum Company, Inc. et al., SFSC Case No. CGC-11-275879; and Jerry Verworn v.
28 Soco West, Inc., et al., SFSC Case No.: CGC-17-276582.
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 assigned to Gordon Rees Scully Mansukhani, LLP on October 9, 2020. (Homersham
2 Decl. ¶ 7; Strunk Decl. ¶ 10.)
3 Because Travelers was not notified of the subject case or the subsequent entry of
4 default until after it was entered, it was denied an opportunity to defend its insured and
5 prevent the default judgment from being entered against SFL. Had Travelers been put on
6 notice prior to entry of default judgment, Travelers would have intervened to defend its
7 insured and prevent the entry of default judgment. (Homersham Decl. ¶ 8.)
8 D. Counsel’s efforts to resolve the case have been conscientious and
continuous since October 2020
9
10 After assignment, counsel began to research the extensive corporate histories of
11 “SFL, Inc.” and “Daniels Dry Wall, Inc.” to determine whether the correct entity had
Gordon Rees Scully Mansukhani, LLP
12 been sued, and whether there was any connection between “Daniels Dry Wall, Inc.” and
1111 Broadway, Suite 1700
Oakland, CA 94607
13 “SFL, Inc.” (Strunk. Decl. ¶ 7.) Extensive research into these entities, including
14 investigations involving multiple percipient witnesses, revealed there were multiple
15 companies registered with the California Secretary of State that involve some iteration of
16 the tradename “S F L” over the years, all of which are defunct. SFL is a named insured on
17 a liability policy issued by SFL, Inc. (Strunk Decl., ¶8; Homersham Decl. ¶ 4.) Moreover,
18 after extensive research it was determined there is no discernable connection between
19 Travelers insured, SFL, and its alleged alternative entity, “Daniels Dry Wall.” (Strunk
20 Decl. ¶ 9.)
21 Counsel for Travelers met and conferred with Plaintiffs’ counsel to globally
22 resolve the group of cases concerning SFL. In fact, in two of the cases on May 12, 2021,
23 Plaintiffs’ counsel and Travelers signed stipulations that (1) the respective defaults are
24 not enforceable against Travelers and (2) allowing for unopposed intervention on behalf
25 of the SFL to defend its and Travelers’ interest.4 It further bears mentioning that when
26 this case was assigned to and being handled, counsel’s Northern California offices, like
27
4 Patricia Casey et al., v. Kaiser Gypsum Company, Inc. et al., SFSC Case No. CGC-11-275879;
28 and Jerry Verworn v. Soco West, Inc., et al., SFSC Case No.: CGC-17-276582
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 the entire country, was dealing with issues related to the COVID-19 pandemic. (Strunk
2 Decl. ¶ 10.)
3 At the same time that the parties entered into those stipulations, it was discussed
4 with plaintiffs’ counsel and understood that the parties would address this case and the
5 McLain case in a similar fashion. Thereafter, Travelers intervened on behalf of its insured
6 in the Verworn and Casey matters. The parties, however, understood that given that this
7 case is closed, it and Joan McLain, et al. v. Crane Co. et al. would be left until the other
8 two cases resolved. (Strunk Decl. ¶ 11.)
9 To reach settlements and evaluate all the cases against SFL, Travelers served
10 written discovery to evaluate plaintiffs’ claims in the pending cases. Moreover, after
11 extensive settlement negotiations and discussions of lack any product identification,
Gordon Rees Scully Mansukhani, LLP
12 Plaintiffs’ counsel produced a declaration in February 2022 from the plaintiff in the
1111 Broadway, Suite 1700
Oakland, CA 94607
13 Verworn matter providing an identification of the insured. (Strunk Decl., ¶ 12.)
14 Precipitated by the declaration regarding SFL provided by Plaintiffs’ counsel, the parties
15 officially settled the Verworn and Casey matters in May of 2022. Thereafter, and
16 pursuant to the aforementioned understanding, counsel for Travelers then turned to
17 resolving the default judgments entered against its insured in this case and the McLain
18 case. (Strunk Decl., ¶ 13.)
19 While litigating and resolving the Casey and Verworn cases, counsel exercised
20 appropriate diligence in investigating these claims, and continued to spend significant
21 amounts of time researching its insured and the multiple SFL entities. Given the stale
22 nature of these claims, and the decades that have elapsed since these entities have been in
23 business, the task was difficult, complex, and time consuming, taking many months to
24 make even a small amount of progress. Counsel’s efforts included multiple searches of
25 governmental and other entities in an effort to identify documents. However, counsel
26 concluded from its extensive efforts that Travelers had had been denied an opportunity to
27 litigate the cases filed against its insured, and to contest the facts that comprise the default
28 and default judgment obtained against SFL. (Strunk Decl., ¶ 14.) Should the default
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 judgment be set aside, Travelers is prepared to immediately intervene on behalf of SFL
2 and defend the case via an answer-in-intervention. In fact, Travelers has already
3 identified its affirmative defenses and drafted its answer-in-intervention. (Strunk Decl. ¶
4 15, Exhibit C [proposed answer-in-intervention].)
5 III. ARGUMENT
6 A. There is a strong policy in California favoring resolution of cases on
the merits
7
8 A trial court has broad discretion to vacate judgment and/or the clerk’s entry of
9 default that preceded it, and any doubts as to whether a default should be vacated should
10 be resolved in favor of the party seeking relief from the default. (Code. Civ. Proc., §
11 128.7; Weitz v. Yankosky (1966) 63 Cal.2d 849, 854.) The courts do not look favorably
Gordon Rees Scully Mansukhani, LLP
12 upon defaults and adhere to the policy of the law favoring trials on the merits whenever
1111 Broadway, Suite 1700
Oakland, CA 94607
13 possible. (Weitz, supra, 63 Cal.2d at 854.) Thus, any applications seeking discretionary
14 relief “must be resolved in favor of the party seeking relief.” (Murray & Murray v.
15 Raissi Real Estate Development, LLC (2015) 223 Cal.App.4th 379, 385.)
16 The discretion of the court should always be exercised in conformity with the
17 spirit of the law and in such manner as will serve rather than defeat the ends of justice.
18 (Bernards v. Grey (1950) 97 Cal.App.2d 679, 684.)
19 B. Travelers has standing to set aside the default entered against its
insured SFL, Inc.
20
21 Against this backdrop, a defendant’s liability insurer has standing to move to set
22 aside a default judgment entered against its insured because it would be obliged to pay
23 the judgment. (Clemmer v. Hartford Ins. Co. (1978) 22 Cal.3d 865, 885 [overruled on
24 other grounds by Ryan v. Rosenfeld (2017) 3 Cal.5th 124, 134-135]; compare Tomassi v.
25 Scarff (2000) 85 Cal.App.4th 1053, 1058, [insurer that has denied coverage and refused
26 to defend is not an “aggrieved party” within meaning of statute allowing motion to vacate
27 judgment.]) Accordingly, by virtue of its role as SFL’s liability insurer, Travelers has
28 standing to make the instant motion and set aside the default and default judgment
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 entered against its insured.
2 C. Because SFL did not receive proper notice of the default, the default is
void and should be set aside
3
4 The Court has statutory authority, “on motion of either party after notice to the
5 other party, to set aside any void judgment or order.” (Code Civ. Proc., § 473 (d)). A
6 void judgment may be set aside at any time and for any reason, even in the absence of
7 diligence of the party seeking to set the judgment aside. (Plotitsa v. Superior Court
8 (1983) 140 Cal.App.3d 755; see also Rochin v. Pat Johnson Mfg. Co. (1998) 67
9 Cal.App.4th 1228, 1239 [judgment void on face subject to collateral attack at any time.]).
10 A judgment may be void as a matter of law for a host of reasons, including lack of
11 subject matter or personal jurisdiction, lack of actual or constructive notice of
Gordon Rees Scully Mansukhani, LLP
12 proceedings, or if a default is improperly entered. (Ziller Electronics Lab GmbH v. Sup.
1111 Broadway, Suite 1700
Oakland, CA 94607
13 Ct. (1988) 206 Cal.App.3d 1222; Ellard v. Conway (2001) 94 Cal.App.4th 540; Heidary
14 v. Yadollai (2002) 99 Cal.App.4th 857.) A void judgment must be set aside regardless
15 of the merits of the underlying case, and prejudice to the party that obtained the default is
16 not a factor in setting aside a void judgment or order. (Peralta v. Heights Med. Ctr.
17 (1988) 485 U.S. 80, 86 – 87; Sindler v. Brennan (2003) 105 Cal.App.4th 1350, 1354).
18 A court may “set aside a default judgment which is valid on its face, but void, as a matter
19 of law, due to improper service.” (Ellard, 94 Cal.App.4th at 544.)
20 The default and default judgment in this case are void “due to improper service.”
21 The agent for service of process that appears on the California Secretary of State’s portal
22 and is the actual agent for service of process as to SFL is not the individual that was
23 served by the Brayton office, as reflected in the Brayton office’s own proof of service.
24 Moreover, Plaintiffs’ proof of service of the summons shows service of process on, as
25 typed by Plaintiffs’ counsel, “Kim Massey, Office Manager, Authorized to Accept
26 Service of Process” at 12115 Lakeside Ave., Lakeside, CA 92040-1712. The proof of
27 service of process of the entry of default lists “Thomas M. Towne, Authorized Agent for
28 Service” at the same address. However, there is no indication in the Secretary of State’s
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INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 records, or other evidence, that these individuals are indeed affiliated in anyway with
2 SFL, let alone authorized to accept service of process on behalf of the defunct
3 corporation. Plaintiffs’ assertions that an individual is authorized to accept service does
4 not make it so. This Court must set aside both the default and the default judgment for
5 this reason alone, and permit Travelers to intervene and defend the interests of its insured.
6 D. Travelers has satisfied the burdens necessary to set a aside the default
and default judgment entered against SFL on equitable grounds
7
8 Even were the default and default judgment not void, under Code Civ. Proc.,
9 473(b) a defendant may seek relief from default based on “mistake, inadvertence, surprise
10 or excusable neglect” within six-month of either the entry of default and/or default
11 judgment. However, the 6-month limit does not apply where relief is sought on equitable
Gordon Rees Scully Mansukhani, LLP
12 grounds, e.g., extrinsic fraud or mistake. “After six months from entry of default, a trial
1111 Broadway, Suite 1700
Oakland, CA 94607
13 court may still vacate a default on equitable grounds even if statutory relief is
14 unavailable.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981; see also Olivera v.
15 Grace (1942) 19 Cal.2d 570, 575 [“Equity’s jurisdiction to interfere with final judgments
16 is based upon the absence of a fair, adversary trial in the original action”].) In fact, a
17 court has inherent authority to grant equitable relief from a default judgment on a theory
18 of extrinsic mistake when, as here, the defendant is able to show excusable neglect,
19 hardship, or other grounds for the failure to present a defense. (Kasperbauer v Fairfield
20 (2009) 171 Cal.App.4th 229, 237.)
21 A default or default judgment is properly set aside where the moving party can
22 demonstrate a (1) meritorious defense; (2) a satisfactory excuse for not presenting a
23 defense to the original action; and (3) diligence in seeking to set aside the default once it
24 was discovered. (Rappleyea, 8 Cal.4th 975 at 982; Kramer v. Traditional Escrow, Inc.
25 (2020) 56 Cal.App.5th 13, 29.) Travelers has satisfied these burdens, so the default and
26 default judgment entered against SFL must be set aside.
27 ///
28 ///
-12-
INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT
JUDGMENT
1 1. Travelers can, and has, demonstrated a meritorious defense
2 Filing an answer “denying the material allegations” of the operative complaint in
3 conjunction with a motion to set aside demonstrates a meritorious defense. (Stiles v.
4 Wallis (1983) 147 Cal.App.3d 1143, 1148; Shields v. Siegel (1966) 246 Cal.App.2d 334,
5 342 [unverified answer].) Upon setting aside the judgment e
Preview
1 CHRISTOPHER D. STRUNK (SBN: 214110) cstrunk@grsm.com 2 JAMES H. MOKHTARZADEH (SBN: 319860) ELECTRONICALLY jmokhtarzadeh@grsm.com 3 GORDON REES SCULLY MANSUKHANI, LLP F I L E D Superior Court of California, 1111 Broadway, Suite 1700 County of San Francisco 4 Oakland, CA 94607 Telephone: (510) 463-8685 07/20/2022 5 Facsimile: (510) 984-1721 Clerk of the Court BY: SANDRA SCHIRO Deputy Clerk 6 Attorneys for Intervenor TRAVELERS INDEMNITY CO., intervening on behalf of defunct corporation SFL, INC. 7 8 SUPERIOR COURT OF CALIFORNIA 9 COUNTY OF SAN FRANCISCO 10 ROBERT ROSS and JEAN ROSS ) CASE NO. CGC-10-275731 ) 11 Plaintiffs, ) MEMORANDUM IN SUPPORT OF Gordon Rees Scully Mansukhani, LLP ) INTERVENOR TRAVELERS 12 vs. INDEMNITY COMPANY’S MOTION 1111 Broadway, Suite 1700 ) ) TO SET ASIDE DEFAULT AND Oakland, CA 94607 13 C.C. MORE & CO. ENGINEERS ET AL, DEFAULT JUDGMENT ENTERED ) AGAINST SFL, INC. 14 Defendants. ) ) Accompanying Documents: 15 ) 1. Motion and Notice of Motion ) 2. Declaration of Christopher D. Strunk 16 ) 3. Declaration of Scott Homersham ) 3. [Proposed] Order 17 ) ) Date: August 15, 2022 18 ) Time: 9:30 a.m. ) Dept: 514 19 Judge: Hon. Cynthia Ming-Mei Lee ) 20 ) 21 22 23 24 25 26 27 28 -1- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION .............................................................................................................. 5 4 II. STATEMENT OF FACTS ................................................................................................. 5 5 A. SFL was dissolved in May 1993 ............................................................................. 5 6 B. Plaintiffs took a default against SFL in April 2012, nineteen years after its dissolution, and waited five years until May 2017 to enter a default 7 judgment ................................................................................................................. 6 8 C. Plaintiffs tendered this case to Travelers in May 2020, three years after the default judgment was entered against SFL ............................................................. 7 9 D. Counsel’s efforts to resolve the case have been conscientious and 10 continuous since October 2020 ............................................................................... 8 11 III. ARGUMENT .................................................................................................................... 10 Gordon Rees Scully Mansukhani, LLP 12 A. There is a strong policy in California favoring resolution of cases on the 1111 Broadway, Suite 1700 merits..................................................................................................................... 10 Oakland, CA 94607 13 B. Travelers has standing to set aside the default entered against its insured 14 SFL, Inc................................................................................................................. 10 15 C. Because SFL did not receive proper notice of the default, the default is void and should be set aside.................................................................................. 11 16 D. Travelers has satisfied the burdens necessary to set a aside the default and 17 default judgment entered against SFL on equitable grounds ................................ 12 18 1. Travelers can, and has, demonstrated a meritorious defense .................... 13 19 2. Travelers was not aware of this case, nor the default and default judgment until well after they were entered ............................................. 13 20 3. Diligence is a concept that flows both ways ............................................. 14 21 a. Travelers has been diligent ........................................................... 14 22 b. Plaintiffs delayed five years before entering a default 23 judgment against SFL, and another three to tender the judgment to Travelers ................................................................... 15 24 4. Extrinsic mistake justifies setting aside the default and default 25 judgment ................................................................................................... 15 26 IV. CONCLUSION ................................................................................................................. 17 27 28 -2- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Bernards v. Grey (1950) 97 Cal.App.2d 679 ........................................................................................................ 10 5 Clemmer v. Hartford Ins. Co. 6 (1978) 22 Cal.3d 865 ................................................................................................................ 10 7 Ellard v. Conway (2001) 94 Cal.App.4th 540 ....................................................................................................... 11 8 Heidary v. Yadollai 9 (2002) 99 Cal.App.4th 857 ....................................................................................................... 11 10 Jade K. v. Viguri (1989) 210 Cal.App.3d 1459 .................................................................................................... 14 11 Gordon Rees Scully Mansukhani, LLP Kasperbauer v Fairfield 12 (2009) 171 Cal.App.4th 229 ..................................................................................................... 12 1111 Broadway, Suite 1700 Oakland, CA 94607 13 Kramer v. Traditional Escrow, Inc. (2020) 56 Cal.App.5th 13 ......................................................................................................... 12 14 Manson, Iver & York v Black 15 (2009) 176 Cal.App.4th 36 ....................................................................................................... 15 16 Mechling v. Asbestos Defendants (2018) 29 Cal.App.5th 1241 ......................................................................................... 13, 15, 16 17 Murray & Murray v. Raissi Real Estate Development, LLC 18 (2015) 223 Cal.App.4th 379 ..................................................................................................... 10 19 Olivera v. Grace (1942) 19 Cal.2d 570 .......................................................................................................... 12, 13 20 Peralta v. Heights Med. Ctr. 21 (S. Ct. 1988) 485 U.S. 80 .......................................................................................................... 11 22 Plotitsa v. Superior Court (1983) 140 Cal.App.3d 755 ...................................................................................................... 11 23 Rappleyea v. Campbell 24 (1994) 8 Cal.4th 975 ................................................................................................................. 12 25 Rochin v. Pat Johnson Mfg. Co. (1998) 67 Cal.App.4th 1228 ..................................................................................................... 11 26 Ryan v. Rosenfeld 27 (2017) 3 Cal.5th 124 ................................................................................................................. 10 28 -3- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 Shields v. Siegel (1966) 246 Cal.App.2d 334 ...................................................................................................... 13 2 Sindler v. Brennan 3 (2003) 105 Cal.App.4th 1350 ................................................................................................... 11 4 Stiles v. Wallis (1983) 147 Cal.App.3d 1143 .................................................................................................... 13 5 Tomassi v. Scarff 6 (2000) 85 Cal.App.4th 1053 ..................................................................................................... 10 7 Weitz v. Yankosky (1966) 63 Cal.2d 849 ................................................................................................................ 10 8 Western Heritage Insurance Company v. Superior Court 9 (2011) 199 Cal.App.4th 1196 ..................................................................................................... 5 10 Ziller Electronics Lab GmbH v. Sup. Ct. (1988) 206 Cal.App.3d 1222 .................................................................................................... 11 11 Gordon Rees Scully Mansukhani, LLP Statutes 12 1111 Broadway, Suite 1700 Code of Civil Procedure Oakland, CA 94607 13 Section 128.7 ............................................................................................................................ 10 14 Code of Civil Procedure Section 473 ......................................................................................................................... 11, 12 15 Rules 16 Rules of Court 17 Rule 3.110 ................................................................................................................................. 15 18 19 20 21 22 23 24 25 26 27 28 -4- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 I. INTRODUCTION 2 The Court should set aside the default and default judgment entered against 3 defunct corporation SFL, Inc. (“SFL”) for two reasons. First, the judgment is void. There 4 is no record that SFL ever received notice of this action nor the default taken against it as 5 the proofs of service list individuals who are not the registered agent for the defunct 6 corporation. Alternatively, the Court should set aside the judgment because Intervenor 7 Travelers Indemnity Company, insurance carrier for SFL, did not get notice of the default 8 or the judgment until years after they were entered, has meritorious defenses to Plaintiffs’ 9 claims and claimed damages, and has been endeavoring to negotiate a resolution with 10 Plaintiffs’ counsel. 11 Equity demands that the default and default judgment should be set aside, and that Gordon Rees Scully Mansukhani, LLP 12 Travelers be permitted to intervene and defend the interests of its insured. 1 1111 Broadway, Suite 1700 Oakland, CA 94607 13 II. STATEMENT OF FACTS 14 A. SFL was dissolved in May 1993 15 SFL was first registered with the California Secretary of State on January 7, 1987 16 after what appeared to be multiple mergers with predecessor entities and was assigned 17 entity number C1396102. (See Declaration of Christopher D. Strunk in Support of 18 Travelers’ Motion to Set Aside (“Strunk Decl.”), ¶2, Exhibit D.) Six years later, on May 19 10, 1993, SFL elected to dissolve, stating “the corporation’s known debts have been 20 actually paid” and “the corporation’s known assets have been distributed.” (Strunk Decl., 21 ¶3, Exhibit A.) Importantly, the Secretary of State’s website identifies SFL’s agent for 22 service of process as Blair Sweet, Jr., with an address of 4030 Birch St., #103, Newport 23 Beach, CA 92660. (Strunk Dec., ¶4.) Moreover, the California Secretary of State 24 25 1 Although Travelers brings this motion to set aside, Travelers does not waive, and expressly 26 preserves, its right to seek declaratory judgment at a later date and time that it is not bound by the default against its insured. Travelers may make any arguments necessary to defend its own 27 interests, both now and if/when it should bring its own action. (See Western Heritage Insurance Company v. v. Superior Court (2011) 199 Cal.App.4th 1196, 1211 [“[W]e have concluded 28 that an intervening insurer is not bound by a default taken against its insured.”].) -5- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 identifies multiple corporate entities in existence over the years, which use some iteration 2 of the tradename “SFL.” 2 3 B. Plaintiffs took a default against SFL in April 2012, nineteen years after 4 its dissolution, and waited five years until May 2017 to enter a default judgment 5 6 Plaintiffs filed their second amended complaint on May 16, 2011 alleging Plaintiff 7 Robert Ross contracted colon cancer, asbestosis and pleural disease from exposure to 8 asbestos during his career as an insulator. A year later, Plaintiffs took a default against 9 SFL on April 5, 2012. The Proof of Service on the summons and default (and later 10 attached to the default judgment) did not serve SFL’s agent for service of process. 11 Instead, Plaintiffs’ proof of service of the summons showed service of process on, as Gordon Rees Scully Mansukhani, LLP 12 typed by Plaintiffs’ counsel, “Kim Massey, Office Manager, Authorized to Accept 1111 Broadway, Suite 1700 Oakland, CA 94607 13 Service of Process” at 12115 Lakeside Ave., Lakeside, CA 92040-1712. Plaintiffs’ proof 14 of service of process of the entry of default, however, lists “Thomas M. Towne, 15 Authorized Agent for Service” at the same address. Five years later, on May 2, 2017, this 16 Court entered a default judgment in the amount of $1,395,967.72 against SFL. Plaintiffs 17 filed a dismissal of their entire complaint on March 15, 2019. (Strunk Decl., ¶5; A true 18 and correct copy of the Proofs of Service is attached to the Strunk Decl. as Exhibit B.) 19 In their moving papers, Plaintiffs contend Mr. Ross’s exposures relative to SFL 20 occurred over two weeks during 1978 while employed by Consolidated Insulation. 21 Specifically, Plaintiffs’ moving papers assert that Mr. Ross recalled seeing SFL 22 contractors while he was performing duct insulation at Embarcadero Center #3 in San 23 Francisco for an unspecified two-week period in 1978. SFL was insured by a liability 24 policy issued by Travelers under two (2) policies from February 1, 1973 to February 1, 25 2 1) S.F.L. Inc. which was registered on February 25, 1981 and is now suspended by the 26 Franchise Tax Board; 2) SFL Inc., which was incorporated on June 23, 1952 and was merged out (“SFL I”) ; 3) SFL, Inc. which was registered on March 7, 1967 and is now suspended by the 27 Franchise Tax Board (“SFL II”); and 4) SFL, Inc. which was registered on January 7, 1987 and is now dissolved. True and correct copies of excerpts from the records of the Secretary of State 28 are attached to the Strunk Decl. as Exhibit D. -6- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 1974 and February 1, 1974 until the purported cancellation on August 14, 1974. 2 (Declaration of Scott Homersham (“Homersham Decl.”) at ¶ 4.) 3 C. Plaintiffs tendered this case to Travelers in May 2020, three years after the default judgment was entered against SFL 4 5 Travelers was not made aware of the subject case, or any cases, filed against SFL, 6 Inc. until May 7, 2020, after the default judgment was entered against SFL when 7 Plaintiffs’ counsel sent a letter advising of the default judgment. The tender letter was 8 from Plaintiffs’ counsel to Travelers “and its associated companies, Aetna Casualty and 9 Surety Co., United States Fidelity and Guaranty Company.” The letter noted that, 10 “[Plaintiffs] have reason to believe that Travelers issued general liability and umbrella 11 liability insurance covering SFL, Inc.” There was no reference to what policy numbers or Gordon Rees Scully Mansukhani, LLP 12 years of policies were at issue. (Homersham Decl. at ¶ 5.) Given the very limited 1111 Broadway, Suite 1700 Oakland, CA 94607 13 information and the need to research multiple entities and documents from many decades 14 ago, the time and resources required to determine if any policies existed took 15 approximately five months to identify two policies from 1973 and 1974. In prior tenders 16 from the Brayton firm, Travelers has, on occasion, learned that the insured and named 17 defendant were not the same. In other situations, Travelers has also learned that the 18 policies were not applicable to the claims of the case. (Homersham Decl. at ¶ 6.) 19 Additionally, when this case was tendered to Travelers, so too were three other 20 cases implicating SFL.3 Further complicating these issues, one of the complaints, Jerry 21 Verworn v. Soco West, Inc. et al., lists a company named “Daniels Dry Wall, Inc” as an 22 alternate entity for SFL. Accordingly, Travelers needed to search for any policies that 23 may be associated with “SFL, Inc.” and/or “Daniels Dry Wall, Inc.” Once Travelers 24 identified policies issued to SFL, this case, and all other cases implicating SFL, were 25 26 27 3Joan McLain, et al. v. Crane Co. et al., SFSC Case. No. CGC-13-276208; Patricia Casey et al., v. Kaiser Gypsum Company, Inc. et al., SFSC Case No. CGC-11-275879; and Jerry Verworn v. 28 Soco West, Inc., et al., SFSC Case No.: CGC-17-276582. -7- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 assigned to Gordon Rees Scully Mansukhani, LLP on October 9, 2020. (Homersham 2 Decl. ¶ 7; Strunk Decl. ¶ 10.) 3 Because Travelers was not notified of the subject case or the subsequent entry of 4 default until after it was entered, it was denied an opportunity to defend its insured and 5 prevent the default judgment from being entered against SFL. Had Travelers been put on 6 notice prior to entry of default judgment, Travelers would have intervened to defend its 7 insured and prevent the entry of default judgment. (Homersham Decl. ¶ 8.) 8 D. Counsel’s efforts to resolve the case have been conscientious and continuous since October 2020 9 10 After assignment, counsel began to research the extensive corporate histories of 11 “SFL, Inc.” and “Daniels Dry Wall, Inc.” to determine whether the correct entity had Gordon Rees Scully Mansukhani, LLP 12 been sued, and whether there was any connection between “Daniels Dry Wall, Inc.” and 1111 Broadway, Suite 1700 Oakland, CA 94607 13 “SFL, Inc.” (Strunk. Decl. ¶ 7.) Extensive research into these entities, including 14 investigations involving multiple percipient witnesses, revealed there were multiple 15 companies registered with the California Secretary of State that involve some iteration of 16 the tradename “S F L” over the years, all of which are defunct. SFL is a named insured on 17 a liability policy issued by SFL, Inc. (Strunk Decl., ¶8; Homersham Decl. ¶ 4.) Moreover, 18 after extensive research it was determined there is no discernable connection between 19 Travelers insured, SFL, and its alleged alternative entity, “Daniels Dry Wall.” (Strunk 20 Decl. ¶ 9.) 21 Counsel for Travelers met and conferred with Plaintiffs’ counsel to globally 22 resolve the group of cases concerning SFL. In fact, in two of the cases on May 12, 2021, 23 Plaintiffs’ counsel and Travelers signed stipulations that (1) the respective defaults are 24 not enforceable against Travelers and (2) allowing for unopposed intervention on behalf 25 of the SFL to defend its and Travelers’ interest.4 It further bears mentioning that when 26 this case was assigned to and being handled, counsel’s Northern California offices, like 27 4 Patricia Casey et al., v. Kaiser Gypsum Company, Inc. et al., SFSC Case No. CGC-11-275879; 28 and Jerry Verworn v. Soco West, Inc., et al., SFSC Case No.: CGC-17-276582 -8- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 the entire country, was dealing with issues related to the COVID-19 pandemic. (Strunk 2 Decl. ¶ 10.) 3 At the same time that the parties entered into those stipulations, it was discussed 4 with plaintiffs’ counsel and understood that the parties would address this case and the 5 McLain case in a similar fashion. Thereafter, Travelers intervened on behalf of its insured 6 in the Verworn and Casey matters. The parties, however, understood that given that this 7 case is closed, it and Joan McLain, et al. v. Crane Co. et al. would be left until the other 8 two cases resolved. (Strunk Decl. ¶ 11.) 9 To reach settlements and evaluate all the cases against SFL, Travelers served 10 written discovery to evaluate plaintiffs’ claims in the pending cases. Moreover, after 11 extensive settlement negotiations and discussions of lack any product identification, Gordon Rees Scully Mansukhani, LLP 12 Plaintiffs’ counsel produced a declaration in February 2022 from the plaintiff in the 1111 Broadway, Suite 1700 Oakland, CA 94607 13 Verworn matter providing an identification of the insured. (Strunk Decl., ¶ 12.) 14 Precipitated by the declaration regarding SFL provided by Plaintiffs’ counsel, the parties 15 officially settled the Verworn and Casey matters in May of 2022. Thereafter, and 16 pursuant to the aforementioned understanding, counsel for Travelers then turned to 17 resolving the default judgments entered against its insured in this case and the McLain 18 case. (Strunk Decl., ¶ 13.) 19 While litigating and resolving the Casey and Verworn cases, counsel exercised 20 appropriate diligence in investigating these claims, and continued to spend significant 21 amounts of time researching its insured and the multiple SFL entities. Given the stale 22 nature of these claims, and the decades that have elapsed since these entities have been in 23 business, the task was difficult, complex, and time consuming, taking many months to 24 make even a small amount of progress. Counsel’s efforts included multiple searches of 25 governmental and other entities in an effort to identify documents. However, counsel 26 concluded from its extensive efforts that Travelers had had been denied an opportunity to 27 litigate the cases filed against its insured, and to contest the facts that comprise the default 28 and default judgment obtained against SFL. (Strunk Decl., ¶ 14.) Should the default -9- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 judgment be set aside, Travelers is prepared to immediately intervene on behalf of SFL 2 and defend the case via an answer-in-intervention. In fact, Travelers has already 3 identified its affirmative defenses and drafted its answer-in-intervention. (Strunk Decl. ¶ 4 15, Exhibit C [proposed answer-in-intervention].) 5 III. ARGUMENT 6 A. There is a strong policy in California favoring resolution of cases on the merits 7 8 A trial court has broad discretion to vacate judgment and/or the clerk’s entry of 9 default that preceded it, and any doubts as to whether a default should be vacated should 10 be resolved in favor of the party seeking relief from the default. (Code. Civ. Proc., § 11 128.7; Weitz v. Yankosky (1966) 63 Cal.2d 849, 854.) The courts do not look favorably Gordon Rees Scully Mansukhani, LLP 12 upon defaults and adhere to the policy of the law favoring trials on the merits whenever 1111 Broadway, Suite 1700 Oakland, CA 94607 13 possible. (Weitz, supra, 63 Cal.2d at 854.) Thus, any applications seeking discretionary 14 relief “must be resolved in favor of the party seeking relief.” (Murray & Murray v. 15 Raissi Real Estate Development, LLC (2015) 223 Cal.App.4th 379, 385.) 16 The discretion of the court should always be exercised in conformity with the 17 spirit of the law and in such manner as will serve rather than defeat the ends of justice. 18 (Bernards v. Grey (1950) 97 Cal.App.2d 679, 684.) 19 B. Travelers has standing to set aside the default entered against its insured SFL, Inc. 20 21 Against this backdrop, a defendant’s liability insurer has standing to move to set 22 aside a default judgment entered against its insured because it would be obliged to pay 23 the judgment. (Clemmer v. Hartford Ins. Co. (1978) 22 Cal.3d 865, 885 [overruled on 24 other grounds by Ryan v. Rosenfeld (2017) 3 Cal.5th 124, 134-135]; compare Tomassi v. 25 Scarff (2000) 85 Cal.App.4th 1053, 1058, [insurer that has denied coverage and refused 26 to defend is not an “aggrieved party” within meaning of statute allowing motion to vacate 27 judgment.]) Accordingly, by virtue of its role as SFL’s liability insurer, Travelers has 28 standing to make the instant motion and set aside the default and default judgment -10- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 entered against its insured. 2 C. Because SFL did not receive proper notice of the default, the default is void and should be set aside 3 4 The Court has statutory authority, “on motion of either party after notice to the 5 other party, to set aside any void judgment or order.” (Code Civ. Proc., § 473 (d)). A 6 void judgment may be set aside at any time and for any reason, even in the absence of 7 diligence of the party seeking to set the judgment aside. (Plotitsa v. Superior Court 8 (1983) 140 Cal.App.3d 755; see also Rochin v. Pat Johnson Mfg. Co. (1998) 67 9 Cal.App.4th 1228, 1239 [judgment void on face subject to collateral attack at any time.]). 10 A judgment may be void as a matter of law for a host of reasons, including lack of 11 subject matter or personal jurisdiction, lack of actual or constructive notice of Gordon Rees Scully Mansukhani, LLP 12 proceedings, or if a default is improperly entered. (Ziller Electronics Lab GmbH v. Sup. 1111 Broadway, Suite 1700 Oakland, CA 94607 13 Ct. (1988) 206 Cal.App.3d 1222; Ellard v. Conway (2001) 94 Cal.App.4th 540; Heidary 14 v. Yadollai (2002) 99 Cal.App.4th 857.) A void judgment must be set aside regardless 15 of the merits of the underlying case, and prejudice to the party that obtained the default is 16 not a factor in setting aside a void judgment or order. (Peralta v. Heights Med. Ctr. 17 (1988) 485 U.S. 80, 86 – 87; Sindler v. Brennan (2003) 105 Cal.App.4th 1350, 1354). 18 A court may “set aside a default judgment which is valid on its face, but void, as a matter 19 of law, due to improper service.” (Ellard, 94 Cal.App.4th at 544.) 20 The default and default judgment in this case are void “due to improper service.” 21 The agent for service of process that appears on the California Secretary of State’s portal 22 and is the actual agent for service of process as to SFL is not the individual that was 23 served by the Brayton office, as reflected in the Brayton office’s own proof of service. 24 Moreover, Plaintiffs’ proof of service of the summons shows service of process on, as 25 typed by Plaintiffs’ counsel, “Kim Massey, Office Manager, Authorized to Accept 26 Service of Process” at 12115 Lakeside Ave., Lakeside, CA 92040-1712. The proof of 27 service of process of the entry of default lists “Thomas M. Towne, Authorized Agent for 28 Service” at the same address. However, there is no indication in the Secretary of State’s -11- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 records, or other evidence, that these individuals are indeed affiliated in anyway with 2 SFL, let alone authorized to accept service of process on behalf of the defunct 3 corporation. Plaintiffs’ assertions that an individual is authorized to accept service does 4 not make it so. This Court must set aside both the default and the default judgment for 5 this reason alone, and permit Travelers to intervene and defend the interests of its insured. 6 D. Travelers has satisfied the burdens necessary to set a aside the default and default judgment entered against SFL on equitable grounds 7 8 Even were the default and default judgment not void, under Code Civ. Proc., 9 473(b) a defendant may seek relief from default based on “mistake, inadvertence, surprise 10 or excusable neglect” within six-month of either the entry of default and/or default 11 judgment. However, the 6-month limit does not apply where relief is sought on equitable Gordon Rees Scully Mansukhani, LLP 12 grounds, e.g., extrinsic fraud or mistake. “After six months from entry of default, a trial 1111 Broadway, Suite 1700 Oakland, CA 94607 13 court may still vacate a default on equitable grounds even if statutory relief is 14 unavailable.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981; see also Olivera v. 15 Grace (1942) 19 Cal.2d 570, 575 [“Equity’s jurisdiction to interfere with final judgments 16 is based upon the absence of a fair, adversary trial in the original action”].) In fact, a 17 court has inherent authority to grant equitable relief from a default judgment on a theory 18 of extrinsic mistake when, as here, the defendant is able to show excusable neglect, 19 hardship, or other grounds for the failure to present a defense. (Kasperbauer v Fairfield 20 (2009) 171 Cal.App.4th 229, 237.) 21 A default or default judgment is properly set aside where the moving party can 22 demonstrate a (1) meritorious defense; (2) a satisfactory excuse for not presenting a 23 defense to the original action; and (3) diligence in seeking to set aside the default once it 24 was discovered. (Rappleyea, 8 Cal.4th 975 at 982; Kramer v. Traditional Escrow, Inc. 25 (2020) 56 Cal.App.5th 13, 29.) Travelers has satisfied these burdens, so the default and 26 default judgment entered against SFL must be set aside. 27 /// 28 /// -12- INTERVENOR'S MEMORANDUM IN SUPPORT OF MOTION TO SET ASIDE DEFAULT AND DEFAULT JUDGMENT 1 1. Travelers can, and has, demonstrated a meritorious defense 2 Filing an answer “denying the material allegations” of the operative complaint in 3 conjunction with a motion to set aside demonstrates a meritorious defense. (Stiles v. 4 Wallis (1983) 147 Cal.App.3d 1143, 1148; Shields v. Siegel (1966) 246 Cal.App.2d 334, 5 342 [unverified answer].) Upon setting aside the judgment e